Commissioner of State Revenue v Mondous
[2018] VSCA 185
•1 August 2018
SUPREME COURT OF VICTORIA
COURT OF APPEAL
S APCI 2017 0095
| COMMISSIONER OF STATE REVENUE | Applicant |
| v | |
| SOUHAIL MONDOUS | First Respondent |
| and | |
| NAILA MONDOUS | Second Respondent |
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| JUDGES: | McLEISH and NIALL JJA and McDONALD AJA |
| WHERE HELD: | MELBOURNE |
| DATE OF HEARING: | 9 March 2018 |
| DATE OF JUDGMENT: | 1 August 2018 |
| MEDIUM NEUTRAL CITATION: | [2018] VSCA 185 |
| JUDGMENT APPEALED FROM: | [2017] VSC 416 (Hargrave J) |
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ESTOPPEL – Issue estoppel – Privity of interest – Whether privity between trustee of discretionary trust and potential beneficiaries – Trustee party to first proceeding – Beneficiaries parties to subsequent proceeding – First proceeding pursued for economic benefit of parties to subsequent proceeding – Trustee in first proceeding controlled by parties to subsequent proceeding – Parties to subsequent proceeding had no legal interest in outcome of first proceeding – Effem Foods Pty Ltd v Trawl Industries of Australia Pty Ltd (in liq) (1993) 43 FCR 510; Timbercorp Finance Pty Ltd (in liq) v Collins (2016) 259 CLR 212; Tomlinson v Ramsay Food Processing Pty Ltd (2015) 256 CLR 507 considered.
ESTOPPEL – Issue estoppel – Privity of interest – Bare trust over land – Legal title transferred to beneficiaries prior to first proceeding – Whether privity of interest between former trustee and beneficiaries – Former trustee party to first proceeding regarding tax liability incurred in respect of trust land – Former beneficiaries parties to second proceeding – Former trustee had personal right of indemnity against former beneficiaries in respect of land tax liability – Right of indemnity survived distribution of trust property – Balkin v Peck (1998) 43 NSWLR 706; Timbercorp Finance Pty Ltd (in liq) v Collins (2016) 259 CLR 212; Tomlinson v Ramsay Food Processing Pty Ltd (2015) 256 CLR 507 considered.
ABUSE OF PROCESS – Relitigation of issue finally determined – Whether administration of justice brought into disrepute – ‘Relitigating’ parties controlled party to prior proceeding – Relevant issue not determinative of prior proceeding – Reichel v Magrath (1889) 14 App Cas 665; O’Halloran (2000) 159 FLR 260; Kermani v Westpac Banking Corporation (2012) 36 VR 130 considered.
ABUSE OF PROCESS – Relitigation of issue finally determined – Whether administration of justice brought into disrepute – Denial of privity based on status as potential beneficiaries of discretionary trust – Substantive tax liability argument based on status as beneficiaries of bare trust – Privity established if beneficiaries of bare trust – Successful challenge to prior findings would establish privity so as to prevent same challenge – Tomlinson v Ramsay Food Processing Pty Ltd (2015) 256 CLR 507 considered.
ABUSE OF PROCESS – Relitigation of issue finally determined – Whether merits of prior decision to be considered in deciding question of abuse – Abuse doctrine informed by principle of finality – Manifest error in prior decision may be factor in determining abuse in rare cases – Haines v Australian Broadcasting Corporation (1995) 43 NSWLR 404 considered.
PRACTICE AND PROCEDURE – Appeal on error of law – Whether issue open on appeal – Issue agreed between parties at first instance – Whether expedient in interests of justice to permit raising of issue on appeal – Whether issue could have been met by evidence at first instance – Secretary to the Department of Justice v Western Suburbs Legal Service Inc (2009) 22 VR 66; Medical Practitioners Board of Victoria v Lal (2009) 23 VR 702 considered.
PRACTICE AND PROCEDURE – Appeal – Abuse of process – Finding of abuse in attempting to relitigate issue already finally determined – Whether intermediate appellate court should consider all grounds of appeal – Where determining substantive issues would perpetuate abuse.
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| APPEARANCES: | Counsel | Solicitors |
| For the Applicant | Mr D J Williams QC with Mr N A Kotros | Solicitor for the Commissioner of State Revenue |
| For the Respondents | Mr D J Batt QC with Mr J Korman | Belleli King & Associates |
McLEISH JA:
In 2014 the Commissioner of State Revenue determined that the respondents had failed to pay adequate stamp duty in respect of a transfer of land from Kameel Pty Ltd (‘Kameel’) to the respondents dated 4 June 1999. Kameel was the trustee of a discretionary trust whose property included the land, and the respondents were among the beneficiaries of that trust.
Duty was assessed at the time of the transfer by reference to a consideration of $120,000 stated in the transfer. While stamp duty was, under the Stamps Act 1958, not payable upon a transfer by a trustee of a discretionary trust to a beneficiary of that trust, this was so only if the transfer took place pursuant to a power of appointment, and not if there was a sale to the beneficiary.[1] The consideration of $120,000 was also stated in a partially executed contract for the sale of the land dated in 1989 (but prepared in 1991), which was provided to the then Comptroller of Stamps in connection with the stamping of the 1999 transfer. The Commissioner decided in 2014 that this contract had not been genuine or legally binding. He also rejected an alternative argument that the land had been transferred in equity to the respondents in 1990 by way of a trust distribution. As a result, the Commissioner decided that the respondents had no beneficial interest in the land before 1999 and stamp duty was assessed based on the value of the land in 1999, namely $2,575,000.
[1]Stamps Act 1958 sch 3 heading VI exemption (10) (‘Exemption (10)’); Re Ralara Pty Ltd v Comptroller of Stamps (Vic) (1992) 24 ATR 1133, 1140–2 [16]–[23] (Member Nettle) (‘Ralara’).
The Commissioner issued the 2014 stamp duty assessment after Kameel had challenged its liability to land tax for the years 1991 to 1999. In that context, it was held in the Victorian Civil and Administrative Tribunal (‘the Tribunal’) that Kameel had owned the relevant land for land tax purposes throughout the period in question. The respondents were not parties to that proceeding. The Tribunal’s decision was upheld on appeal to this Court. The Commissioner relied on the Tribunal’s finding as part of his 2014 assessment of stamp duty.
The respondents unsuccessfully challenged the 2014 stamp duty assessment before a differently constituted Tribunal. A judge in the Trial Division allowed an appeal against that decision and set aside the assessment. The Commissioner seeks leave to appeal on grounds including issue estoppel and abuse of process, in reference to the land tax proceeding. The Commissioner also contends that the respondents had no beneficial interest in the land before the 1999 transfer in any event.
For the reasons that follow, leave to appeal should be granted and the appeal allowed.
Background
Kameel was appointed as the trustee of the Mondous Family Trust, a discretionary trust, by a trust deed dated 21 September 1986. The trustee acquired various real property for the trust, including land in Berwick, Victoria. The respondents, Mr and Mrs Mondous, are the specified beneficiaries of the trust. Other family members are general beneficiaries. The trust fund and its income are held for the beneficiaries in such proportions as the trustee may appoint or (generally) for the specified beneficiaries if no appointment is made by the vesting day. The trustee is empowered to pay income to any beneficiary as it thinks fit and to convey or transfer the whole or any part of the trust fund or its capital to any beneficiary.
Mr Mondous is the ‘Guardian’ and ‘Appointor’ under the trust deed. As a result, the power to appoint the trust fund to particular beneficiaries and the power to convey or transfer part of the trust fund or its capital (among other powers) can only be exercised with his consent.
From December 1988 until October 2005, the respondents were the only two directors of Kameel and, since then, Mr Mondous has been its sole director. He is also the secretary of Kameel and its only shareholder.
The Berwick land was divided pursuant to a plan of subdivision registered in October 1990. By that time, the respondents had begun construction of a family home on what became, pursuant to the plan of subdivision, 18–22 Leemak Crescent, Berwick (‘the land’). Once the plan of subdivision was approved and the titles to the land issued, in late 1990, Mr Mondous and his solicitor considered how to transfer the land to the respondents in their own names.
At first, Mr Mondous agreed that the transfer should be by way of a distribution from the trust. The solicitor prepared an instrument of transfer of land, under which Kameel transferred the land to the respondents as joint proprietors. This instrument of transfer was dated 28 December 1990 (the ‘first transfer’). Consideration for the transfer was stated to be: ‘The Transferees’ entitlement to a distribution of corpus pursuant to The Mondous Family Trust Deed dated the 21st September, 1986.’
The common seal of Kameel as transferor was affixed, and each of the respondents signed the first transfer as directors. It is not clear whether the respondents also signed in their personal capacities as transferees.[2] As it turned out, the first transfer was never lodged with the Titles Office for registration. However, there is an issue between the parties as to whether the first transfer was effective to pass an equitable interest in the land to the respondents. If so, the result would be that the 1999 transfer of the legal interest would be exempt from stamp duty, as the final step in a distribution from the trust to the respondents as beneficiaries.[3]
[2]The judge in the Trial Division found that they had: Mondous v Commissioner of State Revenue [2017] VSC 416 [11] (‘Reasons’). However, the version provided to us did not include these signatures. Counsel for the Commissioner suggested there may have been a page missing from that version. In any event, no party contended that it mattered whether the respondents also signed the transfer in their personal capacities.
[3]See [34] below.
In February 1991, Kameel’s solicitor signed a ‘Notice of Disposition of an Interest in Land’ and lodged it with the Commissioner of Land Tax in order to separate the land from the other real property owned by Kameel for the purposes of land tax assessment. The Commissioner of Land Tax acted on the basis of this notice and, accordingly, the land was not included in Kameel’s land holdings for the purposes of land tax for the years from 1991 until 1999. As a result, its land tax liability was substantially reduced over that period. At the same time, the respondents were assessed for land tax in respect of the land.
Also around February 1991, the solicitor lodged the first transfer with the Comptroller of Stamps for opinion as to the amount of stamp duty payable on it. In March 1991, Mr Mondous made a statutory declaration in response to the Comptroller’s queries, in which he stated that Kameel had acquired the land subsequent to the respondents being specified beneficiaries of the trust, and that the respondents were accepting the land in their own right. The Comptroller determined that the first transfer was not subject to ad valorem stamp duty, being a transfer from a trustee to a beneficiary,[4] and assessed it as a deed requiring only nominal stamp duty of $10.
[4]Pursuant to Exemption (10).
In the meantime, as already mentioned, the first transfer was not lodged with the Titles Office and Kameel remained the registered proprietor of the land.
In a letter dated 17 May 1991, Mr Mondous’s solicitors wrote to his accountants raising the possibility of adverse capital gains tax consequences following from the first transfer. The first transfer was described in the letter as a ‘proposed transfer’.
In October 1991 the solicitors sent the first transfer to the bank which held a mortgage over the land. They asked the bank to endorse an order to register on the transfer so that it could be lodged with the Titles Office. In response, the bank noted that it would require new security documentation to reflect the change in ownership of the land. By a letter dated 11 November 1991, the solicitors asked the bank to return the first transfer to them, stating that their client would not be proceeding with it.
Mr Mondous gave evidence that, at some time in 1991, his solicitor drew up a contract to the effect that the land had been sold in 1989 (the ‘backdated contract of sale’). Inconsistently with the terms of the first transfer, the backdated contract of sale recorded consideration of a total purchase price of $120,000, with a deposit of $12,000 having been paid and the balance to be paid on 28 December 1990 or within five years.
As stated above, Kameel had after 1991 not paid land tax in respect of the land, on the basis that it had transferred the land to the respondents pursuant to the first transfer. In 1999, the State Revenue Office (‘SRO’) discovered that Kameel remained the registered proprietor of the land and made enquiries of Kameel and the respondents.
In response, Mr Mondous informed the SRO that the respondents claimed ownership of the land for land tax purposes based on the backdated contract of sale, under which they were given possession of the land on 28 December 1989, and under which the balance of the purchase price was not yet owing and had not yet been paid (so that Kameel was not yet obliged to transfer the title into the respondents’ names). Under this argument, the respondents were ‘buyers in possession’ of the land. This would have meant that Kameel was no longer the owner of the land for the purposes of the Land Tax Act 1958.[5] If the land had been owned for land tax purposes by the respondents, rather than Kameel, it would have attracted a reduced rate of land tax for reasons it is not necessary to explain. This was how the land had been treated until 1999, on the basis of the SRO’s mistaken belief that the land was held by the respondents, and it had assessed them for land tax accordingly. The ‘buyer in possession’ argument was Kameel’s attempt to justify this treatment, on a different basis.
