Annacott Pty Ltd v Konann Pty Ltd
[2012] VSC 389
•6 September 2012
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. 89 of 2012
| ANNACOTT PTY LTD (ACN 126 010 955) | Plaintiff |
| v | |
| KONANN PTY LTD (ACN 084 100 149) | Defendant |
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JUDGE: | McMILLAN J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 2, 4 and 11 April 2012 | |
DATE OF JUDGMENT: | 6 September 2012 | |
CASE MAY BE CITED AS: | Annacott Pty Ltd v Konann Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2012] VSC 389 | |
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REMEDIES – Declarations sought in relation to the beneficial ownership of the property – Principles relating to the granting of declaratory relief – Russian Commercial and Industrial Bank v British Bank of Foreign Trade [1921] All E.R. 329; Aussie Airlines v Australian Airlines (1996) 68 FCR 406 – A real and not a theoretical question – Swift Australian Co. Pty Limited v South British Insurance Co. Limited [1970] VR 368 – Applicant’s status – Applicant’s interest – Proper contradictor – In the Matter of Pilchowski (Unreported Supreme Court of Queensland, Cullinane J, 29 August 1997).
PRACTICE AND PROCEDURE – Objection by the State Revenue Office on the basis that the declarations sought usurp the powers of the State Revenue Office – Discretion of the Court – Forster v JododexAust.Pty Ltd (1972) 127 CLR 421 – Cuming Campbell Investments Pty Ltd v Collector of Imposts (Vict) [1938] 60 CLR 741 – McGarrigle v Public Service Board [1979] 1 NSWLR 292.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Ms R. Kaye | Foster Nicholson Legal |
| For the Defendant | Mr M. Hines | Hunt & Hunt |
HER HONOUR:
Introduction
In this proceeding, the plaintiff, Annacott, seeks declarations in relation to the beneficial ownership of a property known as “Tulliallan”, 805 Berwick-Cranbourne Road, Cranbourne North (“the Property”).
The defendant, Konann, is registered as the proprietor of the Property in its capacity as the trustee of the Peter White Family Trust (“the White Family Trust”). Until September 2006, Mr Peter and Mr Garry White were registered as proprietors of the Property.
The declarations sought are:
(a) A declaration that Annacott is and has been since 14 September 1994 the sole beneficial owner of the Property.
(b) A declaration that Mr Peter and Mr Garry White held the Property on trust for Annacott at all times between 14 September 1994 and 7 July 2006.
(c) Alternatively to (b), a declaration that Mr Peter and Mr Garry White held the Property on a resulting trust for Annacott at all times between 14 September 1994 and 7 July 2006.
(d) Alternatively to (b) and (c), a declaration that Mr Peter and Mr Garry White held the Property on a constructive trust for Annacott at all times between 14 September 1994 and 7 July 2006.
(e) A declaration that on 7 July 2006, Mr Peter and Mr Garry White transferred the Property to Konann as constructive trustee for Annacott.
(f) A declaration that Konann holds the Property as constructive trustee for Annacott and has done so since 7 July 2006.
Preliminary Issue
At the commencement of the trial, counsel for Annacott raised a preliminary issue being the State Revenue Office’s (“the SRO”) objections to this proceeding.
By way of background, counsel notified the Court that prior to the commencement of this proceeding two proceedings involving Annacott and Konann as plaintiffs and the SRO as defendant were initiated in this Court and were dismissed without trial.[1] In the previous proceedings both Annacott and Konann agreed that Annacott is the beneficial owner of the Property.[2]
[1]S CI 2011 2419 and S CI 2011 4504.
[2]Transcript for proceeding number S CI 2011 4504 Annacott and Konann v Commissioner of State Revenue dated 28/10/11, 1-2.
The first proceeding was initiated in May 2011 and did not proceed (“the first proceeding”). The second proceeding, initiated in August 2011, (“the second proceeding”) sought declarations against the Commissioner that Annacott was, at all material times, the sole beneficial owner of the Property and that Konann holds the Property on constructive trust for Annacott.
The second proceeding was dismissed at the first directions hearing before Pagone J on the basis that there was no relief sought against the Commissioner. During the hearing, counsel for Annacott and Konann agreed that there was no relief sought against the Commissioner and stated that the Commissioner was “joined as a potentially interested party.”[3]
[3]Transcript for proceeding number S CI 2011 4504 Annacott and Konann v Commissioner of State Revenue dated 28/10/11, 2.
Following this, in January 2012 Annacott issued this proceeding with Konann as the defendant.
