Azzure-Blacktown Pty Ltd, Azzure-Chiltern Pty Ltd and Azzure-Kotara Pty Ltd v Chief Commissioner of State Revenue
[2013] NSWADT 207
•19 September 2013
Administrative Decisions Tribunal
New South Wales
Medium Neutral Citation: Azzure-Blacktown Pty Ltd, Azzure-Chiltern Pty Ltd and Azzure-Kotara Pty Ltd v Chief Commissioner of State Revenue [2013] NSWADT 207 Hearing dates: 4 June 2013 Decision date: 19 September 2013 Jurisdiction: Revenue Division Before: J Block, Judicial member Decision: The assessments (and objection decisions) under review are affirmed
Catchwords: "Presently entitled" and "entitled" in the context of the relevant legislation - interpretation Legislation Cited: Land Tax Management Act 1956 Cases Cited: CPT Custodians Pty Ltd v Commissioner of State Revenue for the State of Victoria (2005) 224 CLR 98; (and cases therein cited)
GTN Developments Pty Ltd v Chief Commissioner of State Revenue [2007] NSWADT 168
Sahab Holdings Pty Limited ATF Kanjian Family Trust v Commissioner of State Revenue for the State of Victoria (2005) 224 CLR 98
JAM Investments Australia Pty Ltd v Chief Commissioner of State Revenue [2011] NSWADT 76Texts Cited: Jacobs; Law of Trusts 7th edition at [1606-1611] Category: Principal judgment Parties: Azzure-Blacktown Pty Ltd, Azzure-Chiltern Pty Ltd and Azzure-Kotara Pty Ltd (Applicants)
Chief Commissioner of State Revenue (Respondent)Representation: Counsel
A de Wijn (Applicants)
B Katekar (Respondent)
Herbert Geer (Applicants)
Crown Solicitor's Office (Respondent)
File Number(s): 126070, 126071 and 126072
REasons for decision
Part A Preliminary
The Applicants in this matter are Azzure Blacktown Pty Ltd ("Blacktown") as trustee of the Azzure -Blacktown Unit Trust ("B Trust"), Azzure- Chiltern Pty Ltd ("Chiltern") as trustee of the Azzure-Chiltern Unit Trust ((C Trust") and Azzure-Kotara Pty Ltd ("Kotara") as trustee of the Azzure-Kotara Unit Trust ("K Trust'). The B Trust, the C Trust, and the K Trust are collectively referred to as the 'Trusts" and each is a 'Trust"; similarly the Applicants are usually collectively referred to as the "Trustees" and each as a "Trustee". The trust deeds in respect of the Trusts are collectively the "Trust Deeds" and each is a "Trust Deed". The Respondent is usually referred to as the "Chief Commissioner".
In respect of the relevant land tax years (and as to which see clause 3 below) the Applicants were assessed to land tax on the basis that the Trusts of which they were respectively the Trustees, were special trusts and not fixed trusts, and having regard to the fact that special trusts were not entitled to the tax free threshold. The Applicants contend that the Trusts were fixed trusts and not special trusts and the only question before the Tribunal is therefore whether each Trust was or was not during the relevant years, a special trust.
At the commencement of the hearing the Tribunal was informed that in respect of each of the Trusts the relevant land tax year was the 2011 land tax year. Subsequently and during the course of argument the Tribunal was informed that in respect of each of the Trusts the 2010 land tax year was a relevant year but that there were other land tax years which were relevant in respect of certain of the Trusts. The Tribunal was informed that it would be informed as to which years were relevant land tax years in respect of each of the Trusts; the Tribunal was also informed that nothing turned on this aspect in that in respect of all three Trusts and all relevant land tax years the issues are the same. I refer in this context to page 60 of the Transcript as follows:
MR KATEKAR: I don't think it's quite right. I'll confer with my friend and I'll clarify for you. For one of them it's right. All three are 2010; for one it's 2009 and 2010 and for another, it's eight, nine and ten.
MR DE WIJN: Nothing hangs on it.
MR KATEKAR: No, no, nothing hangs on it for the sake of the argument, but in terms of you decision there's been a challenge made to assessments for the three trusts; one relates to 2010, one relates to 2009 and 2010 and another relates to eight, nine and ten.
HIS HONOUR: I see. Can you tell me which is which?