[5]Sections 48–9.
The SRO’s enquiries prompted Mr Mondous to take steps to transfer the legal title from Kameel to the respondents, pursuant to an instrument of transfer of land dated 4 June 1999 (the ‘second transfer’). The second transfer was executed by Kameel as transferor, being affixed with its common seal and signed by the respondents in their capacity as officers of Kameel, and the respondents also signed the instrument again, in their personal capacities as transferees. Kameel purported to transfer ‘all its estate in fee simple’ in the land to the respondents as tenants in common in equal shares for a stated consideration of $120,000. This is the instrument the subject of the present application for leave to appeal.
The second transfer was stamped with ad valorem duty of $3,400, calculated on the stated amount of consideration, being $120,000. The stamp duty was paid, the second transfer was registered and the respondents became the registered proprietors of the land in August 1999.
Land tax proceeding: SRO assessments and objections
The SRO did not accept Kameel’s contention that the respondents were ‘buyers in possession’, and advised Mr Mondous by letters dated December 1999 and January 2000 that the land tax assessments in the respondents’ names would be cancelled, and refunds paid to them, and that assessments for Kameel as owner of the land from 1991 until 1999 would be issued instead. Kameel objected to this course. The Commissioner disallowed the objection on the grounds that it had not been shown that at least 15 per cent of the purchase money had been paid (as required by the ‘buyer in possession’ provisions of the Land Tax Act). The Commissioner amended the assessments to reflect that a deduction was due to Kameel for land tax paid by the respondents as purported owners of the land. Once the amended assessments were issued to Kameel, it again objected. The objections were again disallowed, in 2005, on the same basis.
Land tax proceeding: Tribunal and Supreme Court
Kameel’s objections were referred to the Tribunal, which heard them in March 2013.[6] Shortly before the hearing, Kameel added a ground of objection alternative to its ‘buyer in possession’ ground. This alternative was based on the first transfer and relied on ss 51 and 52 of the Land Tax Act. The details of the ground of objection are not relevant for present purposes, but it relied on the first transfer having conveyed the equitable estate in the land to the respondents.
[6]No explanation for the delay between the disallowance of the objections in 2005 and the VCAT hearing in 2013 was provided.
The Tribunal refused Kameel’s objections to the land tax assessments.[7]
[7]Kameel Pty Ltd v Commissioner of State Revenue(Review and Regulation) [2013] VCAT 1320 (‘Land Tax Reasons’).
As to Kameel’s ground that the respondents were buyers in possession pursuant to the backdated contract of sale, the Tribunal found that the contract was a sham and that, in any event, Kameel had not proved that 15 per cent of the purchase price had been paid.
The Tribunal rejected Kameel’s contention that the first transfer had conveyed the equitable estate in the land to the respondents. It also found that, even if the first transfer had constituted a conveyance of the equitable estate, that conveyance had been revoked. It is these findings (‘the equitable interest findings’) that give rise to the issue estoppel and abuse of process arguments now advanced by the Commissioner.
The Tribunal also found that, even if the first transfer had conveyed the equitable estate in the land to the respondents, Kameel could not rely on ss 51 and 52 of the Land Tax Act to avoid liability for land tax as an owner of the land. That conclusion was based on this Court’s decision in Lygon Nominees Pty Ltd v Commissioner of State Revenue[8] and is now accepted by the respondents as correct. Kameel sought leave to appeal against the Tribunal’s decision only on the buyer in possession ground. That leave was refused.[9]
[8](2007) 23 VR 474.
[9]Kameel Pty Ltd v Commissioner of State Revenue (Unreported, Supreme Court of Victoria, Court of Appeal, Hansen and Tate JJA, 29 August 2013).
After the land tax issue between Kameel and the Commissioner was resolved, the SRO began investigating whether the respondents had paid the correct stamp duty on the second transfer.
Stamp duty proceeding: SRO assessment and objection
As noted above, the stamp duty originally assessed and paid on the second transfer was $3,400, based on the stated consideration of $120,000. The Commissioner now decided that the respondents had not held an equitable interest before 1999 and that stamp duty on the second transfer should therefore be assessed based on the value of the land at the date of transfer, 4 June 1999.[10] The Valuer-General valued the land at $2,575,000 as of that date. Consequently, stamp duty on the second transfer was assessed in the sum of $141,625. As $3,400 stamp duty had already been paid on the second transfer, a notice of assessment for the difference, $138,225, was issued on 29 September 2014. The 2014 assessment also included penalties and interest, making a total assessment of $552,900.
[10]Stamps Act 1958, sch 3 heading VI.
The respondents objected to the 2014 assessment. Their objection was disallowed. The Commissioner’s reasons for disallowing the objection were based in part on the Tribunal’s findings in the land tax proceeding between Kameel and the Commissioner. The Commissioner decided that the second transfer was not the result of a pre-existing genuine contract of sale, in part because the Tribunal had found the 1989 contract to be a sham. For that reason, the value of the land for stamp duty purposes was to be assessed as at the date of transfer.
As to the date of transfer, the Commissioner said that the respondents could not rely on the first transfer as supplying the relevant date for assessing the applicable stamp duty because the Tribunal had found that the transaction recorded in the first transfer had been abandoned or revoked. The Commissioner said that the transfer described in the first transfer had been abandoned or revoked for the following reasons, drawing heavily on the Tribunal’s decision in the land tax proceeding:[11]
[11]Reasons [50].
(a) Mr Mondous’s solicitor informed the bank in October and November 1991 that the first transfer was not proceeding at that time;
(b) contractual relations cannot be made retrospectively, so the first transfer could not have been based on the backdated contract of sale;
(c) the first transfer and the backdated contract of sale could not ‘logically or legally co-exist’; and
(d) there was ‘no evidence to indicate the basis upon which the [first transfer] is predicated’. Further:
In the absence of any objective evidence that [the land] was distributed as a result of [the first transfer], the Commissioner treats the [first transfer] as having been revoked by the parties and therefore, Kameel … remained the owner of [the land].
Stamp duty proceeding: Tribunal
The respondents applied to the Tribunal for a review of the refusal of their objection to the stamp duty assessment. That review was the genesis of the present proceeding. The Tribunal, constituted by a different member than in the land tax proceeding, heard the review and confirmed the assessment.[12]
[12]Mondous v Commissioner of State Revenue (Review and Regulation) [2016] VCAT 1343 (‘VCAT Reasons’).
In the Tribunal, the respondents contended that the second transfer was exempt from stamp duty under Exemption (10) in the Stamps Act 1958. As already noted, that exemption applies to the conveyance of land comprising trust property from a trustee to a beneficiary of the trust, when certain conditions are met.
The issue in the Tribunal was whether the second transfer was a conveyance of the land to the respondents as beneficiaries of the trust and, if so, whether Exemption (10) was attracted in the circumstances of the case. The respondents contended then (and contend now) that the second transfer transferred only the legal title to the land, the equitable interest having been conveyed by way of the first transfer. They contended that the effect of the first transfer was to convey the equitable interest in the land by way of trust distribution to the respondents as beneficiaries, with the result that a bare trust arose over the land in favour of the respondents. The second transfer was said to have completed the trust distribution contemplated by the first transfer, by transferring Kameel’s legal title to the land to the respondents (thereby bringing the bare trust to an end).
However, the Commissioner contended that there was an issue estoppel arising out of the land tax proceeding, which precluded the respondents from asserting that they were equitable owners of the land by reason of the first transfer. The two findings of the Tribunal in the land tax proceeding that were said to give rise to the issue estoppel were the ‘equitable interest findings’ referred to at [26] above, namely: first, that the first transfer did not constitute a conveyance of the equitable interest in the land; and secondly that, even if such conveyance were established, it had been revoked.
The Tribunal accepted this contention and found that the respondents were estopped from relying on an equitable transfer of the land to them under the first transfer.[13] As part of this finding, it found that Kameel ‘is and has been at all material times a privy of the [respondents]’.[14]
[13]VCAT Reasons [32].
[14]VCAT Reasons [20].
Although the Tribunal’s finding on the issue estoppel was sufficient to dispose of the application to review, it also went on to find that, in any event, the respondents’ objection to the assessment should fail. The Tribunal found that there had been no trust distribution or any other conveyance pursuant to the first transfer.[15] It also found that, even assuming that the respondents did obtain an equitable interest in the land by virtue of the first transfer, it was not possible under the Torrens system for the second transfer to have transferred the bare legal title.[16]
[15]VCAT Reasons [38]–[39].
[16]VCAT Reasons [47].
Lastly, the Tribunal found that the requirements of Exemption (10) on which the respondents relied were not met, since that exemption applied only to transfers to beneficiaries in their character as such and not to transfers on sale.[17]
[17]VCAT Reasons [53]–[55].
The respondents sought leave to appeal the Tribunal’s decision in the Trial Division on a number of grounds and were substantially successful. The judge ordered that the 2014 stamp duty assessment be set aside. The Commissioner now seeks to appeal from that decision.
Reasons of the judge
The judge considered five issues on the appeal from the Tribunal:[18]
[18]Reasons [61].
(1) Were the equitable interest findings by the Tribunal in the land tax proceeding legally indispensable to its decision?
(2) Were Mr and Mrs Mondous privies of Kameel?
(3) Is challenging the equitable interest findings an abuse of process?
(4) Did the first transfer constitute a distribution in specie?
(5) Is the second transfer exempt from stamp duty?
As to the first issue, the judge found that the equitable interest findings were legally indispensable to the Tribunal’s decision in the land tax proceeding, such that they could potentially found an issue estoppel. No challenge is now made to that finding.
The Commissioner seeks to agitate the remaining issues, all of which the judge decided in favour of the respondents.
Issue estoppel — privity
The judge found that the respondents were not the privies of Kameel,[19] so that there could be no issue estoppel.[20]
[19]Reasons [91].
[20]Blair v Curran (1939) 62 CLR 464, 531 (Dixon J).
The Commissioner had submitted as a preliminary issue that, as the respondents had not disputed the question of privity in the Tribunal and as it was a question of fact, they should not be allowed to raise it on appeal to the Supreme Court. The judge rejected that submission, finding that the issue was one of mixed fact and law, that the Tribunal’s reasons failed to consider the relevant legal principles, and that those reasons were wrong in any event.[21]
[21]Reasons [93].
On the question of privity, the judge found that the respondents had no legal interest in the outcome of the land tax proceeding. The judge recognised that the question whether the respondents were privies of Kameel in the land tax proceeding might depend on the legal effect of the first transfer or, in other words, on whether the equitable interest findings were correct.[22] The judge found that the equitable interest findings were wrong,[23] for reasons referred to below, and he considered the question of privity first on that basis. The judge found that, even though the equitable interest findings were wrong, so that a bare trust had arisen in respect of the land between 1991 and 1999, Kameel in the land tax proceeding was acting in its capacity as trustee of the discretionary trust. In that capacity it was not representing the interests of the respondents as beneficial owners of the land, but was pursuing the land tax objections for its own benefit, namely to reduce its own tax liability, ‘albeit in its capacity as trustee of the trust with fiduciary duties to all potential objects of its power of appointment as a class’.[24] Also, since the land tax proceeding determined only whether Kameel was liable for land tax in respect of the land, the judge found that the decision could have no effect on the respondents’ beneficial ownership of the land.[25]
[22]Reasons [97].
[23]Reasons [98].
[24]Reasons [99].
[25]Reasons [100].
The judge then considered the privity question on the basis that the equitable interest findings were correct and found that the same result applied. The effect of the findings was that no bare trust had arisen, so that the respondents were mere objects of a discretionary trust without any legal or equitable interest in its assets. Mr Mondous’s control of Kameel was insufficient to give rise to privity in interest, just as control of a corporate litigant, even when coupled with a shareholding in the company, is insufficient for the purpose of making the controller a privy of the company.[26] As to Mrs Mondous, the judge found that there was in any event no evidence that she authorised Kameel to make the objection or otherwise had any role in the manner in which Kameel conducted the land tax proceeding.[27]
[26]Reasons [101], citing Tomlinson v Ramsay Food Processing Pty Ltd (2015) 256 CLR 507, 522 [35] (French CJ, Bell, Gageler and Keane JJ) (‘Tomlinson’); Sheraz Pty Ltd v Vegas Enterprises Pty Ltd (2015) 319 ALR 709, 730–2 [102]–[111] (Murphy JA).
