Chief Cmr of Stamp Duties v Buckle

[1997] HCATrans 141

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S171 of 1996

B e t w e e n -

CHIEF COMMISSIONER OF STAMP DUTIES

Appellant

and

WILLIAM FRANCIS BUCKLE, WILLIAM JOHN BUCKLE and JANE MARGARET JORY

Respondents

BRENNAN CJ
TOOHEY J
GAUDRON J
McHUGH J
GUMMOW J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON WEDNESDAY, 4 JUNE 1997, AT 3.24 PM

Copyright in the High Court of Australia

MR A.H. SLATER QC:   If the Court pleases, I appear with my friend DR H.R. SORENSEN, for the appellant.  (instructed by I.V. Knight Crown Solicitor for the State of New South Wales)

MR R.W. WHITE:   If the Court pleases, I appear with my learned friend, MS P.P. WINES for the respondents.  (instructed by Mallesons Stephen Jacques)

BRENNAN CJ:   Mr Slater.

MR SLATER:   Your Honours, this is a stamp duty appeal from the Court of Appeal of New South Wales and it involves no constitutional issues and we are not blessed with the company of Solicitors-General.  It begins with a very simple set of facts, and they can be summarised in four propositions.  In 1991 a fund was settled on discretionary trusts both as to the whole fund at a future date, called in the instrument “the distribution date”, and as to the intermediate income.  The deed provided that in default of exercise of the powers to appoint the fund as from the distribution date there was to be a gift to a class of persons who in fact comprised the children of the trustee.

Your Honours, those provisions can be found beginning at page 24 of the appeal book and, briefly stated, paragraph 2.1, at line 50 on page 24 says:

The Trustee shall hold the net annual income derived by the Trustee on behalf of the Trust Fund prior to the distribution date upon trust -

in a manner there provided for, in effect, in such fashion as the trustee might determine and in default of determination - I withdraw that.  The trustee had power to accumulate, and in 2.13 there was a provision in default of accumulation upon trust for children.  That issue does not arise.  Then at the foot of page 25, “Trusts of Corpus:

As from the distribution ‑ ‑ ‑

GAUDRON J:   You said that issue does not arise.  Did you say that?

MR SLATER:   I did, your Honour.

GAUDRON J:   By which you mean it is irrelevant?

MR SLATER:   By which I mean there is no contest about the destination of the intermediate income before the distribution date, not did the instrument ‑ ‑ ‑

GAUDRON J:   But at least to the extent of the intermediate income, I assume, there is not a settlement of the trust - of the whole of the trust fund in issue in this case.

MR SLATER:   The amendment which is in issue in this case was an amendment to the provisions which I am about to take the Court to.  There was no amendment to the provisions on the top half of page 25 dealing with the intermediate income.  Does that answer your Honour’s question?

GAUDRON J:   There is no transfer of any interest in the trusts of income or of the income?

MR SLATER:   There is no alteration to the trusts of income.

GUMMOW J:   And there was no trust of corpus, was there, until the distribution date?

MR SLATER:   That is correct.

GUMMOW J:   No vested interests.

MR SLATER:   There is no express disposition of corpus until that date, no.  It is perhaps slightly misleading to speak of there being a trust of corpus pending distribution date.  The corpus was held on the trusts described in the instrument.  There is a direction in the instrument as to how the trustee is to deal with income from time to time.  There are powers which I will take your Honours to shortly as to the way in which the trustee might deal with capital during that time by applying it, by receiving it and by handing it over to somebody else.  Those are all powers.  There is then what might be called an estate in remainder following the distribution date as to corpus, but whether to speak of estates in remainder in a context such as this is apposite, is perhaps one of the issues in the case.

I was taking your Honours to the trusts of corpus in 2.2:

As from the distribution date the Trustee shall hold the Trust Fund on trust:

.21  For such of the beneficiaries or any one or more of them to the exclusion of the other or others in such shares and proportions as the Trustee in its absolute discretion may on or before the distribution date appoint ‑ ‑ ‑

GUMMOW J:   There is a definition of “beneficiaries”, is there not?

MR SLATER:   Yes, there is, your Honour.  Does your Honour wish me to take you to that?  I can draw your Honour’s attention to it.  It is at page 24 at line 5:

“The beneficiaries” means the father, the children and other issue -

There is an inelegancy in the drafting of the deed arising from, no doubt, the use of a precedent.  The person described as the father is also the person who is the original trustee.  The definition of “beneficiary” goes on to say that no person who is or has been a trustee may take under the instrument.  So that to include the father in the class of beneficiaries involved a contradiction.