MR KATEKAR: Yes I can.
MR DE WIJN: I beg your pardon sir; I think I may have been mistaken.
HIS HONOUR: One in relation to 2011. I think that's the 30th--
MR DE WIJN: The relevant years of assessment for Assure-Blacktown, which is JM1, is 2009 and 2010
HIS HONOUR: 2009 and 2010?
MR DE WIJN: That's right.
HIS HONOUR: And not 2011 at all?
MR DE WIJN: It's probably best if we agree on this because this is not something that's in dispute between us. As best I understand it--
HIS HONOUR: I am more than happy to give you any time you need.
MR DE WIJN: And I don't mean to embarrass my friend--
MR KATEKAR: Apologies for the confusion.
MR DE WIJN: --but we do need to get this right for your purposes.
HIS HONOUR: I was under the impression that I was concerned in all three cases with one year only.
MR KATEKAR: And that's what I said sir, so that's my--
HIS HONOUR: And there are no problems, Mr De Wijn; I am perfectly happy now that I know that nothing turns on it-
The Tribunal was not by the time the hearing proper concluded, informed by the parties as to the land tax years which are relevant in respect of the three Applicants. However and in clause 4 of AFS the Applicants noted that "the relevant years for each trust are set out in the following table. The "taxing point" for each year is the 31 December immediately before that year; i.e. for the 2011 year is 31 December 2010. That is the point at which the question of whether each trust was a special trust or a fixed trust must be answered. In any event there is no suggestion that anything material changed between each year." It is not necessary to include the table which followed those quoted words; suffice it to say that the Applicants asserted that in respect of Blacktown the relevant years are 2009 and 2010, in respect of Chiltern the relevant years are also 2009 and 2010 and in respect of Kotara the relevant years are 2008, 2009 and 2010. The Chief Commissioner did not in RFS contend that those assertions were incorrect and accordingly the Tribunal is prepared to accept that the terms "relevant years' and each a "relevant year" can be given the meaning set out in clause 4 of AFS, and as set out in this clause 4 and on the basis that the objections by the Applicants under consideration by the Tribunal, relate in respect of each of them to the land tax years noted..
The Tribunal had before it the documents lodged under section 58 of the Administrative Decisions Tribunal Act. The Tribunal admitted into evidence as Exhibit A1 a witness statement dated 28 March 2013 by John Mirabito which includes as attachments copies of the Trust Deeds of the Trusts and marked JM1 JM2 and JM3 respectively. Exhibit A1 also includes a deed of variation in respect of the B Trust relating to its change of name from Azzure-Kingsbury Unit Trust to Azzure-Blacktown Unit Trust.
There was no oral evidence before the Tribunal and the matter was argued on the papers before the Tribunal which included submissions by the parties. The hearing took up the whole of the hearing day at the end of which the Tribunal allowed time periods for the submission of consolidated updated submissions. . The Tribunal thereafter received the Applicants' Final Submissions ("AFS") dated 5 July 2013, and the Respondent's Consolidated Final submissions ("RFS") dated 14 August 2013. The Applicants did not in the result exercise a right of reply within the time period allowed for this purpose.
The matter was, as I have noted argued at considerable length and on the basis that the relevant issue for decision was complex. Having considered the documentation and case authorities I have come to the conclusion that this case was not as complex as was thought to be the case.
There are only two provisions of the Land Tax Management Act 1956 ("the Act") which are directly relevant to the issue to be resolved. In this context:
(a) Section 3A of the Act (which is entitled "Special Trust- meaning) reads (relevantly) as follows:
3A Special trust-meaning
(1) For the purposes of this Act, a trust is a
"special trust" if:
(a) the trust property includes land, and
(b) the trustee of the trust is the owner of the legal estate in the land, and
(c) the trust is not a fixed trust.
(2) For the purposes of this section, a trust is a
"fixed trust" if the equitable estate in all of the land that is the subject of the trust is owned by a person or persons who are owners of the land for land tax purposes (disregarding section 25 (3)).
(3) For the purpose of determining whether a trust is a fixed trust under this section, any equitable interest of the trustee as trustee of the trust is to be disregarded.
(3A) If a trust satisfies the relevant criteria, the persons who are beneficiaries of the trust under the trust deed are taken to be owners of an equitable estate in the land that is the subject of the trust and, accordingly, the trust is taken to be a fixed trust.
