Baxter v Chief Commissioner of State Revenue

[2024] NSWCATAD 153

Civil and Administrative Tribunal

New South Wales

Medium Neutral Citation:

Baxter v Chief Commissioner of State Revenue [2024] NSWCATAD 153

Hearing dates:

10 May 2024

Date of orders:

31 May 2024

Decision date:

31 May 2024

Jurisdiction:

Administrative and Equal Opportunity Division

Before:

E A MacIntyre, Senior Member

Decision:

The matter is remitted to the Chief Commissioner of State Revenue for determination in accordance with this decision.

Catchwords:

ADMINISTRATIVE LAW — administrative review — assessment — objection — appeal

DUTIES — dutiable transaction — agreement for sale or transfer — land in NSW — transfer — change in beneficial ownership — discretionary trust — fixed trust — construction of agreements

TRUSTS — trustee’s right of indemnity — beneficial interest — value — powers of trustee – discretions of trustee

REAL PROPERTY — transfer — registrable — electronic conveyancing — PEXA — rights under unregistered dealing — equitable ownership

Legislation Cited:

Administrative Decisions Review Act 1997 (NSW)

Civil and Administrative Tribunal Act 2013 (NSW)

Conveyancing Act 1919 (NSW)

Duties Act 1997 (NSW)

Duties Act 2000 (Vic)

Electronic Conveyancing National Law

Income Tax Assessment Act 1936 (Cth)

Land Tax Management Act 1956 (NSW)

Real Property Act 1900 (NSW)

Taxation Administration Act 1996 (NSW)

Cases Cited:

Bahr and Anor v Nicolay and Others (No 2) (1988) 164 CLR 604

Barry v Heider [1914] HCA 79; (1914) 19 CLR 197

Chief Commissioner of Stamp Duties (NSW) v Buckle [1998] HCA 4; 192 CLR 226; 151 ALR 1; 72 ALJR 243

Chief Commissioner of Stamp Duties (NSW) v ISPT Pty Ltd (1998) 45 NSWLR 639

Commissioner of Taxation v Commercial Nominees of Australia Ltd [1999] FCA 1455

Commissioner of Taxation v Commercial Nominees of Australia Ltd [2001] HCA 33

CPT Custodian Pty Ltd v Commissioner of State Revenue [2005] HCA 53

Jones v Dunkel (1959) 101 CLR 298

K.L.D.E Pty Limited. v Commissioner of Stamp Duties (Q.) [1984] HCA 63; (1984) 155 CLR 288

Rakmy Pty Ltd v Commissioner of State Revenue [2017] VSC 237

Saunders v Vautier [1841] 41 ER 482

Tanwar Enterprises Pty Ltd v Cauchi [2003] HCA 57; 217 CLR 315; 201 ALR 359; 77 ALJR 1853

Worrall v Harford [1802] Eng R 342

Category:

Principal judgment

Parties:

Cynthia Gana Baxter (Applicant)
Chief Commissioner of State Revenue (Respondent)

Representation:

Counsel:
A Rider (Respondent)

Solicitors:
Munro Lawyers (Applicant)
Crown Solicitor (Respondent)

File Number(s):

2023/00283529

Publication restriction:

None

REASONS FOR DECISION

1. Cynthia Gana Baxter (“Applicant”) has applied for administrative review of a decision of the Chief Commissioner of State Revenue (“Respondent”) about whether duty is payable on a variation of a trust instrument and if it is, the amount of duty payable. The Applicant does not consider that any duty is payable. The Respondent considers that duty is payable, on the basis that the variation of trust amounted to a “change in beneficial ownership of dutiable property”. The dutiable property comprised two parcels of land in NSW.

2. In summary, I have decided that the matter be remitted to the Chief Commissioner of State Revenue for determination in accordance with this decision because:

1. a change in beneficial ownership of dutiable property occurred as a result of variation of the trust instrument;

2. the land in New South Wales, the subject of that change, included one of the parcels of land held on trust but not the other parcel of land.

Legislative Framework

3. The Duties Act 1997 (NSW) (“Duties Act”) charges duty on certain transactions that it describes as “dutiable transactions” (s 8 of the Duties Act). Where duty has been assessed on a transaction as such, s 86 of the Taxation Administration Act 1996 (NSW) (“Administration Act”), allows to a taxpayer dissatisfied with an assessment, rights of objection. This is an internal review process under which the Chief Commissioner of State Revenue, the Respondent in these proceedings, must consider and determine the objection (s 91 of the Administration Act).

4. A taxpayer who is dissatisfied with the decision made upon the Respondent’s determination of an objection, may apply to the NSW Civil and Administrative Tribunal (“Tribunal”) for an administrative review under the Administrative Decisions Review Act 1997 (NSW) of the decision of the Chief Commissioner of State Revenue.

5. These circumstances have arisen in the present matter as set out in the background below, so bringing the matter within the jurisdiction of the Tribunal. That the Tribunal has jurisdiction to deal with the present matter was not disputed.

6. The Tribunal, dealing with the taxpayer’s application, may do one or more of the following under s 101(1) of the Administration Act:

(a) confirm or revoke the assessment or other decision to which the application relates,

(b) make an assessment or other decision in place of the assessment or other decision to which the application relates,

(c) make an order for payment to the Chief Commissioner of any amount of tax that is assessed as being payable but has not been paid,

(d) remit the matter to the Chief Commissioner for determination in accordance with its finding or decision,

(e) make any further order as to costs or otherwise as it thinks fit.

Background

7. Under a deed dated 10 January 2021 titled “Discretionary Trust Deed” (Trust Deed), Parkdaill Pty Ltd as trustee (“Trustee”), established a trust named the “Windsmere Family Trust” (“Trust”). The Trust Deed allowed the Trustee an absolute discretion to decide to distribute any part of the income of the Trust to any person named in the Schedule as beneficiaries. The persons so identified as “named beneficiaries” were the Applicant, her spouse John Charles Baxter and her son Antonio Stuart Baxter. Distributions of income were also allowed to be made to classes of “eligible beneficiaries”, including various other family members (clause 9 of Trust Deed).

8. Where no discretion was exercised, on or prior to 30 June of any financial year, the income of that year was to be held on trust in specified shares for the “named beneficiaries” who were alive at the time. If none were alive at that time, certain other persons took in specified shares (clause 12 of the Trust Deed).

9. The Trustee also had an absolute discretion to decide to distribute the trust fund in any proportions the Trustee decided, to any one or more persons named in the Schedule as beneficiaries or members of the classes of “eligible beneficiaries” (clause 27 of the Trust Deed).

10. In default of exercise of discretion, the amounts in respect of which the discretion had not been validly exercised were to be held for specified persons. The Trustee had to distribute those amounts to the “named beneficiaries” who were alive on the vesting day, and if more than one, as tenants in common. If no named beneficiary was alive, certain others took in specified proportions (clause 28 of the Trust Deed).

11. In 2021, the Trustee in its capacity as trustee of the Trust acquired two properties in New South Wales. They were located at 54 Ridge Street, Surry Hills (“Ridge Street Property”) and 15 Norton Street, Surry Hills (“Norton Street Property”).

12. John Baxter, the Applicant’s husband, set out in his statement of 13 November 2023 (exhibit A, para 6) that agreement was reached for the transfer by the Trustee of the Ridge Street Property for market value consideration, or the “purchase price” (if the value was below the “purchase price” for which the Ridge Street Property had been acquired by the Trustee) to the Antonio Baxter, the Applicant’s son). The funds for the purchase and stamp duty were agreed to be provided by way of a loan from the Trustee (exhibit A, para 7). For ease of reference, I will refer to John Baxter as ‘husband’ and Antonio Baxter as ‘son’.