[27]Reasons [96].
Abuse of process
The judge found that it was not an abuse of process for the respondents to challenge the equitable interest findings made in the land tax proceeding to prosecute their stamp duty objection.
The judge found that since the equitable interest findings made in the land tax proceeding were wrong, it would be unjust to prevent the respondents from relitigating those findings where they were neither parties nor privies of Kameel in that proceeding.[28]
[28]Reasons [106], referring to Haines v Australian Broadcasting Corporation (1995) 43 NSWLR 404, 414 (Hunt CJ at CL) (‘Haines’).
Further, the judge found that the respondents’ contention that Exemption (10) applied was arguable, and that providing them the opportunity to advance that position would not unduly oppress the Commissioner, or bring the administration of justice into disrepute.
The judge found that Mr Mondous was deprived of any opportunity to consider the respondents’ stamp duty position at the time of the land tax proceeding because the Commissioner had then not yet reassessed the respondents’ stamp duty liability. As with the privity ground, there was no evidence that Mrs Mondous had been involved in the land tax proceeding at all.
Transfer by distribution – first transfer
The judge found that the first transfer did constitute a distribution of the land from the trust.
First, the judge found that the Commissioner was correct that the respondents had no entitlement to a distribution as mere objects of a discretionary trust. However, he also found that the first transfer ought to be looked at in a common sense way and given a business-like interpretation. Doing so entailed finding that it both recorded Kameel’s decision to distribute the land to the respondents, and constituted a transfer of the land to them in registrable form.[29] Otherwise the first transfer made no commercial sense. That finding was supported by the general principle of contractual interpretation that ‘parties are unlikely to have intended to agree to something … legally ineffective’.[30]
[29]Reasons [114].
[30]Reasons [116], citing Bank of Credit and Commerce International SA v Ali [2002] 1 AC 251, 269 (Lord Hoffmann), quoted in Lewison, The Interpretation of Contracts (Sweet & Maxwell, 6th ed, 2015) 425 [7.16].
Secondly, the judge found that a separate recording of or document constituting the exercise of the trustee’s power to distribute trust property was, in any event, not required by the trust deed.[31]
[31]Reasons [118]–[119], citing provisions including cl 17(2) of the trust deed, which permitted the trustee to exercise powers in writing signed by the trustee or by resolution.
Thirdly, the judge rejected certain conclusions of the second Tribunal, which it is not necessary to consider further.[32]
[32]Reasons [121]–[124]. Those conclusions are either not pressed by the Commissioner or replicate reasoning of the first Tribunal already canvassed.
Application of exemption — second transfer
As to the final issue, the judge found that the second transfer was exempt from stamp duty under Exemption (10). In order to attract the exemption, the respondents must have acquired the land as beneficiaries rather than as purchasers.[33]
[33]Reasons [105], citing Ralara (1992) 24 ATR 1133, 1140–2 [16]–[21] (Member Nettle).
The judge accepted that Mr Mondous both believed and intended that the second transfer would give effect to the backdated contract of sale, but rejected the submission that this determined the legal nature of the transaction giving rise to the second transfer.[34]
[34]In support of this finding, the judge cited High Court authority to the effect that material extrinsic to an instrument can be considered in determining the legal operation of that instrument: Reasons [136]–[139], citing Commissioner of Stamp Duties (Qld) v Hopkins (1945) 71 CLR 351, 360 (Latham CJ), 369 (Rich J), 378 (Dixon J).
The judge also found that Mr Mondous was mistaken in this regard. As explained, the judge had already found that the first transfer constituted a valid conveyance of the equitable interest in the land to the respondents. There had been no re-transfer of the equitable estate to Kameel, as the Commissioner had not identified any instrument signed by the respondents as required by s 53(1) of the Property Law Act 1958 that had accomplished such a transaction.[35] The judge therefore rejected the submission of the Commissioner, and the finding by the Tribunal, that if there had been any transfer of the equitable estate in the land by way of the first transfer then such transfer had been revoked. The judge also rejected an argument that the first transfer was meant as no more than a proposed means of transferring the land. The evidence established a firm intention to proceed with the first transfer until March 1991, that is, after the date of the instrument and the decision it evidenced.[36]
[35]Reasons [142].
[36]Reasons [141].
As a result, the judge found that Kameel had no interest in the land to sell to the respondents and, as a bare trustee of the land for the respondents, was under an obligation to transfer the legal interest to them for no consideration. It followed that the reference in the second transfer to consideration of $120,000 was irrelevant to its legal operation, and that the purported transfer of the land by way of sale had no legal effect.[37]
[37]Reasons [135], [140]. That was found to be true irrespective of whether there was also an oral contract for the sale of the land: [143].
In deciding this final issue, the judge considered the finding of the Tribunal that it is not possible to transfer only a bare legal interest under the Torrens system of land title registration. The judge accepted that it may not be possible to transfer only the legal interest in land while retaining the equitable interest, but found that where a trustee had already transferred the equitable interest it could, and indeed was obliged to, transfer the bare legal interest to the beneficiary. He found that the second transfer, when registered, gave effect to that obligation and enabled the Registrar of Titles to reflect the respondents’ beneficial ownership of the land since the execution of the first transfer.[38]
[38]Reasons [144]–[145].
Proposed grounds of appeal
The Commissioner’s proposed grounds of appeal, reflecting the above four issues but in a slightly different order, are as follows:
1.Abuse of process: The primary judge erred in failing to find that it was an abuse of process for Mr and Mrs Mondous, by the second proceeding, to re-agitate the finding that they were not the equitable owners of the land made in the first proceeding.
2.Privity: The primary judge erred in interfering with the Tribunal’s finding, made without any dispute, that Mr and Mrs Mondous and their family trustee company were privies for issue estoppel purposes.
3.No distribution: The primary judge erred in overturning the Tribunal’s decision that Mr and Mrs Mondous were not the equitable owners of the land under a ‘distribution’.
4.No exemption anyway: The primary judge erred by failing to recognise that Mr and Mrs Mondous and their company Kameel Pty Ltd were entitled to agree, and did agree, by 1999 if not by 1991 (in writing, if writing be necessary), not to proceed with the [second] instrument, and that the exemption was not engaged by what in fact occurred.
Argument proceeded before us on the basis that if each of the four grounds of appeal were rejected, then Exemption (10) would be engaged and no additional stamp duty would be payable by the respondents. As such, the only issue as to the application of the exemption is that contained in proposed ground 4: whether the land was transferred to the respondents pursuant to a trust distribution rather than a sale.[39]
[39]The exemption is set out at Reasons [52] and discussed at Reasons [126]–[128]. At trial, too, it was accepted by the parties that the only issue in respect of Exemption (10) was whether the second transfer was a conveyance of the land to the respondents in their capacity as beneficiaries of the trust: see Reasons [53], [59].
The Commissioner submitted that the proposed grounds of appeal were alternatives in that even if he failed on any one of those grounds, the next could still be considered independently. The parties presented their argument in the sequence proposed by the Commissioner, starting with ground 2 and followed by grounds 1, 3 and 4. It is convenient to adopt the same order here.
Parties’ submissions: Issue estoppel — privity (ground 2)
The Commissioner submitted that, contrary to the decision of the judge, the Tribunal was correct in holding that, owing to the findings in the land tax proceeding, the respondents were estopped from now contending that they had become the equitable owners of the land pursuant to the first transfer. The result was that they were not equitable owners of the land before it was transferred to them in 1999.
The Commissioner submitted that the judge erred in finding that no privity existed between Kameel and the respondents for the purposes of an issue estoppel, particularly when the question of privity was not contested in the Tribunal and when it was a matter of mixed fact and law, which may have been the subject of evidence had privity been in issue. The Commissioner submitted that the Tribunal proceeding was run on the basis that privity was conceded by both sides, in circumstances where both sides ran and responded to issue estoppel arguments. Since privity was not in issue before the Tribunal, it could not have been in error for the Tribunal not to have addressed it. The Commissioner also submitted that the notion that Mrs Mondous was in a distinct position from her husband was raised only late in the Supreme Court hearing and should not have been allowed to be argued on that appeal.[40]
[40]Coulton v Holcombe (1986) 162 CLR 1, 7–8 (Gibbs CJ, Wilson, Brennan and Dawson JJ).
The Commissioner submitted that if, contrary to his position, the question of privity was capable of being raised on the appeal as a question of law, then privity existed so as to found an issue estoppel.
The Commissioner submitted that the relevant issue in the land tax proceeding was whether the respondents had become the equitable owners of the land and so liable for assessment, or whether Kameel had retained ownership of the land for land tax purposes and was so liable instead. The Commissioner submitted that even though the respondents and Kameel had different interests in the sense that one of them would be found liable to pay the land tax attributable to the land (a burden) and the other would not (a benefit), in fact all the relevant interested persons, both Kameel and the respondents, were in favour of the respondents paying the land tax rather than Kameel, because that entailed a significantly reduced amount of land tax for which the family assets, considered as a whole, would be liable. The respondents were therefore said to have an economic interest in the outcome of the land tax proceeding coupled with a legal interest, being the determination of their personal land tax liability.
As to the finding of the judge that Mrs Mondous stood separately from her husband because there was no evidence that she, no longer being a director of Kameel, had any role in the land tax proceeding, the Commissioner submitted that this was in error. He submitted that it could readily be inferred, based on Mr Mondous’s correspondence over the years,[41] that he was acting at all relevant times with the authority of Mrs Mondous and that she had always, before and after her tenure as a director, knowingly given him the running of trust matters on her behalf.
[41]The Commissioner’s solicitor wrote to Mr and Mrs Mondous in 1999 (during Mrs Mondous’s tenure as a director) and stated what the solicitor believed both respondents to have been asserting in respect of their ownership of the property, based on what Mr Mondous had told the solicitor that day, namely that they ‘owned’ the land for land tax purposes pursuant to a sale; an objection was lodged on 27 October 2014 on the letterhead of both respondents, arguing in favour of the sale contention; and letters dated 29 January 2003 letters from Comito & Co, one as solicitors for the trustee, and the other as solicitors for the respondents, indicated that Mr Mondous alone was representing not only Kameel, despite Mrs Mondous still being a director at that time (in one letter), but also both the respondents (in the other).
The Commissioner also submitted that Kameel’s position, and that of Mr Mondous, had been consistent since 1991, well before Mrs Mondous ceased to be a director in 2005. Mr Mondous had not been said to have gone off on a frolic of his own once Mrs Mondous ceased to be a director. The position that both Kameel and the respondents took, which the Commissioner submitted founded both the land tax proceeding and the present proceeding, was that although there had originally been a transfer instrument indicating a distribution, they had instead proceeded with a sale of the land.[42] The current position taken by the respondents — that the first transfer separated the legal and beneficial interests — was simply a ‘lawyer’s construct’, not reflective of what either Kameel or the respondents had ever intended to do.
[42]Ibid.
The respondents submitted that estoppels should not be found lightly, particularly where they are put on the basis of privity, as their effect is to prevent a party from putting their claim to a court. They contended that it was the responsibility of the Commissioner to demonstrate to the Tribunal that privity existed between Kameel and the respondents.
The respondents submitted that the trial judge was correct to find that the question of privity was one of mixed fact and law and, as such, was capable of being taken on appeal from the Tribunal. The respondents also submitted that the question of privity was the basis of a ground of appeal before the judge and that the Commissioner had not opposed the issue being raised, nor had he sought to include a ground of appeal in this Court seeking to object to the privity question having been raised before the judge. The respondents also submitted that the Commissioner had not identified any relevant additional evidence he could have brought before the Tribunal on the privity question.
The respondents submitted that the judge was correct to find no privity between Kameel in the land tax proceeding and the respondents in the present proceeding. They submitted that the correct question was whether the respondents had claimed under or through Kameel, as privies in interest with Kameel.[43] The outcome of the land tax proceeding was not a decision as to the equitable ownership of the land but one as to whether a tax assessment should be confirmed or set aside. They submitted that Kameel in the land tax proceeding was concerned only with reducing its own tax liability, for the general benefit of the objects of the trust fund. It was therefore pursuing the litigation for its own benefit alone (as trustee) rather than by representing the legal interests of the respondents. On the contrary, they submitted, the respondents’ interest in the outcome of the land tax proceeding was opposed to that of Kameel since, if Kameel were successful, they would be exposed to land tax liability in respect of the land.