GUMMOW J:   Could he not appoint to himself?

MR SLATER:   Can I take your Honour to line 11 on page 24.  I do not think this involves anything which is in issue in these proceedings.  It is a by‑way:

Notwithstanding any other provision of this deed no company which is, or has at any time been a trustee of this trust can be or become a beneficiary under this trust -

As your Honour says, he could appoint to himself.

GUMMOW J:   There is a definition of “distribution date” too, is there not?

MR SLATER:   There is, your Honour, yes.  I was going to come back to that.  The definition of “distribution date” is the 80th anniversary, in effect 7 August 2071, or such earlier date as may be appointed by the trustee.  Going back to the trusts which are going to take effect from that distribution date, after the power of appointment in 2.21, it is then provided:

that if the Trustee fails to make any appointment under paragraph 2.21 then the Trustee shall hold the Trust Fund on trust for such of the children -

which is a term defined on page 23 in the last line, “the children of the father” -

as are alive at the distribution date and if more than one in equal shares as tenants in common -

with a proviso for a gift over to surviving issue of a deceased child per stirpes.  Then there is a final gift over in 2.23 that if all the previous trusts fail, then it is to go to such charitable institutions as the trustee may appoint.

There are other provisions of the trust instrument which, unless the Court wishes me to do so immediately, I will come back to later.  There is one other provision which is immediately material, and that is on page 38 of the appeal book, paragraph 14, and that provides that:

Notwithstanding anything to the contrary (other than paragraph 1.07) hereinbefore contained the Trustee may upon the expiration of thirty days after the giving of written notice to the Appointor of its intention so to do or upon the prior receipt of written advice.....by deed or oral declaration revocable or irrevocable -

It is the next words which are significant:

Vary, add to or revoke any of the terms hereof or any of the trusts, powers or obligations hereby conferred or imposed upon the Trustee and the Trustee may appoint such new trusts in such manner or form as the Trustee in its absolute discretion thinks fit but without infringing the rule against perpetuities and for the purpose of any appointment by way of resettlement may delegate to the Trustee of such resettlement the right to exercise the same discretions as are by this deed conferred -

Then there is a proviso excluding from any variation the interest of any beneficiary and income of the trust fund, and a proviso excluding the creation of:

any interest or benefit whatsoever in the capital or income of the Trust Fund in favour of the Trustee or the settlor.

It was that provision which I was thinking of when I said earlier that there is an inconsistency since the trustee, who must not be favoured by a variation, is also the father who is one of the persons nominated as beneficiary.  It is significant that the power of variation in clause 14.1 is a power to vary the trusts in respect of the trust fund as a whole.  That is apparent from the concluding words which limit it in the way in which there may be variations “in the capital or income of the Trust Fund”.

GUMMOW J:   There were two children, were there, then alive at the date of the trust?

MR SLATER:   As far as appears from the evidence, yes.  The trust having been settled, the trustee borrowed moneys and acquired some real estate.  The value which was accepted between the parties as being the value of the real estate was $4,056,000, and that appears from the accounts of the trust as at 30 June 1993, which are reproduced on page 14 of the appeal book.  The non‑current assets, described as “fixed assets” at line 10 are shown by the note on the next page to be “Land and buildings” at cost.  There is an addition, a $10 note, at least nominally part of the assets, and the liabilities were $4,059,000, and they were, as appears from the note at the foot of page 15, partly secured and partly unsecured.  The net result was that the liabilities, by some $3,000, exceeded the book value and the agreed value of the assets.

Your Honours, the instrument which brings the matter before this Court was executed in 1993, and is reproduced at page 41 of the appeal book.  It is a deed made on 11 June 1993 by the trustee, Mr Buckle, and it recites the establishment of the trust, the authority to vary the terms of the trust deed, and the approval of the appointor.  The operative provision starting at line 25 on page 41 is:

That the terms of the Trust Deed are altered by the deletion of sub‑paragraph 2.22 and the insertion of the following sub‑clause:

“2.22  Provided that if the Trustee fails to make any appointment under paragraph 2.21 then the Trustee shall hold the Trust Fund on trust for the children in the following shares as tenants in common:
Jane Margaret Jory - one third
William John Buckle - two thirds -

Then it is evidently the intention that the proviso should go on to pick up what was there as 2.2.21 on ‑ ‑ ‑

GUMMOW J:   What is the effect of that, in terms of the children?

