Dadeeton Pty Ltd v Commissioner of State Taxation No. Scciv-02-957

DADEETON PTY LTD v COMMISSIONER OF STATE TAXATION
[2002] SASC 372
Miscellaneous Appeal

DOYLE CJ: This is an appeal against an assessment by the Commissioner of State Taxation (“the Commissioner”), assessing an “Application To Transfer An Abalone Fishery Licence” (“the application”) as chargeable with stamp duty under the Stamp Duties Act 1923 (SA) (“the SDA”). As a party to that instrument Dadeeton Pty Ltd (“Dadeeton”) is liable to pay the duty: s 4(2) of the SDA.
The application
The application was submitted to the Director of Fisheries (“the Director”), seeking his consent to the transfer of an Abalone Fishery Licence (“the licence”) from Mr Pickering (“Pickering”) to Dadeeton.
The application was submitted in writing on what appears to be a prescribed form. Pickering is described as the transferor. Dadeeton is described as the transferee. Dadeeton is described as the person making the application.
The Director consented to the transfer of the licence on 2 March 2001.
The form requires the transferor to state the price to be paid for the licence. In the part of the form where the price is to be stated appear the words “See Court Order attached.”
Attached to the application is a copy of a sealed order of this Court. The order provides, among other things, that upon the making of a certain payment by Smoothpool Nominees Pty Ltd (“Smoothpool”) to Pickering, a Deed of 25 October 1982 is set aside. There is then a declaration that upon the making of that payment, Pickering has held the licence “on trust” for Dadeeton, and there is an order that upon the making of the payment by Smoothpool, Pickering must transfer “the legal interest” in the licence to Dadeeton.
The order provides that if Pickering does not execute the documents required to transfer the legal interest to Dadeeton, the Registrar of this Court will do so, and the Registrar has done so.
Accordingly, what was submitted to the Director was a duly completed application for the Director’s consent to a transfer of the licence, accompanied by a court order requiring Pickering to transfer the legal interest in the licence to Dadeeton on the making of a specified payment by Smoothpool to Pickering. The order also provides for consequential payments by Pickering and others to Dadeeton. As I will explain later, these amounts are payable by way of an account of profits due to Dadeeton in respect of the use by Pickering of the licence in the period leading up to the order. That brief summary omits reference to certain other parties involved in the matter, but for present purposes it is not necessary to refer to them.
The application was submitted to the Commissioner before the transfer was approved by the Director. There is no evidence before me about the circumstances under which the application was submitted to the Commissioner.
On 1 March 2001 the Commissioner, exercising his powers under s 9(1) of the Taxation Administration Act 1996 (SA) (“the Administration Act”) assessed the application as chargeable with duty under the SDA. I am prepared to infer that the assessment, a copy of which is before me, is in respect of the application, although that is not spelt out in the agreed facts.
It is common ground, although nothing is said in the agreed facts about the basis upon which the Commissioner acted, that the Commissioner acted on the basis that the application was a conveyance for the purposes of the SDA, and was either a conveyance on sale or a conveyance operating as a voluntary disposition inter vivos.
Again, it is common ground, although not spelt out in the agreed facts, that the Commissioner treated the licence as having a market value of $4,000,000. There is no agreed fact establishing how the Commissioner arrived at that value. There is no evidence before me about the value of the licence.
I assume (there was no proof of these matters) that Dadeeton objected to the assessment under s 82 of the Administration Act, and that the Minister confirmed the assessment.
Dadeeton has now appealed to this Court pursuant to s 92 of the Administration Act. Dadeeton bears the onus of proving its case: s 97 of the Administration Act. Accordingly, Dadeeton must show that the Commissioner was wrong.
The issues on appeal
It is common ground that Dadeeton held any interest that it had in the licence, at all times, as trustee of a family trust. Smoothpool was trustee of that trust before Dadeeton became trustee.