On 8 March 2012, Konann sent a letter to the Commissioner attaching the transcript from the directions hearing in which the second proceeding was dismissed. The letter stated:
You will see from the transcript…, that the institution of the present proceeding and the participation of a contradictor was foreshadowed by counsel then appearing for [Annacott and Konann]. The possibility of the Commissioner’s participation was adverted to both by counsel for [Annacott and Konann]… and by the Judge…
….
Although it is doubtful whether the Commissioner has sufficient interest in the present proceeding to be joined as a party thereto, it may well save future time and expense if he agrees to be bound by any declaration made by the Court. I therefore invite the Commissioner to appear in the proceeding as amicus curiae, to make submissions, and to cross examine such witnesses as he wishes. The plaintiff’s solicitor has told me that the plaintiff would consent to this.
The plaintiff will appear at the proceeding by counsel, but not the defendant, which has the same director as the plaintiff (Peter White) and considers itself subject to the trust.
On 29 March 2012, the SRO responded to Konann’s letter stating:
Your Letter invites the Commissioner to be bound by any declaration made by the court in the proceeding and asks the Commissioner to appear as amicus curiae, to make submissions, and to cross-examine such witnesses as he wishes.
The Commissioner declines the Contradictor’s invitation to participate in [this proceeding] as amicus curiae and does not agree to be bound by any declaration made by the court for the reasons set out below.
The Commissioner cannot resile from his position as previously outlined to Annacott and Konann in correspondence relating to previous proceedings: [the first and second proceedings].
The Commissioner cannot be involved in these proceedings in any capacity as he is of the view that the proceedings circumvent the Taxation Administration Act 1997 (TAA) and the SRO’s taxation assessments and objections scheme as formulated by Parliament. It is clear from the scheme of the TAA that state taxation questions can only be determined by the mechanisms set out in Part 10 of the TAA (see in particular ss 96(2) and 127) and Part 4 of the TAA (see s18(1)). See eg Forster v Jododex Aust Pty Ltd (1972) 127 CLR 421 at 427 per Walsh J: ‘[T]he special procedures laid down by the statute should be allowed to take their course and should not be displaced by the making of declaratory orders concerning the respective rights of the parties under the statue.’
The Commissioner maintains the position confirmed by Pagone J on 28 October 2011 at directions of [the second proceeding], that the Commissioner should not be involved in any matter concerning private ownership of land and constructive trust issues as the Commissioner’s role is that of a taxation collector.
Further, the Commissioner states that in the circumstances of this matter, any declaration that might affect the land as between Annacott and Konann cannot bind the Commissioner in the exercise of his function under the Duties Act 2000 given the clear ulterior motive of the parties in bringing this proceeding, that is, to ‘directly affect the SRO and its administration of the Duties Act 2000’ as advised by the solicitors acting for the parties. The practical utility of the declaration sought in this matter appears to be for state taxation purposes as can be inferred from the circumstances set out in your Letter (thus, your invitation). Accordingly, any issues regarding state taxation should be dealt with under the TAA regime not through declaratory relief of the court in this proceeding, as this would usurp or pre-empt the power vested in the Commissioner to administer state taxation laws including the making of assessments (see s 63 TAA).
In my view, the reasons provided by the SRO for not participating in this proceeding and the objections raised by it involve significant issues relating to the Court’s discretionary power to make the declarations as sought by Annacott. Consequently, it is necessary to consider and determine these issues prior to considering the declarations sought by Annacott.
In order to understand the reasons and objections raised by the SRO, it is necessary to briefly set out the transfers of ownership that have taken place with respect to the Property and the SRO’s investigation into the transfers.[4]
[4]It is unnecessary to set out the detailed factual evidence in respect of the transfers and the circumstances surrounding them.
Transfers of Ownership of the Property and the SRO’s Investigation
The contract for the purchase of the Property was executed in August 1994 by Mr Peter and Mr Garry White as trustees of the White Family Trust.
In this proceeding, both Mr Peter White[5] and Annacott contended that, since 14 September 1994, it was the intention of Mr Peter and Mr Garry White that the Property was purchased by them as trustees for Annacott. In November 1994, the Property was registered in the names of Mr Peter and Mr Garry White.
[5]Mr Garry White died prior to the issue of any proceeding by Annacott and Konann.
In October 1998, Mr Peter and Mr Garry White retired as trustees for the White Family Trust and, in their place, Konann was appointed trustee.
On 2 December 2004, Mr Peter White’s then solicitor, Mr Donaldson, upon instruction from Mr Peter White, wrote to the SRO seeking its opinion as to whether an executed transfer of the Property from Mr Peter and Mr Garry White to Annacott would be dutiable. This opinion was sought on the basis that the transfer was a transfer of the Property to the beneficial owner.[6]
[6]At this time, Mr Donaldson was not informed by Mr Peter White that Konann was the trustee of the White Family Trust.