MR SLATER:   The net effect is that ‑ ‑ ‑

GUMMOW J:   The two designated children there.

MR SLATER:   The net result is that whereas before the execution of the instrument the two children had a future contingent and defeasible right to share pari passu between themselves and with any other child born in a distribution of the Trust Fund on the distribution date, after the execution of the instrument, they had a future defeasible right to have the Trust Fund, as it stood at the distribution date, paid over to them in two to one shares.

Now, the appellant Commissioner claims duty on the amending deed as being a conveyance as defined in the Stamp Duties Act of the assets held by the trustee, that is, the land and the $10 note.  The relevant statutory provisions which give rise to that claim appear at pages 109 and following of the appeal book and they are sections 65 and 66 of the Stamp Duties Act and the material relating to conveyances in the second schedule to that Act.  Section 65 provides a definition of “conveyance”:

For the purposes of this Act the expression “conveyance” includes any transfer, lease, assignment, exchange appointment, settlement, surrender, release, foreclosure, disclaimer, declaration of trust, and every other instrument (except a will), and every decree, judgment or order of any court whereby any property in New South Wales is transferred to or vested in or accrues to any person, and also includes a covenant to pay money not made for a full consideration.....and “convey” has a meaning corresponding with that of “conveyance”.

Then there is a further definition of “conveyance on sale” as meaning:

every instrument and every decree, judgment or order of any court whereby any property on the sale thereof is conveyed -

Section 66 specifies the method of calculating duty and it provides that:

Subject to the provisions of this Act every conveyance is to be charged with ad valorem duty in respect of the unencumbered value of the property thereby conveyed.

(3)  A conveyance of property made without consideration in money or money’s worth is to be charged with ad valorem duty on whichever is the greater of:

(a)  the unencumbered value of the property ascertained in accordance with section 68; or

(b)  the amount or value of all encumbrances (whether certain or contingent) subject to which the property is conveyed.

The second schedule specifies in paragraph (1) the duty on a conveyance on sale and that, as your Honours will see at the top of page 110, is where the consideration exceeds $1 million, a sum of some $40,000 plus 5.5 per cent of the excess and on:

every conveyance of any property..... made without consideration in money or money’s worth:

On whichever is the greater of:

(a)  the unencumbered value of the property; or

(b)  the amount or value of all encumbrances -

the same duty as would be payable on a sale for a consideration equal to that value.  Your Honours, the appellant asserts that the unencumbered value of the property which was the subject of a conveyance effected by the amending deed is the value of the land, $4,056,000 ‑ ‑ ‑

GUMMOW J:   Do you not first have to identify what the property is? Unencumbered or otherwise, what is the property that is conveyed?

MR SLATER:   I was coming to that, your Honour.

GUMMOW J:   I hope so.

MR SLATER:   I was leading up to it, rather circuitously perhaps, but I was coming to it.  May I approach it this way.  There are, in our submission, three questions which arise in the appeal.  The first question is whether the amending deed of 1993 was a conveyance within the definition in section 65.  The second is, if so, of what was it a conveyance.  The third question, which depends upon the answer to the second, is, what is the value for duty of the property which was conveyed?  The respondent invites the Court to skip over the first question by making a concession that the instrument is a conveyance and to concentrate on the approach advanced by the respondent to the resolution of the second question.

TOOHEY J:   I am not sure how you can divorce them, really.

MR SLATER:   We say you cannot, your Honour, and that is, at its root, the difference between the parties.  We say that one needs to identify the nature of the instrument before one can determine what it is that it does and what property it affects.  The respondent and Justice Sheller below concentrated rather on the result - more or less the question that Justice Gummow asked me, what was the net effect of the transaction - and says, “Look at the position before and after the execution of the instrument.”

It is our submission that stamp duty is not a tax on the difference between the position before and after the transaction.  It is not a tax on differences and it is not a tax on transactions or outcomes but a tax on instruments.  Your Honours, the authorities which support us in that contention are conveniently gathered together in the dissenting judgment of Justice Dawson in a decision last year in a matter of Alders International v Commission of State Revenue 140 ALR 189.

The issue, as your Honours will recall, in that case was whether the State Parliament of Victoria was precluded by section 52(i) of the Constitution from making a law imposing stamp duty upon a lease of a place acquired by the Commonwealth for public purposes. The resolution of that question turned on a characterisation, for constitutional purposes, of the tax imposed but, in the course of arriving at the conclusion as to the constitutional character of the tax, all members of the Court looked at the nature of stamp duty. I have taken Justice Dawson’s summary of it simply because it is a little more comprehensive than the others, but the other members of the Court also took the same view of it.

