AUST-WIDE MANAGEMENT LIMITED v CHIEF COMMISSIONER OF STAMP DUTIES (NSW)

Judges:
Allen J

Court:
Supreme Court of New South Wales

Judgment date: Judgment handed down 20 November 1992

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Allen J

These are appeals pursuant to s. 124 of the Stamp Duties Act 1920 against each of two assessments of duty and fines imposed for late payment. By consent the appeals are heard

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together with evidence in the one being evidence in the other.

The transactions which gave rise to the assessments concerned dealings with unit trusts in what was named the Aust-Wide Grosvenor Place Trust. The trust was established by deed dated 20 June 1988. I refer to it as the Trust. The parties to it were the manager, Aust-Wide Management Limited, which is one of the plaintiffs (appellants). I refer to that company as the Manager. The trustee of the Fund to be established pursuant to the deed was the second of the plaintiffs, Permanent Trustee Australia Limited. I refer to that company as the Trustee. The other party to the deed was another company which was the guarantor of the performance by the Trustee of its obligations under the deed.

I refer to that deed as the Trust Deed.

By the deed the Fund was established by the Manager lodging with the Trustee money for application for units in the Trust (cl. 1, definitions of ``commencing date'', ``the Fund'': cl. 4, cl. 5). The beneficial interest in the Fund was divided into units. I shall return later to consider the nature of the interest conferred by the units.

Units could be subscribed for as fully paid or as being payable by instalments (cl. 14). For the first six months after the commencement of the Fund the subscription price for a fully paid unit was fixed at $1M. Thereafter units subscribed for were to be allotted at the ``Unit Value'' as at the date of acceptance of the subscription application (cl. 9). The Unit Value was, in substance, in the case of fully paid unit the net value of the Fund divided by the number of allotted units and in the case of a partly paid unit the percentage of that unit value which was the percentage paid of the full subscription price (definition of ``Unit Value'', cl. 1). Where a subscription was accepted by the Manager, the Manager was to deposit the cash received with the Trustee. It thereupon was held upon the trusts of the deed and the Manager allotted the unit (cl. 9, cl. 15). On allotment of a unit the Manager was entitled to a commission (cl. 12).

The provisions of the Trust Deed concerning repurchase of units by the Manager and the redemption of units by the Trustee are of critical importance to an understanding of the transactions said to give rise to the liability to stamp duty. I set these out in full:

``REPURCHASE OF UNITS

19. (1) During the continuance of the Trust the Manager covenants that it shall keep posted at the office of the Manager during ordinary business hours a statement of the Repurchase Price per Unit which Repurchase Price will be the Unit Value of a Unit. The Manager may at any time deduct from the amount payable to a Unitholder all stamp duty payable on or in respect of the repurchase of Units.

(2) Any Unitholder may in writing, accompanied by the relevant Certificate, request the Manager to repurchase all or any of his Units by giving the Manager fourteen (14) days notice. Subject to clause 48(4) the Manager covenants that it shall at the termination of the notice period contained in such request repurchase and pay for such Units at the Repurchase Price of Units as at the date of repurchase, payment to be posted by cheque to such Unitholder on the first working day after the expiration of the notice period.

(3) The repurchase of Units shall at all times be subject to the operation of clause 48(4).

(4) Notwithstanding the foregoing provisions of this clause the obligations of the Manager under sub-clauses (1) and (2) of this clause shall be suspended:-

• (i) while such Units have Official Quotation or while the Units are suspended from such Official Quotation or are unconditionally removed therefrom for less than 60 consecutive days; and
• (ii) prior to the Units having Official Quotation except in respect of any Unit having an Issue Price of less than one million dollars ($1,000,000).

REDEMPTION OF UNITS

20. (1) If at any time the Manager furnishes the Trustee with a statement in writing:-

• (i) certifying that in order that the Manager shall be able to carry out its obligations under Clause 19 or it is otherwise in accordance with the terms of issue of any Units, that Units be redeemed;

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• (ii) stating the number of Units to be redeemed and the Repurchase Price paid or payable in respect of such Units; and
• (iii) requesting that an amount of cash equivalent to the sum of the Unit Values of the relevant Units on the date of such statement be so released, together with a report of the Auditor to the effect that the release of the cash will be in accordance with the provisions of this clause.

THEN the Trustee shall forthwith pay from the Fund such cash to the Manager, whereupon the number of Units to which the request relates shall be redeemed as from the date on which such statement is furnished to the Trustee and shall not thereafter be re- issued but such redemption shall not limit or restrict the right of the Manager to create additional and to issue further or other Units.

(2) Upon redemption of Units the Manager shall forthwith cancel the relevant Certificate and remove the name of the Unitholder from the Register in respect of the number of Units represented by that Certificate and cause a Certificate for the balance (if any) of the said Units to be issued.

(3) The Trustee shall at the request of the Manager borrow funds as provided for in the Deed for the purpose of redeeming Units pursuant to this Clause 20 PROVIDED THAT the Trustee shall be entitled to refuse such a request by the Manager where such borrowing would cause the total liabilities of the Trust to exceed at the time of any such borrowing thirty per centum (30%) of the Gross Asset Value of the Fund.

(4) Notwithstanding the provisions of this Clause 20, the Manager may at any time and from time to time (in anticipation of requests for repurchase of Units being made to it) request in writing the Trustee to realise the investments then specified by it in order that cash shall be available in the Fund for redemption of Units and the Trustee shall comply with such request PROVIDED THAT the Trustee shall be entitled to refuse such a request by the Manager where such realisation of investments would cause the total liabilities of the Trust at the time of such realisation to exceed the Gross Asset Value of the Fund.

21. The Manager shall be entitled to resell the Units repurchased by it which have not been redeemed.

22. (1) The Issue Price of Units resold pursuant to Clause 21 shall be the Unit Value of a Unit, as at the date of sale by the Manager.

(2) There shall be deducted from Issue price referred to in sub-clause (1) of this clause in respect of every Unit sold a service charge payable to the Manager of point eight five per centum (0.85%) of the Issue Price.''

The reference in cl. 19(3) to cl. 48(4) is not relevant. I note that in clause 20(1)(i) the reference in the deed as originally executed appeared as a reference to clause 18. That error was corrected by a formal variation to the deed in the prescribed manner. The error, accordingly, is not relevant.

The existence however of a prescribed way (cl. 55) of altering the provisions of the trust is of importance.