On 21 January 2005, the SRO replied requesting further information in relation to the purchase of the Property. On 22 November 2005, the SRO wrote to Mr Donaldson stating that it had not received any response and, if it did not receive a response from him within 14 days, the documents would be impounded until they received the information requested.
On 27 February 2006, Mr Donaldson wrote a letter to the SRO stating that the information requested could not be provided and that “the land should remain registered in the name of [Mr Peter and Mr Garry White]” and the documents should be held by the SRO. On 9 March 2006, the SRO replied to Mr Donaldson stating that the documents had been impounded under s 275 of the Duties Act 2000 (“the Duties Act”).
In March 2006, Mr Peter White informed Mr Donaldson that Konann was the trustee of the White Family Trust and instructed him to transfer the Property into the name of Konann.
In September 2006, the Property was registered in the name of Konann with the transfer being stamped “exempt from duty”.
In April 2009, the SRO advised Konann, as the trustee of the White Family Trust, that there would be an investigation of the transfer to Konann.[7] The stated purpose of the investigation being “to assess compliance with the Duties Act 2000 for the transfer of the Property”.
[7]Under s 73 of the TAA.
On 3 July 2009, Konann wrote to the SRO submitting that Annacott has always been the beneficial owner of the Property and that the transfer should be exempt from duty. At the conclusion of that letter the solicitors for Konann wrote:
The position can be rectified in one of two ways. The Commissioner can agree to accept that, in equity, Konann holds the property on trust for Annacott as a non dutiable transfer under either section 34 or section 36 of the Act. If the Commissioner is not prepared to do this, the parties can (and will) commence proceedings in the Supreme Court to obtain rectification which will achieve the same result.
On 4 August 2009 the SRO replied, again requesting further information from Konann in relation to its assertion that Annacott is the beneficial owner of the Property. The SRO advised that it also required “further information and clarification in relation to the [transfer from Mr Peter and Mr Garry White] to Konann”. On 1 September 2009, Konann responded providing further information in relation to the 2006 transfer and its assertion that Annacott was the beneficial owner of the Property.
On 19 February 2010, upon completion of the investigation the SRO advised Konann that:
Based on an examination of the records and documents supplied, together with careful consideration of your comments and explanations, we are not satisfied that the transfer to Konann was exempt from duty pursuant to section 33(3) of the [Duties Act].
The subject transfer, a Transfer of Land dated 15 August 2006, was lodged for stamping by [Mr Donaldson] under cover of correspondence dated 15 August 2006. Amongst the documentation that was provided to support stamping was a statutory declaration in which it was declared that the [P]roperty was an asset of the [White Family Trust].
You have advised that that statutory declaration misstated the facts and that the [P]roperty was not an asset of the [White Family Trust], as was stated in the declaration, but was an asset of [Annacott].
In order for Section 33(3) to apply the transfer must have been made solely
(a) because of the retirement of a trustee or the appointment of a new trustee, or other change in trustees; and
(b) in order to vest the property in the trustees for the time being entitled to hold it
this clearly was not the case. Furthermore, there was no evidence that it was intended at the time of the transfer that Konann was to hold the [P]roperty as trustee for Annacott.
Given the registration of the transfer to Konann, there appears to be no clear basis to apply either section 34 or section 36 of the [Duties Act] to a subsequent transfer of the Property from Konann to Annacott as proposed in the correspondence of 3 July 2009 from your legal advisor…
It was stated in that same correspondence that in the event that the Commissioner did not agree to your proposed course of action in respect of the transfer of the [P]roperty proceedings will be commenced seeking rectification.
On 23 February 2010, the SRO wrote to Konann stating that it will “hold reassessment of the transfer in abeyance upon receipt of advice that your clients still intend to seek rectification in the Supreme Court.”
Following this correspondence between the SRO and Konann, the abovementioned proceedings were initiated. It was on the basis of the above investigation and these (and other communications) between the SRO and Konann that the SRO objected to the three proceedings. With this background in mind, I now turn to the SRO’s objections as outlined in its letter of 29 March 2012.[8]
Usurpation or Pre-emption of the Powers Vested in the Commissioner to Administer State Taxation Laws
[8]See above, paragraph 10.
In its letter of 29 March 2012, the SRO’s primary objection to this proceeding is that the granting of the declarations as sought would circumvent the SRO’s taxation assessments scheme and objections scheme under the Taxation Assessment Act 1997 (“TAA”). In particular, the SRO referred to sections 96(2) and 127 of Part 10 of the TAA and section 18(1) of Part 4 of the TAA as well as sections 34 and 36 of the Duties Act.