Note: Under section 25, owners of an equitable estate or interest in land are liable in respect of land tax as if they were legal owners of the land. Owners of an equitable estate in land are treated as secondary taxpayers.
(3B) For the purposes of this section, the
"relevant criteria" are as follows:
(a) the trust deed specifically provides that the beneficiaries of the trust:
(i) are presently entitled to the income of the trust, subject only to payment of proper expenses by and of the trustee relating to the administration of the trust, and
(ii) are presently entitled to the capital of the trust, and may require the trustee to wind up the trust and distribute the trust property or the net proceeds of the trust property,
(b) the entitlements referred to in paragraph (a) cannot be removed, restricted or otherwise affected by the exercise of any discretion, or by a failure to exercise any discretion, conferred on a person by the trust deed.
(b) The definition of "owner" contained in section 3 of the Act reads (as to paragraph (a)) as follows:
(a) in relation to land, every person who jointly or severally, whether at law or in equity:
(i) is entitled to the land for any estate of freehold in possession, or
(ii) is entitled to receive, or is in receipt of, or if the land were let to a tenant would be entitled to receive, the rents and profits thereof, whether as beneficial owner, trustee, mortgagee in possession, or otherwise,
Mr de Wijn advised the Tribunal that the Trust Deeds in respect of the C Trust and the K Trust are cast in the same terms; although the Trust Deed in respect of the B Trust is cast in different terms the Tribunal was advised by Mr de Wijn (TS2) that "those differences do not lead to different conclusions." Having checked the Trust Deeds the Tribunal agrees that that information was correct.
As the submissions before the Tribunal demonstrate, the Applicants do not contend that the Trusts comply with the special criteria set out in section 3A (3B) of the Act and so that and in consequence, the Applicants do not seek to rely on those statutory provisions. (TS8 Lines 32 and 33) The Applicants rely on paragraph (a) (ii) of the definition of "owner" on the basis that in respect of each Trust "the equitable estate in all of the land which is the subject of the trust is owned by a person or persons who are owners of the land for land tax purposes. (TS 8 lines 37 to 39). The Chief Commissioner contends that the Applicants must, in order to succeed, establish that in respect of each Trust the beneficiaries were entitled in respect of each relevant year, and on the taxing date in respect of that relevant year, (if the land had been let) to receive the rents and profits. The Chief Commissioner contends, as noted in clause 6 of RFS that the Applicants conceded that the beneficiaries of the Trusts did not have any estate of freehold in possession in respect of the lands owned by the Trusts. That clause noted (correctly) that the Applicants conceded that the beneficiaries were not at the taxing date presently entitled to the income and capital of the Trusts. The point in issue is neatly encapsulated by clause 9 of RFS as follows:
The needle the Applicants are trying to thread is the difference between "present entitlement to income" in section 3A (4) (which they concede they do not have), and "entitled to receive the rents and profits" in paragraph (a) (ii) of the definition of "Owner" (which "entitlement" they say they had at the relevant dates).
The Applicants' contention in turn can be summed on the basis that they are entitled to succeed if they are entitled to the rents and profits at some time, albeit not the taxing date, and it is not necessary that they be so entitled at the taxing date referable to any relevant year. The Applicants rely on the fact that whereas section 3A refers to a "present entitlement", the definition of "owner" refers merely to an "entitlement" and contend that that statutory distinction has the effect that they were on the taxing dates owners within the definition
Part B the Trust Deeds; the B Trust
It may be noted that the trust deed in GTN Developments Pty Ltd v Chief Commissioner of State Revenue [2007] NSWADT 168 was substantially in the same terms as the Trust Deed in respect of the B Trust. It is also very similar to the deeds considered in Sahab Holdings Pty Limited ATF Kanjian Family Trust v Commissioner of State Revenue for the State of Victoria (2005) 224 CLR 98 and JAM Investments Australia Pty Ltd v Chief Commissioner of State Revenue [2011] NSWADT 76.
Blacktown has a discretion as to the allocation of income for distribution. (Clause 2.25 (c of the B Trust Deed). The Trustee could accordingly calculate income in a manner which excludes rents and profits. The Applicants in their original submissions conceded this point (clause 10 of their original submissions). That concession was withdrawn at the hearing (TS 27 lines 5 to 17).
