Chief Commissioner of State Revenue v Benidorm Pty Ltd

[2021] HCATrans 67

[2021] HCATrans 067

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S221 of 2020

B e t w e e n -

CHIEF COMMISSIONER OF STATE REVENUE ABN 77 456 270 638

Applicant

and

BENIDORM PTY LTD ACN 125 162 307

Respondent

Application for special leave to appeal

GORDON J
STEWARD J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON MONDAY, 12 APRIL 2021, AT 12.10 PM

Copyright in the High Court of Australia

MS R.L. SEIDEN, SC:   May it please the Court, I appear with my learned friend, MR S. KANAGARATNAM, for the applicant.  (instructed by the Crown Solicitor’s Office (NSW))

MR C.J. BEVAN:   May it please the Court, I appear with my learned friend, MS I. SETHI, for the respondent.  (instructed by Piper Alderman)

GORDON J:   Ms Seiden.

MS SEIDEN:   Thank you.  Your Honours, the central issue is whether the definition of “declaration of trust” in section 8(3) of the Duties Act is satisfied where there is no change in equitable rights, but the statutory definition is otherwise satisfied.  In order to demonstrate what the applicant contends is the error, can I take your Honours to application book 140, and the definition of what is a dutiable transaction in section 8.

GORDON J:   You accept that this is now an Act that imposes duties on transactions?

MS SEIDEN:   Your Honour, we say that it ‑ ‑ ‑

GORDON J:   As this Court found in State Revenue v Dick Smith Electronics, at paragraph 15 and, again, later in the other judgment – I think it was 65 or 69.

MR SEIDEN:   Indeed.  We say that it is a tax on dutiable transactions, your Honour, and the question that this matter raises is really what is a transaction?  So, it is not that – there is no dispute that we have moved away from a tax on instruments – it is really the gravamen of the applicant’s submission is that the word “transaction” in section 8 itself has no operative effect and is defined by what follows it.  When one comes to declaration of trust that has its own express definition that one need not find a change in legal or equitable rights.

STEWARD J:   Can that proposition survive what this Court said in Lend Lease at paragraph 41?

MS SEIDEN:   Your Honour, I do not have it in front of me.

STEWARD J:   The whole point of Lend Lease was to establish that the Duties Act of both Victoria and New South Wales more or less charged duty on actual transactions, things that moved things, as it were, usually a disposition of beneficial ownership and suffering.

MS SEIDEN:   Indeed.  However, we say that when one has the express definition in section 8(3) that that is qualified.  If I could perhaps take your Honours to what the applicant refers to as some circularity of reasoning in ‑ ‑ ‑

GORDON J:   Before you do that let us just go to the definition, can we, of “declaration of trust” in 8(3) so you can make good your proposition, if you would, that that somehow assists you in your argument.

MS SEIDEN:   Yes, thank you, your Honour.  Section 8(3) is found on page 141 and the first point is it does not expressly refer to a transaction.  It has several factors, or criteria, the first is that there must be a declaration.  The second is there must be identified property.  The third, which we say is highly critical, is that that property is either vested or to be vested in the person making the declaration.

GORDON J:   Then, you have got to read on:

that any identified property vested or to be vested –

something has to happen to it:

is or is to be held in trust ‑

MS SEIDEN:   Indeed.  We say that there is not a ‑ that it could be held in trust for the person mentioned in the declaration and that if one goes back to page 140, that it is a tax on certain transactions and the following transactions, we say, take their meaning from the factors in the enumerated list.  The difference between the learned primary judge held that the word transaction in the chapeau to section 8(1)(b) had no operative effect and merely was a classificatory device and took its meaning from the matters that followed.

GORDON J:   Can I ask a question in relation to that?  Is there any other item listed in subparagraphs (i) to (viii) which would not effect a movement of property?

MS SEIDEN:   Your Honours, it would be difficult to point to one.

GORDON J:   It might suggest something about the word “transaction”.

MS SEIDEN:   Well, other than the fact – and if I could come to – I think the circularity of reasoning point that the applicant seeks to make might answer your Honour’s issue.  If I could take your Honours to page 149, paragraph 82.  What their Honours did in identifying what was a transaction was to identify that “Each of the listed” – this is the second last sentence of paragraph 82:

Each of the listed transactions in s 8(1)(b) denotes, as a matter of ordinary legal terminology, something which alters the legal or equitable rights or obligations concerning property. 

That, as a matter of ordinary legal terminology is one thing, however, the court had already at paragraph 79 identified that the definition of “declaration of trust” does, in fact, not have its ordinary legal terminology and that is found at page 148 at the last sentence of 79:

It follows that, as the Commissioner submitted, a “declaration of trust” for the purposes of s 8(1)(b)(ii) is apt to be broader than what the law of trusts might regard as a declaration of trust.

Their Honours reiterated that at 94 which is at application book 152, the last sentence:

Save to say that there is no reason to confine the extended definition to cases which would amount to a declaration of trust in equity, it is unnecessary to address these submissions.)