The principal asset which it was contemplated would be acquired by the Trust for investment was the interest of another body, the Superannuation Fund Investment Trust, which was a body corporate constituted under the Superannuation Act 1922 of the Commonwealth, in the leasehold of the City building known as Grosvenor Place. The Superannuation Fund Investment Trust has been given by the parties the acronym SFIT and it is convenient (if distasteful) to adopt it. The purchase by the Trustee of that interest of SFIT was financed pursuant to a deal arranged between the Manager and SFIT. The essence of the deal was that SFIT would subscribe for units in the Trust in contemplation that units would be redeemed or repurchased as other subscribers to the Trust were found. This achieved the commercial result of substantial vendor financing in respect of the acquisition of the interest in Grosvenor Place.

The deal was formalised by documentation. The principal document was a deed dated 30 June 1988 the parties to it being the Manager, the Trustee and SFIT. The deed recited the contract for the purchase of SFIT's interest in the leasehold of Grosvenor Place and a request by the Manager to SFIT for it to subscribe for not more than 49 units in the trust and SFIT's agreement to do so on the terms set out in the

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deed. I refer to the deed as the Subscription Deed.

The substance of the deed was that SFIT would subscribe, on the date provided, for 49 units less the number of other subscriptions for units which the Manager succeeded in obtaining in the meantime. Clause 2.1 provided:

``Aust-Wide will use its best endeavours to obtain subscriptions for units from persons other than SFIT so that SFIT is obliged to subscribe for as few units as possible.''

Aust-Wide was identified as the Manager by the Subscription Deed.

There were financial inducements to SFIT. The Manager agreed to pay to it on or prior to execution of the deed a substantial ``fee'' and it guaranteed to SFIT a specified interest return on each unit whilst held by SFIT.

By Part 6 of the Subscription Deed, headed ``Redemption'' provision was made for the redemption of units subscribed for by SFIT (referred to as ``SFIT Units''). The precise wording of Part 6 is important. It is:

``PART 6 - REDEMPTION

6.1 The parties agree that the SFIT Units shall be issued, on the terms contained in this Part 6.

6.2 Subject to compliance with its duties as trustee of the Trust, the Trustee shall on 31st May, 1989 redeem all SFIT Units held by SFIT on that date, and Aust-Wide shall do all things required on its part to achieve this redemption.

6.3 The Manager may by giving a notice in the form contained in Schedule 4 to each of the Trustee and SFIT two (2) Business Days before each Redemption Date direct the Trustee to redeem the number of SFIT Units specified in the notice and the Trustee shall on the Redemption Date specified in the notice redeem such SFIT Units.

6.4 The obligation of the Trustee to redeem the SFIT Units under Clauses 6.2 and 6.3 is subject to:-

• (a) the Trustee receiving a statement pursuant to Clause 20(1) of the Trust Deed;
• (b) SFIT delivering to the Manager a Certificate or Certificates for the number of SFIT Units to be redeemed.

All parties acknowledge that the SFIT Units are issued on the basis that they will be redeemed in accordance with this Part 6 and Aust-Wide undertakes to give to the Trustee a statement pursuant to and in accordance with Clause 20(1) of the Trust Deed.

6.5 Subject to Clause 6.4 the Trustee shall redeem the SFIT Units on the Redemption Date and notwithstanding Clause 19(1) of the Trust Deed pay to SFIT an amount equal to the Selling Price for each SFIT Unit redeemed.''

The ``Selling Price'' which pursuant to cl. 6.5 Permanent Trustee was to pay to SFIT for each unit redeemed was fixed by the Subscription Deed at $1M (cl. 1.2). This provision stood in stark contrast, as to the price to be paid, to what was provided by cl. 20(1) of the Trust Deed. By cl. 20(1) the amount to be paid by the trustee for redemption of a unit was to be the ``Repurchase Price'' (cl. 20(1)(ii)) which in turn was the ``Unit Value'' (cl. 19(1)), that is the actual value of the unit. The time- frame provided by the Subscription Deed was such that the subscription price paid by SFIT for each unit was fixed by the trust deed at $1M. The combined effect of the Trust Deed and the Subscription Deed therefore was that SFIT was to purchase each unit at $1M and have it redeemed in due course for the same sum, receiving in the meantime its ``fee'' payable on or before execution of the deed and thereafter the return guaranteed by the Manager.

The Subscription Deed gave further protection to SFIT. Part 8 provided:

``PART 8 - PURCHASE BY AUST- WIDE

8.1 If all of the SFIT Units are not redeemed in full on or before 31 May, 1989 for no less than the Selling Price per Unit, then Aust- Wide shall purchase from SFIT all of the SFIT Units held by SFIT for a purchase price equal to the Selling Price per Unit, such sale to be completed before 30 June, 1989, in which respect time shall be of the essence, and the only obligation of SFIT on settlement being to provide a transfer of the Units duly executed by SFIT, being in the form of the Australian Associated Stock Exchange common form of transfer, together with the certificates for the Units.''

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It is apparent that by cl. 8 the Manager assumed a personal obligation. This was commercially significant in that in the event of a financial collapse such that the Trustee was unable to redeem under cl. 6 of the Subscription Deed at the fixed price of $1M per unit the Manager, personally, would be obliged to repurchase the unredeemed units at that price.

It is unnecessary to refer to subsequent variations of the Subscription Deed or to the detail of variations, in the prescribed manner, to the Trust Deed (other than the correction already referred to of the reference to cl. 19). It is to be noted, however, that the Subscription Deed was not treated as a variation of the Trust Deed. The prescribed procedure for variation of the Trust Deed was not invoked to validate the provisions of the Subscription Deed to the extent, if any, that they involved alteration of the Trust.

Following upon execution of the deed the purchase from SFIT of its interest in the lease of Grosvenor Place was completed and SFIT subscribed for 37 units in the Trust. One of the units SFIT sold directly to another investor and stamp duty duly was paid by that investor. The Manager asserts that what happened in respect of the remaining 36 units for which SFIT subscribed is that they were redeemed by the Trustee as provided by the Subscription Deed and the Trust Deed. In each case the redemption was made possible because the Manager had found a new subscriber for the unit and the subscription money when received was paid into the Fund in accordance with the Trust Deed thereby providing the money necessary for the Trustee to redeem the SFIT unit. The Manager further claims that in each case upon redemption what happened is that the SFIT unit was duly cancelled as provided by the Trust Deed and thereupon a new unit was created as provided by the Trust Deed and allotted to the new subscriber.

The assessments of stamp duty under challenge in these appeals were made in reliance upon Division 3A of the Stamp Duties Act which deals with transactions otherwise than by dutiable instruments. Both the Manager and the Trustee submit that the transactions above referred to (which they assert were redemptions followed by the issue of new units) were not transactions to which Division 3A applied.