[43]Ramsay v Pigram (1968) 118 CLR 271, 279 (Barwick CJ); Tomlinson (2015) 256 CLR 507, 521–3 [31], [33], [35]–[38] (French CJ, Bell, Gageler and Keane JJ); Timbercorp Finance Pty Ltd (in liq) v Collins (2016) 259 CLR 212, 231 [36], 236 [54], 239–40 [68] (French CJ, Kiefel, Keane and Nettle JJ) (‘Timbercorp’); Timbercorp Finance Pty Ltd (in liq) v Collins [2016] VSCA 128 [160]–[172] (Warren CJ, Santamaria and McLeish JJA) (‘Timbercorp’). See also Reasons [88]–[90].
As to the position of Mrs Mondous, the respondents submitted that the judge correctly noted that she was neither a shareholder nor a director of Kameel at the time of the land tax proceeding, and had no control over the running of that
proceeding. They submitted that the correspondence from Mr Mondous to which the Commissioner referred did not evidence or give rise to an inference of any grant of authority by Mrs Mondous. In any event, they submitted, the question of control or influence over a corporation by a director or shareholder is not determinative of privity.
As to the Commissioner’s argument that the claim that Mrs Mondous was in a special position distinct from her husband had not been raised in the Tribunal, the respondents submitted that the Commissioner had sought and failed to persuade the Tribunal that it would be an abuse of process for Mrs Mondous to challenge the equitable interest findings.
Analysis: Issue estoppel — privity (ground 2)
Was it open to the judge to review the Tribunal’s finding as to privity?
The first question is whether the issue of privity was open to being revisited by the judge on appeal, in circumstances where, the Commissioner contends, it had been the subject of agreement between the parties in the Tribunal. For present purposes, it is convenient to assume that there was such agreement, or at least that the parties proceeded upon the common basis that privity existed.
As a preliminary matter, the Commissioner’s second proposed ground is broadly expressed so as to extend to this argument. It alleges error by the judge in interfering with the finding ‘made without any dispute’.
The Commissioner contended that there could be no error of law in the Tribunal deciding a matter on an agreed legal and factual basis. Without an error of law, it was pointed out, there is no basis for an appeal under s 148 of the Victorian Civil and Administrative Tribunal Act 1998. In Hussain v Minister for Foreign Affairs, the Full Court of the Federal Court found that there was ‘substance’ in a similar submission made in respect of s 44 of the Administrative Appeals Tribunal Act 1975 (Cth), which provides for appeal on a question of law from the Administrative Appeals Tribunal to the Federal Court.[44] In that case, the tribunal had proceeded upon the basis of an effective concession by the applicant as to the validity of certain certificates, which he then sought to impugn upon appeal.
[44](2008) 169 FCR 241, 256–7 [41], 258 [50] (Weinberg, Bennett and Edmonds JJ). See also Federal Commissioner of Taxation v Raptis (1989) 19 ALD 726, 728 (Gummow J).
However, no rigid rule applies in the context of s 44 of the Commonwealth Act.[45] Moreover, this Court has consistently permitted the raising of new points on appeals under s 148 of the Victorian Civil and Administrative Tribunal Act 1998, provided it is in the interests of justice to do so.[46] That is consistent with the view that, if a conclusion reached by the Tribunal is affected by legal error, it cannot lose its character as such merely because the source of the error lay in the submissions of the parties, or their common approach to the issue in question. Those circumstances might explain, but do not deny, the error.
[45]Kuswardana v Minister for Immigration and Ethnic Affairs (1981) 35 ALR 186, 193–4 (Bowen CJ); Comcare v Fiedler (2001) 115 FCR 328, 338 [39] (Drummond, Kiefel and Dowsett JJ); Repatriation Commission v Warren (2008) 167 FCR 511, 529–30 [78] (Lindgren and Bennett JJ); Toia v Minister for Immigration and Citizenship (2009) 257 ALR 237, 247–8 [52]–[58] (Stone and Jacobson JJ).
[46]See, eg, Secretary to the Department of Justice v Western Suburbs Legal Service Inc (2009) 22 VR 66, 75 [24] (Beach J); Medical Practitioners Board of Victoria v Lal (2009) 23 VR 702, 713 [41] (Maxwell P, Weinberg JA and Kyrou AJA). See also Transport Accident Commission v Bausch [1998] 4 VR 249, 263–6 (Tadgell JA, Batt and Buchanan JJA agreeing); Macedon Ranges Shire Council v Romsey Hotel Pty Ltd (2008) 19 VR 422, 434 [41] (Warren CJ, Maxwell P and Osborn AJA).
While there is no jurisdictional bar, therefore, the question remains whether the unsuccessful party, having contributed to the error, may yet seek to have it corrected on appeal. This is a variation, or perhaps an extreme example, of the situation that arises when an unsuccessful party seeks on appeal to raise an argument not advanced at first instance. Ordinarily, of course, that is not permitted.
However, exceptionally, it may be expedient in the interests of justice to permit a party to raise on appeal an argument that was not advanced below. That will require showing at least that the point could not possibly have been met by
evidence.[47]
[47]See, eg, Harplex Pty Ltd v Konstandellos [2018] VSCA 67 [66]–[67] (McLeish and Hargrave JJA and McDonald AJA), citing Coulton v Holcombe (1986) 162 CLR 1, 7–8 (Gibbs CJ, Wilson, Brennan and Dawson JJ) and Vlahos Pty Ltd v Vlahos [2017] VSCA 166 [49]–[51] (Kyrou JA, Tate and McLeish JJA agreeing).
In the present case, the question of privity was a significant element of the issue for decision in the Tribunal. The respondents challenged the Tribunal’s treatment of the point and the Commissioner raised no objection before the judge to that course. Nor did the Commissioner in this Court, or before the judge, seek to establish that, had the respondents contested privity in the Tribunal, the Commissioner could have met the point by evidence. The highest it was put by the Commissioner was that the question of the capacity of Mrs Mondous to influence the land tax proceeding was not explored in the Tribunal.
Leaving the position of Mrs Mondous to one side for the moment, the question of privity therefore involved the application of legal principles to facts not in dispute. As formulated on appeal, the question lay at the heart of the dispute between the parties. There was no prejudice to the Commissioner in permitting it to be ventilated on appeal, and considerable prejudice to the respondents if that course were not to be allowed. Moreover, the Commissioner acceded to the point being taken before the judge. For those reasons, the respondents were properly permitted to argue that privity was lacking, and the Commissioner’s submissions to the contrary should be rejected.
The situation regarding Mrs Mondous is more complicated, because it is conceivable that a fuller exploration of her connection and any involvement on her part in the land tax proceeding would have been undertaken had the respondents contested privity in the Tribunal. However, again, the Commissioner did not object to the privity argument in respect of Mrs Mondous being run before the judge, even though it appears that the point only emerged in reply. The Commissioner might therefore be taken to have acquiesced in the taking of the point by the respondents. In all the circumstances, the better view is that the respondents were properly permitted to raise this argument as well. However, as will appear, the argument makes no difference to the disposition of this ground.
Principles governing privity for the purposes of issue estoppel
The question whether the respondents were subject to an issue estoppel in respect of the equitable interest findings made by the Tribunal in the land tax proceeding depends upon whether they were Kameel’s ‘privies in interest’ in that proceeding. The significance of privity is that the prior determination of an issue of fact or law legally indispensable to the decision is held to have disposed of the issue once and for all, so that it cannot be raised afterwards between the same parties or their privies.[48]
[48]Blair v Curran (1939) 62 CLR 464, 531 (Dixon J); Tomlinson (2015) 256 CLR 507, 517 [22] (French CJ, Bell, Gageler and Keane JJ).
The essential feature of a privy in interest is that ‘the privy must claim under or through the person of whom he is said to be a privy’.[49] In Tomlinson v Ramsey Food Processing Pty Ltd, French CJ, Bell, Gageler and Keane JJ explained:[50]
a party to a later proceeding (A) can be privy in interest with a party to an earlier proceeding (B) on either of two bases. One basis is that A might have had some legal interest in the outcome of the earlier proceeding which was represented by B, or that B has some legal interest in the outcome of the later proceeding which is represented by A. The extent to which the representation by A or B will be sufficient to bind the other is the critical issue which will be explored later in these reasons. The other basis is that, after that earlier proceeding was concluded by judgment, A might have acquired from B some legal interest in respect of which B would be affected by an estoppel which A then relies on in the later proceeding.
It is the first of these bases that is relevant here; the Commissioner contends that the respondents had a legal interest in the outcome of the land tax proceeding which was represented by Kameel as trustee of the family discretionary trust.
[49]Ramsay v Pigram (1968) 118 CLR 271, 279 (Barwick CJ); Tomlinson (2015) 256 CLR 507, 515 [17] (French CJ, Bell, Gageler and Keane JJ).
[50]Tomlinson (2015) 256 CLR 507, 521–2 [33].
Their Honours went on to emphasise the need for a legal, rather than an economic interest:[51]
Subsequent applications of the principle in Ramsay v Pigram have for the most part correctly emphasised that the interest of the privy must in each case be a legal interest: an economic or other interest on the part of A in the outcome of the earlier proceeding is insufficient. Those applications have also correctly emphasised that, absent a legal interest, such influence as A might have had over the conduct of the earlier proceeding is irrelevant even if that influence amounted to control. Thus, directors of a company, who also held shares in its parent company, were held not to be estopped from pursuing a later action to recover damages to compensate for a loss on their own account in circumstances where they had stood to gain financially from an earlier action by the company claiming damages for loss on the company’s account. That was despite the directors having been found to have exercised effective control over the company’s conduct of that earlier action. The constraint on the conduct of A in such circumstances lies not in an estoppel but, in an appropriate case, in abuse of process.
[51]Ibid 522 [35] (citations omitted).
In Timbercorp Finance Pty Ltd (in liq) v Collins French CJ, Kiefel, Keane and Nettle JJ said, in respect of estoppel through a privy in interest:[52]
The basic requirement of a privy in interest is that the privy ‘must claim under or through the person of whom he is said to be a privy’. The principle underlying the concept of privies is that ‘one who claims through another is, to the extent of his claim, subject to … all estoppels affecting the person through whom he claims’. That principle is in turn informed by the theory that a person who takes a benefit ought also to bear a burden. With the benefit of the claim comes the detriment of the estoppel. But, as explained in Tomlinson, it is a theory which has its limitations. It would be quite unjust for a person whose legal interests stood to benefit by making a legal claim to be precluded if they did not have some measure of control of the proceedings in question.
Was privity established?
[52](2016) 259 CLR 212, 236 [54] (citations omitted), quoting Ramsay v Pigram (1968) 118 CLR 271, 273–4, 279 (Barwick CJ).
In both Tomlinson and Timbercorp, the High Court gave as an example of a situation in which an estoppel will bind a person represented by another, the relationship of trustee and beneficiary.[53] However, the cases do not decide, and the Commissioner did not suggest, that a relationship of privity in interest necessarily exists between a trustee of a discretionary trust and each of the potential beneficiaries in whose favour a power of appointment might be exercised or in whom part of the capital or income of the trust may one day vest. It is not necessary to consider the position regarding the beneficiaries as a whole, or as a class, as no such privity is in issue in the present case. It suffices to note that the interest of a potential beneficiary of a discretionary trust is confined to an interest in the due administration of the trust (including proper consideration whether and how to exercise the trustee’s powers including as to appointment) and does not extend to a beneficial interest in the trust property itself.[54]
[53]Tomlinson (2015) 256 CLR 507, 524 [40] (French CJ, Bell, Gageler and Keane JJ), 539 [95]–[96] (Nettle J); Timbercorp (2016) 259 CLR 212, 233–4 [45] (French CJ, Kiefel, Keane and Nettle JJ).
[54]Kennon v Spry (2008) 238 CLR 366, 393–4 [74]–[78] (French CJ), 408 [125] (Gummow and Hayne JJ), 417–18 [160]–[161] (Heydon J).