As I understood the submission for Dadeeton, it is that the application operated as a conveyance, but that the property transferred by the application is the bare legal interest in the licence, and that that bare legal interest has either no value or negligible value.
That submission is advanced on one of two bases. The first basis is that all along Pickering has held the licence on trust for Dadeeton or Smoothpool, and that the effect of the court order is merely to provide for and to require the transfer of the bare legal interest in the licence. The submission is that the order is remedial in nature, merely enforcing the existing equitable interest of Dadeeton in the licence.
In other words, the submission appears to be that the beneficial interest in the licence never left Smoothpool or Dadeeton, despite the Deed of October 1982 which the order sets aside (as I will shortly explain, the apparent effect of the Deed was to vest the beneficial interest in the licence in Pickering). I am uncertain whether counsel for Dadeeton advanced, as an alternative, the submission that the effect of the making of the payment under the order was to set aside the Deed of October 1982 and to vest the beneficial interest in Dadeeton, and that all the application does is to complete the process by dealing with the legal interest only. In any event, it is necessary to consider that alternative.
It is also submitted for Dadeeton that although the application is a conveyance, it is not a conveyance on sale. It is further submitted that the application is deemed not to be a conveyance operating as a voluntary disposition inter vivos by operation of s 71(5)(d) and (e) of the SDA. Those provisions are as follows:
“71(5)       Subject to subsection (6), an instrument effecting or acknowledging, evidencing or recording, any of the following transactions shall be deemed not to be a conveyance operating as a voluntary disposition inter vivos:
....
(d)    a transfer of property for the purpose of effectuating the retirement of a trustee or the appointment of a new trustee, where the Commissioner is satisfied that the transfer is not part of a scheme for conferring a benefit, in relation to the trust property, upon the new trustee or any other person, whether as a beneficiary or otherwise, to the detriment of the beneficial interest or potential beneficial interest of any person;
(e)     a transfer of property to a person who has a beneficial interest in the property by virtue of an instrument that is duly stamped, where -
(i)     the beneficial interest arises under a trust of which the transferor is a trustee; and
(ii)    (A)    the transferor or some other trustee or trustees of the trust obtained his, her or their interest in the property under one of the other paragraphs of this subsection (except paragraph (d)); or
(B)the transferor or some other trustee or trustees of the trust obtained his, her or their interest in the property by virtue of an instrument duly stamped with ad valorem duty; …”.
Accordingly, it is submitted that even if more than a bare legal interest is transferred, the application is not dutiable because it is not a conveyance on sale or a conveyance operating as a voluntary disposition inter vivos.
The Court order
The order was made after the trial of an action in this Court. The trial Judge’s reasons are before me as part of the agreed facts. Those reasons provide relevant background, which I will now summarise.
Smoothpool was trustee of a family trust. In October 1980 Pickering agreed to hold the licence on trust for Smoothpool. Between October 1982 and June 1983 Dadeeton replaced Smoothpool as trustee.
The Deed of October 1982, to which Pickering, Smoothpool and others were parties, effected a purchase by Pickering of the licence.
The Judge found that the Deed was liable to be set aside because it was a purchase by Pickering as trustee of a trust asset, for which purchase Pickering did not pay fair value. The Judge also found that the beneficiary of the trust did not give an effective consent. The beneficiary’s apparent consent was vitiated or made ineffective by Pickering’s failure to inform the beneficiary adequately of certain matters, and by the fact that Pickering’s continuing breaches of trust caused the beneficiary to consent to or to submit to the purchase.
The Judge found that the purchase was not “absolutely void”, but voidable unless Pickering could establish certain matters (such as payment of full value and fair dealing), which matters Pickering could not establish. The purchase was voidable at the election of Smoothpool.
The Judge specifically found that while the Deed was in force, Pickering held the legal and beneficial interest in the licence.
The Judge’s order for the transfer of the licence from Pickering to Dadeeton was made on terms that the Judge imposed to achieve substantial restitution as between the parties.