13. In October 2022, a valuation determined a value of $2,750,000 for the Ridge Street Property. As the market value was below the “purchase price”, it was “agreed that the Property would be transferred to Antonio for $2,815,000” (exhibit A, para 9). These arrangements were not put into writing at that time.

14. The son’s evidence was that he agreed to purchase the Ridge Street Property for market value or the original purchase price. He also states that he did not have the funds to pay for the Ridge Street Property and agreed to borrow from the Trustee (exhibit B, para 5-7).

15. The husband’s evidence was that on 13 November 2022, he and the Applicant executed;

1. a paper transfer form for the Ridge Street Property;

2. a client authorisation form enabling the transfer to be registered with PEXA (exhibit A, para 10).

16. The transfer was not dated by the husband but bore a date of 21 November 2022 added by hand.

17. The transfer took the form of a “Transfer” in the former standard form under the Real Property Act1900 (NSW). A “Purchaser/Transferee Declaration – Individual” (Form ODA 076) (“Purchaser’s Declaration”) was also in evidence. It bore the signature of the son but was undated. It referred to a date of agreement for sale or transfer, being 21 November 2022.

18. A loan agreement and mortgage were entered into between the Trustee as such and the son, evidencing a loan by the Trustee to the son of $2,815,000 plus the duty payable in respect of the proposed transfer of the Ridge Street Property. That loan was to be advanced “on the Date of this Agreement”. The loan agreement bore a date of 28 November 2022. The mortgage securing the loan made under the loan agreement bore a date of 21 November 2022. It referred to the loan agreement and the date of that agreement, being 28 November 2022. The dates on the loan agreement and mortgage had been handwritten.

19. The husband’s evidence was that the loan agreement and mortgage were signed by the Applicant and him on or before 21 November 2022 but not dated. The husband was “unsure” why the loan agreement was dated 28 November 2022 (exhibit A, para 16). In his oral evidence, the husband stated that he believed that the date of 28 November 2022 was added in error. He also stated that regardless of the date of each relevant agreement, “there was no doubt between the parties that the loan agreement was effective from the date of execution by both parties, being 21 November 2022” (exhibit A, para 17).

20. The transfer was provided to a representative of the Chief Commissioner of State Revenue on 21 November 2022. The husband’s evidence was that the transfer was provided to the Respondent undated and later dated 21 November 2022 (exhibit A, para 14).

21. On 21 November 2022, the Respondent’s representative issued a “Duties Notice Assessment” for a total of $135,450 addressed to the son as the “Liable party”, based on a dutiable value of $2,750,000. A “Duties Statement” bearing the same date stated the “Dutiable amount” to be $2,750,000. It also described the “Document type” to be a “Transfer of real property”.

22. The transfer of the Ridge Street Property was electronically registered with Land Registry Services through the PEXA platform on 28 November 2022.

23. The husband’s evidence was that the transfer, loan agreement and mortgage were dated subsequent to execution by him.

24. On 22 November 2022, the Trustee executed a deed of variation amending the Trust Deed. The amendments made by the deed of variation were intended to change the Trust into a “fixed trust” for the purposes of the Land Tax Management Act 1956 (NSW).

25. The deed of variation effected the following changes.

1. The “beneficiary” of the Trust identified in clause 2 of the amended Trust Deed became the Applicant Cynthia Baxter.

2. The “named beneficiary” was allowed a “present entitlement” to all income and capital of the Trust in each income year, subject only to the payment of property expenses by the Trustee in relation to the administration of the Trust (clause 8 of the amended Trust Deed). The income was to be held for the absolute benefit of the “beneficiary” (clause 9 of the amended Trust Deed). The “beneficiary” had a right to an immediate and indefeasible vested interest in the income of the trust fund for each year. The Trustee had, prior to the termination of the trust power, to pay or apply the whole or any part of the trust fund to or for the benefit of “the beneficiary” (clause 9 of the amended Trust Deed). Previously, no beneficiary had an interest in any part of the trust fund or any income, either individually or as a group. Their entitlements were subject to the Trustee’s discretion but in default of exercise of discretion, certain entitlements vested in relevant beneficiaries.

3. In the “Definitions” in the Trust Deed, “Beneficiary” was amended to mean “the beneficiary named in the schedule”. Previously, that definition captured “a beneficiary” named in the Schedule or relevant “eligible beneficiaries”.

4. In the Schedule of the Trust Deed, certain further amendments were made.

1. The definition of “Beneficiary” was deleted and replaced with:

“Beneficiary      Cynthia Gana Baxter”

2. The section labelled “Beneficiary” in the Schedule was to be deleted and replaced with:

“Beneficiary: Cynthia Gana Baxter”

3. The definition of “Class of eligible beneficiaries” was deleted.

4. Before the variation, there had been a heading in the Schedule “Named beneficiaries”, with the names of the Applicant, husband and son set out underneath.

5. The heading “Named Beneficiaries” was deleted and replaced with the “Named Beneficiary”. However, there was no express deletion of the references to the Applicant, the husband and the son under that heading.

26. On 31 March 2023, the Respondent issued two separate assessments to the Applicant in the amounts of $88,304.04 and $140,583.68 in respect of both the Norton Street Property and the Ridge Street Property. The basis of the assessments was that the deed of variation resulted in a “change in beneficial ownership” in respect of both properties.

27. On 9 May 2023, the Applicant objected to these assessments of duty. By letter dated 6 July 2023, the Respondent disallowed the objection. In addition, the Respondent advised the Applicant that the two transactions should have been treated as a single dutiable transaction with duty chargeable on the total unencumbered value of the two properties. The duty reassessed was $242,150.

28. The Applicant objected to the reassessment on 28 September 2023.

29. The Respondent in determining the objection, partly allowed the objection by way of a reduction of the interest component and issued another reassessment on 5 October 2023. It is that determination which the Applicant is seeking review of in these proceedings.

Consideration

30. The provision the Respondent relies on to assess duty is s 8 in Chapter 2 of the Duties Act. Section 8 charges duty in the following terms:

8 Imposition of duty on certain transactions concerning dutiable property

(1) This Chapter charges duty on—

(a) a transfer of dutiable property, and

(b) the following transactions—

(i) an agreement for the sale or transfer of dutiable property,

(ii) a declaration of trust over dutiable property,

(iii) a surrender of an interest in land in New South Wales,

(iv) a foreclosure of a mortgage over dutiable property,

(v) a vesting of dutiable property by or as a consequence of an order of a court of this or another jurisdiction, whether inside or outside Australia,

(vi) the enlargement of a term in land into a fee simple under section 134 of the Conveyancing Act 1919,

(vii) a vesting of land in New South Wales by, or expressly authorised by, statute law of this or another jurisdiction, whether inside or outside Australia,

(viii) a lease in respect of which a premium is paid or agreed to be paid,

(ix) another transaction that results in a change in beneficial ownership of dutiable property, other than an excluded transaction.

31. The Respondent submitted that upon the deed of variation occurring, the discretionary trust known as the “Windsmere Family Trust” ceased to exist and a new fixed trust came into existence. The deed of variation, both “in form and substance, created an entirely new fixed bare trust”. It also created new equitable interests in the trust property, from being previously held by the Trustee of a discretionary trust to being held absolutely and solely for the Applicant. There was also a termination of the former discretionary trust.

32. The Respondent also submitted that exchange of the relevant documents dealing with the Ridge Street Property did not occur on 21 November 2022 but occurred on 28 November 2022 when the documents were dated and/or exchanged on PEXA. The Respondent submitted that the relevant documents were not proved to be an executed agreement for the transfer of the Ridge Street Property on 21 November 2022 (Respondent’s Outline of Submissions dated 21 December 2023, paragraph 19).