Division 3A of Part III was inserted in the Act by the Stamp Duties (Amendment) Act 1987. Its purpose was clearly stated by the responsible Minister in the second reading speech in the Legislative Assembly. After referring to what he described as ``the Clayton's Contract'' used as an ``avoidance practice'' the Minister said:

``This device operated by one party making an offer to another who accepted the offer in such a way that a valid contract was made without creating a document. Thus the duty, which in proper circumstances would have been payable was avoided.... The Clayton's Contract practice is addressed in the bill by requiring the preparation and lodgment of a statement for stamping within two months of a change in the beneficial ownership of property. Thus there will be no longer a tax haven even if a trust arrangement is used. The types of property covered are limited to land, transfers of interests in lease, good will, certain interests in partnerships, shares and goods, wares or merchandise sold with other property... The specific listing of the types of property affected means that the transfer of book debts, or everyday sales of goods, such as cars and other consumer durables will not be taxed.''

I turn to some of the key provisions of the legislation.

Section 44 specifies the transactions to which the Division applies. I shall return shortly to this section.

Section 44A provides, so far as presently material:

``(1) A person, being a party to a transaction to which this division applies which is not effected or evidenced by an instrument chargeable with ad valorem duty... shall, if a person would have been liable to pay such ad valorem duty in respect of the transaction had such an instrument been executed, lodge... a statement in respect of the transaction...

(3) The statement shall be lodged within two months after the change in beneficial ownership which is caused by or results from the transaction...

(5) The statement shall, for the purposes of this Act, be deemed to be an instrument effecting the transaction to which it relates and is chargeable with the ad valorem duty... appropriate to the transaction.

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(6) The statement shall, for the purposes of this Act, be deemed to have been executed on the date on which the change in beneficial ownership occurs...''

I return to s. 44. So far as presently material it provides:

``(1) This Division applies to a transaction which... causes or results in a change in the beneficial ownership of an estate or interest in:

• (a) land is situated in New South Wales;...
• (d) a lease of land situated in New South Wales...

(2) A reference to a change in beneficial ownership in this section does not include a reference to a change in beneficial ownership occurring as the consequence of:

• ...
• (d) the issue or redemption of units in a unit trust scheme;...''

The Trust was such a scheme (definition of ``unit trust scheme'', s. 3).

It is submitted for the defendant in support of the assessments that the transactions in question did cause or result in a change in the beneficial ownership of an estate or interest falling within paragraph (a) or paragraph (d) of s. 44(1), the land being Grosvenor Place. Further it is submitted the transactions did not amount to ``the issue or redemption of units in a unit trust scheme'' as provided by s. 44(2)(d). What occurred, it is urged, was that the SFIT units were repurchased by the Manager and then sold by it (the relevant sales being sales to the Trustee in its capacity as trustee of other trusts). The Chief Commissioner acknowledges that neither the repurchase in each case nor the on- sale in each case was effected or evidenced by an instrument chargeable with ad valorem duty. However the operation of Division 3A is such that duty is payable as if such instruments, appropriate to the transactions, had been used.

The initial response of the Manager and of the Trustee is that even if it be that the effect of the transactions was, in each case, a repurchase by the Manager from SFIT and an on-sale by the Manager no duty became payable because the transaction was not one to which Division 3A of Part 3 applied. Neither the repurchase nor the on-sale effected a change in the beneficial ownership of an estate or interest in either land (s. 44(1)(a)) or a lease of land (s. 44(1)(d)). What is argued is that none of the units conferred any ``beneficial ownership of an estate or interest'' in property, including Grosvenor Place, the subject of the Trust and hence the purchase or sale of a unit effected no change in the beneficial ownership of any of the property the subject of the Trust as distinct from the rights given to unitholders by the Deed of Trust. The Manager and the Trustee accept that a unit in a unit trust scheme may confer an estate or interest in the property the subject of a trust. Such was the case in the scheme considered by the High Court in
Charles v. FC of T (1954) 10 ATD 328; (1953-1954) 90 CLR 598. In its joint judgment the Court (Dixon CJ, Kitto and Taylor JJ) contrasted the position of a shareholder in a company with the holder of a unit in a unit trust (at ATD 331; CLR 609):

``A share confers upon the holder no legal or equitable interest in the assets of the company; it is a separate piece of property... But a unit under the trust deed before us confers a proprietary interest in all the property which for the time being is subject to the trust of the deed...''

The Court, however, specifically limited that observation to the particular trust deed which was before it in that case. It was not, it is urged, an observation of general application. Whether in respect of any particular trust deed it does apply must depend upon the provisions of that particular deed. The Manager and the Trustee urge that the provisions of the Trust Deed, in the present case, have the effect that a unitholder had no estate or interest in any of the trust property. I do not agree.

By cl. 3(1) ``The Trustee declares that it will hold the Fund upon TRUST for the Unitholders subject to the terms and conditions of this Deed''. The Fund is defined (cl. 2) as meaning:

• ``(i) the sum lodged with the Trustee on the Commencing Date and further cash and investments which the Manager may lodge with the Trustee pursuant to the provisions of this Deed;
• (ii) the investments representing the said sum and any such cash;
• (iii) the proceeds of the sale, redemption or repayment of any such investments;
• (iv) all additions or accretions to the Fund which may arise from any bonus, premium or other payment or consideration in respect

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  of or in connection with any property forming part of the Fund or from any source;
• (v) all investments representing the reinvestment in accordance with the provisions herein contained of any property forming part of or arising in respect of the Fund;
• (vi) all income for the time being in the hands of the Trustee; and
• (vii) any amount set aside (but not expended) to any reserve or provision created pursuant to sub-clauses (4) to (6) inclusive of Clause 42.''

Sub-clauses (4), (5) and (6) of cl. 42 deal with the establishment of reserves to meet contingencies, depreciation and estimated income tax. The definition of ``the Fund'' is a comprehensive description of all the assets and income coming under the control of the Trustee. Nothing is omitted. It is that Fund which the Trustee holds on trust for the unitholders. The whole of that ``beneficial interest in the Fund'' is ``divided into Units'' (cl. 5(1)). By cl. 5(3) the ``beneficial interest in the Fund'' as constituted by the initial payment of cash by the Manager to establish the Trust is to be ``divided into Fully Paid Units of a number equal to the amount of the payment divided by an Issue Price of one million dollars ($1,000,000)''.

The Manager and the Trustee rely, however, upon the provision in cl. 5(2) that ``a Unit shall not confer any interest in any particular asset or assets held by the Trustee on the trusts of this Deed but only such interest in the Fund as a whole as is conferred on a Unit under the provisions of this Deed...''. Further cl. 7 provides, so far as relevant: ``Subject to the rights of Unit holders created by this Deed and by law no Unit holder shall be entitled to require the transfer to him of any asset or assets held by the Trustee on the trusts of this Deed... or to lodge any caveat in any register in respect of the Fund or any part thereof''.