Section 96(2) of Part 10 the TAA provides:
No court or administrative review body, including the Tribunal, has jurisdiction or power to consider any question concerning an assessment or decision referred to in subsection (1), except as provided by this Part.
Section 127 of Part 10 the TAA provides:
127 Evidence of assessment
Production of a notice of assessment, or of a document signed by the Commissioner purporting to be a copy of a notice of assessment, is—
(a) conclusive evidence of the due making of the assessment; and
(b) conclusive evidence that the amount and all particulars of the
assessment are correct, except in objection, review or appeal proceedings (in which it is proof in the absence of evidence to the contrary).
Section 18(1) of Part 4 of the TAA provides:
(1)Proceedings for the refund or recovery of tax paid or purportedly paid under a taxation law, whether before or after the commencement of this section, must not be brought, whether against the Commissioner or otherwise, except as provided in this Part.
Section 34(1) of the Duties Act provides:
34 Property vested in an apparent purchaser
(1) No duty is chargeable under this Chapter in respect of—
(a)a declaration of trust made by an apparent purchaser in respect of identified dutiable property or marketable securities referred to in section 10(2) -
(i)vested in the apparent purchaser upon trust for the real purchaser who provided the money for the purchase of the dutiable property or marketable securities; or
(ii)to be vested in the apparent purchaser upon trust for the real purchaser, if the Commissioner is satisfied that the money for the purchase of the dutiable property or marketable securities has been or will be provided by the real purchaser; or
(b) a transfer of dutiable property or marketable securities referred to in section 10(2) from an apparent purchaser to the real purchaser in a case where dutiable property or marketable securities are vested in an apparent purchaser upon trust for the real purchaser who provided the money for the purchase of the dutiable property or marketable securities.
….
Section 36 of the Duties Act provides:
36 Property passing to beneficiaries of fixed trusts
(1)No duty is chargeable under this Chapter in respect of a transfer of dutiable property that is subject to a fixed trust (the principal trust) to a beneficiary of the trust if—
(a)the duty (if any) charged by this Act in respect of the dutiable transaction that resulted in the dutiable property becoming subject to the principal trust has been paid or the Commissioner is satisfied that the duty will be paid; and
(b)the beneficiary was a beneficiary at the relevant time; and
(c) the transfer is—
(i) to the beneficiary absolutely; or
(ii)to the beneficiary as trustee of another trust all the beneficiaries of which are—
(A)natural persons who were beneficiaries of that other trust at the relevant time; or
(B)a corporation as trustee of a further trust all the beneficiaries of which are natural persons who were beneficiaries of that further trust at the relevant time; and
(d)the dutiable value of the property transferred does not exceed the value of the beneficiary's interest in the principal trust; and
(e)the Commissioner is satisfied that the transfer is not part of a sale or other arrangement under which there exists any consideration for the transfer.
(2)If a beneficiary would be entitled to an exemption from duty under subsection (1) but for subsection (1)(d), the beneficiary is entitled to a concession from duty in respect of so much of the dutiable value of the dutiable property that does not exceed the value of the beneficiary's interest in the principal trust.
(3) Nothing in this section limits the application of the exemption in section 34.
(4)A reference in this section to dutiable property becoming or first becoming subject to a trust includes a reference to property from which that dutiable property was derived, by subdivision or consolidation of titles, becoming or first becoming subject to the trust at a time when the transferee was a beneficiary of the trust.
(5) In this section -
fixed trust means a trust other than—
(a)a discretionary trust (within the meaning of section 36A); or
(b) a trust to which a unit trust scheme relates; or
(c)a superannuation fund (within the meaning of section 41A);
relevant time in relation to dutiable property that is subject to the principal trust, means the time at which the property first became subject to the principal trust.
In its letter of 29 March 2012, the SRO further stated that there is a “clear ulterior motive of the parties in bringing the proceeding, that is, to ‘directly affect the SRO and its administration of the Duties Act 2000’” and that “the practical utility of the declaration sought in this matter appears to be for state taxation purposes”.
The SRO referred to and relied on the well known case of Forster v JododexAust.Pty Ltd,[9] which sets out the circumstances in which the Court should decline to make a declaration with respect to an issue that is within the jurisdiction of a specialist court or tribunal.
[9](1972) 127 CLR 421; See above paragraph 10.
