Commissioner of State Revenue v Karingal 2 Holdings Pty Ltd; Commissioner of State Revenue v CPT Custodian Pty Ltd
[2003] VSCA 214
•16 December 2003
SUPREME COURT OF VICTORIA
COURT OF APPEAL
Nos.5357 of 2002
5358 of 2002
5359 of 2002
5360 of 2002
| commissioner of state revenue | |
| Appellant/Cross-Respondent | |
| v. | |
| karingal 2 holdings pty. ltd. | Respondent/Cross-Appellant |
| and | 5361 of 2002 5362 of 2002 |
| commissioner of state revenue | Appellant/Cross-Respondent |
| v. | |
| cpT custodian pty. ltd. | Respondent/Cross-Appellant |
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JUDGES: | PHILLIPS, BUCHANAN and EAMES, JJ.A. | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 18, 19 and 20 August 2003 | |
DATE OF JUDGMENT: | 16 December 2003 | |
MEDIUM NEUTRAL CITATION: | [2003] VSCA 214 | |
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Taxation – Land tax – Tax on “owner” of land – Trusts – Land held as an asset of unit trust or sub-trust – Estate or interest of unit holder – Meaning of “owner” - Whether sole unit holder has “any freehold estate in possession” – Whether estate affected by trustee’s right of indemnity out of the trust assets – Whether holder of some units only has a “freehold estate in possession” – Land Tax Act 1958 ss.3, 45, 51, 52.
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| APPEARANCES: | Counsel | Solicitors |
| For the Appellants/Cross Respondents | Mr. J.D. Merralls Q.C. with Mr. C. Horan | Solicitor for Commissioner of State Revenue |
| For the Respondents/Cross Appellants | Mr. B.J. Shaw Q.C. with Mr. D. O’Brien | Gadens Lawyers |
phillips, j.a.:
These six appeals, all by the Commissioner of State Revenue, were heard at the same time as the appeal in Arjon Pty. Ltd. v. Commissioner of State Revenue[1]. In these six matters the Commissioner appealed against orders made by Nettle, J. in the Trial Division on 29 October 2002[2] in separate proceedings which were commenced when the respondents, Karingal 2 Holdings Pty. Ltd. (“Karingal”) and CPT Custodian Pty. Ltd., formerly known as Sandhurst Nominees (Victoria) Limited (“CPT”), requested that their several objections to certain assessments to land tax for the years 1996 to 1999 be treated as appeals to the Supreme Court under s.25 of the Land Tax Act 1958 (“the Act”). The Commissioner had disallowed the objections and in the Trial Division that decision was set aside and the proceedings were remitted to be dealt with by the Commissioner according to law. From those orders, the Commissioner now appeals contending that the respondents’ appeals under s.25 ought to have been dismissed and the assessments confirmed. By their cross appeal the respondents challenge some of the reasoning below and contend that, in any event, the trial judge ought to have set aside the assessments and remitted, not the proceedings, but the subject matter of the assessments for reconsideration and re-determination according to law. The parties are now in agreement that that should have been the form of the orders, if his Honour was otherwise correct.
[1][2003] VSCA 213.
[2][2002] VSC 431, 51 A.T.R. 190.
All six assessments depended upon the ownership of land on which stand certain shopping centres. There are five of them: the Karingal Shopping Centre at Frankston; the Glen Shopping Centre at Glen Waverley; the Keilor Downs Plaza at Keilor Downs; the Cranbourne Park Shopping Centre at Cranbourne and the Mildura Centre Plaza at Mildura. The Karingal Shopping Centre land is owned directly by Karingal: it is the registered proprietor of the land and the beneficial owner. As to the other four shopping centres, however, the land on which the centre stands is held by the registered proprietor as trustee of a unit trust and, in making the assessments, the Commissioner relied upon ownership of the units in the unit trust. As on the appeal by Arjon Pty. Ltd., this proceeding focussed principally upon the nature and extent of the estate or interest in the land of a person who holds, not the land, but units in a land-holding unit trust – or, as in some of these cases, units in a unit trust which itself holds as an asset within the trust fund units in a land-holding trust.