It is pointed out that only upon a winding-up following determination of the period of trust would it be that the assets would be converted into money and the proceeds divided between the unitholders (cl. 49). The Trust Deed provides that the life of the Trust will be 80 years unless it is earlier determined at a duly convened meeting of unitholders by resolution passed by a majority of not less than 75% of the votes of those present in person or proxy or other events occur as are set forth in cl. 48 of the deed. The only rights of unitholders for the time during the continuance of the Trust are, it is put, to have the Trust properly administered and the income distributed periodically as provided by the Trust Deed.

The unitholders as a whole, however, have the entirety of the beneficial interest in the Fund - that is in all the assets making up the Fund. The beneficial ownership of those assets is at all times in the body of the unitholders as they are from time to time. The body of the unitholders has no separate existence from the individual unitholders which make it up. Any change in the identity of the unitholders accordingly involves a change in the beneficial ownership of the Fund. As the assets, in the present case, of the Fund included Grosvenor House any change in the identity of the unitholders resulted in a change in the beneficial ownership of an estate or interest in land in New South Wales or a lease situated in New South Wales (within the meaning of s. 44(1) of the Act).

The contrary view would be inconsistent with the principle in
Saunders v. Vautier (1841) 4 Beav. 115; 49 E.R. 282. By that rule if all the persons who have any present or contingent interest in the property are sui juris and consent they are entitled to require the Trustee to transfer the legal estate to them. The application of that principle to units in a unit trust scheme is as stated by HAJ Ford in the chapter ``Public Unit Trusts'' in the Law of Public Company Finance, Austin and Vann, as follows:

``Because a company is a distinct legal entity which owns its property in its own right a shareholder is not regarded as having any legal or equitable interest in the company's property. But in a unit trust the trustee's ownership of the property of the enterprise is not beneficial ownership. The beneficial interest is in the unitholders in fractions proportional to the number of units held by each of them. Under the terms of the deed, as usually drawn, a unit does not confer any interest in any particular part of the trust fund or any particular investment but only such interest in the trust fund as a whole as is conferred on a unit under the trust deed. This would not prevent all the unitholders, they being of full age and capacity, from unanimously calling for a transfer of the trust assets to the unitholders

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under the principle in Saunders v. Vautier.''

(at 400)

The interest of the unitholder, accordingly, is correctly described in Principles of the Law of Trusts, 2nd Ed, Ford and Lee at para 2304.6 as follows:

``The unitholder's interest has two aspects: the unitholder has not only part of the beneficial ownership of all the assets of the trust but also important rights as against the manager, such as the right to require the manager to buy back the unitholder's interest.''

There is no authority precisely in point. Such authority as there is, however, affords no comfort to the Manager or the Trustee. The width of the principle in Saunders v. Vautier is illustrated by
Sir Moses Montefiore Jewish Home v. Howell & Co (No 7) Pty Ltd [1984] 2 NSWLR 406. In that case it was held that where the objects of a discretionary trust, as a group, exhausted the trust property those presently entitled could invoke the principle. It is no obstacle to invocation of the principle in respect of a unit trust scheme that the trust contemplated that it would inure into the future and that persons presently unidentifiable might acquire units in the future. Such a person does not have a present contingent interest in the Fund. Authority more directly in point is
Costa & Duppe Properties Pty. Ltd. v. Duppe & Ors [1986] V.R. 90. The case concerned a different point but the observations of the Court (Brooking J) are pertinent. The case concerned units in a property trust. The relevant provisions of the trust deed were:

``7. (a) The beneficial interest in the Trust Fund as originally constituted and as existing from time to time shall be vested in the Unit Holders for the time being.

8. (a) Each Unit shall entitle the registered holder thereof together with the registered holders of all other Units to the beneficial interest in the Trust Fund as an entirety but subject thereto shall not entitle a Unit Holder to any particular security or investment comprised in the Trust Fund nor any part thereof and no Unit Holder shall be entitled to the transfer to him of any property comprised in the Trust Fund other than in accordance with the provisions here and after contained.''

As Brooking J commented: ``These provisions are in the common form'' (at 92). His Honour concluded, after a careful analysis of relevant authority:

``To my mind, having regard to the New Zealand Insurance Case (
New Zealand Insurance Co. Ltd v. Commissioner of Probate Duties [1973] V.R. 647) and what is said in Charles v. Federal Commissioner of Taxation ((1954) 10 ATD 328; (1953-1954) 90 C.L.R. 598), the conclusion is inescapable that the unit-holders in the Costa & Duppe Properties Unit Trust have a proprietary interest in all the property which is for the time being subject to the trust deed. This proprietary interest is recognized by cl. 7(a) of the deed. Clauses 7(a) and 8(a) cannot mean that the unit-holders, while having a proprietary interest in the whole, have no such interest in any of the constituent parts. If there is a proprietary interest in the entirety, there must be a proprietary interest in each of the assets of which the entirety is composed: cf.
Smith v. Layh (1953) 90 C.L.R. 102, at pp. 108-9. What cl. 8(a) recognises is that no unit- holder can claim to have any particular asset appropriated to his share or transferred to him otherwise than in accordance with the deed.

... A unit-holder has a proprietary interest in each asset of the trust notwithstanding the possible duration of the trust, the extremely wide powers of management given to the trustee and the possibility that the trust might lose the whole or part of the capital through unprofitable trading or speculation.''

(at 96)

The observations of Brooking J were referred to with approval in the Supreme Court of South Australia (Bollen J) in
Softcorp Holdings Pty. Ltd v. Commissioner of Stamps (S.A.) 87 ATC 4532 at 4540, 4541.

The submission for the plaintiffs that neither the repurchase of a unit in the Trust nor the sale of the unit so repurchased would have constituted change in the beneficial ownership of an estate for interest in land situated in New South Wales or a lease of land situated in this State is rejected.

Accepting, however, that the interest of a unitholder in the Trust extends to an interest in land or a lease in land what was the nature of

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the transactions in that respect which occurred in the present case?

Assuming that the transactions gave effect to the provisions of the Subscription Deed read with the Trust Deed, what falls for determination fundamentally is the operative effect of those instruments. They are, particularly as to their operation when read together, a draftsman's nightmare - or perhaps one should say an interpreter's nightmare.

The Subscription Deed does not stand alone. It was entered into in the setting of the Trust established under the Trust Deed. It must be read with that deed. Indeed the key provision of the obligation of the Trustee to redeem the SFIT units is expressed to be ``subject to compliance with its duties as trustee of the Trust''. The rational starting point in unravelling the skein is the Trust Deed.