TOOHEY J:   Is this an issue in the present appeal?  By “this” I mean the concept that stamp duty is a duty upon instrument.

MR SLATER:   I do not think it is in issue in the sense that I do not think that it would be disputed by the respondent that it is a tax upon instruments, but, in our submission, it is necessary to focus upon the fact that it is a tax upon instruments in order to arrive at the right result rather than to pass over that and simply look at the net outcome of the transaction.

TOOHEY J:   Yes, I understand that.

MR SLATER:   If I could read to your Honours briefly from what Justice Dawson said, having adverted to the fact, at the foot of page 200, that it is:

necessary to go further to answer the question posed and to examine the nature of the tax imposed by the Stamps Act.

At the top of 201 his Honour said:

before embarking on that examination it may be said that any analysis of a traditional stamp duty reveals that it is a tax upon an instrument, not a tax upon a transaction, let alone a tax upon property.  To speak of a stamp duty as a tax upon an instrument is not to employ a slogan or a metaphor.  it is to express a legal conclusion as to the nature of the tax - a conclusion which has been accepted for many years by countless authorities both in this country and elsewhere.

Then he cites Chief Justice Griffith in Rosehill Racecourse Co:

The scheme of the Act is to make it payable on the conveyance, that is, on the instrument, not on the transaction -

Chief Justice Latham, in Commissioner of Stamp Duties v Hopkins saying:

It is true that, as has often been said, the Stamp Duty Acts impose duties upon instruments and not upon transactions.

and at the end of the quotation:

it is nevertheless necessary to ascertain the legal operation of the instrument, ie, to determine the nature of the transaction which it accomplishes.

Then there is a reference to what was said by Justice Mason in DKLR:

in observing that it is “a fundamental principle of the law relating to stamp duties that duty is levied on instruments, not on the underlying transactions -

His Honour then referred to what had been said by Sir Garfield Barwick in Associated Steampships Pty Ltd and at line 37 expressed a qualification upon that, and finally referred to the observations of the court in Commissioners of Stamps v Wienholt that:

What is made dutiable, then, is the instrument and not the transaction -

Your Honours, similar observations will be found in the judgments of each of the members of the majority in that case.  If I can just give your Honours the references to them.  In the judgment of your Honour the Chief Justice at page 194 line 20 to page 195 line 32; in the judgment of Justice Toohey at page 207 lines 18 to 47; and in the joint judgment at page 222 lines 14 to 24.  I will not read those to your Honours.  What emerges from those authorities is that the starting point for stamp duty is the instrument.  So, one must look at the instrument and not only at what it does but at how it does what it does.  That was the point which was made by Justice Mason in the passage which was referred to by each of your Honour the Chief Justice, Justices Dawson and Toohey in the Allders Case.        In his Honour’s judgment in another stamp duty appeal in DKLR Holding Co (No 2) v Commissioner of Stamp Duties, 149 CLR 431. That was a case in which an unsuccessful device to minimise stamp duty was attempted. The device was to execute a declaration of trust in respect of land, while the declarant was not the proprietor of the land - I do not use the word “owner” because that is a slippery word. Then, the declaration having been executed to transfer the land to the declarant so that forthwith upon the transfer the declarant held the land on trust for the transferor. The argument was that the declaration was not liable to duty because there was no property at the time which was subject to it and that the transfer was not subject to duty, either because it conveyed merely a bear legal estate, or because it comprised the appointment of a trustee to hold the land.

The passage which was subsequently cited from the judgment of Justice Mason is on page 449, and if I could take your Honours to that, beginning in the middle of the page, where his Honour says:

It is a fundamental principle of the law relating to stamp duties that duty is levied on instruments, not on the underlying transactions -

and refers to what had been said in Hopkins’ Case -

As we shall see when we come to consider the liability to duty on each of the instruments, in the case of a conveyance the statutory command is that it attracts duty on the property conveyed; in the case of the declaration it attracts duty on “the property comprised therein”.  Consequently the issues are:  (1)  What was the property conveyed by the transfer?; and (2) What was the property comprised in the declaration?  The decision on these issues hinges on the interpretation of the two instruments, that is, on the description given by them of the relevant estate or interest as applied to the facts of the case.  It is a matter of ascertaining what is the property with which each instrument deals, according to its terms.