Therefore, in effect, it is submitted, that what the court did was to construe the word “transaction” in the chapeau to section 8(1)(b) by reference to the ordinary meaning of each of the matters in the enumerated list but then use that definition of “transaction” to construe the defined meaning of “declaration of trust”.

STEWARD J:   Just step back a bit.  Why would Parliament have intended to render “exigible” the manufacture of a document which acknowledges a trust and no more, in the context where it otherwise is taxing movements in property and thus giving rise to a moment of exigibility?

MS SEIDEN:   Your Honour, we say that the real issue in section 8(3) arises in the words “to be vested” and they were included to close a loophole with respect to some tax avoidance.  Nevertheless, one has to live with that definition.  We say that the definition is in such materially similar terms to the way it has been since the 1960s in Toohey’s Case, that had Parliament intended that definition to have a different meaning in fact Parliament would have said so.  So we put a few propositions together, but the first is that ‑ ‑ ‑

STEWARD J:   It may have said so by the context in which a declaration of trust is listed as a transaction which is dutiable in section 8(1)(b).

MS SEIDEN:   Your Honour, of course, we must accept that.  However, we say that, given the similarity ‑ and your Honours will see we have marked up that at page 163 – the fact that nothing was said about it, the fact that it was originally brought in, particularly the words “to be vested”, to shut down a tax avoidance, we say very critically in this case there are a myriad of concessions and exemptions that would really be left with no or little work to do if this declaration of trust was not to apply, unless there was a change in legal or equitable interests.

STEWARD J:   So in your submission, does “declaration” mean or include acknowledgement?

MS SEIDEN:   Indeed.  And if one turns to, for instance, sections 55 and 18(6), which are found at page ‑ ‑ ‑

STEWARD J:   So does that mean that someone orally acknowledges the existence of a trust in New South Wales they pay duty?

MS SEIDEN:   Well, that might ‑ ‑ ‑

STEWARD J:   And they have to produce an instrument then in the course of the Act, yes.

MS SEIDEN:   Indeed, and the way that it is submitted is the architecture of the Act is very much that it casts the net wide and then there are a plethora of exemptions and concessions to ‑ ‑ ‑

GORDON J:   But it casts the net wide by reference to transactions, not by reference to what you are putting to us, which is to identify a document, an instrument.  The whole focus is shifted and the exemptions and qualifications are all directed to that question rather than a question of instrumentation.

MS SEIDEN:   Your Honour, with respect, we identify that the Act is – it is dutiable transactions.  If I could take your Honour back to the definition?  So, the word “transaction” appears – so this is at page 140 – the word “transaction” is in the heading and “the following transactions”, the enumerated list.  Critically then at subsection (2) on the next page “Such a transfer” – it starts with “a transfer” and then these other transactions are deemed to be transfers – or not deemed, but are taken to be transfers, and that is seen by section 9 with the table that identifies who is liable.

So, these enumerated factors are dutiable transactions.  With respect, if I take your Honours to the way that the learned primary judge put it, which is at page 103 of the application book, that the word “transaction” in (1)(b) really does not have any work of its own to do.  It is submitted that to give it the meaning that the Court of Appeal has given it is to add an additional hurdle or an anterior threshold.

GORDON J:   It is an anterior threshold because, as we know from Dick Smith Electronics, as this Court acknowledged, the entire focus of the Act had changed.

MS SEIDEN:   Your Honour, we do not cavil with the change in focus.  We say it begs the ‑ ‑ ‑

GORDON J:   It represents a shift in emphasis.

MS SEIDEN:   Indeed, and we embrace that, your Honour, however we say that it begs the question what is a transaction?  It is submitted that is not simply a transaction in the ordinary sense that happens to be dutiable, we say it is a dutiable transaction the way it is referred to in section 8(2).

STEWARD J:   Are there any authorities under the former Act in which an instrument of acknowledgment of an existing trust has been said to be exigible?

MS SEIDEN:   Yes, your Honour, there was the case, not from this Court, the Supreme Court in the case of Crowther, and the primary judge distinguished it on the basis that that was an acknowledgment sort of within the parties, whereas here it was as a result of the operation of the Probate Act, and the Court of Appeal distinguished it on the basis that the world has shifted.

Nevertheless, we rely on what – to put the submission the way the learned primary judge did at page 103, paragraph 317, that really the word “transaction” in the chapeau to 8(1)(b) does not really have any work to do, it is a classificatory device for the list that follows it.   So, the real question is what do the legal events in the lists that follow it mean, and where you have got a definition in 8(3) ‑ ‑ ‑

GORDON J:   This is why I asked you at the outset, if you looked at those enumerated items, and you took out a declaration of trust, each of them involves some movement of property, do they not?  And that is your problem.  So one can say this transaction does not add anything to the list but it takes its meaning from what follows on any view.

MS SEIDEN:   Your Honour, we would say two things to that.  The first is that “declaration of trust” is expressly and specifically defined, so one has to – the way the Court of Appeal approached it was to say, you start with the proposition everything is a transaction, now let us look at what is a declaration of trust, and we suggest that that is a circularity, that one needs to start with the definition of “declaration of trust” before you can answer the question that your Honour has put to me, whether each of the enumerated factors in fact does evidence a change.