33. Further, the Respondent’s position was that the deed of variation made the Applicant the sole beneficiary of the new trust created as a result of the deed of variation and that the Applicant’s husband and son were not beneficiaries.

34. The Respondent also submitted that whether the Trustee’s right of indemnity had any substance was a question of fact about which the Applicant had failed to put on evidence. The Trustee’s right of indemnity therefore could not have a bearing on the matter.

35. The Applicant made submissions that she did not obtain any ownership interest in the Trust assets as a result of the deed of variation. This was because her interests were neither absolute, vested nor indefeasible. She submitted that all that the beneficiaries were entitled to under the Trust Deed was an “undetermined and uncertain surplus (if any) following the payment of the uncertain amounts” (Applicant’s Outline of Submissions dated 15 November 2023, paragraph 54). In addition, the Trustee also had an interest in the trust estate by virtue of the express rights provided under the Trust Deed, as amended by the variation. The Applicant submitted that the reasoning in CPT Custodian Pty Ltd v Commissioner of State Revenue [2005] HCA 53, that the beneficiaries of the unit trust the subject of that case were not the owners of the trust property, should also apply to “fixed trusts”.

36. The Applicant also submitted that while the Applicant as “the beneficiary” had the income of the trust held for her absolute benefit, the “named beneficiaries”, under the deed of variation remained, on a proper construction of the deed of variation, the Applicant, her husband and her son. She therefore was not solely the beneficial owner.

37. As regards the Ridge Street Property, the Applicant submitted that there was an executed agreement for the transfer of that property to her son as at 21 November 2022. The signed transfer represented that contract for the transfer to her son and on entry, he acquired an equitable interest in the Ridge Street Property, commensurate with his entitlement to obtain a decree of specific performance.

38. As to the Trustee’s right of indemnity, the Applicant did not consider that statutory provisions dealing with trustee’s right of indemnity, affected her position that the variation did not result in a change in beneficial ownership. The Applicant was of the view that such exclusion confirmed that the trustee’s rights sat in priority to any interest of a beneficiary. The Respondent, on the other hand, argued that the exclusion of the trustee’s right of indemnity necessarily implied that any change in the beneficiaries’ equitable interest in dutiable property arising from a trustee’s right of indemnity should be disregarded in determining whether there has been a change in beneficial ownership of dutiable property. This was a result of the statutory context that provided for the exclusion of a change in a trustee’s right of indemnity.

What was the effect of the variation?

39. The income, following the deed of variation, was to be held for the absolute benefit of the “beneficiary” (clause 9 of the Trust Deed). There was no dispute that deed of variation had the effect of vesting in the Applicant all income of the Trust.

39. Where there was a difference between the parties was who had entitlements to capital of the Trust after the variation. The Respondent submitted that the Applicant had these entitlements. The Applicant submitted that any entitlements to capital may have vested in the Applicant together with her husband and her son, but that this was “unclear”.

40. The “beneficiary” of the Trust identified in clause 2 of the Trust Deed became Cynthia Gana Baxter. The “Definitions” in the Trust Deed, were amended so that the “Beneficiary” meant “the beneficiary named in the schedule” (emphasis added). The variation inserted the following words into the Schedule of the Trust Deed:

“Beneficiary Cynthia Gana Baxter”

Before the deed of variation, that definition in the Definitions captured “a beneficiary” named in the Schedule or relevant “eligible beneficiaries”.

42. The doubt in the matter arises out the amendments to the provisions dealing with “named beneficiaries” before and after the deed of variation. Following the deed of variation, the Trust Deed referred to the “named beneficiary”, who was allowed a “present entitlement” to all income and capital of the Trust. The heading in the Schedule setting out under it who they were before the deed of variation, was changed from “named beneficiaries” to “named beneficiary”. In deleting the heading “named beneficiary”, what is not clear is whether the intention was also to delete the contents under that heading and replace them with the name of the Applicant. The change in the heading from “named beneficiaries”, in the plural, to “named beneficiary”, in the singular, indicates that this was the intention, having regard also to the effect of all of the amendments described below at [43].

43. That the “beneficiary” of the Trust identified in clause 2 became only the Applicant, and the continuous use of the singular form in referring to the “beneficiary” and the “named beneficiary”, indicates that the Applicant alone was intended to be the beneficiary of the Trust. A construction of the words “named beneficiary” where used in the Trust Deed, after making the variation, as meaning simply the “beneficiary” named such in clause 2 and the Schedule of the Trust Deed, in other words, the Applicant, appears what was intended. Otherwise, it appears that the intended effect of the removal of the heading “named beneficiaries” may have been also to remove the contents under that heading and replace them with the Applicant’s name.

44. If I am wrong in my conclusion as to what the parties intended and the Applicant’s husband and son remained beneficiaries as to capital after the variation, these circumstances do not, in any event, affect the conclusions I reach as to whether there was a change in beneficial ownership for the reasons set out at [68] below.

Was there a “change in beneficial ownership”?

45. Whether the deed of variation produced a “change in beneficial ownership” of the property the subject of the Trust is the next question.

46. What is “beneficial ownership”, a “change in beneficial ownership” and an “excluded transaction” within the meaning of s 8(1)(b)(ix) are defined in s 8(3) of the Duties Act as follows:

beneficial ownershipincludes ownership of dutiable property by a person as trustee of a trust.

change in beneficial ownershipincludes the following—

(a) the creation of dutiable property,

(b) the extinguishment of dutiable property,

(c) a change in equitable interests in dutiable property,

(d) dutiable property becoming the subject of a trust,

(e) dutiable property ceasing to be the subject of a trust.

…

excluded transaction means the following—

(a) the purchase, gift, allotment or issue of a unit in a unit trust scheme,

(b) the cancellation, redemption or surrender of a unit in a unit trust scheme,

(c) the abrogation or alteration of a right relating to a unit in a unit trust scheme,

(d) the payment of an account owing for a unit in a unit trust scheme,

(e) the grant, renewal or variation of a lease for no consideration,

(f) the grant of an easement for no consideration,

(g) the grant of a profit a prendre for no consideration,

(h) the provision of a security interest within the meaning of the Personal Property Securities Act 2009 of the Commonwealth,

(i) a change in a trustee's right of indemnity,

(j) the creation of an interest in dutiable property by statute,

(k) a transaction of a kind prescribed by the regulations,

(l) a combination of the transactions referred to in paragraphs (a)-(k).

47. Section 8(1)(b)(ix) of the Duties Act was introduced into that Act with effect from 19 May 2022 under the State Revenue and Fines Legislation Amendment (Miscellaneous) Act 2022 (NSW). A comparable provision is found in the Duties Act 2000 (Vic). Although no case law considering s 8(1)(b)(ix) was argued before the Tribunal (no doubt, on account of the relatively recent enactment of the provision), certain case law considering the comparable provision in the Duties Act 2000 (Vic) was placed before the Tribunal.

48. Rakmy Pty Ltd v Commissioner of State Revenue [2017] VSC 237 (“Rakmy”) considered the meaning of what comprised a “change in beneficial ownership” within the meaning of s 7(4) of the Duties Act 2000 (Vic). A “change in beneficial ownership” relevantly was defined to include five paragraphs in identical terms to the equivalent five paragraphs in the definition of that term in s 8(3) of the Duties Act.

49. Croft J in Rakmy referred to a decision of the Supreme Court of New South Wales, Chief Commissioner of Stamp Duties v ISPT Pty Ltd (1998) 45 NSWLR 639, in which Fitzgerald AJA described the effect of equivalent provisions in now repealed NSW legislation. Those provisions were said to be materially concerned with a change which involves “different persons beneficially owning an estate or interest before and after the relevant transaction”. The Court in Rakmy went on to hold, however, that there was a change in beneficial ownership where property the subject of one trust became the subject of another, even though the beneficiary of both trusts was the same entity.

