Dick Turpin Pty Ltd and Commissioner of State Revenue
[2006] WASAT 363
•15 DECEMBER 2006
DICK TURPIN PTY LTD and COMMISSIONER OF STATE REVENUE [2006] WASAT 363
| STATE ADMINISTRATIVE TRIBUNAL | Citation No: | [2006] WASAT 363 | |
| TAXATION ADMINISTRATION ACT 2003 (WA) | |||
| Case No: | DR:179/2006 | 6 DECEMBER 2006 | |
| Coram: | JUSTICE M L BARKER (PRESIDENT) | 14/12/06 | |
| 34 | Judgment Part: | 1 of 1 | |
| Result: | Commissioner's decision to impose ad valorem duty affirmed Review proceedings dismissed | ||
| B | |||
| PDF Version |
| Parties: | DICK TURPIN PTY LTD COMMISSIONER OF STATE REVENUE |
Catchwords: | Stamp duty Transfer of land instrument Contract for sale of land Ad valorem duty Nominal duty Nominee clause Changes to initial contract Whether purchaser agent of transferee Whether nominal duty concessions in Stamp Act 1921, s 74 apply Whether Stamp Act 1921 , s 73AA(1)(f) applies on basis "no beneficial interest" passes. |
Legislation: | Commissioner's Practice SD1.2, Stamp Duty - Assessment of Contracts or Agreements Involving Substituted Purchasers and/or Nominee Clauses Duties Act 2000 (Vic), s 31 Stamp Act 1921 (WA), s 73AA(1), s 73AA(1)(a), s 73AA(1)(b), s 73AA(1)(c), s 73AA(1)(d), s 73AA(1)(e), s 73AA(1)(f), s 73AA(1)(f)(ii), s 73AA(1)(f)(iii), s 74, s 74(1), s 74(1aa), s 74(2), s 74(3), s 74(3a), s 74(3a)(a), s 74(3a)(b), s 74(3b), s 74(3c), s 74(3d), s 74(3d)(a), s 74(3d)(b), s 74(3d)(c), s 74(3d)(d), s 74(3d)(e), s 74(3d)(f), s 74(3e), s 74(3f), s 74(3g), s 75JAA, Item 6, Second Schedule |
Case References: | Gibbs v Williams (1992) 8 SR (WA) 244 Harry v Fidelty Nominees Pty Ltd (1985) 41 SASR 458 J R Stevens Holdings Pty Ltd v Von Begensey (1992) 5 BPR 11, 543 Parland Pty Ltd v Mariposa Pty Ltd (1995) 5 Tas R 121 Re Ma Hong and Commissioner of State Revenue (2004) 58 ATR 138 Re People's Investment Co Pty Ltd and Commissioner of State Revenue (2004) 58 ATR 127 Salter v Gilbertson (2003) 6 VR 466 Serana Pty Ltd and Commissioner of State Revenue [2006] WASAT 78 Tonelli v Komirra Pty Ltd [1972] VR 737 Bacon v Simpson (1837) 3 M & W 78 Commissioner of Stamp Duties (NSW) v Bradhurst (1950) 81 CLR 199 Field v Fitton [1988] 1 NZLR 482 Lambly v Silk Pemberton Ltd [1976] 2 NZLR 427 Legione and Anor v Hateley (1982) 152 CLR 406 London and Brighton Rly Co v Fairclough (1841) 133 ER 916 Norilya Minerals Pty Ltd v Commissioner of State Taxation (WA) 95 ATC 4559; (1995) 16 WAR 266 Power v Nathan [1981] 2 NZLR 403 Stephens v Lowe (1832) 9 Bing 32 Sutton v Toomer (1827) 108 ER 778 Vickery v Woods (1951) 85 CLR 336 |
Orders | 1. The decision of the Commissioner of State Revenue to impose ad valorem duty on the transfer of land instrument executed by the applicant is affirmed.,2. The application of the applicant for review of the Commissioner's decision to refuse its objection to the decision to impose ad valorem duty is dismissed. |
JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL STREAM : DEVELOPMENT & RESOURCES ACT : TAXATION ADMINISTRATION ACT 2003 (WA) CITATION : DICK TURPIN PTY LTD and COMMISSIONER OF STATE REVENUE [2006] WASAT 363 MEMBER : JUSTICE M L BARKER (PRESIDENT) HEARD : 6 DECEMBER 2006 DELIVERED : 15 DECEMBER 2006 FILE NO/S : DR 179 of 2006 BETWEEN : DICK TURPIN PTY LTD
- Applicant
AND
COMMISSIONER OF STATE REVENUE
Respondent
Catchwords:
Stamp duty - Transfer of land instrument - Contract for sale of land - Ad valorem duty - Nominal duty - Nominee clause - Changes to initial contract - Whether purchaser agent of transferee - Whether nominal duty concessions in Stamp Act 1921, s 74 apply - Whether Stamp Act 1921 , s 73AA(1)(f) applies on basis "no beneficial interest" passes.