Of course, the argument for privity in the present case goes beyond the fact of the respondents being beneficiaries of the trust. It relies upon the control of the family discretionary trust, and the trustee, by the respondents — directly in the case of Mr Mondous, and in the case of Mrs Mondous through his alleged agency. The Commissioner relies on this control, as well as the economic interest the respondents have in the fortunes of the trust in their capacity as beneficiaries.
However, it is clear from the discussion of the principles in Tomlinson that an economic interest, short of a legal interest, in the outcome of the earlier proceeding will not suffice to establish privity in interest even where the party in the later proceeding held influence over the other party’s conduct of the prior proceeding amounting to control of that conduct.[55]
[55]Tomlinson (2015) 256 CLR 507, 522 [35] (French CJ, Bell, Gageler and Keane JJ).
That is illustrated by the decision in Effem Foods Pty Ltd v Trawl Industries of Australia Pty Ltd (in liq),[56] which the joint judgment in Tomlinson cited with approval.[57] That case involved a claim of res judicata or cause of action estoppel, which presents the same issue of privity. A company had obtained judgment in the Supreme Court of New South Wales in respect of claims including misleading and deceptive conduct brought against it by another company. The unsuccessful company, along with parties associated with it, subsequently brought proceedings in the Federal Court claiming relief including for misleading and deceptive conduct relying on the same alleged misrepresentations.
[56](1993) 43 FCR 510 (‘Effem Foods’).
[57]Tomlinson (2015) 256 CLR 507, 522 [35].
The additional parties in the second proceeding, who were found not to be privies of the plaintiff company, were the holding company of the plaintiff, a lender to both companies and their directors (two of whom owned a one third interest in the holding company and one of whom owned and was a director of the lending company). The primary judge (Gummow J) held that the applicants other than the director who held no shares in the holding company had participated so actively in the Supreme Court litigation that in substance they assumed the role of actual parties.[58] In the Full Court, Northrop and Lee JJ accepted that it had also been found that those parties had an economic or financial interest in the Supreme Court action and would have gained financially if the plaintiff company had succeeded in that action.[59]
[58]Effem Foods (1993) 43 FCR 510, 520 (Northrop and Lee JJ).
[59]Ibid 526.
It was held that the associated parties were not privies of the unsuccessful plaintiff company because neither party had claimed a title or right or made a claim by virtue of a title or right in the other but each was seeking to enforce rights for their own benefit.[60] Neither their economic interests nor their control of the plaintiff company, including in the conduct of the prior proceeding, sufficed to establish the required right or interest. They were therefore not subject to a cause of action estoppel. Instead, their action would have been more appropriately considered under the law of abuse of process.[61]
[60]Ibid 526, 528 (Northrop and Lee JJ), 542 (Burchett J).
[61]Ibid 543 (Burchett J).
The economic interest alleged by the Commissioner in the present case is unusual. Kameel’s failure to persuade the Tribunal of its case in the land tax proceeding led to the respondents receiving a tax refund. This strongly suggests an absence of privity. But it is desirable to address the Commissioner’s argument on the assumption that Kameel was in the land tax proceeding pursuing a course that would have been to the respondents’ overall benefit.
It follows from the above authorities that, in circumstances where the interest of the respondents in the subject matter of the land tax proceeding was confined to their interest as beneficiaries of a discretionary trust (itself an economic interest at best), the fact of control by Mr Mondous of Kameel and its conduct of the land tax proceeding cannot supply the requisite legal interest to establish privity between him and Kameel. The assumption that Kameel was pursuing a course for the respondents’ overall benefit does not take their interest beyond a purely economic one.
It further follows that, even if Mrs Mondous were found to have authorised her husband to conduct the land tax proceeding on behalf of Kameel, there would not be privity between her and Kameel either. It is therefore not necessary to decide whether she did so authorise Mr Mondous, or to decide whether the respondents should have been permitted to raise doubts as to that matter before the judge. The Commissioner’s case regarding Mrs Mondous, at its highest, depends on making out his case in respect of Mr Mondous and in this the Commissioner cannot succeed.
Were that the end of the matter, leave to appeal on proposed ground 2 should be granted but the ground would fail. However, as explained below, the position is made more complicated by a further submission advanced before us by the Commissioner. The effect of that submission was that, if the respondents were to succeed in establishing the incorrectness of the equitable interest findings, as they did before the judge, then it would follow that they were not merely beneficiaries of a discretionary trust but also beneficiaries of a bare trust in respect of the subject land, and that there was privity between them and Kameel after all. That submission is considered in more detail under the abuse of process ground below.
Parties’ submissions: Abuse of process (ground 1)
The Commissioner submitted that the stamp duty proceeding initiated by the respondents should have been dismissed as an abuse of process and that the judge had erred in finding otherwise.
The Commissioner submitted that the doctrines of abuse of process and estoppel were aimed at preventing courts from going into questions on which they might have made a finding different to one previously made. It followed that the judge erred in finding that, because he considered the decision of the Tribunal in the land tax proceeding to be wrong, it would be unjust to prevent the respondents from re-arguing the findings there made.
The Commissioner submitted that the two primary considerations in determining whether there is an abuse of process are, first, unfairness to the other party to the litigation and, secondly, the potential for the administration of justice to be brought into disrepute generally, including having regard to the need for finality.[62] The Commissioner contended that the reasons of the judge did not reflect these two considerations, focussing instead on Mr and Mrs Mondous having been deprived of opportunities to agitate the matters they have sought to raise in these proceedings.
[62]Rogers v The Queen (1994) 181 CLR 251, 256 (Mason CJ); Tomlinson (2015) 256 CLR 507, 518–19 [24]–[26] (French CJ, Bell, Gageler and Keane JJ), 526 [48] (Nettle J).
The Commissioner submitted that, to the contrary, neither of the respondents had been deprived of any opportunities so as to prevent them, in fairness, from being bound by the earlier findings. As to Mrs Mondous, the Commissioner submitted, as he did under the privity ground, that Mr Mondous was at all relevant times acting with the implied or apparent authority of his wife, who had chosen to leave matters in his hands. The Commissioner also submitted that Mrs Mondous had not made any submissions to the effect that Mr Mondous had approached the land tax proceeding incorrectly or that she would have taken a different stance in that proceeding.
The Commissioner submitted that the respondents were attempting to reagitate a foundational issue that had been resolved years earlier by the same tribunal, based on substantially the same evidence and argument put by the same counsel. The issue — whether the first transfer had conveyed the equitable interest in the land to the respondents — had been resolved against them, via their family trustee and concerning their family home, in a contest against the same respondent. Further, the Commissioner submitted, the issue was not taken on appeal from that proceeding and was thus admitted to have been resolved correctly. Rather, the respondents (including Mrs Mondous) had, along with Kameel, pursued and maintained their position as having become owners of the land pursuant to the backdated contract of sale both before and after the time that Mrs Mondous ceased to be a director.
The Commissioner finally submitted that the respondents had, by way of the Tribunal proceeding in 2016, attempted to raise a claim of exemption that they had conceded in 1999 by paying stamp duty ad valorem (on the second transfer) without objection. It was an abuse of process for them to go back on their tactical decision to frame the second transfer as one giving effect to the backdated contract of sale. As a result, the timing of the sale transaction was the only issue that should have been agitated in the stamp duty proceeding.
The respondents submitted that an abuse of process, like an issue estoppel, should not be found lightly. They submitted that the doctrine involves consideration of all the circumstances of the determination of the earlier case and, as such, does not prevent consideration of whether the earlier findings were wrong. The respondents submitted that the authorities emphasised the questions whether the later proceedings would be unjustifiably oppressive to the other party or whether the administration of justice would be brought into disrepute,[63] neither of which were said to be established here.
[63]Tomlinson (2015) 256 CLR 507, 518–19 [24]–[26] (French CJ, Bell, Gageler and Keane JJ); Timbercorp [2016] VSCA 128 [2]–[8] (Warren CJ, Santamaria and McLeish JJA).
The respondents submitted that, in particular, there would be no abuse of process in litigating an issue already determined if the earlier decision overlooked binding authority.[64] They therefore submitted that the judge was correct to decide that there was no abuse of process, and to decide the question whether the first transfer effected a conveyance of the equitable estate in the land, since the Tribunal in the land tax proceeding had overlooked s 53(1) of the Property Law Act 1958, which precluded its finding that, if there had been a conveyance, it could be revoked in circumstances where that revocation was not in writing.
[64]Haines (1995) 43 NSWLR 404, 414 (Hunt CJ at CL).
As to the purported points of similarity between the land tax proceeding and the present stamp duty proceeding, the respondents submitted that they did not have the same opportunities to present argument and evidence in each proceeding. They pointed to Mrs Mondous’s lack of standing in the land tax proceeding and, as in relation to the privity ground, they submitted that she exerted no control over either the trust or the manner in which Kameel conducted the land tax proceeding, nor did she authorise Mr Mondous to act on her behalf. The respondents also submitted that Mr Mondous was deprived of the opportunity to consider his stamp duty position (as distinct from his land tax position) because the respondents’ liability for stamp duty was assessed and increased from $3,400 to $552,900 two years after the trial in the land tax proceeding. In particular, it was not until the current proceeding that the respondents had advanced evidence upon which the judge had found that they and Kameel intended to proceed with the first transfer until 27 March 1991.[65]
[65]See [57] above.
The respondents further submitted that the arguments put by counsel at each of the proceedings were different. Specifically, the key propositions put by their counsel in the present proceeding — that the distribution created an interest in land that could not be revoked other than in writing signed by the respondents, and that the respondents had an entitlement to the land so that the second transfer could only effect the registration that was Kameel’s obligation to perform — were not put in the land tax proceeding.
The respondents submitted that the decision by Kameel not to challenge on appeal the finding in the land tax proceeding that the first transfer did not convey the equitable estate in the land was not an admission that the issue had been correctly resolved. Rather, that finding could not have affected Kameel’s land tax liability in any event, meaning that it would have been futile to seek leave to appeal in respect of the finding even if it were wrong.[66]
[66]See [27] above.
It followed, in the respondents’ submission, that whatever the finding in the land tax proceeding as to whether beneficial ownership of the land had passed to the respondents, the outcome would have been the same. That being so, a finding either way on the same issue in the present proceeding could not yield an outcome inconsistent with the earlier proceeding, and as a result there was no abuse of process.
The respondents finally submitted that the Commissioner’s contention that they had conceded their obligation to pay ad valorem stamp duty in respect of the second transfer was neither referred to by the Commissioner in disallowing the objection nor raised in the Tribunal or before the judge, and could not be relied on for the first time on appeal to this Court.
In reply, senior counsel for the Commissioner expanded on the consequences of the bare trust said by the respondents to have arisen as a result of the first transfer and for which they contended. Counsel submitted that, had such a bare trust arisen, then the respondents would have been classic privies of Kameel in its capacity as trustee in respect of the bare trust. The Commissioner contended that the respondents could not now argue that they had been beneficial owners of the land pursuant to that bare trust and simultaneously deny that they were privies of Kameel in the land tax proceeding. It was submitted that advancing fundamentally inconsistent arguments in the stamp duty proceeding in this way constituted an abuse of process. It will be necessary to return to this alternative abuse of process argument in more detail below.
Analysis: Abuse of process (ground 1)
Principles governing abuse of process
In Tomlinson, French CJ, Bell, Gageler and Keane JJ considered the relationship between the doctrines of estoppel and abuse of process. Having explained that the doctrines were both informed in part by considerations of finality and fairness and may have overlapping operation in the context of the raising of issues in successive proceedings, they emphasised that abuse of process was ‘inherently broader and more flexible than estoppel’.[67] The joint judgment continued:[68]
Although insusceptible of a formulation which comprises closed categories, abuse of process is capable of application in any circumstances in which the use of a court’s procedures would be unjustifiably oppressive to a party or would bring the administration of justice into disrepute. It can for that reason be available to relieve against injustice to a party or impairment to the system of administration of justice which might otherwise be occasioned in circumstances where a party to a subsequent proceeding is not bound by an estoppel.
[67](2015) 256 CLR 507, 518 [24]–[25].
[68]Ibid 518–19 [25], citing Batistatos v Roads and Traffic Authority (NSW) (2006) 226 CLR 256, 262 [1], 265 [9] (Gleeson CJ, Gummow, Hayne and Crennan JJ) (‘Batistatos’) and PNJ v The Queen (2009) 83 ALJR 384, 385–6 [3] (French CJ, Gummow, Hayne, Crennan and Kiefel JJ).