I draw attention particularly to the next paragraph:

We cannot substitute for the issues presented by the statute a different issue having no foundation in the statutory provisions.  Nor can we substitute for the property which the parties have chosen by their instruments to convey and make the subject of a declaration of trust the interest in property which in a practical sense represents the alteration in 29 Macquarie’s position brought about by the combined operation of the two instruments.

In other words, the point his Honour is making is that it is necessary in a stamp duty case to concentrate on the instrument, and not on the practical outcome of the execution of the instrument.

TOOHEY J:   Mr Slater, I do not want to cut across your argument, but it would assist me to know, in terms of section 65, which of one or more expressions you rely upon as constituting a conveyance.

MR SLATER:   We rely upon it as being ‑ ‑ ‑

TOOHEY J:   Could I just say, I am not asking you to develop it if you are going on to that later, but just so that we can follow the argument.

MR SLATER:   We rely upon it as being a settlement within the meaning given to that word by the authorities, and as being an appointment.  There is a dispute between the parties as to whether it is a settlement.  There is no dispute between the parties that it is an appointment, although there is, perhaps sub silentio, a dispute between the parties as to the subject matter of the appointment.

TOOHEY J:    Yes, thank you.

MR SLATER:   And I should perhaps add that our learned friends, as we understand them, say that the operative part of the definition is that which speaks of an instrument whereby property accrues to or is vested in a person.

TOOHEY J:   Yes, thank you.

MR SLATER:   Your Honours, when one comes to the instrument in this case, it clearly is not a conveyance in the ordinary meaning of the difference between the future interests which the children of Mr Buckle as a class held before its execution and the future interests which his children, William and Jane, held afterwards.  It does not express itself to be a conveyance from the class of children to the two children.  It is framed as, and operates as, an instrument exercising the power to appoint new trusts in respect of the trust fund.

In particular, it is not an exercise of the power given by clause 2.21 to appoint the trust fund at the future date.  Had it been, the result might have been different.  But the instrument which the parties chose to effect the practical objective they sought was one which employed the power of variation, or what might be said to be the power of resettlement of the trusts given by paragraph 14 of the instrument.  It is that fact which, in our submission, is crucial to the outcome of the appeal.

Your Honours, implicit in the respondents’ case, as it appears from their written submissions, is a notion that there is a collective equitable estate in property which is co‑extensive with the legal estate and always subsists, and that the legal ownership of the land in the present case should be regarded as confined to a bare legal estate, with present or future equitable interests vesting in a person by reason of an act of disposition of equitable estates; that is, an act of assignment or transference of them.  Because, in essence, the submission as it emerges from the respondent - and, of course, I am speaking on my learned friend’s behalf, for which he is no doubt grateful - is that because the result of this transaction is that the interests of William Buckle were enlarged and those of his sister were diminished, there is a conveyance of the difference.  That implies that that is the way, and the only way, one can achieve the result.

The implicit argument is underpinned by propositions that the equitable estate - that is a future and defeasible estate but no longer a contingent estate - which, following the 1993 instrument the children had, can only have vested in them by an act of alienation of some coextensive estate.  That coextensive estate is that which vested in the issue of the father, Mr Buckle, under the terms of the original instrument.  It seems to us that it is fundamental to the respondents’ case that it is argued that only in that way could the interest which the children had after 1993 have vested in them.  So that what caused it to do so must have been a conveyance of that future interest.  That is in essence the way in which Justice Sheller approached the matter in the court below.

Your Honours, in our submission, the notion that there must always subsist an exhaustive hierarchy of equitable estates comprising so‑called full equitable ownership of property is one which has been rejected by the highest of authority.  In this Court, for example, it was rejected in the decision in DKLR 149 CLR 431 to which I took your Honours a moment ago where it was established that the equitable estate does not always subsist independently and that there can be an estate called simple absolute ownership. That is when somebody owns property beneficially. There is no division in that person between legal and beneficial estates. That owner simply owns the property and there is no equitable claim upon him in respect of it. That appears in the judgment of Chief Justice Gibbs in that case at the top of page 442.

In the judgment of Justice Mason in a passage which begins with the last paragraph that I read to the Court at the foot of page 449 and goes over to about the middle of page 451, his Honour there gives two examples which he takes from the judgment of Justice Hope in the court below.  The first example is a conveyance of an estate in fee simple to a transferee and a taking back from the transferee of a lease for 50 years.