Accordingly, the order contained the following orders and declarations:
“2.There will be a declaration that on 21 October 1980 the defendant, Gregory James Pickering, became the trustee of Abalone Authority No 17 issued by the South Australian Department of Fisheries which he held on trust for Smoothpool Nominees Pty Ltd.
3.Upon payment of the sum of $514,544 by Smoothpool Nominees Pty Ltd to the defendant, Mr Gregory Pickering, the Deed of Settlement of 25 October 1982 is set aside.
4.Upon compliance by the plaintiff, Smoothpool Nominees Pty Ltd, with the payment to the defendant in paragraph 3 hereof it is declared:
4.1. Since a date sometime after 25 October 1982 and before 30 June 1983 Gregory James Pickering has held Abalone Authority W17 issued by the South Australian Department of Fisheries on trust for Dadeeton Pty Ltd.”
It is clear from the order and from the reasons that the declaration in par 4 of the order is consequential upon the payment provided for in par 3 and consequential upon the setting aside of the Deed.
The transfer of the legal interest in the licence from Pickering to Dadeeton is effected pursuant to par 5 of the order, which in part provides as follows:
“5.Upon compliance by the plaintiff, Smoothpool Nominees Pty Ltd, with the payment to the defendant in paragraph 3 hereof it is ordered:-
Gregory James Pickering at his expense in all things:
5.1 Execute the following documents to effect the registration of the transfer of the legal interest in Abalone Authority W17 to Dadeeton Pty Ltd;
5.1.1.Application to transfer Abalone Fishery Licence;
5.1.2.Statutory Declaration;
5.1.3.Application for Revocation of Registration as Master;
5.1.4.Other documents required by the Director of Fisheries; ...”.
The effect of the order is that upon payment by Smoothpool of the amount stated in par 3 of the order, the Deed of October 1982 is set aside; accordingly, the beneficial interest in the licence reverts to Dadeeton as trustee (the licence now being held by Pickering on trust for Dadeeton); the declaration in par 4 comes into effect, and Pickering is also required to transfer the legal interest in the licence. The transfer of the legal interest is subject to the consent of the Director.
Liability to duty
I reject the submission that the beneficial interest in the licence has been held by either Smoothpool or Dadeeton as trustee of the family trust at all times. The beneficial interest of Smoothpool or Dadeeton arises only after and as a consequence of the order made by this Court and after and as a consequence of the payment provided for by par 3 of the order. If Smoothpool did not make the payment provided by par 3, the Deed of October 1982 would have remained in force and effective, and the beneficial interest in the licence would have remained in Pickering.
The declaration in par 4.1 of the order reflects the consequence of Smoothpool electing to avoid the Deed, on the terms imposed by the Judge.
The consequence of that is that for the purpose of determining consequential remedies, and in particular a claim to an account of the profits made by Pickering while he held the licence, the licence is treated as having been held by Pickering on trust for Dadeeton from the time when Dadeeton became trustee. (For reasons that do not matter there was uncertainty about the date on which that occurred.) In paragraphs of the order that I have not set out here the Judge ordered the making of payments to Dadeeton by way of an account of profits.
I emphasise that the order provides for the setting aside of an otherwise effective transaction, namely, the Deed of October 1982, and grants consequential relief. The order does not determine that, as a matter of law, the Deed was void from the outset, or is to be regarded as a nullity or is to be regarded as if it never occurred. Despite the language used, as a matter of law the Deed was effective until set aside by virtue of the making of the payment provided for by par 3 of the order. The parties did not refer me to any authority precisely on point, other than to some observations of Giles CJ Comm D to a like effect, although in a different context, in FAI General Insurance Co Ltd v Ocean Marine Mutual Protection and Indemnity Association& Anor (1997) 41 NSWLR 559 at 563 ‑ 564. I agree with his Honour’s observations.