To understand cl. 20 in the section headed ``Redemption of Units'' in the Trust Deed one first must read cl. 19 headed ``Repurchase of Units''. That is because the primarily stated condition for redemption of units is that the redemption is to enable the Manager to carry out its obligations under cl. 19. Further, the closeness of the context of the two clauses is made clearer by the fact that the provisions for redemption (cl. 20) follow immediately upon the provisions for repurchase (cl. 19).

What is the purpose in a unit trust scheme of provision for the repurchase of units by the manager? It is well expressed by the pithy but essentially accurate statement in Jacob's Law of Trusts in Australia (5th Edition) by Meagher and Gummow of the nature of the modern unit trust, namely:

``Basically what happens is that a manager (usually a private company) will purchase property and vest it in a trust deed (usually a professional trustee company) initially on trust for the manager on the terms of a trust deed, which divides the trust property into a large number of shares (or units). The manager then sells the units to the public at a price based on their market value plus a service charge to cover the expenses involved, the trustee's remuneration and a profit to the manager. The manager then creates a market in the units by undertaking to repurchase and resell units on demand; additionally, the units may be sold to the public on the open market, where they may or may not be listed on a stock exchange. Additional units may be created in the future if further property is acquired for the trust.''

(at par. 312)

The Trust Deed, in the present case, despite its infelicities, follows that established pattern.

The Trust Deed, however, by cl. 19, creates exceptions to the Manager's obligation to repurchase. The principal exception is that the Manager does not have that obligation in respect of a unit the issue price of which was $1M or more until such time, if any, as the units are officially quoted on the stock exchange. The Manager has no obligation under the deed to seek stock exchange listing. In the present case the units never were listed at any relevant time and, accordingly, no obligation to repurchase them could have arisen pursuant to cl. 19.

Clause 19 remains relevant, however, to the construction of the redemption provisions of cl. 20.

A matter of significance is that albeit that the purpose of the repurchase provisions may be taken to be to establish a market for dealing in the units, the market sought to be established is at a price fixed by the Trust Deed, namely, the ``Unit Value'', the appropriate share of the actual value. The ``Unit Value'' is also the ``Repurchase Price''. That inflexible fixing of the ``Repurchase Price'' applies generally throughout the Trust Deed as the expression is defined in cl. 1 as meaning ``the price calculated in the manner provided for in clause 19(1)''.

It is important, however, to realise that the position of a manager under a modern unit trust scheme is not simply that he is the agent of the trustee of the scheme. The instant scheme follows the pattern in that respect of the scheme considered by the Court of Appeal in
Parkes Management Ltd v. Perpetual Trustee Co. Ltd. & P.T. Ltd. (1977-1978) CLC ¶40-354 where the position of the manager was described by Hope JA (with whom Moffitt P and Mahoney JA agreed) as follows:

``The Deed did not simply provide for the creation of a trust, the appointment of a trustee, and the employment by the trustee of some person as manager, as might occur in other forms of trust. The Manager was the source and origin of the trust, and subject to what might be regarded as supervision by the Trustee, substantially carried out the trust. In effect, the Manager was the

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ATC 4749

entrepreneur of an investment scheme, which contemplated that both it, and those who contributed money to the scheme, should derive financial benefit. The appointment of a trustee is understandably required by statute in this case as a safeguard to ensure that the interests of the unit holders are maintained, but the Manager also had this obligation, and in a sense also supervised the activities of the Trustee. To the unit holders, the identity of the Manager must have been a matter of considerable significance. To the Manager, its office was the source of valuable rights.''

(at 29,551)

Albeit that the Manager had this entrepreneurial role the deed did not preclude the Manager from performing ministerial duties as the agent of the Trustee. The capacity in which the Manager acted in any particular instance could be of significance to the understanding of the nature of the particular transaction.

There is no doubt as to the Manager's role under cl. 19. When required to repurchase as provided by that clause the Manager is personally at risk. It has the right to seek redemption by the Trustee of the relevant units as provided by cl. 20. But there are qualifications to the Trustee's obligation to redeem (cl. 20(3), (4)). The Manager's obligation to repurchase, on the other hand, when it has arisen under cl. 19, is not dependent upon the Manager being able to procure a redemption under cl. 20. Here the entrepreneur is at risk. By cl. 21 it is ``entitled to resell the units repurchased by it which have not been redeemed'', the ``Issue Price'' of units resold pursuant to clause 21 being ``the Unit Value of a unit as at the date of the sale by the Manager''. If the Manager has not succeeded in creating the market it is in difficulties. The obligation to repurchase under cl. 19 is an obligation by the Manager to purchase out of its own moneys - not an obligation to repurchase out of the assets and income of the Trust (``the Fund'' - cl. 1).

I come now to the provisions of clause 20.

Of key significance is the fact that upon the Trustee incurring the obligation to redeem it ``shall forthwith pay from the Fund'' the Unit Value of the unit being redeemed ``to the Manager'' (cl. 20(1)). The provision is specific. The payment is to be to the Manager. There is no provision for payment to the holder of the unit being redeemed. It is not a matter of the Unit Value being paid to the Manager in its capacity as the agent for the Trustee to transmit that amount to the former holder of the unit. The instant that the payment is made out of the Fund by the Trustee to the Manager it ceases to be Fund money. It has become the property of the Manager itself. That is the essence of the scheme. The primary requirement of redemption is that the redemption is ``in order that the Manager shall be able to carry out its obligations under clause 19'' - that is in order that the Manager shall have the money to fulfil its personal obligation under cl. 19 to repurchase the unit at its Unit Value. The Manager is bound personally to pay. It is entitled to receive, accordingly, beneficially from the Fund where redemption is effected.

Where redemption is effected following upon the Manager having become liable under cl. 19 to repurchase a unit what is contemplated manifestly is that the transactions of repurchase and redemption will be effected almost contemporaneously. There is the repurchase whereby the unit becomes the property of the Manager, the price therefor (the Repurchase Price) being paid by the Manager out of its own money. The price is the Unit Value (the actual value). The repurchase is followed immediately by redemption of the unit by the Trustee from the Manager, the Manager being paid for such redemption the Unit Value out of the Fund of the Trust. There is thus a transfer of title to the Manager followed immediately by a redemption.

The close link between cl. 19 and cl. 20 is emphasised by the requirement in cl. 20(1)(ii) that the certificate to be furnished by the Manager must state ``the Repurchase Price''. True it is that the Repurchase Price is also the Unit Price, the actual value. But the choice of language is significant and is to be contrasted with the immediately following paragraph (iii) where the expression Unit Value is used rather than Repurchase Price.