If the appellant -

that is the taxpayer in that case -

is correct -

in the argument there advanced, the transfer or lessee:

has conveyed, not an absolute estate in fee simple, but the reversion expectant on the determination of a lease for fifty years and the conveyance is to be assessed for duty on this footing.  How the lease is to be assessed on this approach does not emerge.  Fortunately we do not have to solve this problem for the true position is that each instrument is to be separately assessed, the conveyance being assessed to duty on the property conveyed, viz an absolute estate in fee.

The second example is closer to the present case.  A conveys an absolute estate in fee simple to B who executes a declaration of trust acknowledging that he holds as trustee for A absolutely.  The appellant says, contrary to the fact, that the property conveyed is a bare legal estate.  At common law A might have conveyed a bare legal estate, but in the example given he has not done so and therefore duty is to be assessed on the footing that an absolute estate in fee was conveyed.

Then in the following passage his Honour refers at some length to what was said in Quigley’s Case 38 CLR 272 as strongly supporting:

the proposition that we should look to the legal operation of the particular instrument, not to the net result of the transactions.

Quigley’s Case was a similar case of property being sought to be transferred subject to a life estate in the transferor and the argument being advanced of all that was transferred was a beneficial remainder and that argument was rejected.  The same conclusion was reached by Justice Aickin in the DKLR Case 149 CLR at page 463 and his Honour summarised his position rather neatly, in our respectful submission, at about point 7 of that page, the third sentence of the last paragraph on that page:

In my opinion this argument is based upon a fundamental misconception as to the nature of legal and equitable interests in land or other property.  If one person has both the legal estate and the entire beneficial interest in the land he holds an entire and unqualified legal interest and not two separate interests, one legal and the other equitable.

The point of taking your Honours to those passages is to demonstrate that it is not always the case that there is a concurrent legal and beneficial interest in land.  In the instance there under consideration there is simply an absolute interest in a person who holds subject to no trusts.  At perhaps the other end of the scale there is the position which was considered by the Privy Council in Commissioner of Stamp Duties (Q) v Livingston 112 CLR 12. Your Honours will recall that the issue in that case was the liability for duty as succession duty of an estate of a deceased beneficiary in an unadministered testamentary estate.

So that the question which arose was the nature and location of the interest of a beneficiary in an unadministered testamentary estate and in the course of dealing with that their Lordships in the Privy Council responded to an argument which had been advanced to them that there had to be a beneficial interest located somewhere in the unadministered estate.  The passage appears on page 22 of 112 CLR, the paragraph first beginning on the page at about point 2:

A second line of criticism has occasionally been expressed to the effect that it is incredible that Lord Herschell should have intended by his proposition to deny to a residuary legatee all beneficial interest in the assets of an unadministered estate.  Where, it is asked, is the beneficial interest in those assets during the period of administration?  It is not, ex hypothesi, in the executor:  where else can it be but in the residuary legatee?  This dilemma is founded on a fallacy, for it assumes mistakenly that for all purposes and at every moment of time the law requires the separate existence of two different kinds of estate or interest in property, the legal and the equitable.  There is no need to make this assumption.  When the whole right of property is in a person, as it is in an executor, there is no need to distinguish between the legal and equitable interest in that property, any more than there is for the property of a full beneficial owner.  What matters is that the Court will control the executor in the use of his rights over assets that come to him in that capacity; but it will do it by the enforcement of remedies which do not involve the admission or recognition of equitable rights of property in those assets.  Equity in fact calls into existence and protects equitable rights and interests in property only where their recognition has been found to be required in order to give effect to its doctrines.

Your Honour Justice Gummow and your fellow authors in Equity Doctrines and Remedies points out the essential circularity in the nature of property and the relationship between property and remedies, which comes first, the property or the remedy when each is said to depend upon the other?

GUMMOW J:   Is there not some further discussion of this in Short’s Case”?

MR SLATER:   Yes, there is, your Honour, and I do not think I need for the moment I need to take your Honour into that, because the point for which I was going to this is simply to point out that it is not the case that there is always a series of equitable estates which exhaust the same range as the legal estate and can only be dealt with by transfer from one person to another.  I do draw your Honours’ attention to the comment made by Viscount Radcliffe in the next paragraph, to the effect that:

Criticisms of this kind arise from the fact that the terminology of  our legal system has not produced a sufficient variety of words to represent the various meanings which can be conveyed by the words “interest” and “property”.  Thus propositions are advanced or rebutted by the employment of terms that have not in themselves a common basis of definition.