The application and the attached court order effect the transfer of the licence, subject to the Director’s consent. The application suggests that the payment provided for by par 3 of the order will be made when the Director consents to the transfer of the licence. But even if the payment had been made already, the application and the order together record and effect the transfer of the beneficial interest and of the legal interest, the latter transfer being subject to the consent of the Director.
In light of the above, I conclude that the beneficial interest in the licence passed from Pickering to Dadeeton, and vested in Dadeeton, by virtue of par 3 of the order, upon payment by Smoothpool of the amount specified.
I conclude that the legal interest in the licence passed from Pickering to Dadeeton and vested in Dadeeton by virtue of the application, once the Director had consented to it, although I recognise that par 5 of the order is the source of the obligation on Pickering to transfer the legal interest.
The SDA imposes a duty on instruments, not on transactions. The two instruments submitted to the Commission together disposed of the entire interest in the licence. But for the purposes of the SDA it is necessary to identify the interest in property that is conveyed or transferred by the application, because duty is assessed by reference to the value of that property: Commissioner of State Revenue v Pioneer Concrete (Vic) Pty Ltd [2002] HCA 43 at [34].
The Commissioner has not assessed the order as chargeable with duty, but only the application. Accordingly, it is necessary to focus solely on the application.
In submissions before me it was not disputed that the application was, for the purposes of s 60 of the SDA, a conveyance. In that section “conveyance” is defined as follows:
“(a)every conveyance, assignment, transfer or declaration of trust and every application under the Real Property Act1886 or the Community Titles Act1996; and
(b)     every decree or order of any court, judge or commissioner; and
(c)     every other application or request of any kind; and
(d)     every other assurance or instrument of any kind,
by which or by virtue of which or by the operation of which, whether upon registration or otherwise, or by the issue of a certificate of title in pursuance of which, any real or personal property or any estate or interest in any such property is assured to, or vested in, any person, and “to convey” has a meaning coextensive with the meaning of “conveyance”, as extended by this section; …”.
As I have indicated, I am satisfied that the application vested the legal interest in the licence in Dadeeton.
The application, (and, for that matter, the order) may well be a conveyance on sale. It is not necessary to decide that question. It is not necessary to decide that because, as will appear, the outcome of the appeal is the same whether the application is to be regarded as a conveyance on sale or as a conveyance operating as a voluntary disposition inter vivos.
The Commissioner submits that the better view is that the application is to be regarded as a conveyance operating as a voluntary disposition inter vivos. The Commissioner relies upon s 71(3)(b), which deems “an instrument to which paragraph (a) does not apply, being a conveyance that is not chargeable with duty as a conveyance on sale” to be a conveyance operating as a voluntary disposition inter vivos. The application does not fall within par (a). Dadeeton also submits that the application is such a conveyance, but relies upon s 71(5)(d) and (e) of the SDA to take the application outside s 71. The Commissioner denies that Dadeeton can rely on s 71(5).
I consider that the application does not fall within s 71(5)(d). The application is unrelated to the replacement of Smoothpool by Dadeeton as trustee, except that that event explains why the application identifies Dadeeton as transferee. In my opinion this provision of the SDA requires consideration of the purpose of the application in the sense of the object it seeks to achieve. In some cases that may require the selection of a predominant object, but that is not something that I have to decide here. The object of the application is to complete the process of rescinding the transfer of the beneficial interest in the licence to Pickering effected by the Deed of October 1982. The object is also to dissolve the trust created by the Deed of October 1980, in order to restore the licence wholly to the trustee of the family trust. Even if Smoothpool were still the trustee of that family trust, the legal interest in the licence would have been subject to an order requiring Pickering to dispose of it.
Putting things differently, the application is not necessary or appropriate because Dadeeton has replaced Smoothpool. It is necessary and appropriate because the trust arising from the Deed of October 1980 is to be dissolved, in the context of Pickering being deprived of the beneficial interest that he acquired under the Deed of October 1982.