Legislation:
Commissioner's Practice SD1.2, Stamp Duty - Assessment of Contracts or Agreements Involving Substituted Purchasers and/or Nominee Clauses
Duties Act 2000 (Vic), s 31
(Page 2)
Stamp Act 1921 (WA), s 73AA(1), s 73AA(1)(a), s 73AA(1)(b), s 73AA(1)(c), s 73AA(1)(d), s 73AA(1)(e), s 73AA(1)(f), s 73AA(1)(f)(ii), s 73AA(1)(f)(iii), s 74, s 74(1), s 74(1aa), s 74(2), s 74(3), s 74(3a), s 74(3a)(a), s 74(3a)(b), s 74(3b), s 74(3c), s 74(3d), s 74(3d)(a), s 74(3d)(b), s 74(3d)(c), s 74(3d)(d), s 74(3d)(e), s 74(3d)(f), s 74(3e), s 74(3f), s 74(3g), s 75JAA, Item 6, Second Schedule
Result:
Commissioner's decision to impose ad valorem duty affirmed
Review proceedings dismissed
Category: B
Representation:
Counsel:
Applicant : Mr P Beck (Acting as Agent)
Respondent : Ms R Panetta
Solicitors:
Applicant : Dick Turpin Pty Ltd
Respondent : State Solicitor's Office
Case(s) referred to in decision(s):
Gibbs v Williams (1992) 8 SR (WA) 244
Harry v Fidelty Nominees Pty Ltd (1985) 41 SASR 458
J R Stevens Holdings Pty Ltd v Von Begensey (1992) 5 BPR 11, 543
Parland Pty Ltd v Mariposa Pty Ltd (1995) 5 Tas R 121
Re Ma Hong and Commissioner of State Revenue (2004) 58 ATR 138
Re People's Investment Co Pty Ltd and Commissioner of State Revenue (2004) 58 ATR 127
Salter v Gilbertson (2003) 6 VR 466
Serana Pty Ltd and Commissioner of State Revenue [2006] WASAT 78
Tonelli v Komirra Pty Ltd [1972] VR 737
(Page 3)
Case(s) also cited:
Bacon v Simpson (1837) 3 M & W 78
Commissioner of Stamp Duties (NSW) v Bradhurst (1950) 81 CLR 199
Field v Fitton [1988] 1 NZLR 482
Lambly v Silk Pemberton Ltd [1976] 2 NZLR 427
Legione and Anor v Hateley (1982) 152 CLR 406
London and Brighton Rly Co v Fairclough (1841) 133 ER 916
Norilya Minerals Pty Ltd v Commissioner of State Taxation (WA) 95 ATC 4559; (1995) 16 WAR 266
Power v Nathan [1981] 2 NZLR 403
Stephens v Lowe (1832) 9 Bing 32
Sutton v Toomer (1827) 108 ER 778
Vickery v Woods (1951) 85 CLR 336
(Page 4)
Summary of Tribunal's decision
1 The Tribunal held that the Commissioner of State Revenue correctly imposed ad valorem duty under the Stamp Act 1921 (WA) on an instrument of transfer under which an interest in land was transferred to the applicant company and that nominal duty was not payable under s 74 or s 73AA(1)(f) of the Stamp Act 1921.
Issues
2 The primary issue is whether the Commissioner of State Revenue correctly imposed ad valorem duty on a transfer of land instrument, executed by the applicant, Dick Turpin Pty Ltd, on 19 April 2005 in respect of Lot 22 Greenhills Road, Greenhills.
Facts
3 On 4 January 2005, Sean Joseph Roche, Philip York Beck and Richard Smith signed a written Contract for sale of land or strata title by offer and acceptance in respect of the land situate at and known as "The Greenhills Inn". The property was the subject of certificates of title volume 1705 folio 467 and volume 1705 folio 468. As signed, the document constituted an offer to the vendor to purchase the property.
4 The offer was subject to, among other conditions, the acceptance of a separate offer to purchase the business of a hotel conducted on the property.
5 The "Buyer" was described in the document as:
"Sean Joseph Roche, Philip York Beck, Richard Smith and or nominees of 126 Jarrah Road, Victoria Park."
6 On 29 January 2005 - just over a fortnight later - the owner and vendor of the property accepted the offer by executing the Contract for sale of land or strata title by offer and acceptance as "Seller".