He goes on to give some instances of that.  Another instance of diversity of beneficial and legal interests, if I may just mention it, is that which emerged in the consideration by the House of Lords of the appeal in Gartside v Inland Revenue Commissioners (1968) AC 533, where at 606D to E Lord Reid pointed out that there can be a species of equitable interest with no property rights and that the objects of a discretionary trust, as objects alone, have no property interest in the assets of the trust but only a right to have the trust administered and the discretion duly exercised.

BRENNAN CJ:   What is the reference?

MR SLATER: (1968) AC 533, and the passage is at 606D to E, your Honour. Your Honours, in the DKLR Case Justice Mason referred to what had been said by Justice Hope in the Court of Appeal, and if I may do so I will follow suit and draw your Honour’s attention to some passages in his Honour’s judgment, which appears ‑ ‑ ‑

GUMMOW J:   This is all very interesting, but do we not really have to know what the nature was of these children who would take in default of appointment?

MR SLATER:   The nature of the children, your Honour, is that they were the two children ‑ ‑ ‑

GUMMOW J:   Yes, under 2.2.22 in its original form and then thereafter.  What was changed was the class of persons who had taken default of appointment.  We are not talking about special beneficiaries really.

MR SLATER:   No, your Honour.  The class of children beforehand ‑ ‑ ‑

GUMMOW J:   You say they have no present interest at all.  You may be right, but is that not what you say?

MR SLATER:   It is, your Honour, yes, we say that as at the time of ‑ ‑ ‑

GUMMOW J:   And they had no interest after, either.

MR SLATER:   Sorry?

GUMMOW J:   And none after, either.

MR SLATER:   No present interest in possession, certainly.

GUMMOW J:   Well, in interest.  “No present interest” .....possession.  No vested interest.

MR SLATER:   What we say about that, your Honour, is this and ‑ ‑ ‑

GUMMOW J:   I just do not know what the answer is, but I need to know it if one is to evaluate all these rather abstract arguments.

MR SLATER:   May I deal with it by taking your Honour to the provisions of the trust instrument and following them through, and then endeavouring to respond to your Honour’s question at the end of it.

GUMMOW J:   Yes.

MR SLATER:   The distribution date, as your Honour pointed out earlier, is defined in the trust instrument at page 24, line 30, and it is a date 80 years after the execution, 78 years after the variation, unless earlier appointed.  The trust property is defined as the assets held by the trustee from time to time, and that definition appears at page 23, line 45.  There is power in clause 6.1, which is on page 29 at line 10, to:

accept and receive as part of the Trust Fund any property whether real or personal which may at any time hereafter be conveyed transferred or paid by any person to and accepted by the Trustee by way of addition -

to the fund.  There is power in clause 5.1, on page 28 at line 5 to pay out part of the trust fund by way of advancement for the:

maintenance education advancement or otherwise for the benefit -

of any of the beneficiaries.  There is power in clause 15 of the trust instrument, which appears on page 39:

The Trustee shall have power in its absolute discretion from time to time to pay or transfer the whole or any part of the Trust Fund to which any person or persons who is or are at such time or times contingently presumptively or prospectively entitled under this settlement to the Trustee for the time being of any settlement or trust whereunder any such person or persons is or are entitled to any interest whatsoever whether absolute or contingent or presumptive or prospective or subject to any gift over or liable to be defeated -

So there is power to pay out of the fund as well as power to receive assets into the fund.  Then there are extensive powers in clause 7 to acquire and dispose of assets.  So that your Honours will see at page 29 at line 35:

The Trustee is expressly empowered to -

.11  acquire, hold, dispose of or otherwise deal with any investments authorised by this deed or by law; and -

incidentally, in 7.2, to conduct any business of any description in or at any place whatsoever.  Starting at line 45 and going on over the following pages, there are very extensive powers of conduct of business which involves the acquisition and disposal of assets in the course of that.  Finally, at 7.3 on page 31 at line 42 there are powers to invest the assets and to transpose and vary investments.

TOOHEY J:   What is the significance of those powers in answering the question we have to answer?

MR SLATER:   It is significant in answering the questions Justice Gummow asked me.  If I may just draw your Honour’s attention to one more provision before dealing with that.  That is the definition of the trust fund at page 23 at line 36:

“The Trust Fund” means the sum aforesaid paid by the settlor to the Trustee -

that is the $10 -

and all accretions thereto including any moneys investments and property paid or transferred to or accepted by the Trustee as additions.....but excluding any part thereof transferred by the Trustee to a beneficiary pursuant to the provisions hereof.