The first question was whether such a person was liable to be assessed, by virtue of s.51 of the Act, as an “owner of an equitable estate or interest” in the land so held. The respondents contended that, having regard to the terms of the particular trusts in question, a unit holder in these unit trusts could not be said to have “an equitable estate or interest” in any of the land the subject of the trust (or the head trust, if appropriate); alternatively, if that was not correct, a unit holder could not be said to be an “owner” within the meaning of the Act and so liable to tax under s.51. Nettle, J. rejected the first of these submissions, but accepted the second. The Commissioner now challenges the latter and the respondents, by their cross appeals, seek to re-agitate the former.
There was a further argument put to the trial judge, more particularly by CPT in relation to its assessments to land tax. Each of the assessments sought to impose tax by reference to more than one of the shopping centres: it was by amalgamating the lands in the hands of each of the respondents that the rate of tax was increased. CPT contended that the trustee’s right of indemnity for liabilities incurred (and they were substantial liabilities) meant that such parcels of land as were vested in the trustee, were held by it “in severalty in trust for different beneficial owners”. The trial judge described the submission thus[3]:
“The essence of the argument was that, because each trustee has an express right of indemnity out of trust assets, the trustee has a beneficial interest in the trust assets, and that means that ‘each of the trusts owns its land for “different beneficial owners”' within the meaning of s.52’ ”.
[3][2002] VSC 431 at [71].
Nettle, J. rejected the argument and CPT now challenges that rejection.
The structure of land holding and trusts
The detail of the land holding, the various trusts and the assessments is set out in the judgment under appeal under the heading "Agreed facts"[4] and, as the parties accepted its accuracy save in one respect, I do not repeat it all now. The only correction made was in paragraph 16, under heading (4) and in a sub-paragraph numbered 25. It is stated there that the 1998 assessment of CPT as trustee of the Keilor Downs Trust brought to tax, inter alia, a claimed 100% equitable interest held by CPT in the Keilor Downs Plaza land, when in fact that interest was legal not equitable. The mistake reflected an earlier mistake made by others[5]. As it happened, the error made no difference to his Honour's conclusion.
[4][2002] VSC 431 at [8] - [16].
[5]Summary for the Court of Appeal filed by the appellant, page 6/6 fn.7.
As to the assessments of Karingal, it is sufficient for present purposes to take two examples of the structures underlying the Commissioner’s assessments. For the year 1996 (and so by reference to land held as at 31 December 1995) Karingal was assessed to tax on land which the Commissioner claimed was owned by it and by two “related corporations”: 333 Queen Street Pty. Ltd. (“Queen Street”) and Centro Properties Ltd. Under s.41 of the Act, if two or more corporations are related within the meaning of that section, those corporations may, if the Commissioner so determines, be taken to be a single corporation for the purposes of the Act – and hence the assessment of Karingal.
Now, Karingal was itself the registered proprietor of the Karingal Shopping Centre land ("the Karingal Centre land"), which it owned beneficially and no unit trusts were involved. That did not change in any of the years in question. It is not in dispute that Karingal was properly brought to tax in respect of the Karingal Centre land. The dispute is over the inclusion of other lands in the same assessment.
Queen Street (one of the two related corporations) was said by the Commissioner to be the owner of a 50% beneficial interest in the Glen Shopping Centre land (“the Glen Centre land"). The registered proprietor of that land was Glen Centre Pty. Ltd., which held the land as trustee of the Glen Centre Trust, a unit trust in which 50% of the units were held by Queen Street. Hence the claim that Queen Street, by holding 50% of the units in the Glen Centre Trust, was the owner of a 50% beneficial interest in the land which was one of the assets in that trust.
Centro Properties Ltd. (the other related corporation) was said by the Commissioner to have the full beneficial interest in the Keilor Downs Plaza land ("the Keilor Plaza land"). The registered proprietor of that land was Centro Asset Management Pty. Ltd. (“Centro AM”) which held the land as trustee of the Keilor Downs Trust. (As from 3 October 1997, CPT replaced Centro AM both as registered proprietor of the land and as trustee of the Keilor Downs trust.) On 31 December 1995, there were 40,533,890 issued units in the Keilor Downs Trust, of which
(a)100 were held by Centro Properties Ltd. on trust for Centro AM as trustee of the Centro Property Trust; and
(b)the remaining units were held by Centro AM as trustee of the Centro Property Trust.