Dadeeton is not entitled to rely on s 71(5)(d).
Nor is it entitled to rely on s 71(5)(e). The short answer to Dadeeton’s submission is that it is not established that it has a beneficial interest in the licence by virtue of an instrument that is duly stamped. I consider that the relevant beneficial interest is the interest that passes under the court order from Pickering to Dadeeton. That order has not been stamped. Moreover, for the purposes of sub-par (i) of s 71(5)(e) the relevant trust is the trust pursuant to which Pickering held the licence on trust for Dadeeton prior to the transfer of the licence to Dadeeton. If that trust arises under par 4 of the order, the answer to Dadeeton’s submission is that the order has not been duly stamped. If the trust arises under the Deed of October 1980, it has not been shown that that instrument has been duly stamped. But these points are to some extent by the by. The fundamental obstacle that Dadeeton’s submission encounters is that Dadeeton’s beneficial interest in the licence is not held by virtue of an instrument that is duly stamped.
I turn now to the value of the property conveyed by the application. Dadeeton argues that as the property conveyed is a bare legal interest, it is of negligible value.

Although the application refers simply to the licence, it is accompanied by the court order which shows how Dadeeton is able to effect a transfer to itself, and further shows that the beneficial interest in the licence passes upon the making of the payment in par 3 of the order. In the circumstances, I consider it appropriate to look beyond the instrument of conveyance (the application) to identify the property transferred by it, and its legal effect: Pioneer Concrete at [41]-[43]. It is appropriate because the application gets its legal effectiveness from the order. It implements the order. To that extent I accept Dadeeton’s submission.
The Commissioner relies in answer to this on s 60A(4b) which provides as follows:
“Where an estate or interest conveyed or transferred merges with an estate or interest already held by the transferee (the latter having been acquired by the transferee on or after 7 January 1997), the Commissioner may, for the purposes of assessing the duty payable on the conveyance, treat the value of the estate or interest conveyed or transferred as being -
(a)where the instrument creating the estate or interest already held was charged with ad valorem duty as a conveyance - the value of the estate or interest produced by the merger less the value of the estate or interest already held; or
(b)in any other case - the value of the estate or interest produced by the merger.”
That provision enables the Commissioner to treat the value of the legal interest in the licence that passes under the application as its market value. The Commissioner is able to do so because upon the transfer of the legal interest it merges with the beneficial interest held by Dadeeton under and by virtue of par 3 of the order, leaving Dadeeton as the holder of the licence simpliciter, although of course as trustee of a family trust. The case does not fall within sub-par (a) because the instrument creating the interest already held by Dadeeton, the order, has not been charged with ad valorem duty. Accordingly, under sub-par (b), the Commissioner is entitled to treat the value of the legal interest transferred as being the value of the licence, and that means the market value.
Dadeeton has not led any evidence challenging the Commissioner’s assessment of the value of the licence. It relies entirely on its assertion that the value of the interest transferred by Pickering is negligible. But for the effect of s 60A(4b) that submission might succeed, but as things stand the submission fails.
Whether this provision was intended to operate in this way in a situation like this might be open to argument, but it appears to me that the case clearly falls within the provision, and I find no basis for holding that the provision does not apply.
All of this may be of little importance. It may be that the Commissioner is entitled to assess the court order as chargeable with duty as a conveyance of the beneficial interest in the licence. If he is, then presumably the value of the interest transferred by the court order would be the full value of the licence. This issue is not before me, and was not argued. Nor were any submissions put forward on s 67(3)(b) of the SDA.
For those reasons my view is that the appeal must be dismissed. However, I will give the parties an opportunity to consider these reasons before so ordering. I do so only because, at the hearing before me, there was confusion between the parties about the approach to be taken to the value of the interest conveyed. However, my tentative view is that there is no basis for me to do anything other than dismiss the appeal.

[2002] SASC 372

15 November 2002