The combined operation, in practice, of clauses 19 and 20 is that where the Manager is entitled to require the Trustee to redeem it will not be out of pocket. It will have in hand the cheque of the Trustee drawn on the Fund before it hands over its cheque to the former unitholder in payment for the unit which it acquired from him pursuant to cl. 19. Nevertheless the order of transactions contemplated is that the unit is

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ATC 4750

acquired by the Manager pursuant to its obligations under cl. 19, for which acquisition it is personally liable to pay the Repurchase Price to the former holder of the unit, and the unit then, the title to which is in the Manager, is redeemed by the Trustee out of the Fund. The Unit Value paid to the Trustee to the Manager to redeem the unit is received by the Manager not as an agent to account to the former holder of the unit but beneficially. There are two transactions - namely the repurchase by the Manager followed by the redemption by the Trustee. There well may have been sound reasons for that scheme having been established by the Trust Deed. Perhaps it was considered desirable to avoid difficulties with Governmental regulatory bodies. It was not the only approach, however, which was open. A scheme could have been established which was a single stage scheme in relation to redemption. It could have been provided, for example, that where the Manager is given notice to repurchase under cl. 19 the notice shall cease to be effective if within 10 days after receipt of it the Manager gives notice to the Trustee requiring the Trustee to redeem the unit directly from the unitholder whereupon the Trustee shall so redeem the unit and pay to the unitholder the Unit Value of it. Such a scheme, however, would be essentially different. It would remove the element of personal liability on the part of the Manager to pay for the unit.

In substance the arguments for the plaintiffs embody the proposition the cl. 20(1)(i) of the existing Trust Deed empowers the issuing of units on terms that the Trustee shall redeem directly from the unitholder, whom the Trustee shall pay directly, there being no intermediate stage of a change of beneficial ownership in the unit from the former unitholder to the Manager and no payment made by the Trustee from the Fund to the Manager beneficially. What the arguments come to is that power to issue units on those terms comes from the words in cl. 20(1)(i) ``otherwise in accordance with the terms of issue of any Units that Units be redeemed''. But redemption must mean redemption as provided by cl. 20. There is no other clause providing for redemption. When one turns to the incidents and method of redemption as provided by cl. 20 it is manifest that an issue of units on the terms which the arguments seek to support is not authorised by the clause. What the clause provides for is redemption by the Trustee paying from the Fund the Unit Value of the unit being redeemed to the Manager. In the context that clearly means payment to the Manager beneficially. It does not mean that the payment made from the Fund to the Manager remains an asset of the Fund until such time as the Manager as the agent of the Trustee pays the money over to the former unitholder whose unit is being redeemed. There is nothing in cl. 20 which deals with payment being made to the former unitholder by the Trustee - whether such payment is made directly or through the Manager as an agent for the Trustee. No difficulty in that connection arises, of course, under the two transaction scheme of clauses 19 and 20 taken in combination. In that case, albeit that the Manager receives the money from the Fund beneficially, the former unitholder will be paid because of the Manager's personal obligation to pay for the repurchase of the unit which he has had redeemed.

What then is the ambit of the power impliedly conferred by the words in cl. 20(1)(i) ``it is otherwise in accordance with the terms of issue of any units that units be redeemed''? The ambit of the power is that units can be issued on terms which, notwithstanding that the Manager has not become bound to repurchase the shares under cl. 19, authorise or empower redemption of the units by the procedure provided by cl. 20 - that procedure including payment by the trustee from the Fund to the Manager beneficially of the Unit Value for each unit so redeemed. The payment being made to the Manager beneficially it is implicit that any unit being so redeemed has become beneficially owned by the Manager. What cl. 20 provides for is redemption from the Manager - not redemption from the former unitholder. Further, the amount to be paid by the Trustee out of the Fund to effect the redemption of any unit is the Unit Value, that is the actual value, of the unit. This achieves the result that the value of units not redeemed is not affected.

So understood the implied power to redeem which comes from cl. 20(1)(i), albeit limited, effects no injustice but does have commercial sense. It might be commercially prudent, for example, to make an issue of units on terms requiring repurchase by the Manager in circumstances other than those provided by cl. 19 in which case the Manager, for its own financial protection, might also require as a

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ATC 4751

term of the issue an appropriate obligation upon the Trustee to redeem the units in the manner provided by cl. 20.

I turn now to the Subscription Deed.

It is clear that cl. 6 of the Subscription Deed, a deed to which both the Trustee and the Manager are parties as well as SFIT, purports to be based upon the power to [be] implied from the words in s. 20(1)(i) of the Trust Deed that ``it is otherwise in accordance with the terms of issue of any Units that Units be redeemed''. Clause 6 of the Subscription Deed asserts no right to act outside the Trust Deed including the provisions of cl. 20 of that deed. Clause 6.2 of the Subscription Deed, providing for the obligation upon the Trustee to redeem, commences with the words ``Subject to compliance with its duties as trustee of the Trust''. Further, by cl. 6.4 of the Subscription Deed the obligation of the Trustee to redeem is subject to the Trustee receiving a statement pursuant to cl. 20(1) of the Trust Deed. These provisions are consistent with the SFIT units having been issued on terms authorised by the implied power under cl. 20(1)(i) of the Trust Deed. Clause 6.5, however, cannot properly be founded upon the implied power conferred by cl. 20(1)(i) of the Trust Deed. It is convenient to repeat the wording of that provision, namely:

``6.5 Subject to Clause 6.4 the Trustee shall redeem the SFIT Units on the Redemption Date and notwithstanding Clause 19(1) of the Trust Deed pay to SFIT an amount equal to the Selling Price for each SFIT Unit redeemed.''

The Selling Price, it will be recalled, was the fixed price of $1M. This provision is a direct attempt to substitute for redemption from the Manager as beneficial owner at the actual value, the Unit Value, redemption directly from SFIT at a fixed price to be paid by the Trustee to SFIT which might or might not be the same as the Unit Value.

The commercial objective of cl. 6 of the Subscription Deed, particularly when contrasted with cl. 8 of that deed which imposes upon the Manager an obligation to purchase any SFIT units not redeemed by the provided date therefor, is clear enough. Until the date arrives when it would have to purchase any SFIT units which had not been redeemed the Manager would not be at entrepreneurial risk under the Subscription Deed of having to repurchase them pursuant to the terms of issue and having then to look to the Trustee for the Trustee to redeem the units from it. Indeed there is no provision in the Subscription Deed for redemption from the Manager. Clause 6.5 provides accordingly for payment directly by the Trustee to SFIT. That provision does not accord with the express requirement of cl. 20(1) of the Trust Deed that upon satisfaction of the condition precedent " THEN the Trustee shall forthwith pay from the Fund such cash (the Unit Value) to the Manager". For the reasons which already have been stated the payment contemplated to the Manager is payment to him beneficially so that the moment that the payment is made the cash ceases to be part of the Fund. It is the Manager's. The Manager does not receive it as mere agent for the Trustee to transmit on the Trustee's behalf to the former unitholder.