Forster’s case concerned an exploration license granted to the respondent Jododex by the Minister of Mines for New South Wales. Upon expiration of the license, Jododex applied for an extension. Mr Forster then applied under the Mining Act 1906 (NSW) for authority to enter certain parts of the land covered by Jododex’s license. As a result, a mining warden commenced an inquiry into Forster’s application. Jododex commenced proceedings in the Supreme Court of NSW seeking declarations as to its license. The Supreme Court declared that the company “[was] presently the holder of [an exploration license] validly renewed from time to time under the provisions of the Mining Act, 1906, as amended, over the land the subject of applications by [Mr] Forster… for authority to enter.”[10] The High Court on appeal held by a two to three majority that the appeal should be dismissed. The Court, with the exception of Walsh J, ultimately determined that the Supreme Court should have made the declarations that were sought.
[10]Ibid, 423.
Counsel for Annacott referred to a passage by Gibbs J in Forster’s case, in which his Honour held that the Court did have the power to make the declarations sought. The position taken by Gibbs J with respect to this issue was agreed to by Stephen, Mason and McTiernan JJJ. Gibbs J held:[11]
With all respect, I find it difficult to see any reason why the Court should have lacked jurisdiction to declare that Jododex held the right which it claimed, namely the right of the holder of an exploration license validly renewed. There is no provision in the Act that gives to any other tribunal exclusive jurisdiction to decide the question whether a person is the holder of a valid exploration license, or that otherwise withdraws the determination of that question from the jurisdiction of the Supreme Court.
[11]Ibid, 436.
On the contrary, in respect of this issue, Walsh J said: [12]
For the reasons indicated, I have felt disposed to hold that this is not a case in which the Supreme Court should have made any declaratory order. The learned judge's exercise of his discretion was influenced, to some extent, by what I regard as an erroneous assumption that Jododex might not have had a right to be heard in the proceedings before the warden. Consequently, it may be suggested that the established limitations upon the interference by an appellate court with a discretionary judgment are not applicable and that this Court should itself decide how the discretion ought to be exercised. However, I have come to the conclusion that I should not dissent from the view of other members of this Court that the appeal ought not to be upheld on the ground that there was a wrong exercise by the Supreme Court of its discretion.
[12]Ibid, 428.
His Honour further said: [13]
In my opinion, when a special tribunal is appointed by a statute to deal with matters arising under its provisions and to determine disputes concerning the granting of right or privileges which are dependent entirely upon the statute, then as a general rule and in the absence of some special reason for intervention, the special procedures laid down by the statute should be allowed to take their course and should not be displaced by the making of declaratory orders concerning the respective rights of the parties under the statute.
[13]Ibid, 427. This statement has been treated as authoritative in many later cases, see for example, Slattery v Public Service Board [1983] 3 NSWLR 41 at 46, Noosa Shire Council v TM Burke Estates Pty Ltd [2000] 1 Qd R 398. The statement is considered important dictum in assessing the proper course to take in cases seeking declarations.
Forster’s case has been referred to and relied upon in a number of subsequent cases, in particular, the dictum of Walsh J. Notably it was referred to in the Queensland Court of Appeal decision of Noosa Shire Council v T.M. Burke Estates Pty Ltd[14] and in the New South Wales Supreme Court decision of Slattery & Ors v Public Service Board[15].
[14][2000] 1 Qd R 398.
[15][1983] NSWLR 41, 47.
In the Noosa Shire Council case, Pincus JA held that:[16]
What was said by Gibbs J about the exercise of discretion [in the Forster’s case] was not inconsistent with the view of Walsh J, which has considerable importance in assessing the proper course to take in a case such as this.
[16][2000] 1 Qd R 398, 401.
Pincus JA also referred to the later High Court decision of Dalgety Wine Estates Pty Ltd v Rizzon,[17] in which Mason J, with whom Stephen J agreed, held that:[18]
First, a superior court should hesitate before granting an injunction restraining a party from commencing or maintaining proceedings in a court or tribunal which has been specially constituted by statute with a jurisdiction to entertain and determine proceedings of that kind, the more so when the proceedings relate to rights or privilege which depend for their existence on the statue…
[17](1979) 141 CLR 552.
[18][2000] 1 Qd R 552, 574, 566 and 568.
In Slattery’s case, the plaintiff sought declarations in relation to matters that the Court held were matters in which the Parliament had made its intention clear in the Industrial Relations Act 1940 were to be determined by the Industrial Commission. In that case, Lee J held:[19]
This Court should not, in my view, appear to pre-empt the exercise of jurisdiction by the Commission by deciding a question which the Commission itself must decide in order to determine the matter raised in the compulsory conference. Sections 84 and 87 make it clear that Parliament intends that the Industrial Commission should finally deal with industrial matters, and in my view it is in the public interest that this Court refrain, except in exceptional cases, from dealing with matters that are in truth industrial matters, particularly when those matters are presently before the Industrial Commission. The words of Walsh J in Forsters v Jododex Australia Pty Ltd, are in my view apt to the present proceedings,…
[19][1983] NSWLR 41, 47.