50. Whether there was a “change in beneficial ownership”, as submitted by the Respondent, turns on the nature of the interests held before and after the variation and what if any change occurred as a result of the variation.

51. The effect, in equity, of a variation of a trust providing certain benefits to members of the trust fell for consideration in Commissioner of Taxation v Commercial Nominees of Australia Ltd [1999] FCA 1455 (“Commercial Nominees”), in the context of the Income Tax Assessment Act 1936 (Cth). A trust deed was amended pursuant to a power under the trust. One of the amendments effected was a change in the nature of benefits to which members were entitled. New classes of membership were also created. A question before the Federal Court was whether existing trusts were extinguished and new trusts created by the amendments in question. The Federal Court held that the amending deed in question did not, of itself, create new beneficial interests. It merely created the potential for such interests in the event that certain new memberships were taken up. A comparison of the rights and prospective entitlements of members under the old and new arrangements, indicated that they were essentially the same. Under the former and new arrangements, the members had no entitlement to any specific property.

52. In holding that there was a continuity in the existence of the trust in question rather than the creation of a new trust, the Court noted that “any amendment of the trust obligations relating to such trust property is made in accordance with any power conferred by the instrument creating the obligations, and continuity of the property that is the subject of trust obligation is established” (at [56]). An appeal to the High Court from the decision of the Federal Court was dismissed (Commissioner of Taxation v Commercial Nominees of Australia Ltd [2001] HCA 33).

53. Section 8(1)(b)(ix) applies to “another transaction” that results in a change in beneficial ownership of dutiable property, subject to relevant exclusions. In other words, transactions referred to in the preceding paragraphs (i) to (viii) of s 8(1)(b) are brought to duty, if they fall within any of these particular paragraphs. Where such a transaction produces a change in beneficial ownership of dutiable property, it will be taxed under the relevant paragraph (i) to (viii). Where, however, a transaction that results in a change in beneficial ownership does not fall within any of these paragraphs, as “another transaction” that results in a change in beneficial ownership of dutiable property, it should fall with paragraph (ix). In this regard, paragraph (ix) operates as a “catch all” provision that may bring to duty relevant transactions that escape the preceding eight paragraphs.

54. The second reading speech in the Legislative Council accompanying the bill introducing paragraph (ix) into s 8(1)(b) of the Duties Act, the State Revenue and Fines Legislation Amendment (Miscellaneous) Bill 2022 (NSW) describes the wide reach intended for paragraph (ix) in the following terms:

“Duty is chargeable on certain transactions of dutiable property. The broad intention of the Act is that changes in ownership of property—be they changes in legal or beneficial ownership—will, subject to some exceptions and concessions, attract duty.

Currently, however, there is scope to avoid duty by structuring affairs such that, while there is no change in the legal ownership of dutiable property, the beneficial ownership changes.

I will give you one example: a fixed trust holding land in New South Wales that has two beneficiaries, each with an equal interest and one of these beneficiaries disposes of their 50 per cent interest to the other beneficiary. There is no change in the legal ownership of the land, which is held by the trustee, but the remaining beneficiary has now acquired an additional 50 per cent beneficial interest in the land, without any duty being incurred. This is obviously contrary to the intentions of the Act.

This bill will clarify that a change in beneficial ownership of land is a dutiable transaction, aligning our provisions with Victoria. This will help to prevent avoidance of duty.”

55. Section 8(3) of the Duties Act defines a “change in beneficial ownership” to “include” five specific things. The inclusive terms of the definition indicate that what amounts to a “change in beneficial ownership” generally may be subject to taxation, as well as any matter falling within the five paragraphs (a) to (e) of the definition.

56. Paragraph (c) brings a “change in equitable interests in dutiable property” within the definition of “change in beneficial ownership”. Whether paragraph (c) can capture the variation will, in the circumstances of the case, depend firstly on whether equitable interests in the property the subject of the Trust existed prior to the variation. Secondly, following the variation, these interests must have changed and different equitable interests have come into existence. This requires both identification of what equitable interests existed before the variation and what interests came into being after the variation.

57. What comprises an “equitable interest”, first of all, requires consideration. Equity as it stands today, does not necessarily require that legal ownership in a trustee carries a corollary that corresponding rights of full ownership in equity must vest in some other persons or persons. Equity recognises a range of interests that may fall short of something like full ownership rights in equity of the kind of contemplated in Saunders v Vautier [1841] EWHC Ch J82 (1841) Cr & Ph 240, (1841) 4 Beav 115 8; 41 ER 482. The principle drawn from that case allows the beneficiary so entitled, the right to require an immediate transfer from the trustee of the legal estate.

58. The following observations of the High Court in CPT Custodian Pty Ltd v Commissioner of State Revenue [2005] HCA 53 (“CPT Custodian”), at [25] confirm that an interest in equity may include rights that amount to something less than full ownership.

“Griffith CJ said of an argument for the Revenue that it was:

‘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.”

The particular question is what kind of interests arose in equity under the Trust before the variation.

59. The features of the Trust before the deed of variation were those of what may be thought in general terms to be a “discretionary trust”. The nature of the interests of beneficiaries in a trust of this kind is therefore relevant. What these interests were, was described by the High Court in Chief Commissioner of Stamp Duties(NSW) v Buckle [1998] HCA 4; 192 CLR 226; 151 ALR 1; 72 ALJR 243 (“Buckle”). The High Court said, at [8] to [9]:

"discretionary trust" has no fixed meaning and is used to describe particular features of certain express trusts…..In the case of the … [Deed of Settlement under consideration in the case]…., the identity of those who might receive income or capital, the amounts they might receive, the period or duration of the trusts, the content from time to time of the fund impressed with those trusts, and the very terms of the trusts themselves all depended wholly or significantly upon the exercise of, or the failure to exercise, powers bestowed by the Deed of Settlement upon the trustee. In such a case, the term "discretionary trust" serves a useful purpose in emphasising the strong position occupied by the trustee and the instability of the interests and prospective interests of those taking under the Deed of Settlement”.

60. The High Court also said:

“.. a "discretionary trust" is not a component of the doctrinal divisions by which there is determined the formal and essential validity of trusts. For this purpose, divisions are made between express trusts, implied or resulting trusts, and constructive trusts, between purpose trusts and non-purpose trusts, between trust powers and bare powers, and between testamentary trusts and settlements inter vivos. On the other hand, "discretionary trust" has no fixed meaning and is used to describe particular features of certain express trusts”.

The High Court in Buckle went on to describe the terms of the trust instrument under consideration in that case in the following terms, at [9] to [10].

“In the case of the Deed of Settlement, the identity of those who might receive income or capital, the amounts they might receive, the period or duration of the trusts, the content from time to time of the fund impressed with those trusts, and the very terms of the trusts themselves all depended wholly or significantly upon the exercise of, or the failure to exercise, powers bestowed by the Deed of Settlement upon the trustee. In such a case, the term "discretionary trust" serves a useful purpose in emphasising the strong position occupied by the trustee and the instability of the interests and prospective interests of those taking under the Deed of Settlement …...”.

61. The High Court specifically considered the entitlements of the beneficiaries as follows (at [15] to [17]):

“Clause 2.1 dealt with the treatment of net annual income derived by the trustee before the distribution date. The trustee might determine that the whole or any part of this income was to be accumulated and, if so, it would be added to and form part of the capital of the Trust Fund (cl 2.11). The trustee also was given a broadly expressed power to pay or distribute the income among the beneficiaries and to apply it for their maintenance, education and advancement (cl 2.12). As to the balance not dealt with under cl 2.11 or cl 2.12, the trustee was required by cl 2.13 to hold it upon trust for such of the children as were living at the end of the year in question and, if more than one, in equal shares as tenants in common per stirpes.