The tests of unjustifiable oppression and bringing the administration of justice into disrepute have been frequently stated.[69]
[69]See, eg, D’Orta-Ekeniake v Victoria Legal Aid (2005) 223 CLR 1, 28 [74] (Gleeson CJ, Gummow, Hayne and Heydon JJ); Batistatos (2006) 226 CLR 256 [15] (Gleeson CJ, Gummow, Hayne and Crennan JJ).
The broad nature of the abuse of process doctrine means that it can operate where there is no estoppel. In a situation involving successive legal proceedings, it may operate where there is no privity between the parties in the two cases. The joint judgment in Tomlinson put it this way, in words apt to apply to the Commissioner’s argument in the present case:[70]
Accordingly, it has been recognised that making a claim or raising an issue which was made or raised and determined in an earlier proceeding … can constitute an abuse of process even where the earlier proceeding might not have given rise to an estoppel. Similarly, it has been recognised that making such a claim or raising such an issue can constitute an abuse of process where the party seeking to make the claim or to raise the issue in the later proceeding was neither a party to that earlier proceeding, nor the privy of a party to that earlier proceeding, and therefore could not be precluded by an estoppel.
[70](2015) 256 CLR 507, 519 [26] (citations omitted).
The principal authority to which the joint judgment referred in stating the second of the above propositions was O'Shane v Harbour Radio Pty Ltd. [71] In that case, Beazley P (with whom McColl JA and Tobias AJA relevantly agreed) canvassed a series of authorities in which it had been sought to relitigate an issue already the subject of finalised proceedings. She observed that those cases either involved the same parties as in the earlier proceeding or, where there was only one party common to both proceedings, that party had lost the issue sought to be relitigated in the subsequent proceeding.[72] The point had been emphasised by Heydon JA in R v O’Halloran,[73] who stated that there ‘cannot be “re-litigation” if there has not been litigation’.[74] However, Beazley P did not take Heydon JA to be deciding that the failed party in the earlier proceeding must necessarily be a party to the later proceeding in order for any abuse of process argument to be made. As she pointed out, the categories of abuse of process are not closed.[75]
[71](2013) 85 NSWLR 698, 722–4 [99]–[111] (‘O'Shane’). The Tomlinson judgment referred also, as being to similar effect, to: Reichel v Magrath (1889) 14 App Cas 665 and Virgin Atlantic Airways Ltd v Zodiac Seats UK Ltd [2014] AC 160, 185 [25] (Lord Sumption JSC) (explaining Johnson v Gore Wood & Co [2002] 2 AC 1).
[72](2013) 85 NSWLR 698, 724 [109].
[73](2000) 159 FLR 260, 289–92 [101]–[109] (‘O’Halloran’).
[74]Ibid 290 [103].
[75](2013) 85 NSWLR 698, 724–5 [112].
At the same time, as discussed further below, the fact that the party seeking to litigate an issue in later proceedings was not a party in the earlier proceeding where the issue was previously decided will be relevant to identifying whether the later proceedings are an abuse of process and may tend against a conclusion to that effect.[76] That is of course the present case; the respondents seek to raise an issue which, the Commissioner says, was determined in the land tax proceeding but the respondents were not parties to that proceeding.
[76]O’Halloran (2000) 159 FLR 260, 289 [98] (Heydon JA, Spigelman CJ and Mason P agreeing); O’Shane (2013) 85 NSWLR 698, 724–5 [109]–[112] (Beazley P).
The considerations relevant to determining whether the raising of an issue in successive proceedings gives rise to an abuse of process have been articulated more than once along the following lines:[77]
[77]See eg, Kermani v Westpac Banking Corporation (2012) 36 VR 130, 154–5 [97] (Robson AJA, Neave and Harper JJA agreeing); Timbercorp [2016] VSCA 128 [228] (Warren CJ, Santamaria and McLeish JJA); Rippon v Chilcotin Pty Ltd (2001) 53 NSWLR 198, 204 [32] (Handley JA, Mason P and Heydon JA agreeing); O’Halloran (2000) 159 FLR 260, 291 [107] (Heydon JA, Spigelman CJ and Mason P agreeing); State Bank of NSW v Stenhouse Ltd [1997] Aust Torts Reports [81-423] 64,077, 64,089 (Giles CJ).
The guiding considerations are oppression and unfairness to the other party to the litigation and concern for the integrity of the system of administration of justice. Regard may be had to:
(a)the importance of the issue in and to the earlier proceeding, including whether it is an evidentiary or ultimate issue;
(b) the opportunity available and taken to fully litigate the issue;
(c) the terms and finality of the finding as to the issue;
(d) the identity between the relevant issues in the two proceedings;
(e)any plea of fresh evidence, including the nature and significance of the evidence and the reason why it was not part of the earlier proceeding;
(f)the extent of the oppression and unfairness to the other party if the issue was re-litigated and the impact of the re-litigation upon the principle of finality of judicial determination and public confidence in the administration of justice; and
(g)an overall balancing of justice to the alleged abuser against the matters supportive of abuse of process.
In Haines, the plaintiff had brought a defamation case in which he alleged that the publisher had imputed that he was the type of person who consented to appearing naked on a television program. It was held that the publication was incapable of conveying that imputation. The plaintiff then sought to add a new party against whom he pleaded, relevantly, that it had represented that he had consented to appearing naked on a television program. In that context, Hunt CJ at CL reviewed authorities in which it had been contended that a party seeking to relitigate an issue upon which the same party had previously been unsuccessful was engaged in an abuse of process.
The leading case to which Hunt CJ at CL referred in that context was Reichel v Magrath,[78] to which the joint judgment in Tomlinson also referred with approval. That case illustrates that a plaintiff may be prevented, on account of abuse of process, from litigating against one defendant an issue which he or she has already litigated unsuccessfully against another. There, a vicar had brought proceedings against a bishop seeking a declaration that the vicar remained in office. He failed in that proceeding. The succeeding vicar then sued his predecessor for a declaration and injunction as to his own office and entitlements. It was held by the House of Lords that the original vicar could not mount by way of defence the claim that he had unsuccessfully raised against the bishop.
[78](1889) 14 App Cas 665.
The respondents sought review of the refusal of their objection in the Tribunal (‘second Tribunal’). Before the second Tribunal, the respondents contended that the first transfer had been effective to transfer an equitable interest, and that Kameel had thereafter held the land as bare trustee until the registration of the second transfer in 1999.
In summary, in the first Tribunal proceeding (between Kameel and the Commissioner), the Tribunal found that there had not been a conveyance of an equitable interest under the first transfer as a step to concluding that Kameel remained liable as owner for land tax between 1991 and 1999.
In the second Tribunal proceeding (between the respondents and the Commissioner), the respondents, who had been assessed for stamp duty, sought to avoid the burden of the first Tribunal’s finding and contend again that there had been a transfer of an equitable interest and that the legal and equitable interests were united by means of the registration of the second transfer.
The critical question is whether the respondents can, in the second Tribunal proceeding, run a case that Kameel had run and failed on in the first Tribunal proceeding. I will turn first to consider the Commissioner’s second ground of appeal which relates to whether the respondents are estopped from challenging the first Tribunal’s findings. I will then deal with the Commissioner’s first ground which relates to abuse of process.
Ground 2: Issue estoppel — privity
The position of Kameel
It is convenient to begin by examining the position of Kameel.
It was not in contest before us that issue estoppel and abuse of process can apply to the Tribunal[100] and can apply in the context of reviews of assessments for tax.[101] It is also not in contest, and was found by the primary judge, that the first Tribunal’s findings that the first transfer was ineffective or had been revoked and that the backdated contract of sale was a sham were indispensable to the Tribunal’s reasoning in affirming the amended land tax assessments. I proceed on that basis.
[100]Walton v Gardiner (1993) 177 CLR 378, 395 (Mason CJ, Deane and Dawson JJ), 406 (Brennan J), 421 (Toohey J); Coffey v Secretary, Department of Social Security (1999) 86 FCR 434, 443 [25] (‘Coffey’); Stoops v Lefas [2016] VSC 350 [66]−[70] (‘Stoops’).
[101]See Hoysted v Federal Commissioner of Taxation (1925) 37 CLR 290; Queensland Trustees Ltd v Commissioner of Stamp Duties (Qld) (1956) 96 CLR 131, 138 (Dixon CJ), 144−5 (Webb J), 151−2 (Kitto and Taylor JJ); IEL Finance Ltd v Federal Commissioner of Taxation (2006) 62 ATR 165, 201−6 [71]−[81], 209−11 [89]−[92]. Cf Caffoor v Commissioner of Income Tax, Colombo [1961] AC 584; Spassked v Federal Commissioner of Taxation [No 2] (2007) 165 FCR 484.
In the first Tribunal proceeding, Kameel was assessed for land tax on the basis that it was the registered proprietor and therefore owner of the land for the period 1991 to 1999. On that basis, Kameel would be estopped from re-litigating as against the Commissioner the effect of either the first transfer or the backdated contract of sale. Its liability for land tax had been fixed and that process necessarily involved a determination of whether, and in what way, Kameel was the ‘owner’ of the land for the purposes of the Land Tax Act.
The respondents would be bound by reason of issue estoppel by the findings in the first Tribunal proceeding if there was a privity of interest between them and Kameel in respect of that proceeding.
Applicable principles on privity
Relevantly, in the context of successive proceedings, privity will be established if A has some legal interest in the outcome of a proceeding which was represented in the proceeding by B.[102] There are two aspects that need to be examined. The first is whether the person said to be privy had a legal interest in the outcome. The second is whether the proceeding was conducted in a representative capacity.
[102]Tomlinson v Ramsey Food Processing Pty Ltd (2015) 256 CLR 507, 521−2 [33] (French CJ, Bell, Gageler and Keane JJ).
The first aspect is to be considered by reference to the orders that are sought in the proceeding. It is the legal effect of those orders that is critical. An economic or other interest falling short of a legal interest is insufficient.[103]
[103]Ibid 522 [35] (French CJ, Bell, Gageler and Keane JJ).
The second aspect requires that B represent the legal interest of A in the conduct of the proceeding. The question whether B represented the legal interest of A is to be answered by reference to all of the circumstances, including whether A authorised the claim to be made on its behalf and the nature of the subsisting relationship between the two. The authorities recognise that the representative character will generally be present in a number of established cases. These include the relationship of trustee and beneficiary and principal and agent.[104]
[104]Ibid 524 [40] (French CJ, Bell, Gageler and Keane JJ).
Both aspects may be demonstrated by some of the examples examined in Tomlinson v Ramsey Food Processing Pty Ltd (‘Tomlinson’).[105] First, directors of a company, who also held shares in its parent company, were held not to be estopped from pursuing a later action to recover damages to compensate for a loss on their own account in circumstances where they had stood to gain financially from an earlier action by the company claiming damages for loss on the company’s account.[106] That was despite the directors having been found to have exercised effective control over the company’s conduct of that earlier action.
[105]Ibid.
[106]Effem Foods Pty Ltd v Trawl Industries of Australia Pty Ltd (in liq) (1993) 43 FCR 510, cited in Tomlinson (2015) 256 CLR 507, 522 [35] (French CJ, Bell, Gageler and Keane JJ).
In Trawl Industries of Australia Pty Ltd (in liq) vEffem Foods Pty Ltd,[107] it was held that a mere economic interest was not sufficient to establish privity. That case was concerned with whether guarantors were privies of the guaranteed party (Trawl) on the basis that if Trawl had succeeded in its earlier claim, its success would have resulted in an award of damages which might have gone in reduction of Trawl’s indebtedness to its bank and thereby ameliorated the guarantors’ liabilities to the bank. Trawl and the guarantors shared a mutual economic interest in the success of Trawl’s earlier claim, but mutual economic interests were insufficient to establish privity.[108]
[107](1992) 36 FCR 406.
[108]Ibid 415−6.
Tomlinson itself provides another relevant example. In that case, the Fair Work Ombudsman brought a proceeding against an employer alleging an underpayment of amounts owing to employees under an industrial instrument. The Ombudsman sought an order that the amount of underpayment be paid to the appellant employee. The plurality found that, notwithstanding the form of order sought, the Ombudsman was not making a claim on behalf of the employee.[109] Their Honours did not make an express finding as to whether the employee had a legal interest in the outcome of the Ombudsman’s proceeding. Given that the Ombudsman did not represent the employee’s interest, and that the employee did not bring the action under or through the Ombudsman, it was unnecessary to determine that point.