The Tribunal agrees that the Applicants were correct when they made their original concession. As set out in clause 67 of RFS the B Trust operates in the following manner:
a) Clause 2.16 of the Trust Deed requires the "rents and profits" to be income.
b) Clause 2.25(c) of the Trust Deed gives the trustee a discretion to calculate net income in such manner as the trustee determines in its absolute discretion. This would include allocating rents and profits to the capital account, not for distribution as net income. The provisos in clauses (i) to (iv) of clause 2.25(c) of the Trust Deed do not prevent that.
c) Clause 2.8 of the Trust Deed defines capital as being that part of the trust fund not being income or net income.
d) Accordingly net income is subject to the discretion of the Trustee. Once the Trustee has determined net income it needs to be distributed, subject to the accumulation power in clause 19.3 (which is subject to the unitholders' consent).
e) Clause 20.1 (b) of the Trust Deed gives the Trustee a discretion as to whether to distribute capital to unitholders, and in what amount.
f) Clause 25.1.7 of the Trust Deed provides that the trustee has the following power:
To vary or transpose any investments into or for any other or others of any nature whatsoever and to vary the terms of or property comprised in any security.
The exercise of the Trustee's discretion is absolute and unfettered and cannot be objected to or questioned: clause 3.1. This clause is headed "Discretion" and states:
The expression "absolute discretion" and "shall think fit" as they apply to the exercise, making, doing or performance of any power, right, determination, decision, discretion or authority by the Trustee shall give the Trustee the widest possible discretion in relation to the manner, mode and timing of and whether or not to exercise, make, do or perform the power, right, determination, decision, discretion or authority and the exercise, making, doing or performance of that power, right, determination, decision, discretion or authority shall be final and binding
Through the operation of the above provisions, the Trustee's discretion under clause 2.25(c) of the Trust Deed enables it to sell property for a profit and allocate that profit to capital. The Trustee can decide whether to retain or distribute that capital, under clause 20.1(b) of the Trust Deed. The capital can be reinvested pursuant to the transposition power in clause 25.1.7.
At the hearing, a hypothetical was put to the Tribunal: if the Trustee sold the land for a profit, the Trustee could allocate the profit to the capital account and reinvest it. It must follow that the unitholders cannot say that they are entitled to receive the profits derived in respect of the land.
The Applicants contend that paragraph (a) (ii) of the definition of owner permits only the hypothesis that the land were let to a tenant, and so that the hypothetical put to the Tribunal is not pertinent. The Tribunal does not agree. Paragraph (a) (ii) includes the expression "is entitled to receive ... the rents and profits", which operates without reference to a hypothetical tenancy. In any event, clauses 2.25(c), 20.1(b) and 25.1.7 of the B Trust Trust Deed enable Blacktown to allocate the rental income to capital and reinvest it; it follows that the hypothetical would also apply to the hypothesized tenancy.
It is important in the view of the Tribunal to have regard to the fact that under clause 25.1.29 and 25.1.42 of the B Trust Trust Deed Blacktown has the power to make gits or donations; any such gifts or donations must adversely impact on the entitlements of the beneficiaries to receive rents and profits. The Tribunal does not agree that clause 25.4 of the B Trust Trust Deed has the effect that any charitable donation required the unanimous consent of the beneficiaries; Clause 25.4 reads as follows:
Notwithstanding Clause 25.1, the Trustee may not exercise any power or discretion described in Clauses 25.1 or make any decision or determination under Clause 25.1 in a manner or to the extent that it will or purports to deprive a Unitholder of any vested and indefeasible interest or entitlement of that Unitholder in respect of the entirety (or any particular part share or proportion) of the income, net income or capital of the Trust Fund pursuant and subject to the terms and conditions of this Deed without the consent of that Unitholder.
Clause 25.4 does not in the opinion of the Tribunal have that impact having regard to the fact that the interest of the beneficiaries is subject to the exercise by the Trustee of its powers and including the ability to determine what income is and what is capital and whether to make donations to charities. Clause 25.1. 29 of the Trust Deed entitles the Trustee to make donations for "any charitable scientific religious or educational purposes". The Tribunal agrees with the submissions by the Chief Commissioner that a court will not control the exercise by the Trustee of its discretionary powers unless they are exercised in a manner which is mala fide. The Trustee could not act irresponsibly capriciously or wantonly of for an ulterior purpose (Jacobs; Law of Trusts 7th edition at [1606-1611]. But within these bounds the Trustee can make donations for charitable purposes. Even if the view of the Tribunal in this particular regard is not correct, the overall decision of the Tribunal would not, having regard to what follows later in these reasons, alter.