On 31 December 1995, all of the issued units in the Centro Property Trust were held by Centro Properties Ltd. Hence Centro Properties was regarded by the Commissioner as the full beneficial owner of the Keilor Plaza land because it held all of the units in the Centro Property Trust, the trustee of which, either directly or indirectly, held as assets of the trust all of the units in the Keilor Downs Trust - and the trustee of that trust was the registered proprietor of the Keilor Plaza land.
On 31 December 1996 (relevant to the 1997 assessment of Karingal) the structure of land holding and unit trusts was much the same as twelve months earlier (and a chart used by the parties to show the relevant holdings at 31 December 1996 is Appendix A to these reasons). There were two differences. First, there were more issued units in the Keilor Downs Trust, but there was no relevant change in how those units were held: it was still as described above[6]. There was further land included within the Karingal assessment, the Cranbourne Park Shopping Centre land ("the Cranbourne Park land"). Of this land Warriewood Pty Ltd was a registered proprietor, but as to 50% only. Warriewood held that share or interest as trustee of the Cranbourne Park Unit Trust, a trust in which all of the issued units were held by Centro AM as trustee of the Keilor Downs Trust. Hence the claim of the Commissioner to include within the Karingal assessment a one half share or interest in the Cranbourne Park land, as owned by Centro Properties Ltd (albeit through the Centro Property Trust).
[6]The chart in Appendix A is inaccurate in so far as it does not mention the 100 units in the Keilor Downs Trust which were held by Centro Properties Ltd. on trust for Centro AM as trustee of the Centro Property Trust. But, directly or indirectly, Centro AM as trustee of the Centro Property Trust held all of the issued units in the Keilor Downs Trust, as is shown.
As to the assessments of CPT to land tax, I take first the year 1998. CPT was here assessed to tax on land which the Commissioner claimed was owned by it on 31 December 1997 as trustee of the Keilor Downs trust, and either directly or through its holding all of the issued units in a unit trust. (A second chart, which shows the relevant holdings at 31 December 1997, is Appendix B to these reasons.) First, on 31 December 1997 CPT was itself the registered proprietor of the Keilor Plaza land, holding as trustee (in place of Centro AM) of the Keilor Downs Trust. It was therefore the legal owner of the Keilor Plaza land, albeit that the fee simple was vested in it as trustee of the Keilor Downs Trust. (It was not relevant to the 1998 assessment, but it became relevant the following year, that all of the units in the Keilor Downs Trust were also held by CPT, albeit as trustee of the Centro Property Trust, CPT having replaced Centro AM as trustee of that trust too).
On 31 December 1997, CPT, as trustee of the Keilor Downs Trust, also held all of the issued units in the Cranbourne Park Unit Trust, of which the trustee was, again, CPT. As trustee of the Cranbourne Park Unit Trust, CPT was the registered proprietor of a 50% interest in the Cranbourne Park land (meaning, as I apprehend it, that it was one of the two registered proprietors of the land as tenants in common). According to the Commissioner, because it held all of the units in the Cranbourne Park Unit Trust, CPT was the equitable owner of a one-half share in the Cranbourne Park land (as well, of course, as being the legal owner of the Keilor Plaza land).
By 31 December 1998 the position was a little different (and a third chart showing the relevant holdings at that date is Appendix C.) For the year 1999 CPT was assessed to tax as trustee of the Centro Property Trust (another trust in which, as I have said, CPT had replaced Centro AM as trustee). By 31 December 1998, Centro Property Trust had become the holder of all of the issued units in the Mildura Centre Plaza Unit Trust, of which the trustee was, again, CPT and in which capacity CPT was the sole registered proprietor of the Mildura Centre Plaza land ("the Mildura Plaza land"). CPT was assessed as equitable owner of that land in its capacity as trustee of the Centro Property Trust and thus the sole unit holder in a land holding trust.
As trustee of the Centro Property Trust, CPT also held all of the issued units in the Keilor Downs Trust of which it was also trustee and in which capacity it was (as in the previous year) the registered proprietor of the Keilor Plaza land and, as well, the holder of all of the issued units in the Cranbourne Park Unit Trust, a unit trust of which it was the trustee and in which capacity it still held a one-half share in the Cranbourne Park land. By this chain of devolution, the Commissioner claimed for the year 1999 to assess CPT, as trustee of the Centro Property Trust, for the full beneficial interest in the Keilor Plaza land and a one-half share in equity of the Cranbourne Park land (through the Keilor Downs Trust) and (through the Mildura Centre Plaza Unit Trust) the full beneficial interest in equity in the Mildura Plaza land.