The consequence was that, subject to the operation of cl 2.13, before the distribution date (being 7 August 2071 or an earlier date determined as a matter of "absolute discretion" by the trustee), receipt by any beneficiary of funds representing income or corpus would only come about by reason of the exercise of powers conferred upon the trustee with respect to the disposition of income and the making of advancements and appropriations from the Trust Fund. Moreover, the class of beneficiaries might be extended from time to time.

The position of the trustee was further strengthened by the power of variation conferred by cl 14. This gave the trustee a power exercisable upon the giving of notice to the Appointor being, in the events that happened, the same person. The power was one to vary, add to or revoke any of the terms of the Deed of Settlement or any of the trusts, powers or obligations conferred or imposed by it upon the trustee. This was subject to the proviso (cl 14.1) that the exercise of the power was not to have the effect of divesting or modifying in any way any interest of a beneficiary in income to which that beneficiary had become absolutely entitled. Nor was any interest or benefit, capital or income to be created thereby in favour of the trustee.”

62. The High Court then described what the beneficiaries had, in the following terms (at [23] to [24]):

“The interest of each respondent was vested but subject to divesting upon death before the distribution date. The interest was also liable to divestment by the exercise of the power of appointment in cl 2.21.

Moreover, the extensive powers given the trustee, exercisable at discretion and from time to time, rendered unstable the content of those interests. For example, at any time the whole of the Trust Fund might be resettled under cl 15, the terms of the Deed of Settlement might be further varied, added to or revoked under cl 14, and the Trust Fund depleted or exhausted by the making of advancements under cl 5.1.”

63. The provisions of the Trust Deed before the deed of variation, are broadly comparable with those considered in Buckle, creating interests that were recognised in equity as “vested but subject to divesting”. The Trustee, prior to the variation, had powers and discretions to distribute income of the Trust to any named beneficiary, being the Applicant, the husband and the son, or any members of an eligible class of beneficiaries. Where no discretion was exercised, on or before 30 June of any financial year, the income of that year was to be held on trust for the named beneficiaries in equal shares. The Trustee also had the discretion to distribute the “trust fund” to any relevant beneficiaries. In default of exercise of discretion, the amounts in respect of which the discretion had not been validly exercised were to be held for specified persons. The Trustee had to distribute those amounts to the “named beneficiaries”. The Trustee also had certain powers to add and delete beneficiaries (clauses 6 and 7 of the Trust Deed before variation).

64. Following the deed of variation, the entitlements of beneficiaries changed. Their equitable interests were no longer interests subject to the discretion of the Trustee. The “beneficiary” as to income became the Applicant solely. To the extent that she was also the “named beneficiary”, she had a present entitlement to all income and capital of the Trust in each income year, subject only to the payment of property expenses by the Trustee in relation to the administration of the Trust.

63. The Trust became a “fixed trust” within the meaning of the Land Tax Management Act 1956 (NSW). Section 3A(2) of that Act provides as follows:

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)).

That the Trust became a “fixed trust” as so defined was not in dispute. In other words, what were previously interests in default under a discretionary trust of the kind governed by the Trust Deed before the variation, became an equitable estate of “owners”. The interests of the unitholders considered in CPT Custodian were found to be something less than this. I do not think that interests of the relevant kind held by unitholders are the same thing as the interests of “owners” expressly vested with “present entitlements” to income and capital as in the present case.

66. It follows that the effect of the variation, was to produce a change in beneficial ownership of the property of the Trust. The interests held by the beneficiaries of the Trust before the variation were interests that were vested but subject to divestment. After the variation, beneficial entitlements no longer depended on the discretions of the Trustee that previously applied. They now were vested as present entitlements.

67. The Applicant raised doubts as to whether the beneficiaries as to capital had changed as a consequence of the variation, in that the “named beneficiaries” remained the Applicant, the husband and the son. I find that the variation, on a proper construction, effected a change that left the Applicant solely as the beneficiary for the reasons set out at [43] above.

68. In any event, even if the Applicant, the husband and the son had remained as “named beneficiaries”, the effect of the variation was to vest in them a present entitlement to capital, so changing what they previously had as default beneficiaries. These circumstances would have produced a change in beneficial ownership for the reasons set out above.

69. I do not need to decide whether the variation had the effect of resulting in either “dutiable property becoming the subject of a trust” or “dutiable property ceasing to be the subject of a trust” within paragraphs (d) and (e), having found that the variation amounted to a “change in equitable interests in dutiable property” within paragraph (c). Nevertheless, I make the following observations.

70. Each of paragraphs (d) and (e) refer to “a trust”. Dutiable property must respectively become the subject of that trust or cease to be subject of that trust. The submissions made on behalf of the Respondent was that the variation both created a new trust over the relevant land and ended a prior trust, so bringing the variation within paragraphs (d) and (e).

71. The Applicant, on the other hand, argued that there was no creation of or end of a trust, but the continuation of the same trust. It relied on the decision of the Federal Court in Commercial Nominees, where a continuation of an existing trust was found to have occurred, despite amendments to the relevant trust instrument. In that case, the amendment in question was made in circumstances where the entitlements of members under the old and new arrangements were essentially the same and was made in accordance with power conferred by the instrument creating the trustee’s obligations. There was also continuity of the property that was the subject of trust obligations.

72. The circumstances in Commercial Nominees can be distinguished from the facts at hand, on the basis that in that case, the entitlements of members under the old and new arrangements, were essentially the same. In the present case, the entitlements of the beneficiaries changed from those of takers in default to those of someone presently entitled to income and capital. However, the operation of the same instrument (as amended), namely the Trust Deed, to continue to govern the rights as between the Trustee and beneficiaries, the continuation of the trustee’s right of indemnity under clause 39 and 40 of the Trust Deed and the retention of the vesting date, being the expiration of the perpetuity period, on balance, support the conclusion that there was a continuity of the one trust, both before and after the variation.

73. What paragraphs (d) and (e) address, however, is not whether there was continuation of a trust or not. It applies where dutiable property becomes the subject of a trust or dutiable property ceases to be the subject of a trust. This requires identification of “dutiable property” and that property either becoming the subject of a trust or ceasing to be subject of a trust. There is no requirement that the trust in question be a continuing trust or a new trust. The provisions, for example, could apply where dutiable property becomes subject of a continuing trust, where it previously was not subject of that trust. They could also apply where dutiable property ceases to be subject to a continuing trust, where it previously was subject to that trust. In the present circumstances, the land in question neither became the subject of a trust nor ceased to be the subject of a trust, in my opinion, but the nature of the beneficial entitlements to the land changed. These circumstances fall within paragraph (c), as a change in equitable interests, for the reasons set out above.

Trustee’s right of indemnity

74. The next question is whether the trustee’s right of indemnity, understood as a beneficial interest in the trust property, affected the beneficial interest of the beneficiaries that had changed.

75. The High Court, in its unanimous decision in Buckle, referred to the following description of the trustee’s right of indemnity in Worrall v Harford [1802] Eng R 342:

"Where the trustee acting within his powers makes a contract with a third person in the course of the administration of the trust, although the trustee is ordinarily personally liable to the third person on the contract, he is entitled to indemnity out of the trust estate. If he has discharged the liability out of his individual property, he is entitled to reimbursement; if he has not discharged it, he is entitled to apply the trust property in discharging it, that is, he is entitled to exoneration."