Part C the Trust Deeds in respect of the C Trust and the K Trust
The Trust Deeds in respect of the C Trust and the K Trust are relevantly the same.
Each Trustee (Chiltern and Kotara) has a discretion in respect of the allocation of income for distribution. Clause 15.1 of each Trust Deed relevantly states:
The Trustee must determine the income of the Trust Fund for each accounting period and may in its discretion determine whether the income of the Trust Fund is to include the whole or part of any receipt profit or gain which would not be credited to the income account for accounting purposes.
The discretion referred to in the preceding clause is absolute and unfettered. See clause 20.10 of each Trust Deed which provides:
Where in this Deed the Trustee is entitled to exercise a power or a discretion such power or discretion shall be an absolute unfettered power or discretion and no Unit Holder or other person except as expressly herein provided shall be entitled to call into question the exercise of such power or discretion or failure to exercise such power or discretion.
The Trustee has a power to make gifts or donations (clause 14.4.42 of each Trust Deed), which will of necessity impinge on the beneficiaries' entitlement to the rents and profits. (Each Deed does not contain an equivalent to clause 25.4 of the Trust Deed in respect of the B Trust.)
The Trustee can determine the amount of income for distribution, for retention, for reserves and for accumulation (Clause 15.2 of each Trust Deed).
The Trustee has a discretion as to whether to distribute capital to unit holders, and in what amount. (Clause 16.2 of each Trust Deed)
The Tribunal accordingly considers that the effect is that the beneficiaries are not relevantly "entitled to receive the rents and profits" of the trust property. They are therefore not "owners" for land tax purposes.
Part D The decision in GTN
In respect of all three Trusts the Tribunal quotes, with approval, clause 63 of the decision of JM Seve in GTN Developments Pty Ltd v Chief Commissioner of State Revenue [2007] NSWADT 168 as follows;
63 In my view, based on the terms of the Trust Deed, as at 31 December 2005, the Unit Holders were not jointly or severally, in equity, entitled to receive, or in receipt of, or if the land were let to a tenant, entitled to receive, the income or capital of the Trust, for the following reasons:
(1) As aforementioned, the rights of the Unit Holders, as Ordinary Unit Holders (with no other classes of units having been issued in the Trust) under the Third Schedule of the Trust Deed, relevantly were, an entitlement to:
(i) the net income and net capital gains of the Trust for any Accounting Period (comment: the net income and net capital gains of the Trust for any Accounting Period are not known until the expiry of the Accounting Period. Accordingly, the net income and net capital gains of the Trust for the Accounting Period in which 31 December 2005 occurred could not be determined until the expiry of that Accounting Period, on 30 June 2006. As such, the Ordinary Unit Holders were not "entitled" to net income and net capital gains of the Trust under the Third Schedule of the Trust Deed as at 31 December 2005); and
(ii) the whole of any distribution of the Trust Fund not arising from income or capital gains other than any part which the Trustee appoints or allocates to any other class of Unit in proportion to the number of Units held by each of them.
(2) Clause 23(e) of the Trust Deed entitles the Unit Holders to such of the net income of the Trust at the end of an Accounting Period as has not already been the subject of a determination. Unless the Applicant (Trustee) resolves in its discretion to make an interim distribution of income of the Trust under Clause 23(d) of the Trust Deed, nothing in the Trust Deed entitles the Unit Holders to the income of the Trust as at 31 December 2005. There was no evidence of any resolution for an interim distribution of the income of the Trust as at 31 December 2005, to the Unit Holders. Accordingly, I find that the Unit Holders were not entitled in equity to the income of the Trust as at 31 December 2005.
(3) The provisions of Clause 4 of the Trust Deed quoted above conflict with the Applicant's claim that the Unit Holders were jointly or severally, in equity, entitled to the income of the Trust as at 31 December 2005, in the circumstance of no resolution for an interim distribution of the income of the Trust as at 31 December 2005 having been made.