Thus, either by reference to its own property or that of a related corporation, Karingal and CPT were each assessed as follows, at least once:-
(a)as registered proprietor (and in the case of Karingal as full beneficial owner) of the land of one of the shopping centres;
(b)as beneficial owner of the land of at least one shopping centre, by virtue of its holding the issued units in a unit trust, the trustee of which was the registered proprietor of that land;
(c)as beneficial owner of the land of at least one shopping centre by virtue of its holding the issued units in a unit trust, the trust fund of which comprised all of the units in another unit trust, the trustee of which was the registered proprietor of the land;
(d)as the owner in equity of a one-half share in the land of at least one of the shopping centres, through one or more unit trusts.
As to this last (the one half share), in the case of Karingal in 1997 and CPT in 1998 and 1999 this was because of its holding all of the issued units in the Cranbourne Park Unit Trust the trustee of which was one of the two registered proprietors, as tenants in common, of the Cranbourne Park land. In the case of Karingal, it was also because, in each of the years now in question, Queen Street was the holder of 50% of the issued units in the unit trust the trustee of which was the registered proprietor of the Glen Centre land.
The issues on appeal
The relevant provisions of the legislation have already been described on the appeal by Arjon Pty. Ltd.: see Arjon Pty. Ltd. v. Commissioner of State Revenue[7]. As mentioned above, the respondents’ first contention on these six appeals was that, having regard to the terms of the particular trusts in question, a unit holder could not be said to have “an equitable estate or interest” in any of the land the subject of the trust in which the units were held: a fortiori if the units were held in a trust which itself held the units in the land holding trust. The trial judge rejected this submission and did so by reference to the weight of authority which, as he put it, “has been for some years that the holder of a unit in a unit trust has an equitable proprietary interest in all the property which is for the time being subject to the trust deed” and also “a proprietary interest in each of the assets which comprise the entirety of the trust fund”.[8] In short, his Honour adopted the analysis of Brooking, J. in Costa & Duppe Properties Pty. Ltd. v. Duppe[9], for which there is ample support elsewhere.
[7][2003] VSCA 213 at [7] – [9].
[8][2002] VSC 431 at [26] - [29]. This portion of his Honour’s comprehensive reasons for judgment is set out in my judgment in Arjon at [21].
[9][1986] V.R. 90 at 92.
Mr. Shaw made the submission that it all depended upon the terms of the trust deeds and upon careful examination there were significant distinctions to be drawn between the terms of the trust deed in Costa& Duppe (to the extent that those terms were disclosed by Brooking, J. in the judgment) and the terms of the trust deeds governing the Keilor Downs Trust, the Glen Centre Trust, the Mildura Centre Plaza Unit Trust and the Cranbourne Park Unit Trust and, indeed, of the trust deed governing the Centro Property Trust too. The conclusion of Brooking, J. in Costa & Duppe that the unit holders in the unit trust in that case had a proprietary interest in each of the assets which comprised the entirety of the trust fund was expressly denied (Mr. Shaw submitted) in the trust deeds affecting the Glen Centre land, the Mildura Plaza land and the Keilor Plaza land, and also the trust deed of the Centro Property Trust. In each, there was a specific provision (he pointed out) that a unit should not confer “any interest in any particular part of the Trust Fund” or (alternatively) “any interest in a particular Asset”, whereas in Costa & Duppe the trust deed did no more than provide that the unit “shall not entitle a Unit Holder to any particular security or investment comprised in the trust fund or any part thereof”. This last was the effect (Mr. Shaw conceded) of the Cranbourne Park Unit Trust deed which provided that unit holders “shall not be entitled to any particular asset, investment, or property of whatever kind of the fund”, but that (he argued) was the only case in which the deed could not be distinguished from that under consideration in Costa & Duppe.