For completeness, counsel also drew the Court’s attention to two further decisions regarding declarations sought which were within jurisdiction of a specialist court or tribunal: Cuming Campbell Investments Pty Ltd v Collector of Imposts (Vic)[20] and Urban Consolidation and Development Pty Ltd & Ors v Commissioner of State Revenue.[21]
[20][1938] 60 CLR 741.
[21][2010] VSC 49.
In Cuming’s case, the applicant applied for a writ of mandamus commanding the Collector of Imposts to assess and accept payment of stamp duty on a particular basis. The application was refused. Latham CJ stated:[22]
The statute shows the intention of the legislature that the court should engage in the assessment of duty only upon an appeal from the collector. It would … be wrong for the court … to exclude the collector from the exercise of the function entrusted to him by statute, and at the same time, to enable the court to make an original assessment of duty which is not contemplated by the Act.
[22]Cuming Campbell Investments Pty Ltd v Collector of Imposts (Vic) [1938] 60 CLR 741, 751.
In Urban Consolidation, the plaintiff sought a declaration that a notice of determination issued by the Commissioner was ultra vires and a nullity. The application was refused on the basis that the plaintiff’s challenge to the assessment could be dealt with in proceedings under Part 10 of the TAA.
Counsel for Annacott submitted that these cases were distinguishable on the basis that, in this proceeding:
(a) There has been no assessment of duty made by the SRO.
(b) The Court is not being asked to make any assessment about duty.
(c) There is no appeal in relation to any assessment.
(d) The question before this Court is a question that the SRO is not able to determine, namely, whether Annacott is the beneficial owner of the Property.
(e) No relief is sought in relation to any duties assessed by the SRO.
Counsel for Konann made no submissions in relation to whether the application for declaratory relief was usurping the SRO’s powers.
In my view, the declarations sought by Annacott must be considered in the context of this proceeding and the two earlier proceedings and the communications between Konann and the SRO. As well as the authorities referred to above, the facts relevant to my determination are that:
(a) The Commissioner was joined as the defendant to the second proceeding, because Annacott and Konann said he had an interest in the determination of the beneficial ownership issue.[23]
[23]See above paragraph 7.
(b) This proceeding was issued after Konann’s advice to the SRO that, if the Commissioner was not prepared to accept that Konann, in equity, holds the Property on trust for Annacott and will not agree to stamp a transfer from Konann to Annacott as a non dutiable transfer, then the parties will commence proceedings in the Supreme Court to obtain rectification.[24]
(c) In this proceeding, the solicitors for Konann invited the Commissioner to agree “to be bound by any declaration made by the Court” as it “may well save future time and expense”.[25]
(d) The declarations sought in this proceeding cover the same propositions that Konann asked the Commissioner to agree to in July 2009, that is, that “in equity, Konann holds the [P]roperty on trust for Annacott and not for [the White Family] Trust”. This agreement was sought in the context of the duty issues arising as part of the investigation conducted by the SRO.[26]
[24]See above paragraph 22.
[25]See above paragraph 9.
[26]See above paragraph 22.
In my view, the Commissioner is correct in stating that this proceeding has clear ulterior motives and that it directly affects the SRO and it has been made for state taxation purposes which, if the declaratory relief sought is granted, will “directly affect the SRO and its administration of the [Duties Act]”.[27]
[27]Letter dated 29 March 2012 from the SRO to the solicitors for Konann.
This case is on point with the statements of Walsh J and Lee J as referred to above.[28] This is a case in which the parties are asking the Court to make declarations concerning the beneficial ownership of the Property which is a question before the SRO and for which the Duties Act and TAA specifically give the SRO the power to determine. The Duties Act specifically provides the Commissioner with the power to make an assessment as to whether the transfer in question is a transfer to the “real purchaser” and deals with circumstances in which there is a transfer from a retired trustee to a newly appointed trustee.[29] Further, the TAA provides a scheme for challenging the assessment of the Commissioner.
[28]See above paragraphs 38 and 42.
[29]Duties Act 2000, s 33.