76. The High Court, in accepting that the trustee’s right of indemnity was not a mere encumbrance, as was once thought, but itself a beneficial interest in trust assets, held as follows:

“The interests of the beneficiaries are not "encumbered" by the trustee's right of exoneration or reimbursement. Rather, the trustee's right to exoneration or recoupment "takes priority over the rights in or in reference to the assets of beneficiaries or others who stand in that situation". A court of equity may authorise the sale of assets held by the trustee so as to satisfy the right to reimbursement or exoneration. In that sense, there is an equitable charge over the "trust assets" which may be enforced in the same way as any other equitable charge. However, the enforcement of the charge is an exercise of the prior rights conferred upon the trustee as a necessary incident of the office of trustee. It is not a security interest or right which has been created, whether consensually or by operation of law, over the interests of the beneficiaries so as to encumber them in the sense required by s 66(1) of the Act. In valuing the interests of beneficiaries which are conveyed by an instrument, there is no encumbrance which the Act requires to be disregarded.

Accordingly, we agree with the following treatment of the matter by Sheller JA … [in Chief Commissioner of Stamp Duties v Buckle (1995) 38 NSWLR 574 at 586]:

"If it be right, as in my opinion it is, that the trustee has a beneficial interest in the trust assets to the extent of its right to be indemnified out of those assets against personal liabilities incurred in the performance of the trust and that interest will be preferred to the beneficial interests of the cestuis que trust, the consequence is that the interest conveyed has no value. This does not depend in any way upon treating the interest as encumbered. It flows from the fact that the trustee has a preferred beneficial interest in the trust fund." (excluding footnotes)

77. Determination of this question, first of all, requires consideration of the specific provisions in s 8 of the Duties Act, dealing with a trustee’s right of indemnity. Section 8(1)(b)(ix) in bringing within the list of dutiable transactions “a transaction that results in a change in beneficial ownership of dutiable property”, expressly excludes from the reach of paragraph (ix) an “excluded transaction”. An “excluded transaction” in turn is defined to include “a change in a trustee's right of indemnity” (s 8(3)).

78. What follows is that any change to the trustee’s right of indemnity, resulting for example, from the incurring or discharge of liabilities as trustee, is not taxed as a “change in beneficial ownership of dutiable property”.

79. When a trustee’s right of indemnity changes, a corresponding change occurs to the entitlement of the beneficiaries. Where the trustee incurs a new liability, what must follow from the trustee’s right of recourse to the trust assets for the amount of that liability, is a corresponding diminution of the value of what the beneficiary has. Equally, the discharge by the trustee of a liability it has as trustee, may have the opposite effect on what the beneficiary has. In these circumstances, a consequence of the exclusion from s 8(1)(b)(ix) of a change in a trustee's right of indemnity, is to relieve any liability for duty on the part of both the trustee and the beneficiary. Both what the trustee and what the beneficiary has changes, as a result of a “change in the trustee’s right of indemnity”. Both therefore should not be subject to taxation that may otherwise apply when such a change occurs.

80. The particular question at hand is whether the exclusion from the reach of s 8(1)(b)(ix) of a change in a trustee's right of indemnity, affects the wider application of s 8(1)(b)(ix). In other words, in determining what is the “change in equitable interests in dutiable property”, must regard be had to the effect of the trustee’s right of indemnity on those interests? The question, put another way, is whether s 8(1)(b)(ix) operates simply to exclude from its reach a “change in the trustee’s right of indemnity” and goes no further, leaving s 8(1)(b)(ix) to apply to other changes in beneficial ownership, allowing the trustee’s right of indemnity to be taken into account, in identifying the extent of the beneficial interest brought to duty? Alternatively, does the enquiry into what that beneficial interest is, require the trustee’s right of indemnity to be disregarded?

81. The text of s 8(1)(b)(ix) refers to a transaction that results in a change in beneficial ownership of dutiable property “other than” an excluded transaction. If this phrasing only has the effect of excluding a change in a trustee’s right of indemnity in itself and goes no further, this must mean that the trustee’s right of indemnity, though excluded in itself, may still be taken into account when testing the extent to which other transactions caught within s 8(1)(b)(ix) are brought to duty. An alternative, and in my view, preferable construction, is one that allows the exclusion from s 8(1)(b)(ix) of a change in a trustee’s right of indemnity, to inform what is a “change in beneficial ownership” within the meaning of the paragraph as a whole.

82. The purpose of s 8(1)(b)(ix) is to bring to duty a “change in beneficial ownership”, the relevant second reading speech, disclosing a “broad intention of the Act”, to tax “changes in ownership of property—be they changes in legal or beneficial ownership” (see [54] above). A construction that allows a trustee’s right of indemnity to be taken into account, in determining the extent of any change in beneficial ownership, could lead to the result that not only would the trustee’s right of indemnity remain outside the duty net, but to the extent that the right of indemnity diminishes the beneficial interest of the beneficiary, a hiatus in the reach of s 8(1)(b)(ix) arises, leaving outside its ambit the value attributable to that diminution. Such a construction may limit the work the provision is intended to do, especially where a trust is highly leveraged, leaving very little by way of a beneficial interest that can be taxed. Given the wide reach of s 8(1)(b)(ix) as a “catch all” provision applying to any transaction not within the previous eight paragraphs of s 8(1)(b) that results in a change in beneficial ownership of dutiable property, it is unlikely, that Parliament intended to limit s 8(1)(b)(ix) in such a way.

83. If I am wrong as to the matters of statutory construction in question, what the trustee’s right of indemnity was, on the facts in this matter, requires consideration. The nature of the trustee’s right of indemnity as itself a beneficial interest in the trust property rather than a mere encumbrance, is well established. The following comments of the High Court in Buckle at [48] are relevant in this regard:

“Until the right to reimbursement or exoneration has been satisfied, "it is impossible to say what the trust fund is". The entitlement of the beneficiaries in respect of the assets held by the trustee which constitutes the "property" to which the beneficiaries are entitled in equity is to be distinguished from the assets themselves. The entitlement of the beneficiaries is confined to so much of those assets as is available after the liabilities in question have been discharged or provision has been made for them. To the extent that the assets held by the trustee are subject to their application to reimburse or exonerate the trustee, they are not "trust assets" or "trust property" in the sense that they are held solely upon trusts imposing fiduciary duties which bind the trustee in favour of the beneficiaries.”

84. In view of the “impossibility” described by the High Court in saying what the trust fund is, the corollary must be that the same uncertainty arises in identifying the exact extent of the trustee’s right of indemnity, given that doing so, also depends on identification of what the relevant liabilities of the trustee are or may be. Should they be the liabilities of the trustee that are current at a particular point in time or should future liabilities be brought to bear on the question? If so, what degree of probability that liabilities will be incurred is necessary to allow future liabilities to be taken into account?

85. These are matters that may well be also “impossible” to determine. However, no evidence was presented to the Tribunal, as to what such liabilities are or may be. In the absence of evidence of relevant liabilities, I am unable to find that the trustee’s right of indemnity can, on the particular facts, affect the determination of the questions at hand, nor affect the conclusion that I have reached as to there having been a change in equitable interests in the relevant dutiable property.

86. If the proposition put by the Applicant, is that as a matter of principle, regardless of the actual present or prospective liabilities of the Trust, the trustee’s right of indemnity, because of its nature as a beneficial interest, must necessarily diminish or even eliminate the entitlements of beneficiaries which s 8(1)(b)(ix) is intended to capture, I am unable to agree. Such a construction of s 8(1)(b)(ix) may leave little or no work for paragraph (ix) to do, for the reasons set out at [82] above. A construction, that renders the paragraph potentially inoperative, could not have been intended by Parliament, given the broad reach the provision is intended to have.