In my opinion, the distinction sought to be made was not real and the difference in wording upon which counsel sought to rely of no consequence. In context the words “entitled to” surely mean “entitled to any interest in” and when so understood there is no difference in kind between the one stipulation and the other. Each of the trust deeds enjoins that a unit does not confer any interest in any particular asset within the fund or, which seems to me the same thing, does not confer an entitlement to any particular asset within the fund. The point of distinction was not established and I see no error in Nettle, J.’s applying to these unit trusts the conclusion of Brooking, J. in Costa & Duppe and rejecting the respondents’ first contention.
The respondents then contended that, if they were not correct in their first submission, a unit holder could not be said to be an “owner” within the meaning of the Act, as that term was defined in s.3. On these appeals, as in Arjon, the parties were in agreement that ss.51 and 52 of the Act were not themselves charging provisions and that a person could not be brought to tax by reference to either or both of those sections unless first an “owner” as defined in s.3. As defined, one could be an owner only if one is “entitled to any land for an estate of freehold in possession”. That, said the respondents, could not be so in the case of a unit holder, given the restrictions imposed by the trust deeds on the rights and powers of unit holders. (That was the argument accepted by the trial judge.) For the Commissioner, Mr. Merralls submitted that those restrictions were of no moment and that each of the unit holders in trusts such as these was entitled to an estate in freehold in possession in the land in question. In Arjon, I have said why in my opinion the holder of all of the units in a unit trust may be said to be entitled, in equity, to the freehold estate in possession in land which is an asset of the trust; and that is my conclusion on these appeals for the reasons there advanced. And in my opinion, that reasoning applies with equal force both to the sole unit holder in a land-holding trust and to the sole unit holder in a trust which is itself the sole unit holder in a land-holding trust.
"Different beneficial owners"
On these appeals the respondents repeated the further argument that had been put below and which turned on a trustee's right of recoupment for liabilities incurred in the capacity of trustee. That argument was that because the trustee’s right of recoupment gave rise to a "beneficial interest" in the trustee in the assets, trust by trust, it meant that the lands in question could not effectively be aggregated for land tax purposes because they were, when considered together, necessarily held "for different beneficial owners" within the meaning of s.52 of the Act. Below, Nettle, J., who considered the argument by way of obiter dictum, rejected it[10] and, with respect, I agree with what his Honour said in that regard.
[10][2002] VSC 431 at [71] - [74].
The argument left aside of course what was often, as it happened in these cases, a correspondence in the identity of the trustee of the various trusts and sub-trusts, but, that apart, the argument fails in my opinion because it misunderstands what is meant by the trustee's "beneficial interest" in the assets. As I sought to explain in Arjon, the trust fund as a whole is held in equity for the cestuis que trust, not the trustee, and when there is but one holder of all the issued units in the trust, the owner in equity of the assets from time to time within the trust fund is that sole unit holder. That is the beneficial owner, in my opinion, to whom s.52 is looking, not the trustee, and where there is an identity in the sole unit holder in the several trusts in issue, it cannot fairly be said that the trustee is holding the assets, trust by trust, for different beneficial owners; the beneficial owner is the same. As Nettle, J. observed, if the respondents' argument were accepted, it would mean that even in the most simple of land-holding trusts, it could not be said, of even a sole beneficiary, that that beneficiary was the holder, albeit in equity, of the fee simple in possession, for the whole was in some fashion being shared with the trustee. The respondents' argument was properly rejected below.
Part ownership
What I have said thus far would justify our allowing these appeals, dismissing the cross appeals, and in effect restoring the decision of the Commissioner disallowing the objections - save for one further complication. In two instances involving Karingal (and in one, CPT also), the land ownership relied upon by the Commissioner involved less than the full estate. The Commissioner’s assessments included tax on a one half share in the Cranbourne Park land and on a one half share in the Glen Centre land.
In both cases the respondent was treated as one of two co-owners and it is s.45 of the Act which deals with co-ownership. Although it speaks throughout of “joint owners”, that expression is defined to include both joint tenants and tenants in common, so that nothing now turns on any difference between them. Section 45 commences thus:-
"(1)Joint owners of land are to be assessed and liable for tax in accordance with this section.
(2)Joint owners of land are to be jointly assessed and liable for tax in respect of the land as if it were owned by a single person, without regard to-
(a)the separate interest of each joint owner; or
(b)any other land owned by any joint owner (either alone or jointly with someone else).