[109]Tomlinson (2015) 256 CLR 507, 525−6 [44]−[46] (French CJ, Bell, Gageler and Keane JJ).
In his reasons for judgment, Nettle J stated that it is necessary that a party and putative privy share the same legal interest. His Honour held that the employee ‘did not have the same legal interest [as the Ombudsman] in the … claim.’[110] In that regard, his Honour observed that the Ombudsman’s statutory entitlement to seek an order for payment of the underpayment ‘arose separately and distinctly’ from the employee’s statutory and contractual entitlement to be paid by his employer. Notwithstanding that the employee had a direct economic interest in the outcome of the Ombudsman’s claim (in that the Ombudsman’s success would have resulted in an order in his favour in the amount of the underpayment), the employee and the Ombudsman stood in a quite different legal relationship in relation to the amount owing by the employer.[111]
[110]Ibid 541 [106].
[111]Ibid 542−3 [109].
In order to address the question of whether the respondents had the same legal interest as Kameel in the outcome of the first Tribunal proceeding, it is necessary to pay close attention to the statutory scheme in which the decision arose.
The scheme of the Land Tax Act
The structure of the Land Tax Act follows a relatively familiar pattern adopted in taxing statutes. It was described by Bell and Gordon JJ in Commissioner of State Revenue (Vic) v ACN 005 057 349 Pty Ltd.[112] The Land Tax Act provided for both the imposition and assessment of land tax on the ‘owner’ of land. The issue of an assessment crystallised the amount of land tax payable by a land owner. The Act provided also for a system of objection and review, including review before the Tribunal.
[112](2017) 91 ALJR 349, 355−9 [24]−[46].
The Commissioner’s powers to issue assessments under the Land Tax Act were governed by ss 17 to 19 of that Act. Those powers included the power to issue assessments and amended assessments from time to time. Section 20 provided that the production of an assessment was ‘conclusive evidence of the due making of the assessment’ and that ‘the amount and all the particulars of the assessment are correct’. Section 21 obliged the Commissioner to serve a notice in writing of the assessment.
A taxpayer dissatisfied with an assessment could object to the Commissioner under s 24A. In the event that the taxpayer was dissatisfied with the decision of the Commissioner on the objection, he or she was empowered to request the Commissioner to refer the decision to the Tribunal or to treat his or her objection as an appeal and to cause it to be set down for hearing in the Supreme Court.[113] Upon any review in the Tribunal, the burden of proving that the assessment was excessive lay upon the taxpayer.[114] The fact that a review was in train did not, in the meantime, interfere with or affect the assessment and tax could be made, levied and recovered on the assessment in the same manner as if no objection had been received and no appeal pending.[115]
[113]Land Tax Act 1958 s 25(1).
[114]Ibid s 26(1)(b).
[115]Ibid s 38(1).
Section 51 provided that, subject to other provisions of the Land Tax Act, the owner of any equitable estate or interest in land shall be assessed and liable in respect of tax as if the estate or interest was a legal estate or interest. However, that section provided for a deduction of any tax paid in respect of the land by the legal owner. Correspondingly, s 52 provided that where land was vested in a trustee, the trustee shall make returns and be assessed and liable as if the trustee were beneficially entitled to the land. Section 52(2) provided that the trustee shall be entitled to be repaid, by the owner of the equitable estate or interest, the amount he or she had paid and, in addition, shall have a right to be recouped out of relevant trust property.
It follows from the scheme of the Land Tax Act that a trustee could be assessed for and liable to pay land tax notwithstanding that the trustee owned the legal interest on behalf of a beneficiary. Having paid that land tax, the trustee was entitled to be repaid by the owner of the equitable estate or by way of an indemnity from the trust property, either through the operation of s 52 or in accordance with ordinary equitable principle.
Analysis: Ground 2: Issue estoppel — privity
The question for the first Tribunal on Kameel’s objection to the amended land tax assessments was whether the assessments were excessive. The answer to that question determined the liability of Kameel to pay land tax in that amount to the Commissioner.
There would appear to be little doubt that the first Tribunal’s findings in respect of Kameel’s objection to the amended land tax assessments would have had an impact on the respondents as beneficiaries. The extent of the impact on the respondents of a liability being imposed on Kameel as trustee depended on the terms and nature of the trust on which Kameel held the land.
In the case of a discretionary trust in which a beneficiary has no entitlement to any trust property but only to the due administration of the estate, the impact on the beneficiaries will be indirect in that a liability imposed on the trustee will reduce the size of the corpus of the estate in the amount of the indemnity. On the other hand, the impact of a liability is more immediately apparent in the case of a bare trust in which the beneficiary has an entitlement to call for the trust property and the trustee’s duty is to hold the property until the beneficiary calls for it. In the case of a bare trust, the trustee has a right to seek an indemnity not just from the trust assets but also from the beneficiaries personally.[116]
[116]Balkin v Peck (1998) 43 NSWLR 706, 713 (Mason P, Priestley JA and Sheppard AJA agreeing).
In my view, regardless of whether the respondents were objects of a discretionary trust or the beneficiaries of a fixed or bare trust, they were not relevantly privy in the determination by the first Tribunal of Kameel’s objection to the amended land tax assessments. I do not regard the respondents as having, in either scenario, the necessary legal interest in the outcome of those reviews. In this respect, there was no error on the part of the primary judge.[117]
[117]See Mondous v Commissioner of State Revenue [2017] VSC 416 [99]−[101] (‘Reasons’).
I respectfully differ from the analysis adopted by McLeish JA in the context of considering the abuse of process ground where his Honour concluded that, had there been a bare trust, privity would have been established.[118] This difference does not have any effect on the conclusion that we have both reached that there was no privity of interest between Kameel and the respondents in the first Tribunal proceeding. However, it is relevant to the analysis in respect of the abuse of process ground which I consider further below.
[118]Reasons for judgment of McLeish JA at [131], [139],[141].
The liability to pay land tax was a personal liability of the trustee Kameel. Its right of indemnity ameliorated the economic burden on it as trustee, but that indemnity did not alter the legal character of the assessment. The ability to call on the trust property and, in the case of a bare trust, to call on the beneficiary was an economic consequence and was not a legal obligation imposed by the assessments themselves.
Even if I were wrong in finding that the respondents had no legal interest in the first Tribunal proceeding, I am of the view that Kameel was not, in conducting its reviews, representing the legal interest of the respondents. Kameel claimed that it held the land on trust for the respondents as a result of the distribution of trust corpus or, alternatively, that the land was, during the relevant period, subject to the backdated contract of sale and that the respondents were in possession under that contract. On the second scenario, Kameel as vendor did not hold the land on trust for the respondents as purchasers but rather the purchasers had an equity in the rights conferred by the contract.[119]
[119]See Stern v McArthur (1988) 165 CLR 489, 523 (Deane and Dawson JJ); Mercier Rouse Street Pty Ltd v Burness [2015] VSCA 8 [94]−[97] (Santamaria JA).
However, Kameel did not represent the legal interest of the respondents when it conducted the reviews. It was concerned to minimise its own liability to pay land tax through review processes available to it as the taxpayer to whom the Commissioner had issued the amended land tax assessments. Of course, it was obliged to act in the best interests of the beneficiaries, however, it did so by minimising its own land tax liability. The fact that, as a consequence, the Commissioner might later impose land tax on the respondents on the basis that they held a beneficial interest in the land or on the basis that they were buyers in possession did not mean that Kameel was not acting appropriately as trustee.
It follows that the respondents did not have the same legal interest in the findings of the first Tribunal which was represented in that proceeding by Kameel. The respondents were therefore not bound by the first Tribunal’s findings by reason of an issue estoppel.
Ground 1: Abuse of process
The doctrine of abuse of process
The conclusion that there was no privity, and therefore no issue estoppel, does not entail that there could be no abuse of process arising from the attempt to re-litigate the legal effect of the first transfer. Abuse of process is a broader concept than issue estoppel but it shares common foundations of finality and a recognition that re-litigation may work an injustice to opposing parties.
The abuse of process doctrine guards against the possibility of inconsistent decisions because they undermine finality and are oppressive to the party that has earlier obtained success. As Lord Pearce observed in Connelly v Director of Public Prosecutions, ‘in civil cases the court has constantly had to guard against attempts to relitigate decided matters’.[120]
[120][1964] AC 1254, 1361.
Finality is an essential feature of the administration of justice in courts and tribunals. Its importance in the context of tribunals is well-established.[121] It is reflected in the doctrines of res judicata, Anshun estoppel, issue estoppel, and in aspects of abuse of process. Relatedly, it underpins witness immunity[122] and advocates immunity,[123] and the restrictions on a court setting aside its own judgments.[124] It is not based on an assumption as to the objective correctness of the first decision.
[121]Walton v Gardiner (1993) 177 CLR 378, 393 (Mason CJ, Deane and Dawson JJ), citing Reichel v Magrath (1889) 14 App Cas 665, 668; Coffey (1999) 86 FCR 434, 443 [25]; Stoops [2016] VSC 350 [66]−[70].
[122]Cabassi v Vila (1940) 64 CLR 130, 139 (Rich ACJ).
[123]Giannarelli v Wraith (1988) 165 CLR 543, 558 (Mason CJ), 574 (Wilson J), 594−5 (Dawson J); D’Orta-Ekenaike v Victoria Legal Aid (2005) 223 CLR 1, 17−18 [34]−[36], 20−1 [45] (Gleeson CJ, Gummow, Hayne and Heydon JJ).
[124]Clone Pty Ltd v Players Pty Ltd (in liq) (2018) 92 ALJR 399, 416 [69].
Analysis: Ground 1: Abuse of process
I agree with McLeish JA for the reasons he gives that it is open to the Commissioner to rely on this ground in the appeal. It was not in dispute that the principles relating to abuse of process apply in respect of the Tribunal, a matter which is reflected in s 75 of the Victorian Civil and Administrative Tribunal Act 1998 itself.
The primary judge concluded there was no abuse of process for four reasons. The first was that the findings made by the first Tribunal concerning the first transfer were, in his Honour’s opinion, wrong and that it would be unjust to shut the respondents out from litigating them in the stamp duty context.[125]
[125]Reasons [106].
Second, the stamp duty assessment came some time after the second transfer was registered and after the first Tribunal decision and, in those circumstances, ‘in making tactical decisions as to the objections to be pursued by the trustee in the land tax proceeding, Mr Mondous was deprived of the opportunity to consider his and Mrs Mondous’s stamp duty position.’[126]
[126]Reasons [107].
Third, duty had been paid on the first transfer on the basis that it was a distribution of the land in specie to the respondents by Kameel. If the first transfer remained effective at the time the second transfer was lodged for registration, it is arguable that the second transfer was exempt from stamp duty. It would not unduly oppress the Commissioner, or bring the administration of justice into disrepute, to allow Mr and Mrs Mondous the opportunity to have that argument determined by a court.[127]
[127]Reasons [108].
Fourth, in relation to Mrs Mondous, there was no evidence of her involvement in the first Tribunal proceeding, and it could not be an abuse of process for her to now seek to have her day in court and dispute the correctness of the first Tribunal’s findings concerning the first transfer.[128]
[128]Reasons [109].
I have, with respect, come to a different conclusion to the primary judge. In my view, the respondents’ reliance in the second Tribunal proceeding on the first transfer as passing an equitable interest to them constituted an abuse of the process of the Tribunal. As it applies in the present case, the essence of the abuse of process lies in the potential for two inconsistent decisions by the Tribunal on the operation of the first transfer in circumstances that are liable to bring the administration of justice into disrepute.
The inconsistency that the doctrine seeks to avoid is apparent in this case by comparing the findings of the first Tribunal in relation to the first transfer with the findings of the primary judge. The first Tribunal found that Kameel had not passed a beneficial interest to the respondents pursuant to the first transfer or that, by reason of later conduct, they could not rely on it as a basis for asserting an equitable interest in the land. As discussed above, the decision of the first Tribunal was the subject of an unsuccessful application for leave to appeal on a question of law.
By contrast, the primary judge found that there was an error of law on the part of the first Tribunal in relation to the first transfer and that the decision of the Tribunal was wrong.[129] The decision of the primary judge represented a collateral attack on the decision of the Tribunal for error of law in circumstances where an application for leave to appeal had failed. The issue is whether such an inconsistency would constitute an abuse of process.