STEWARD J:   But is not a declaration of trust, as defined, a reference to an instrument which has legal effect insofar as it recognises a disposition of beneficial ownership now or in the future?

MS SEIDEN:   Well, your Honour, one of the issues that we say that was a problem within the future is – and we say supports the applicant’s contention – is it may never vest.  There is no requirement for there to be certainty of vesting, it may never happen.

STEWARD J:   I understand that, but is it not directed to an instrument or document or thing which has a legal effect rather than someone simply saying, I acknowledge that I hold property on trust?

MS SEIDEN:   With respect, your Honour, we say it does not for the reason that it includes the expression “to be vested”.  It apprehends documents ‑ ‑ ‑

STEWARD J:   Is there anything in the explanatory notes to this Duties Act which would support a wider reading of “declaration of trust” in the way you advocate?

MS SEIDEN:   Your Honour, we get the support from the earlier High Court decisions that say it is ‑ whatever it means, it is much broader than the legal definition of “declaration of trust” and we say that once you start with that acknowledgment that this definition 8(3) is wider than the legal definition of a “declaration of trust”, and then one cannot immediately answer the question about whether there has been a transaction in the ordinary sense by reference to the enumerated factors because one is immediately starting with a definition that does not abide by its legal ordinary meaning.

That is a matter that has not been dealt with in this Court.  It was obviously touched upon in Rojoda, the circumstances were very different.  We say it is very important.  We say this is an Act in respect of dutiable transactions and that means a declaration of trust as defined, not a declaration of trust that is in the first place a transaction in the ordinary sense and only then do you look whether it satisfies the definition.

The quintessential case would be a resulting trust where you have a resulting trust that is subsequently expressed in writing.  We would say there would be – if you had an oral resulting trust because somebody has paid the purchase price, for instance, that is subsequently reduced to writing and you have an express trust in writing, that writing does not make it exigible – there is not any legal or beneficial entitlement that has sprung into existence as a result of that writing, yet section 55 says in those circumstances you pay a concessional rate of duty.  Section 55 would not be needed because in that circumstance there would not be an exigible transaction in the first place.

Section 18(6) as well, which is at page 146 of the application book, particularly subsection (6A)(a) says, where you have a declaration of trust that supersedes another declaration.  Well, if it is declaring the same trusts why do you need an exemption for it, and we say these are important questions that have not been looked at and the Court of Appeal identified the force in the applicant’s submission by reference to some of these concessions.  But, nevertheless, said, well, because there has been this fundamental shift we really do not need to go there, but we say, with respect, the Act is to be read as a coherent whole.

The Court of Appeal reconciled this sort of – their hesitancy, or this uncomfortableness by saying that the charging provision is the leading provision and these other ones cannot affect its meaning, but it is submitted that these exemptions and concessions really need to be – could be taken into account in determining the actual meaning of that very first proposition.

STEWARD J:   What do you say about the appropriateness of this matter coming here, given that neither the trial judge nor the Court of Appeal referred to the seminal decisions of this Court in Dick Smith and then in Lend Lease?

MS SEIDEN:   Your Honours, I think there is a reference in the Court of Appeal to the fact that it is a tax on transactions and not a tax on instruments, and that was really the primary focus of the Court of Appeal.  However, we say, with respect, that it nevertheless begs the question of what does transaction mean and that is really why we are here.  Otherwise, we say it is a model vehicle because there is no facts in dispute.  The only issue is this very unique definition of “declaration of trust”, which is in at least five other States around Australia, that the court itself acknowledged had a meaning that was much wider than a normal declaration – like a declaration of trust at law.  The question is what does it mean, and we say that none of the cases have answered the question and this is a model case for that.

Your Honours, we note that there has been some submissions about costs.  We have addressed those at page 199 of the application book but, obviously, if this Court grants special leave on the conditions of costs the

applicant would, of course, submit to whatever conditions that the Court sees fit.

Your Honours, I think in summary if I could simply highlight that the way that the Court of Appeal addressed the definition of “declaration of trust” was to start with what their Honours determined was a transaction, and rather than to look at the definition of “declaration of trust” to answer the question that your Honour Justice Gordon has put to me, do in fact each of the enumerated factors refer to something that requires a change of equitable or legal ownership and the only way to answer that question is to actually have regard to section 8(3) first, because the court itself had identified that it did not have its ordinary meaning.  And so we say that the starting point is what does section 8(3) mean in order to answer your Honour Justice Gordon’s question.  Your Honours, they are the applicant’s submissions.

GORDON J:   Thank you, Ms Seiden.  We do not need to hear from you, Mr Bevan. 

The application for special leave to appeal does not identify a question of principle and there is no reason to doubt the correctness of the conclusion reached by the Court of Appeal of the Supreme Court of New South Wales.  Special leave to appeal is refused with costs. 

Adjourn the Court to 10.00 am tomorrow.

AT 12.31 PM THE MATTER WAS CONCLUDED