(3)Each joint owner of land is also to be separately assessed and liable in respect of-
(a)the owner’s individual interest in the land (as if the owner were the owner of a part of the land in proportion to that interest); and
(b)any other land owned by the owner alone; and
(c)the owner’s individual interest in any other land.”
Sub-section (4) then provides for a deduction from the tax payable by a joint owner of “an amount (if any) necessary to avoid double taxation” and a formula is provided for calculating that amount. By sub-s.(5) a joint owner may be separately assessed under sub-s.(3), though no tax is jointly assessable in respect of the land under sub-s.(2). Sub-sections (6) and (7) are not presently relevant.
In the case of the Cranbourne Park land, the Commissioner’s assessment can be justified readily enough. Karingal and CPT were in turn both brought to tax as to a one half share in that land on the ground that each, in the relevant year or years, held all of the issued units (either directly or indirectly) in the Cranbourne Park Unit Trust. That was itself a land holding trust, the trustee of which was, first, Warriewood Pty. Ltd. and, later, CPT (under its former name, Sandhurst Nominees Pty. Ltd.) The trustee was one of two registered proprietors of the Cranbourne Park land, each proprietor having an equal and undivided share in common. Clearly s.45(3) would have justified assessing the registered co-owners to land tax, each as to one half of the value of the Cranbourne Park land. As one of them was holding its interest (as registered proprietor) as trustee of the Cranbourne Park Unit Trust and as the respondent (whether it be Karingal or CPT in the relevant year) held all of the issued units in that unit trust, what I have said in Arjon is enough to justify the assessment of the respondent to tax on a one half share in the Cranbourne Park land.
Put shortly, the trustee of the Cranbourne Park Unit Trust was the registered proprietor of a freehold estate in possession in the Cranbourne Park land (albeit that it was at law a co-owner with another, for “co-ownership exists where the same estate in land is simultaneously vested in two or more persons”[11]); that freehold estate was an asset within the unit trust and, for the reasons advanced in Arjon, the sole unit holder in that trust could properly regarded as the beneficial owner of that asset, and thus as entitled in equity to the like estate of freehold in the Cranbourne Park land. That the asset in the hands of the trustee was itself only an equal and undivided share in the land does not to my mind prejudice the reasoning. Whatever the estate of freehold vested in the trustee at law (be it the full ownership or only as a tenant in common), the sole unit holder was the owner of the like estate in equity[12]. The trustee was entitled at law to a freehold estate in possession (as to one half in value) in the Cranbourne Park land and so the sole unit holder in the Cranbourne Park Unit Trust was entitled in equity to the like freehold estate in possession.
[11]Mendes Da Costa, Coownership under Victorian Land Law (1961) 3 Melbourne University Law Review 137, 306, 433. The passage quoted is at 137.
[12]This is in line with the position, as I saw it, with respect to the Chadstone land, a one half share of which was held by a trustee directly for Arjon without the interposition of a unit trust: see Arjon [2003] VSCA 213 at [43], [44].
The position of the Glen Centre land is altogether different. Here, only Karingal is affected by the Commissioner’s assessment, but the land in respect of which Karingal was brought to tax in all three years (1996, 1997 and 1998) included a one half share in the Glen Centre land which the Commissioner treated as owned by Queen Street, a related corporation of Karingal. The sole registered proprietor of the Glen Centre land was Glen Centre Pty. Ltd., the trustee of the Glen Centre Trust. That was a unit trust of which the Glen Centre land was an asset and Queen Street held 50% of the issued units. Hence the Commissioner’s view that Queen Street (and accordingly Karingal) was a one half owner of the Glen Centre land.
But the holder of some only of the units in a unit trust is not in the same position as the holder of all of the units. Whereas the sole unit holder may be regarded as entitled in equity to the assets of the trust, at least where the trust deeds are as they are in the cases under appeal, it is difficult to see any basis on which the same could be said of an individual unit holder when it is not the only unit holder. It is not enough to determine that Queen Street had “a proprietary interest” in the land in question. For Karingal to be brought to tax, Queen Street had to be seen to be an “owner” as defined by s.3, meaning that it was “entitled to [a one half share of the] land for an estate of freehold in possession”. Certainly the Glen Centre Trust, or perhaps more strictly the trustee on behalf of the trust, held a freehold estate in possession in the Glen Centre land, but it is difficult to see on what basis the same could be said of one who held only some of the units in that trust. An individual unit holder has only that interest in the assets of the trust which the clauses of the trust deed define and confer, and that surely falls far short of a freehold estate in possession. It is not to the point that all of the unit holders together might be said to have an estate of freehold in possession on the ground that, together, they in equity have what the trustee has at law; that is not in issue. For even if all of the unit holders together were properly regarded as having in equity the freehold estate in possession held at law by the trustee of their trust, it does not follow that the holder of only some of those units has the like estate or interest. Indeed I should have thought it was the contrary. The holder of some only of the units has no more than those entitlements afforded by the trust deed to a unit holder; they are surely personal property quite different from the realty held by the trustee.