[129]Reasons [125].
The assessment of whether there is an abuse of process involves a balancing of a variety of factors and considerations.[130] In the case of re-litigation, it is necessary to consider the importance of the point to the first proceeding and how it was resolved, including whether the parties had both the opportunity and interest in fully litigating the issue. Given that, unlike in the case of issue estoppel, the parties will not be the same in the two proceedings, it will be important to examine the nature of interest that the parties to the second proceeding had in the earlier proceeding and the role played by them in that proceeding.[131]
[130]Walton v Gardiner (1992) 177 CLR 378, 395−6 (Mason CJ, Deane and Dawson JJ).
[131]State Bank of NSW v Stenhouse Ltd [1997] Aust Torts Reports [81-423] 64,089 (Giles CJ).
In this case, the relevant factors, in my view, include the following:
(a) First, the issue that was settled by the first Tribunal was central to the question of ownership of the land and the nature of the instruments by which ownership moved from Kameel to the respondents.
(b) Second, the respondents were in control of both the first and second Tribunal proceedings.
(c) Third, although, in my view, the respondents did not have a legal interest in the outcome of the first Tribunal proceeding, in a more general sense the proceeding was brought for their benefit.
(d) Fourth, the respondents have advanced inconsistent and contradictory positions before the Commissioner, the Tribunal and this Court. That approach reflected a considered and deliberate course of conduct by the respondents and compounds the vice of inconsistent decisions.
(e) Finally, holding the respondents to the way the case was run and decided before the first Tribunal works no injustice to the respondents.
I will address each of these factors in turn.
There is commonality of issue between the Tribunal proceedings
Turning to the first factor, the issue in the first Tribunal proceeding related to the ownership of the land, and attendant liability for land tax, during the years 1991 to 1999. The central issue in the second Tribunal proceeding was the legal effect of the second transfer, being the instrument that was liable to be assessed under the Stamps Act. The nature and effect of the transactions between the related parties (which, relevantly, were entered into under the control of the respondents) was central to both proceedings.
The primary judge held that the first Tribunal’s findings concerning the first transfer, although steps along the way to the ultimate question of whether the amended land tax assessments were excessive, were central to the Tribunal’s decision.[132] There is no challenge to that finding. There was no argument that the findings were merely incidental or collateral to the jurisdiction conferred on the Tribunal.[133]
[132]Reasons [74]−[75].
[133]Cf Re Jackson; Ex parte the Amalgamated Engineering Union (Australian Section) (1937) 38 SR (NSW) 13, 17 (Jordan CJ); Cachia v Isaacs (1985) 3 NSWLR 366, 389 (McHugh JA); The Trustees for the Roman Catholic Church for the Diocese of Bathurst v Hine [2016] NSWCA 213 [33]−[38], [56] (Meagher JA, with whom Leeming and Simpson JJA agreed).
In considering the centrality of the findings concerning the first transfer, it is relevant to note that the outcome of the first Tribunal proceeding would not have been any different even if the findings made by the primary judge had been made by the first Tribunal. Even if the first Tribunal had found that the first transfer was effective to distribute trust property and transfer beneficial interest to the respondents, Kameel would still be liable to pay land tax as owner under ss 51 or 52 of the Land Tax Act. The basis for the liability would have been different, but the amended land tax assessments would still have been upheld.
It would appear that Kameel, under the control of Mr Mondous, relied on the first transfer as part of its alternative case that there had been a transfer in specie. Its primary case was that it had sold the property to the respondents who were buyers in possession of the land. However, by tendering both issues for determination, Kameel was bound by the result.
In the second Tribunal proceeding, the respondents contended that the first transfer was valid and operative in order to establish that Kameel had held the land as bare trustee over the period 1991 to 1999. The issue concerning the effect of the first transfer was the same issue that Kameel had (unsuccessfully) agitated before the first Tribunal. The respondents did not tender any fresh evidence on this issue in the second Tribunal proceeding.
The decision of the New South Wales Court of Appeal in Rippon v Chilcotin Pty Ltd (‘Rippon’) is instructive.[134] In that case, the purchasers of a business sued the vendor in contract and in misrepresentation. They were unsuccessful in their misrepresentation case, and were awarded only modest damages in respect of the contract claim. The purchasers subsequently sued the accountants for what were, in substance, the same misrepresentations alleged in the first proceeding.
[134](2001) 53 NSWLR 198.
Handley JA (with whom Mason P and Heydon JA agreed) held that the proceeding against the accountants was an abuse of process because it ‘threaten[ed] the integrity of the administration of justice and raise[d] the prospect of conflicting judgments.’[135] Handley JA found that the issue of the purchasers’ reliance on certain financial statements was an ultimate issue in the first proceeding.[136] His Honour noted that the purchasers had not tendered any fresh evidence (in the technical sense) in the proceeding against the accountants, and that their claim turned on the evidence of a person who effectively controlled the purchasers and whose evidence had not been accepted in the first proceeding.[137]
[135]Ibid 205 [36].
[136]Ibid 202 [17].
[137]Ibid 200 [8], 203−4 [30], 204−5 [34]−[35].
Some analogy may be drawn between the facts in Rippon and the circumstances in this case. Here, the legal effect of the first transfer was central to the first Tribunal’s decision and the respondents did not seek to tender any fresh evidence on this issue before the second Tribunal. Although the first and second Tribunal proceedings were brought by different applicants (Kameel and the respondents respectively), the respondents (particularly Mr Mondous) exercised control over the corporate trustee, Kameel.
The respondents exercised control over both Tribunal proceedings
The evidence clearly established that the conduct of the first Tribunal proceeding was controlled by Mr Mondous, and that he fully availed himself of the opportunity to put evidence and submissions on the transfer of ownership of the land and the instruments by which that transfer was said to have been effected. I refer, in particular, to Mr Mondous’s witness statement of 28 December 2012 made on ‘behalf of Kameel’, the fact that he gave evidence for Kameel at the Tribunal hearing, and the earlier correspondence passing between him (and his solicitors) and the SRO, including his handwritten objection to the amended land tax assessments.
The position of Mrs Mondous might arguably be different in that there is little evidence that she actively made any decisions in the proceeding. However, I would comfortably draw the conclusion that, at the least, she was aware of the proceeding, that it was advanced in her interest, and that she acquiesced in that course.
The respondents controlled the relevant transactions and the first Tribunal proceeding was brought for their benefit
Relatedly, it is significant that the respondents were in control not only of both proceedings but also of both sides of the relevant transactions which, it may be safely inferred, were structured in a way as to maximise their overall benefit to the respondents. The decision to abandon the trust distribution before legal title had passed and to proceed by way of sale was made for fiscal reasons, having regard to the potential impact of Commonwealth taxation law. That decision was deliberate and put into effect by the preparation of the backdated contract of sale and the second transfer which was stamped (on the basis of a sale) and registered.
For the reasons given above at [219] and [221], I have found that the respondents did not have a legal interest in the outcome of the first Tribunal proceeding. However, as beneficiaries of the trust, they did have an economic interest in minimising Kameel’s land tax liability. That was so even though a finding in Kameel’s favour might have resulted in the Commissioner imposing a land tax liability on them.
On its application for leave to appeal, Kameel did not seek to allege any legal error on the part of the first Tribunal in relation to its conclusion as to the legal effect of the first transfer. Its failure to do so might have been explained on the basis that even if this Court had overturned that conclusion, it would not have produced any effect to reduce the land tax liability of Kameel on the proper construction of ss 51 and 52 of the Land Tax Act.
In those circumstances, to preclude the respondents from challenging that aspect of the first Tribunal’s reasons might be thought unfair. However, it is to be borne in mind that the respondents controlled the conduct of the first Tribunal proceeding and that that proceeding was brought for their benefit. Kameel affirmatively ran its case before this Court on a basis that it accepted the findings of the Tribunal in relation to the first transfer. It was, in my view, an abuse of process for the respondents to re-litigate those findings in the second Tribunal proceeding.
The respondents have deliberately advanced inconsistent and contradictory positions
From time to time, the respondents have sought to advance contradictory positions in relation to transactions between them and the corporate trustee controlled by them, and they did so with an eye to the taxation implications. There is nothing untoward in that course but it is, in my view, relevant to the assessment of whether it was an abuse of process for the respondents to re-litigate the issue of the first transfer.
In the course of considering whether Exemption (10) had been made out, the primary judge noted the finding of the first Tribunal to the effect that Mr Mondous ‘intended to revoke, renounce or abandon any effective distribution of the land in specie to Mr and Mrs Mondous under the first transfer.’[138] His Honour concluded that the subjective belief and intention of Mr Mondous was irrelevant to the question of whether the first transfer constituted a valid conveyance of the equitable interest in the land to the respondents.[139]
[138]Reasons [132].
[139]Reasons [135].
That much can be accepted. However, the subjective intention of the respondents to not proceed by way of accepting the trust distribution but by way of purchase under contract, and to advance a case by way of evidence and submissions on that basis before the first Tribunal and the Court of Appeal, is relevant to whether there is an abuse of process. Specifically, it is relevant to the question of whether it would be unjust to preclude the respondents from reverting to their alternative case, rejected by the first Tribunal, that there was a distribution of trust.
The extent to which the respondents proceeded in contradictory fashion is evidenced further in the conduct of their submissions on this application for leave to appeal. In seeking to overcome the argument as to privity, the respondents asserted that at the time of the first Tribunal proceeding they were no more than objects of a discretionary trust. Once that hurdle was overcome, they asserted that they were in fact, and had been since the first transfer, the holders of a beneficial interest in respect of which Kameel was a bare trustee. Unlike McLeish JA, I have concluded that there was no privity on either basis, however, the conduct of the argument demonstrates a willingness to present mutually contradictory positions as to both fact and law for the purposes of advancing their own position. In my view, this aspect of their inconsistent dealing is part of the matrix of factors that demonstrate that the attempt of the respondents in the second Tribunal proceeding to re-litigate was an abuse of process.[140]
[140]Reasons of McLeish JA [142]−[143].
Advancing alternative positions does not necessarily evidence an abuse of process. However, once the legal effect of the first transfer had been settled by the first Tribunal, to continue to re-litigate that issue would, in my view, constitute an abuse of process. To have the second Tribunal unwind the findings of the first Tribunal and proceed on an entirely different basis would engender a strong sense of injustice and impermanence in the decision of the first Tribunal.
There is no injustice to the respondents
In my view, holding the respondents to the result in the first Tribunal and in this Court works no injustice on them.
The extent to which injustice flows is not measured by an assessment of the correctness of the first Tribunal’s decision, particularly in circumstances where the respondents took the opportunity to put evidence and submissions on behalf of Kameel in the first Tribunal proceeding.
The primary judge considered that, with the effluxion of time, the issue of stamp duty would not have been in the forefront of the respondents’ minds when Kameel was prosecuting its land tax proceeding, and the respondents were therefore deprived of the opportunity to consider their stamp duty position when making tactical decisions in that proceeding.[141] However, neither Kameel nor the respondents are able to dismiss the evidence that was advanced before the first Tribunal, and the submissions made on that evidence, as simply tactical. Rather, as I have noted above, the respondents have deliberately sought to advance contradictory positions from time to time with an eye to the taxation implications.
[141]Reasons [107].
Moreover, the measure of injustice to the respondents is not to be assessed by considering whether they could, if permitted, successfully impugn the findings of the first Tribunal concerning the first transfer. Such an approach gives insufficient weight to the principle of finality that underpins the doctrine of abuse of process and the spectre of inconsistent decisions. It would suggest that the outcome of the first Tribunal proceeding was a lottery.[142]
[142]Rogers v The Queen (1994) 181 CLR 251, 267 (Brennan J).
If the respondents were allowed to re-litigate that point, it would permit them to advance the position that they had deliberately and unequivocally abandoned when they took steps to execute and rely on the backdated contract of sale and to execute the second transfer and submit it as a conveyance by sale.
In my view, that course would constitute an abuse of process.
Grounds 3 and 4
For the reasons given by McLeish JA, it is inappropriate to resolve these grounds.
Conclusion and orders
The Commissioner should have leave to appeal, and the appeal should be
allowed. I agree with the disposition proposed by McLeish JA.
McDONALD AJA:
I agree with McLeish JA.
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