The lack of any underpinning in the Trust Deed for cl. 6.5 of the Subscription Deed becomes clearer when one considers the consequences of the discrepancy which may exist between the Unit Value and the million dollars per unit (the ``Selling Price'') provided by the Subscription Deed. In the present case the Unit Value exceeded the Selling Price. It is at this point that attempted explanation of the character in which the Manager receives the redemption money under the Subscription Deed becomes schizophrenic. In fact what has happened is that the Manager, not surprisingly, has kept for its own benefit, without any demur by the Trustee, the excess of the Unit Value received by it under cl. 20 over the Selling Price of $1M which SFIT was entitled to receive from the Trustee for the redemption of each unit. But that could be justified only on the basis that the Manager under cl. 20 receives the redemption money, the Unit Value, beneficially. If the Manager receives it beneficially, it is implicit that it receives it in return for the redemption of a unit which it has acquired beneficially. If, on the other hand, the Manager receives the redemption money, pursuant to the Subscription Deed, as a mere agent for the Trustee, so that it remains in its hands, Fund money, not its own money, until such time as it disperses it in accordance with the instructions of the principal, the Trustee, then by what right does it appropriate to itself the excess in respect of each unit redeemed of the Unit Value over the $1M which the Trustee was required to pay to SFIT? What has to be argued for the Manager is that it received the

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ATC 4752

redemption price in two capacities - namely as a mere agent for the Trustee to remit the Fund money to SFIT, in the sum of $1M per redeemed unit, and also beneficially so that it forthwith became its own money in respect of the excess of the amount received over $1M.

Illuminating although this conundrum is as to the capacity in which the Manager received the redemption money from the Trustee it is a conundrum which never should have arisen. What cl. 20(1) required the Trustee to pay for redemption was the Unit Value. The purpose for the requirement of payment of the Unit Value manifestly is to preserve the value of the units of other unitholders. The total value of the Fund is diminished by the amount paid for the redeemed unit. But because the unit has been redeemed the number of units sharing the Fund is diminished. If the unit has been redeemed for its actual value, the value of the remaining units is neither increased nor decreased. It is otherwise if a unit is redeemed for less, or for more, than its actual value - that is its ``Unit Value''. If too much is paid to redeem it the value of the remaining units is decreased. If less than its value is paid for it the value of the remaining units is increased. The fixing by cl. 6.5 of the Subscription Deed of a sum which did not necessarily represent the actual value of a SFIT unit being redeemed was a transgression of cl. 20 of the Trust Deed. It is no answer that in fact the Unit Value turned out to be, at the relevant time, more than $1M per unit. It might have turned out to be less. In any event, cl. 20 clearly did not contemplate that it was within the authority of the Trustee to redeem for less than the Unit Value yet pay to the Manager the unit value in accordance with cl. 20 for it to pocket beneficially.

Continuing to assume, for the time being, that what the parties in fact have done is that they have implemented the Subscription Deed, what are the consequences? The manifest intention in what they have done was to redeem the units. The units have been cancelled. There has been compliance with cl. 20(1) of the Trust Deed in that the statement required to be furnished by the Manager has been furnished, including the auditor's report, and the Trustee has paid from the Fund the Unit Value to the Manager. It is implicit, however, in what has been done that before redemption was effected the Manager had acquired from SFIT beneficial ownership of the unit being redeemed - for redemption under cl. 20 is redemption from the Manager not redemption from the former unitholder. This cannot be glossed over by a provision that the Trustee pay the former unitholder directly. There was no power in the Trust Deed for redemption directly by the Trustee from the former unitholder as distinct from redemption from the Manager. What then is the effect which is to be given to the provisions of cl. 6.5 of the Subscription Deed? The Trustee had no power in respect of any of the units redeemed to pay the redemption price to SFIT beneficially. Its only power was to pay the Unit Value beneficially to the Manager. Ironically it did pay the Unit Value to the Manager rather than paying $1M directly to SFIT - leaving open the conundrum as to the capacity or capacities in which the Manager would receive the Unit Value. The transaction, correctly understood, however, did involve the Manager receiving the whole of the Unit Value beneficially - notwithstanding that all that SFIT was entitled to receive was $1M per unit. In short, despite its attempt to avoid acting entrepreneurially, the Manager had no choice but to do so - and has done so. The Trustee, for its part, having made the payment not to SFIT but to the Manager, and the payment being one to the Manager beneficially, was left at that stage in the position that its obligation to pay SFIT $1M for each unit was unfulfilled. The Manager however in fact paid $1M for each unit to SFIT. SFIT accepted the payment in discharge of its rights under the tripartite deed to receive payment. It worked out pragmatically as between the parties to the deed - albeit there may be serious questions as to whether the Trustee and the Manager have fulfilled their duties to unitholders. (In fairness to them, however, it should be noted that if all the SFIT units had not been redeemed by the date fixed, the Manager would have had to repurchase the unredeemed units under cl. 8 of the Subscription Deed and would not have had the protection of redemption by the Trustee - as cl. 19 of the Trust Deed would not apply and the terms of issue of the SFIT units made no provision for redemption in that event.)

What has occurred is not a redemption of each SFIT unit directly from SFIT. If that had been what had happened then there would not have been any change in the beneficial ownership of an estate or interest in land or a lease of land within the meaning of s. 44(1) of

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ATC 4753

the Stamp Duties Act 1920 because by s. 44(2)(d) such a change does not include ``a change in beneficial ownership occurring as the consequence of... redemption of units in a unit trust scheme''. Stamp duty would not have been attracted under Part 3 Division 3A. But in the present case there was an intermediate transaction. In respect of each of the units to be redeemed the Manager acquired the title to it from SFIT so that redemption could take place. Redemption was redemption from the Manager - not from SFIT. Was the change in beneficial ownership from SFIT to the Manager one which occurred ``as the consequence of'' redemption of the unit concerned? The answer to that question is that it was not. The Manager was bound by the Subscription Deed to acquire the title from SFIT so as to enable redemption thereafter to occur. Clause 6.2 of the subscription deed provided that the Manager ``shall do all things required on its part to achieve this redemption''. It was a condition precedent to redemption. It was not something ``occurring as the consequence of... redemption''. The change in beneficial ownership which occurred as the consequence of the redemption was the loss by the Manager of the beneficial ownership which it had in the unit before it was redeemed. It was not the earlier acquisition of that interest from SFIT.