Transfer of land

87. The remaining question for determination in this matter was whether the beneficial ownership of the Ridge Street Property remained subject to the Trust, or whether it had moved to the son at the time of the deed of variation. If it was with the Applicant’s son at the time of the entering into the deed of variation, what must follow is that the change in beneficial ownership effected by the deed of variation did not extend to the Ridge Street Property.

88. The nature of the interest of a transferee of land, where the transfer has not yet been registered, is a matter that requires determination in these proceedings. The general position as regards the rights of a transferee of land where the transfer is yet to be registered is well established. The protection of the equitable claims and interests of such a transferee before registration of a transfer have been recognised for more than a century (Barry v Heider [1914] HCA 79; (1914) 19 CLR 197). In that case, the High Court held that notwithstanding that certain dealings were not registered under a system of land titles that requires registration to give effect to a dealing under the Real Property Act 1900 (NSW), the legislative scheme did not exclude equitable claims to land arising out of “contract or personal confidence” (per Griffiths CJ).

89. It was agreed that a transfer of the Ridge Street Property to the son occurred on 28 November 2022 under the PEXA system. The question is whether the Transfer, that took the form of a paper transfer dated 21 November 2022, effected a change in beneficial ownership of the Ridge Street Property on that earlier date.

90. The Respondent’s argument that no transfer occurred on 21 November 2022 relied on certain matters in evidence, including the date of 28 November 2022 on the loan agreement executed to fund the purchase price. The Respondent also relied on the fact that the mortgage securing the relevant loan, though dated 21 November 2022, referred to the later date of the loan agreement. The inference to draw from these circumstances, in the Respondent’s submission, was that the date of the transfer was 28 November 2022.

91. The Respondent also submitted that in accordance with what is known as the rule in Jones v Dunkel (1959) 101 CLR 298, I should draw the inference that in the absence of evidence from the solicitors drafting and dating the documentation for the transfer of the Ridge Street Property, any evidence from the solicitors would not have assisted the Applicant’s case as to when documents were executed.

92. The Respondent also argued that any transaction concerning any agreement for transfer of the Ridge Street Land could not be effective on account of failure to comply with the requirements for writing set out in ss 23C and 54A of the Conveyancing Act 1919 (NSW). The Respondent further argued that given that land transfers in NSW were required to be signed on PEXA (Electronic Conveyancing National Law, s 9(3)), the Transfer, being a paper transfer, could have no relevance or effect. That is, the transactions affecting the Ridge Street Property did not take effect until 28 November 2022.

93. The Applicant’s husband gave evidence that his wife, the Applicant, and he attended in Perth, Western Australia, the offices of the solicitors acting on 13 November 2022, and executed the documents effecting the Transfer. He also said that the loan agreement was dated in error as 28 November 2022.

94. The evidence as to the date of execution, based solely on the executed documentation, is clearly uncertain. While the Transfer in evidence bears a date of 21 November 2022, the loan agreement funding the purchase price was dated 28 November 2022. The accompanying mortgage was dated 21 November 2022 but refers to the loan agreement and the later date it bore. The later date was also the date of the transfer effected through PEXA.

95. I accept the evidence of the husband and son insofar as it can go. However, while they could evidence that they attended the offices of the Applicant’s solicitors to sign documents on or before 21 November 2022, they did not date or witness the dating and exchange of the documents. Neither had the knowledge of the actual time of dating and exchange of the documents.

87. The manner in which the documents were handled was careless to say to least, especially a document dated 21 November 2022, the mortgage, referring to another document bearing the later date of 28 November 2022. In these circumstances, I am unable to come to a conclusion as to the date of the Transfer, based solely on what is disclosed on the face of the Transfer, loan agreement and mortgage and the evidence of the husband and the son. Ido not need to rely on the rule in Jones v Dunkel in coming to my conclusion. The Tribunal is not bound by the rules of evidence as a general matter (Civil and Administrative Tribunal Act 2013 (NSW), s 38(2)) but I take note of the submissions of Counsel for the Respondent. However, this does not end the matter.

88. There was evidence before the Tribunal that documents dealing with the transfer of the Ridge Street Land were submitted for assessment of duty before a representative of the Respondent. They included the Transfer and it appears the Purchaser’s Declaration. The Purchaser’s Declaration referred to a transaction date of 21 November 2022. An assessment issued on that date was in evidence (“Assessment”). There was no evidence placed before the Tribunal, however, either by the Applicant or the Respondent, as to what further submissions (if any) were made to obtain the Assessment, other than what was in the Purchaser’s Declaration.

89. Under the Duties Act, a dutiable transaction includes both a transfer of dutiable property and an agreement for the sale or transfer of dutiable property (s 8(1)(a) and (b)(i)). The liability to duty is triggered when a transfer of dutiable property “occurs” (s 12(1)) or in the case of a transfer effected by instrument or a relevant agreement, when it is “first executed” (s 12(2) and (3)). This means the first time that it is signed and sealed, or signed (as the case may be) by any party (s 295(2)). The evidence given by the husband and the son was that an instrument, being the Transfer was executed by the transferor and transferee on or before 21 November 2022, the terms having been agreed previously. Once there is a liability for duty, the Respondent has the power to make an assessment of the “tax liability” of a taxpayer (Administration Act, s 8).

90. I conclude that as at 21 November 2022, there had been a dutiable transaction evidenced by the Transfer executed by both parties and that documents that disclosed the dutiable transaction were received by the Respondent’s representative. These documents were sufficient to allow the Respondent to issue an assessment of duty. There was nothing before the Tribunal to indicate that the Assessment had been made in error, subject to the matters discussed at [102] below.

91. On the evidence at hand, the documentation evidencing the dutiable transaction included the Transfer signed by the transferor and transferee and Purchaser’s Declaration signed by the son as transferee. There was also evidence of an oral agreement before 21 November 2022 (see [12] and [14] above), that dealt with the subject matter of the Transfer, who the transferee was and the price.

92. The Applicant characterised the Transfer as taking effect as an agreement for sale or transfer of the Ridge Street Property. While agreements for the sale of land in New South Wales, usually take the form of the standard form agreement commonly used in the market, there is no requirement under law for use of a particular standard form agreement, other than the requirements for writing discussed below. Based on the evidence given by the husband and the son as to the terms of the agreement made for the transfer of the Ridge Street Property (see [12] and [14]) above and the Purchaser’s Declaration, I conclude that the Transfer did evidence such an agreement. I am fortified in coming to this conclusion by the fact that the Respondent through their representative, identified a transaction that had given rise to a “tax liability” which they could assess.

93. I am not called upon to consider the adequacy of the stamping disclosed by the Assessment. However, I note that it refers to a dutiable value of $2,750,000 and not the purchase price of $2,815,000. The amount on which duty was assessed corresponds to the market value disclosed in the evidence (see [13] above). As dutiable value is, generally, the greater of consideration and unencumbered value (Duties Act, s 20), the Transfer appears to be stamped inadequately. However, even if the amount of duty paid in respect of the Transfer is inadequate, that inadequacy does not derogate from the conclusion that there was a dutiable transaction evidenced by instrument that occurred on or before 21 November 2022 that was accepted by the Respondent as such, and assessed.

94. Whether or not the dealings in trust property were in writing or not at the relevant time also requires consideration. Section 23C of the Conveyancing Act 1919 (NSW) provides as follows:

(1) Subject to the provisions of this Act with respect to the creation of interests in land by parol--

(a) no interest in land can be created or disposed of except by writing signed by the person creating or conveying the same, or by the person's agent thereunto lawfully authorised in writing, or by will, or by operation of law,

(b) a declaration of trust respecting any land or any interest therein must be manifested and proved by some writing signed by some person who is able to declare such trust or by the person's will,

(c) a disposition of an equitable interest or trust subsisting at the time of the disposition, must be in writing signed by the person disposing of the same or by the person's will, or by the person's agent thereunto lawfully authorised in writing.