Certainly an individual unit holder, who is but one of two or many, cannot be regarded as entitled in equity to the estate or interest held at law by the trustee; the interest of the former must be less than the estate of the latter: see and compare Suncorp Insurance and Finance v. Commissioner of Stamp Duties[13] per Fitzgerald, P. But Mr. Merralls’ submission went thus. If the effect of the terms of the trust would be to create in a beneficiary a proprietary interest in all the assets for the time being which were subject to the trust, a term denying a proprietary interest in particular assets cannot be given effect because the one is inconsistent with the other. It follows in this case, given the terms of the trust, that every individual unit holder had a proprietary interest in each of the assets, including an interest in the freehold estate in possession held by the trustee in the Glen Centre land as an asset of the trust. Thus (the argument concluded) each and every unit holder was “the owner of an equitable estate or interest in land” within the meaning of s.51 and, more importantly for present purposes, was an “owner” as defined by s.3, being a person “entitled to any land for any estate of freehold in possession”.
[13][1998] 2 Qd.R. 285 at 301-2.
It is the very last step in this chain which I cannot accept. As Mr. Shaw submitted, it is not necessary to decide whether under the relevant trust deed each and every holder of a unit has an “equitable estate or interest in land”; for the definition of “owner” speaks of an “estate of freehold in possession”, not merely an interest in land. The word “land” is defined to include “all land and tenements and all interest therein” which may well be sufficient to encompass the share of a co-owner. None the less the words “estate of freehold in possession” are specific and I find it difficult to see how an individual unit holder, whose interest, if any, in the land quite clearly derives solely from and is subject to the terms of the relevant trust deed, can be said to be entitled to “an estate of freehold in possession”. In this respect I agree with Mr. Shaw’s submission.
The Glen Centre land alone throws up the question whether an individual unit holder, who is not the holder of all of the shares in the unit trust, is “entitled to
an estate of freehold in possession” in land within the trust, yet Mr. Merralls’ submissions made no particular point of the Glen Centre land. His submissions were directed to the more general position obtaining on these appeals where the land had but the one registered proprietor and all of the issued units in the unit trust were held by the one person, a position which I have distinguished. In my opinion the Commissioner failed to show any basis upon which Karingal (through its related company Queen Street) was properly brought to tax on a one half share in the Glen Centre land, land of which Glen Centre Pty Ltd was the only registered proprietor and which it held as an asset within the Glen Centre Trust.
Conclusion
Accordingly, subject only to excluding from the Commissioner’s assessment of Karingal the value of a one half share in the Glen Centre land which in my opinion ought not to have been brought to tax, I would allow the appeals and dismiss the cross-appeals, setting aside the orders made below on 29 October 2002 and ordering in lieu that the appeals to the Trial Division be dismissed. I would hear counsel on the details of the orders to be made.
Buchanan, J.A.:
I agree with Phillips, J.A.
EAMES, J.A.:
I have had the advantage of reading the judgment prepared by Phillips, J.A. and, in the main, I agree with it. My only concern is over the Glen Centre land which, although held by the trustee of a unit trust, is in a somewhat special position. That is because in respect of it alone the putative tax payer does not hold all of the units in the unit trust, but only half of them. That is said to lead to a different result, and it is there that I entertain some doubt. However, as the other two members of the court are clear in their opinion, any further elaboration of my doubt would serve
no useful purpose and I am not, in the circumstances, prepared to dissent. Moreover, the parties were anxious to have a decision on the matters under appeal as quickly as possible and, if I were to take the time to prepare more elaborate reasons, a decision would obviously not be possible before the long vacation.
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