Moreover, in my view, it is readily conceivable that, if the declarations sought by Annacott were made, they would be considered by Annacott and Konann to be of some value if and when the SRO ceases to hold the re-assessment of the transfer in abeyance. The granting of the declarations is not appropriate in such circumstances: see McGarrigle v Public Service Board[30], in which Moffitt P said:[31]
Arguments in the Johnco Nominees case, and findings in the present case, relied upon the claim or view, first, that a declaration would arm the plaintiff with a weapon or argument for use in negotiations with some statutory body or government, or would provide an estoppel, in some undefined or undetermined way, in proceedings in some court or tribunal; and that it would also provide an authoritative ruling concerning the exercise of power in other cases in relation to other persons not parties to the proceedings. If this be a correct assessment of reasons for decision in the instant case, or of the argument in the Johnco Nominees case, with respect, these considerations do not provide a legitimate basis for the making of a declaration.
[30][1979] 1 NSWLR 292.
[31]McGarrigle v Public Service Board (1979) 1 NSWLR 292, 295. (citations omitted).
I have determined that, in the circumstances, granting the declarations sought would usurp or pre-empt the powers vested in the Commissioner, and on that basis, I decline to make the declarations sought.
Nevertheless, as I have heard the parties on the question of whether the Court should make the declarations by reference to the principles relevant to the granting of declaratory relief, I will also consider and make a determination on the basis of those principles.
Principles Relating to the Granting of Declaratory Relief
The power of the Court to make declarations is discretionary. In the exercise of that discretion, it has been said that it is not possible or desirable to fetter the Court’s discretionary power by laying down rules as to the manner of its exercise.[32]
[32]Ainsworth v Criminal Justice Commission (1991-1992) 175 CLR 564, 581-2 (Mason CJ, Dawson, Toohey and Gaudron JJ) referring to Forster v Jododex Australia Pty Ltd (1972) 127 CLR 421, 437 (Gibbs J).
Having said that, a number of principles have arisen out of the case law which assists in guiding the Court’s discretion. In seeking and obtaining the grant of declaratory relief from the Courts, an applicant must establish a number of factors. These factors are clearly set out by Lockhart J in Aussie Airlines v Australian Airlines:[33]
·The proceeding must involve the determination of a question that is not abstract or hypothetical. There must be a real question involved, and the declaratory relief must be directed to the determination of legal controversies.[34] The answer to the question must produce some real consequences for the parties.
·The applicant for declaratory relief will not have sufficient status if relief is "claimed in relation to circumstances that [have] not occurred and might never happen"[35] or if the Court's declaration will produce no foreseeable consequences for the parties.[36]
·The party seeking declaratory relief must have a real interest to raise it.[37]
·Generally there must be a proper contradictor.[38]
[33](1996) 68 FCR 406, 414 (citations footnoted).
[34]Re Judiciary and Navigation Acts (1921) 29 CLR 257.
[35]University of New South Wales v Moorhouse (1975) 133 CLR 1, 10 (Gibbs J).
[36]Gardner v Dairy IndustryAuthority (NSW) (1977) 52 ALJR 180, 180 (Mason J), 189 (Aickin J).
[37]Forster Jododex Australia Pty Ltd (1972) 127 CLR 421, 437 (Gibbs J).
[38]Russian Commercial & Industrial Bank, 448; and Ainsworth, 596 (Brennan J).
A Real and Not a Theoretical Question
Counsel for Annacott submitted that this proceeding does not concern a hypothetical question because all of the facts upon which the declarations are sought have occurred.[39] Therefore, the parties are not asking the Court to consider a future matter.
[39]Relying on Swift Australian Co. Pty Limited v South British Insurance Co. Limited [1970] VR 368 in which the Court held that it was not appropriate to grant the declarations sought because the Court was being asked to advise the parties to the action of their rights under a hypothetical state of facts.
Counsel referred to the case of Russian Commercial and Industrial Bank v British Bank of Foreign Trade[40] where Lord Sumner stated:[41]
For many years it has been accepted practice in cases in the Commercial List to hear and determine claims for a declaration of right, when a real, and not a fictitious or academic, question is involved and is in being between two parties, in order that they may know what business course to take without having to run the risk of acting and finding themselves liable in damages, when at last the matter is brought before the court.
[40][1921] All E.R. Rep 329, 333.
[41]Ibid, 333.
Counsel submitted that the situation in this proceeding is exactly as described by Lord Sumner in that the parties are seeking declarations as to what their rights are so that they may know what steps to take in terms of transferring the Property. Specifically, whether or not there is likely to be a dutiable transfer and what is likely to be required from the parties upon a transfer from a taxation perspective.