(4) Clauses 7(a) and 8 of the Trust Deed do not relate to "income" of the Trust. The "Trust Fund" as defined in the Trust Deed does not refer to income of the Trust Fund other than, accumulations of income and Clause 6 of the Trust Deed 'refers to the Trust Fund and income of the Trust, indicating that the definition of "Trust Fund" does not include income generally (i.e. non-accumulated). Accordingly, Clauses 7(a) and 8 of the Trust Deed cannot support the Applicant's case in the context of the income of the Trust. Even if the Trust Fund where referred to in Clauses 7(a) and 8 does include income of the Trust, in my view, as aforementioned, as at 31 December 2005, Clauses 7(a) and 8 did not confer any proprietary interest in the income or the capital of the Trust.
(5) The reasons abovementioned in relation to land the subject of the Trust, apply equally to capital of the Trust generally.
Part D The decision of the High Court in CPT
The decision of the High Court in CPT Custodians Pty Ltd v Commissioner of State Revenue for the State of Victoria (2005) 224 CLR 98 although decided in respect of the Land Tax Act (Vic) 1958 must be binding on the Tribunal or at the very least must be strongly persuasive; Clauses 22 to 28 of that judgment read as follows:
22.Counsel for the Commissioner, with reference to provisions such as those of the Deed just described, submitted in this Court that (i) as a matter of general law, because the trust deeds conferred upon each unit holder fixed and ascertainable rights, in relation to the distribution of income and capital, and not depending upon the exercise of discretion, the trust deeds conferred upon each unit holder an equitable estate or interest in each asset from time to time comprising the trust fund; (ii) no other person or class had any such rights or interests; and (iii) these equitable estates or interests answered the statutory requirement in the definition of "owner" of entitlement to land for any estate of freehold in possession.
23. The Commissioner added that the position was no different where there was a sub-trust, with a unit holder holding units in a unit trust, the trustee of which in turn held units in a land-holding trust. Such a position arose in the 1996 and 1997 land tax years with respect to the Keilor Downs Plaza Land and in 1997 with respect to the Cranbourne Park Shopping Centre Land. The Commissioner's submissions respecting sub-trusts cannot succeed if the primary propositions (I), (ii) and (iii) fail.
24. Propositions (I) and (ii) may be put to one side and attention first given to proposition (iii) which the critical issue is posed by the taxing law itself. It then is necessary to return to Glenn and what was said there respecting the similar definition of "owner" in the 1910 Act.
Glenn v Federal Commissioner of Land Tax [31]
25. In that case, Griffith CJ said of an argument for the Revenue that it was [32]:
"based on the assumption that whenever the legal estate in land is vested in a trustee there must be some person other than the trustee entitled to it in equity for an estate of freehold in possession, so that the only question to be answered is who is the owner of that equitable estate. In my opinion, there is a prior inquiry, namely, whether there is any such person. If there is not, the trustee is entitled to the whole estate in possession, both legal and equitable."
That statement was a prescient rejection of a "dogma" that, where ownership is vested in a trustee, equitable ownership must necessarily be vested in someone else because it is an essential attribute of a trust that it confers upon individuals a complex of beneficial legal relations which may be called ownership[33]. The current state of authority, exemplified by Commissioner of Taxation v Linter Textiles Australia Ltd (In liq) [34], bears out what was said in Glenn by Griffith CJ. General remarks in Chief Commissioner of Stamp Duties v ISPT Pty Ltd [35], a case referred to extensively in Arjun [36], may be at odds with what was said in Glenn to the extent that they go beyond construction of the particular New South Wales stamp duty legislation, but it is unnecessary to pursue the question here.
26 In Glenn, Griffith CJ construed the statutory expression "estate in possession" as denoting "an estate of which some person has the present right of enjoyment", saying that land tax being an annual tax, "the 'owner' of the land is the person who is in the present enjoyment of the fruits which presumably afford the fund from which it is to be paid"[37]. Where a trust for accumulation was in operation, those who thereafter were to take the trust estate were not entitled to an "estate of freehold in possession" and were not "owners". The Chief Justice continued [38]:
"In my opinion, therefore, when the equitable rights created by a will, which may be as diverse as the testator thinks fit, are such that the beneficial enjoyment of property by a particular object of his bounty cannot begin until the expiration of a determinate or indeterminate period, there is no present estate in possession in that property in any person other than the trustees of the will. In one sense, perhaps, the persons who are for the time being entitled to share in the fruits of the land may collectively be called the equitable owners, but that point is not material to the present case."