Accordingly, if the transactions did involve redemption of the SFIT units the acquisition of the beneficial interest in each SFIT unit by the Manager from SFIT, albeit it was a condition precedent to the redemption of the unit, was a transaction within the ambit of s. 44(1) and duty appropriately was levied. It would follow that the appeal by the Manager would fail as to liability to duty.

Did the transactions involve redemption of the SFIT units? One of the arguments for the defendant is that they did not do so - that all that they involved was purchase of the units by the Manager and the resale of them. I do not accept that argument. In my judgment it is clear that there was redemption - albeit that it was redemption from the Manager of the units after the Manager first had acquired title to them from SFIT.

One of the matters seized upon for the defendant is that the Unitholders Register of the Manager, which was produced on computer, recorded each redemption as a transfer to Manager's stock and then a cancellation of the unit. It became apparent, however, that this bookkeeping method was one forced upon the Manager because the computer program being used did not have the facility to record a redemption directly from a unitholder. It would be quite unsafe, in the circumstances, to draw any inference from the bookkeeping entries as to the nature of the transactions. I do not draw any such inference.

From time to time in the course of the transactions the expression ``purchasing'' the units, or a like expression, is used by the parties. Little weight, however, is to be given to such infelicities of expression. One must go behind the infelicities to what is the manifest intention in the context of what happened. The language of the unit trust industry is riddled with infelicities. The Trust Deed itself reflects the inept industry jargon. Clause 19, for example, uses the standard term ``re-purchase'' by the Manager - notwithstanding that the Manager is ``repurchasing'' units which were not sold in the first place but simply allotted in response to a subscription. Again cl. 22(1) speaks of the ``Issue Price'' of units in fact resold by the Manager notwithstanding that the expression is more apt, indeed defined by cl. 1, to mean the price of which a unit is allotted.

I refrain from considering in detail the specific verbal criticisms made on behalf of the defendant. What matters is what the parties intended to do and whether their acts were consistent with and appropriate to the fulfilment of that intention. The intention is manifest. In every transaction it was declared to be to achieve the redemption of the unit as provided by the Subscription Deed. In every case notice was duly given by the Manager to the Trustee requiring redemption as provided by the Subscription Deed. In every case the statement was given as specified by cl. 20(1) of the Trust Deed as the condition precedent of the Trustee's obligation to redeem. There were infelicities of expression and there was clumsiness in administration in respect of payments made. But the acts taken in their context were far more consistent with the transactions involving redemption than not doing so.

In only one respect is the documentation used to give effect to the transactions revealing. With each direction to the Trustee to redeem (as provided by the Subscription Deed) the

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ATC 4754

Manager sent to the Trustee a letter in standard form which omitting formal parts read:

``We refer to our discussion today regarding the redemption of one unit presently owned by SFIT and to be repurchased by ourselves .

We certify that:

• (i) in order that the manager shall be able to carry out its obligations in accordance with the terms of issue of this unit, that this unit be redeemed;
• (ii) the unit to be redeemed is to be repurchased from SFIT at a price of one million dollars pursuant to the agreement with SFIT entered into on 30 June 1988;
• (iii) the unit value of this unit is one million and sixty seven thousand eight hundred and seventeen dollars and accordingly request that $1,067,817 by [sic] released from the Fund.

A report from the Auditor in relation to the redemption will be forwarded forthwith.''

(Emphasis supplied.)

I do not place weight in the particular expression (which I have underlined) ``repurchased''. That can be disregarded as an infelicity in expression and a word such as ``acquired'' substituted. But what the form letter recognises, and what I am satisfied was the intention despite the verbal camouflage used in the Subscription Deed, was that in order to enable cl. 20 of the Trust Deed duly to be applied the Manager would acquire ownership of the SFIT unit - in the same way as ownership would be acquired by the Manager if cl. 19 had applied and the Manager was repurchasing under that clause. It is that acquisition of the beneficial interest which attracts the duty.

I come next to the appeal by the Trustee. The assessment of duty in respect of it was based upon the premise that the units acquired by the Manager were not redeemed, the redemption being followed by cancellation of the units and the allotment of fresh units to the Trustee (in its capacity as trustee of other trusts) but rather that the units having been acquired by the Manager were simply sold by it to the Trustee. However, for the reasons which I have already expressed, the fact is that the units were redeemed. They thereupon ceased to exist. What the Trustee acquired were freshly allotted units. Those allotments did not attract stamp duty. The appeal by the Trustee, accordingly, succeeds.

Although the appeal by the Manager fails on the points argued, it is common ground that there was a miscalculation of the duty. The duty was assessed at $233,502.81. Duty correctly calculated should have been $227,164.09. To that extent the appeal succeeds.

There is an appeal also by the Manager, however, against the penalty which was imposed for late payment. The penalty imposed was 25 per centum of the duty payable.

The failure to pay the stamp duty was detected, not in consequence of any action taken by the Manager in relation to duty, but as the result of a Stamp Office audit conducted months after the duty should have been paid. It is protested for the Manager that counsel's opinion obtained, after it was indicated for the defendant that stamp duty had been attracted, supported the view that no such liability was incurred. The obtaining of such advice would have been of greater significance if the advice had been obtained before the transactions were entered into - so that if the advice had been that the transactions did attract duty, the duty would be paid within time. I consider that the penalty imposed by the defendant was a reasonable one, one within the ambit of a proper exercise of discretion. It is unnecessary to consider an argument put for the defendant that the Court has no jurisdiction on appeal to interfere with the Chief Commissioner's determination as to the proportion which any penalty imposed is to bear to the stamp duty not paid (cf. s. 124A(2)). The 25% rate of penalty is to be applied, however, to the amount of duty ($227,164.09) as correctly calculated. The penalty accordingly is to be reduced to $56,791.02.

The Manager's appeal has failed in substance. It should pay the costs of the Chief Commissioner.

The orders of the Court are:

1. In proceedings 30070 of 1991 Aust-Wide Management Limited v. Chief Commissioner of Stamp Duties appeal allowed in part, duty being assessed at $227,164.09 together with a fine assessed at $56,791.02. The plaintiff (appellant) is to pay the defendant's costs.

2. In proceedings 30071 of 1991 Permanent Trustee Australia Limited v. Chief

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ATC 4755

Commissioner of Stamp Duties appeal allowed. Declared that no liability to duty or fine was incurred. The defendant (respondent) is to pay the plaintiff's costs.