I agree with counsel’s submission that all of the facts upon which the declarations are sought have already occurred. However, in my view, the evidence clearly demonstrates that the declarations sought in this proceeding do not involve a real question between Annacott and Konann because the proceeding does not involve the determination of legal controversy between them. Rather the evidence shows that Konann has always taken the position that Annacott is the beneficial owner of the Property. Konann’s position is evidenced by the following:
(a)In the investigation by the SRO, Konann made submissions which are substantially the same as the submissions made by Annacott in this proceeding, that is, that Annacott has always been the beneficial owner of the Property.[42]
(b) Konann has supported the position of Annacott as the beneficial owner of the Property in both the first and second proceedings.[43]
(c) In this proceeding, Konann informed the SRO that it would not appear because it considers itself subject to the trust alleged by Annacott and because both Annacott and Konann have the same director.[44]
[42]Letter dated 3 July 2009 from Konann to the SRO.
[43]See above paragraph 5.
[44]See above paragraph 9.
Applicant’s Status
In my view, Annacott does not have sufficient status because the declarations sought will not produce a foreseeable consequence between the parties. This is because both Annacott and Konann agree that Annacott is the beneficial owner of the Property.
Applicant to Have a Real Interest
Counsel for Annacott submitted that because the issues raised in this proceeding are real and not hypothetical or theoretical, Annacott has a real interest in seeking the declarations. In my view, it is difficult to conclude that Annacott does have a real interest in the matter because both Annacott and Konann agree that Annacott is the beneficial owner of the Property and there is no legal issue to be decided between them. On the contrary, the interest that Annacott has arises out of the investigation by the SRO.
Proper Contradictor
Counsel for Annacott referred to a number of authorities[45] in support of its submission that, by joining Konann as a defendant, Annacott had secured a proper contradictor.
[45] Dissanayake & Anor v Hillman & Ors [2007] VSC 426; In the Matter of Pilchowski (Unreported, Supreme Court of Queensland, Cullinane J, 29 August 1997); Thorne v Motor Trade Association [1937] AC 797; Sun Life Assurance Company of Canada v Jervis [1944] AC 111.
Counsel for Annacott referred to a category of cases described as “friendly” proceedings, where declarations have been made by the Court in circumstances where the parties were not really in dispute.[46] Counsel submitted that a “friendly” proceeding factually similar to this proceeding is the factual situation set out in the unreported decision of In the Matter of Pilchowski[47].
[46]Thorne v Motor Trade Association (1937) AC 797 where the action was brought to determine the very practical difficulty that had arisen in the affairs of an association by reason of two decisions of the Court which appeared to conflict and Sunlife Assurance of Canada v Jarvis (1944) AC 111 in which it was held that there was no issue to be decided between the parties because the respondent would be in the same position whatever the outcome of the case.
[47]Unreported, Supreme Court of Queensland, Cullinane J, 29 August 1997.
In Pilchowski’s case, the Commissioner had taken the view that a particular transfer was dutiable. The parties sought declarations that the transfer from a retiring trustee to a new trustee that had taken place was void because the parties did not want to pay the assessed duty. The Commissioner refused to participate and did not attend the hearing. The declarations sought were refused because there was no issue between the parties; they were seeking a mutually convenient outcome. In that case, neither party raised the alternate view, which was the Commissioner’s view.
Counsel for Annacott submitted that Pilchowski’s case can be distinguished from this proceeding because Konann “is essentially… raising the opposite view, being the [SRO’s] point of view”.[48]
[48]Transcript of this proceeding dated 2 April 2012, 24-25.
Counsel for Konann submitted that the “defendant would like the issue settled as to which trust it holds the [P]roperty on, does it hold it on trust for the [White Family Trust], or does it hold it on trust for the plaintiff.” Counsel also submitted that “there [is] evidence that goes both ways, and [he would] be highlighting that evidence in cross-examination.”[49]
[49]Transcript of this proceeding dated 2 April 2012, 27-28.
Counsel for Konann did cross-examine some of the witnesses called by Annacott and, in his final submissions, referred to certain inferences that could be drawn from the evidence. However, in my view, counsel could not be described as raising the opposite view to Annacott. To do so would require Konann to take a completely different position on the issue of beneficial ownership of the Property then it has hitherto taken.
In the circumstances, in my view, Konann could not and should not be regarded as a proper contradictor in this proceeding.
Conclusion
As I have determined that granting the declarations sought would usurp or pre-empt the powers vested in the Commissioner and that this application does not satisfy the principles for granting declaratory relief, in the circumstances, it is not necessary, nor is it appropriate, for me to consider and determine the issue of beneficial ownership.
For the reasons set out, Annacott’s proceeding is dismissed. I will hear the parties as to costs.
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