27 Thereafter, this Court decided that it followed from Glenn that, while "in one sense" those between whom a testamentary estate would be appropriated at the end of a stipulated period of accumulation of income were equitable owners of land included in the estate, they were not taxable as owners under the 1910 Act [39].
28 .In the present case, Nettle J, who was upheld on this issue by the Court of Appeal, applied to the definition of "owner" in s 3(a) of the Act the reasoning in Glenn. His Honour rejected the submission for the Commissioner, in essence renewed in this Court, that the entitlements of the unit holders made each unit holder an "owner" in the relevant sense. His Honour was correct in doing so.
I also include clause 37 of the judgment in CPT as follows:
On this issue, remarks by Nettle J are in point and conclusive. His Honour said [58]:
"It may well be that the income of the fund as finally constituted and distributed will include all of the rents and profits generated by a particular parcel of land within the fund. But it is distinctly possible that it will not. Each of the deeds gives power to the trustee to provide out of receipts for future and contingent liabilities; to apply receipts in the purchase of any property or business; to invest receipts in authorised investments and to deal with and transpose such investments; and the only right of the unit holder is to a proportionate share of the income of the fund for the year".
The Commissioner contends that the trustees' powers of disposition and transposition make no difference. He submits that insofar as receipts from particular properties may be applied in making payments other than to a unit holder, they must be seen as made on behalf of the unit holder and in that sense as received by the unit holder. He says that it is in principle no different to the case of a simple trust of land with only one beneficiary, under the terms of which the trustee is entitled to apply receipts in the payment of obligations and in the making of provisions in connection with the management of the land. The Commissioner contends that in such a case there can be no doubt that the beneficiary would be liable to tax as 'owner'.
But I think there is a difference. In the case of a simple trust of the kind instanced by the Commissioner the entitlement of the trustee to apply part of the receipts in defined ways determines the amount of the income which the beneficiary has a right to receive. Contrastingly, in a case of a complex unit trust of the kind with which I am concerned, the entitlement of the trustee to apply receipts in defined ways informs the nature of the income that the unit holders have a right to receive: not a total of all of the receipts derived from each asset the subject of the fund but rather such if any income as may be derived from the product of the application of gross receipts in various ways." (footnotes omitted)
Part E Summary and conclusion
It does not follow that because one section (section 3A) refers to "presently entitled" while section 3 (definition of "owner") refers to "entitled' the two references must of necessity have different meanings. As the Chief Commissioner submits, we are here dealing with two composite clauses each containing different words and laden with interpretative history. The principle of statutory interpretation on which the Applicants seek to rely does not in the view of the Tribunal operate to require that the words" "entitled to receive rents and profits" cannot be read as a "present entitlement" as at a taxing date simply because another section of the Act contains those "presently" entitled words.
In any event the Tribunal considers that the term "entitled" must be construed so as to refer to an entitlement (to rents and profits and whether or not notional) which have been ascertained and which is incapable of being defeated. In respect of the Trust Deeds in this case and pending the exercise by each Trustee of its powers and discretions under the relevant Trust Deed no beneficiary could be heard to contend that is entitled to a specified amount. It must be remembered that, unlike the trust deed in GTN, each Trustee had no power to make an interim distribution and whether on the taxing date or otherwise. The finding in GTN was made despite the fact that the deed in that case did in fact include just such a power.
The Tribunal considers that the definition of "owner" must of necessity be related to a date so as to enable a finding as to whether on that date the beneficiary was indeed an owner. The relevant date for the purposes of this case would in respect of each relevant year be the taxing date and on which not date no beneficiary of any of the Trusts could be heard to say that he was entitled (and whether on that date or later) to any ascertained amount..
In these circumstances the Tribunal finds that in respect of each Trust the beneficiaries were not owners and this being so the decisions under review must be affirmed.
I hereby certify that this is a true and accurate record of the reasons for decision of the Administrative Decisions Tribunal.
Registrar
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Decision last updated: 19 September 2013
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