(2) This section does not affect the creation or operation of resulting, implied, or constructive trusts.

(3) For the purposes of this section, a requirement for writing may be satisfied in electronic form and a requirement for writing to be signed may be satisfied by electronic signature.

104. The provisions of s 54A of the Conveyancing Act 1919 (NSW) are also relevant. The 54A provides as follows:

54A Contracts for sale etc of land to be in writing

(1) No action or proceedings may be brought upon any contract for the sale or other disposition of land or any interest in land, unless the agreement upon which such action or proceedings is brought, or some memorandum or note thereof, is in writing, and signed by the party to be charged or by some other person thereunto lawfully authorised by the party to be charged.

(2) This section applies to contracts whether made before or after the commencement of the Conveyancing (Amendment) Act 1930 and does not affect the law relating to part performance, or sales by the court.

(3) This section applies and shall be deemed to have applied from the commencement of the Conveyancing (Amendment) Act 1930 to land under the provisions of the Real Property Act 1900.

(4) A contract referred to in subsection (1) is not invalidated or rendered unenforceable only because it has been created in electronic form and electronically signed or attested.

105. I find, as a consequence of the matters set out at above, that writing in the form required by ss 23C and 54A of the Conveyancing Act 1919 (NSW) existed as at 21 November 2022. Section 23C requires that there be an agreement or some memorandum or note thereof, in writing, and signed by the party to be charged or by some other person thereunto lawfully authorised by the party to be charged. Section 54A also requires some memorandum or note, in writing, and signed by the party to be charged or by some other person thereunto lawfully authorised by the party to be charged. That the Transfer, with or without any other documents lodged for assessment, must at least answer the description of a “note” for the purposes of ss 23C and 54A, signed by both parties, appears clear.

106. To the extent that there was a change in beneficial ownership of the Ridge Street Property on 21 November 2022, what the extent of that change was, remains the final question. The nature of the interest held by a purchaser under an uncompleted contract for the sale of land has been considered in a series of decisions of the High Court and the English courts. The decision of the High Court in Tanwar Enterprises Pty Ltd v Cauchi [2003] HCA 57; 217 CLR 315; 201 ALR 359; 77 ALJR 1853 reviews the authorities as follows, at [47] to [53]:

“One commences by identifying the "interest" of a purchaser in the land the subject of an uncompleted contract. In Lysaght v Edwards, Sir George Jessel MR described the position of the vendor at the moment of entry into a contract of sale as "something between" a bare trustee for the purchaser and a mortgagee who in equity is entitled to possession of the land and a charge upon it for the purchase money; in particular, the vendor had the right in equity to say to the purchaser "[e]ither pay me the purchase-money, or lose the estate". This way of looking at the relationship in equity between vendor and purchaser before completion appeared also in the works of eminent writers of the period in which the Master of the Rolls spoke. Later, Kitto J and Brennan J preferred to treat what was said in Lysaght as indicating that "to an extent" the purchaser acquired the beneficial ownership upon entry into the contract.

This analogical reasoning in turn suggested (i) the purchaser had before completion an equitable estate in the land which would be protected against loss consequent upon termination of the contract by the principles developed in equity for relief against forfeiture and (ii) in the same way as failure to redeem a mortgage upon the covenanted date for repayment did not destroy the equity of redemption without the proper exercise of a power of sale or a foreclosure suit in equity, failure to complete the contract on the due date did not bar the intervention of equity to order specific performance.

But what, on this way of looking at the matter, was the significance of a contractual stipulation specifying a date for completion as essential? The treatment by the English equity judges of this subject developed in the course of the nineteenth century, as Justice Lindgren has detailed in his extrajudicial writing on the subject. While Lord Thurlow would have pushed the mortgage analogy to the extreme that a time stipulation in equity could never be essential unless there was something in the nature of the subject-matter of the contract, such as its fluctuating or depreciating value, to give it that quality, his view was doubted by Lord Eldon in Seton v Slade and rejected by Sir Lloyd Kenyon MR in Mackreth v Marlar.

If the express contractual stipulation fixing time as an essential matter was not to be disregarded, how did that attitude stand with the analogy drawn from the relief against forfeiture cases? The answer given by Pomeroy, with reference to In re Dagenham (Thames) Dock Co, Ex parte Hulse was that equity would relieve the purchaser from the operation of an essential time stipulation, "and from the forfeiture", if the provision was inserted as a penalty to secure completion of the contract at the purchaser's risk of loss of the equitable interest in the land under the executory contract.

…

At all events, the analogies drawn over a century ago in Lysaght with the trust and the mortgage are no longer accepted. Jacobs J observed in Chang v Registrar of Titles that:

"[w]here there are rights outstanding on both sides, the description of the vendor as a trustee tends to conceal the essentially contractual relationship which, rather than the relationship of trustee and beneficiary, governs the rights and duties of the respective parties."

Subsequently, in Kern Corporation Ltd v Walter Reid Trading Pty Ltd, Deane J said:

"[I]t is both inaccurate and misleading to speak of the unpaid vendor under an uncompleted contract as a trustee for the purchaser".

107. The High Court, having considered the authorities, restated the position, as it stands today, that the “interest” of the purchaser was “commensurate with the availability of specific performance” (at [53]). That interest is accepted as an equitable interest in the property the subject of the relevant agreement (K.L.D.E Pty Limited. v Commissioner of Stamp Duties (Q.) [1984] HCA 63; (1984) 155 CLR 288).

108. The evidence was that the son, having secured the finance to purchase the Ridge Street Property and having executed the Transfer, was in a position to complete the purchase of the Ridge Street Property, with no conditions remaining to be satisfied and so could claim specific performance. To this extent, I find that beneficial ownership had passed to him as at 21 November 2022.

109. I have found that the Transfer took effect as a document evidencing an agreement for sale. The Respondent appears to have identified the Transfer as a “Transfer document”. To the extent that the Transfer took effect as a transfer in equity, the protection of the equitable claims and interests of such a transferee before registration of a transfer may, in these circumstances, be relevant (Barry v Heider [1914] HCA 79; (1914) 19 CLR 197). A transfer of land is effected not by paper transfer but electronically under PEXA, pursuant to the scheme applying in New South Wales at the time of the transactions in this matter. Whether rights of the kind that the holder of paper transfer in registrable form may have had before the introduction of PEXA survive in the form they took before PEXA, under the current scheme that no longer accepts for registration a paper transfer, remains unclear. It is doubtful, however, that the introduction of PEXA and in particular, s 9 of the Electronic Conveyancing National Law was intended to or could have the effect of displacing the well-established protections afforded to holders of equitable interests enforceable against a registered proprietor (see Bahr and Anor v Nicolay and Others(No 2) (1988) 164 CLR 604), including transferees holding equitable rights before registration of a transfer (Barry v Heider). However, I do not need to consider the matter, including whether the Transfer may have taken effect in equity as such, in circumstances where I have found that the Transfer evidenced an agreement, for the reasons set out above at [101].

Conclusion

110. The Applicant, for the reasons stated above, has not proved, on the balance of probabilities, that there was no change in beneficial ownership of the property held subject to the Trust effected by the variation.

111. The Applicant has proved, on the balance of probabilities, that the change in beneficial ownership of the property of the Trust did not include a change in beneficial ownership of the Ridge Street Property.

Order

1. The matter is remitted to the Chief Commissioner of State Revenue for determination in accordance with this decision.

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I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales.

Registrar

Decision last updated: 31 May 2024