Your Honours, the point of taking you to that catalogue of provisions is this, that during the course of the period of up to 80 years in which the trust fund continues and which may elapse before the distribution date is arrived at, the assets of the trust fund may be wholly transmuted many times.  They may be enlarged, they may be contracted by distributions out or by losses, they may be turned over by the sale of assets or the acquisition of other assets.  Your Honour asked me what is the nature of the interest of the beneficiaries in the assets.

GUMMOW J:   Well, if there are any beneficiaries.  That is the first question.

MR SLATER:   In so far as they are the persons to whom the trustee is directed to account at the distribution date, then they would qualify within the ordinary conception of beneficiaries - at least as I understand it.  Perhaps your Honour has a different understanding.  Does that answer your Honour’s question or have I missed the point?

GUMMOW J:   There is powers of appointment exercised at the distribution date and there are objects of the power of appointment.

MR SLATER:   Yes.

GUMMOW J:   I would not call them beneficiaries.

MR SLATER:   No.  One would call them, as a matter of legal analysis, objects of the power.  For the matter of definition in the trust instrument they are called “the beneficiaries”.

GUMMOW J:   Yes, all right.

MR SLATER:   Again, it is the elusiveness of terminology that the use of the defined term tends to import a meaning which goes beyond the definition given - and we see that often in statutory provisions.

GUMMOW J:   By calling them beneficiaries it tends to elevate their interest, in a way, or to incline one to thinking that there is some present interest.

MR SLATER:   Indeed.

GUMMOW J:   Or, indeed, some future interest or whatever.

BRENNAN CJ:   Does it not divert attention from the statutory language?

MR SLATER:   The language used in the deed or the language of discourse?

BRENNAN CJ:   No, the language used in the statute, the definition of conveyance.

MR SLATER:   I am sorry, your Honour, your Honour said, “does it not divert”.  I was not sure what your Honour meant by “it”.

BRENNAN CJ:   The question of whether they are beneficiaries or not diverts attention from the question of whether or not there has been any of the effects which are essential to the definition of conveyance.

MR SLATER:   In our respectful submission, yes, your Honour, but it was by concentration upon what was conceived of as an estate that the beneficiaries had that the result which prevailed in the court below was reached.  What we say is that that is where the court below went astray, that it concentrated on the result, or what it perceived to be the result, instead of concentrating on what the instrument does. 

BRENNAN CJ:   Yes.

MR SLATER:   If I could just endeavour to finish answering the question that Justice Gummow asked me ‑ ‑ ‑

GUMMOW J:   I think you have.

MR SLATER:   I think it also bears upon the question that Justice Toohey asked me.  The interests which the children of Mr Buckle have are not interests by reason of paragraph 2.2.22 in any of the present assets of the fund, they are more accurately described as a right to have the trustee do something when the distribution date arrives.  That is, pay over to them whatever may be the assets of the fund as at that date after discharging the liabilities of the trustee.  There is no present interest under that paragraph in them in any asset of the fund because whatever assets there are may be disposed of by the trustee and they cannot complain of it.  They may be disposed of by realisation and reinvestment or they may be disposed of by paying them away in accordance with the powers.

GUMMOW J:   Or making them an advancement, or whatever?

MR SLATER:   Yes, that is what I meant by paying them away, your Honour.  So that as at the time of execution of the instrument there is no present interest in any present asset in the beneficiaries and therefore, in our submission, no property passing from a class comprising all the children of Mr Buckle to his son, William, and his daughter, Jane, in two to one shares.  I think that answers the question that your Honour Justice Toohey asked me, but I am not sure that I correctly understood the question.

TOOHEY J:   It is some time ago, I am not sure that I even remember it, Mr Slater, but I think in a sense it is supplemented by what the Chief Justice just put to you, that the powers of the trustee to dispose of trust property and so on tends to divert attention from the principal question:  was there a conveyance?

MR SLATER:   The answer to that principal question, in our submission, is yes, there was, and what the conveyance was was an appointment of varied trusts in respect of the trust as at the date of the appointment.

BRENNAN CJ:   You can develop that further tomorrow morning, Mr Slater.

AT 4.18 PM THE MATTER WAS ADJOURNED
UNTIL THURSDAY, 5 JUNE 1997