7 Prior to 29 January 2005, that is to say before the offer was accepted by the Seller, the offer was amended by Mr Beck on behalf of the "Buyer" so that, after his name, the words "& or nominees" were added to the description of the Buyer. As a result, the "Buyer" was, at the time of acceptance of the offer on 29 January 2005, described as follows:
(Page 5)
- "Sean Joseph Roche, Philip York Beck, & or nominees, Richard Smith and or nominees of 126 Jarrah Road, Victoria Park".
8 The reason why Mr Beck and the other named Buyers wished to make and made this change to the written offer, was explained by Mr Beck when he gave evidence at the hearing of these proceedings in the Tribunal. Mr Beck explained, and I accept, that the reason for the change was to reflect the desire of the Buyers to provide for a fourth person, Mr Steven Lee Murphy, to become one of the purchasers.
9 The reason why Mr Murphy's name was not expressly listed as one of the Buyers, as Mr Beck explained and I also accept, was because Mr Murphy, at all material times when the contract was being negotiated, lived in New South Wales and it was considered inconvenient actually for him to sign the offer document. It seems that Mr Murphy was content to rely on Mr Beck to protect his interests and ensure that Mr Murphy would have the opportunity, with the other three men, generally speaking, to acquire the property.
10 The alteration made by Mr Beck, so far as the proper reading of the contract concluded on 29 January 2005 is concerned, was to make it possible for Mr Beck to be a Buyer together with a nominee of his choosing or for Mr Beck to nominate a person as a Buyer in his place. In that regard, the alteration Mr Beck made reflected the basis upon which Mr Smith was also entitled to be a Buyer, that is to say, "Richard Smith &/or nominees".
11 As I read the contract document, and having regard to the evidence given by Mr Beck and Mr Murphy at the hearing of these proceedings, prior to 29 January 2005, Mr Beck was concerned to ensure that Mr Murphy could become one of the nominated buyers. Unless the words he inserted were added, there might have been an issue whether Mr Beck would be able to ensure that Mr Murphy's interests in that regard would be protected. Whilst Mr Smith might have been able to nominate Mr Murphy or his interests, Mr Smith, it seems, was not particularly well acquainted with Mr Murphy and it was not his responsibility to represent or protect the interests of Mr Murphy.
12 It will be necessary later to fully interpret and explain the practical and legal implications of Mr Beck's alteration of the offer in the way that he did by adding after his name the words "and or nominees". For present purposes, however, it is important to note that the contract document, both
(Page 6)
- when the offer was signed on 4 January 2005, and on 29 January 2005 when the Seller accepted the offer and the contract was made, contained a condition which defined exactly who the nominees were. In other words, it was not broadly open to the Buyers to nominate any person as a nominee; they were limited to choosing from those listed nominees.
13 In this regard, condition 9 provided as follows:
"The nominees shall be:
A. Stephen (sic) Murphy's Super Annuation Fund
B. Arrall Pty Ltd as trustee for Richard Smith Family Trust
C. Richard Smith Superannuation Fund
D. Richard and Audrey Smith
E. Larkspur Retirement Fund."
14 The nominee referred to in par A was associated with Mr Murphy. In evidence in the Tribunal, Mr Beck explained that prior to the offer being signed Mr Murphy had advised him that Mr Murphy's superannuation fund would be the vehicle he would use to acquire any interest in the property.
15 The nominees referred to in pars B, C and D were all associated with Mr Smith.
16 The nominee referred to in par E was associated with Mr Beck.
17 The use of "nominee clauses" has a long history. On the face of it, the practice means that people wishing to engage in contractual dealings and not lose a commercial opportunity keep some flexibility available to them, so far as the final structure of a dealing is concerned, to achieve appropriate ownership arrangements taking into account, on later advice, estate planning, and revenue implications, amongst other considerations. There are however, legal issues surrounding the use of a nominee clause, as discussed later.
18 What then happened is that following the acceptance of the offer by the Seller by execution of the contract document on 29 January 2005, but before the settlement of the proposed conveyance or transfer, Mr Beck made a further change to the contract document by purporting to add a
(Page 7)
- further nominee to condition 9 of the purchaser's copy of the contract, in the following terms:
"G. Dick Turpin P/L"
That entity is the applicant in the current proceedings in the Tribunal.
19 I should note in passing that, while Mr Beck purported to add the applicant's name as an additional nominee specified by condition 9 of the contract, the change was not initialled by any of the parties to the contract and, including the Seller.
20 In purely contractual terms, it is difficult to see how what purports to be a condition of the contract, that Dick Turpin Pty Ltd can be nominated as a nominee (either by Mr Beck or by Mr Smith), was ever a term of the contract actually concluded by the Buyer and the Seller.
21 Nonetheless, what then followed was a transfer of land, purportedly giving effect to the contract that resulted in the applicant company acquiring the interest in the property rather than any of the Buyers or nominees mentioned in the contract concluded on 29 January 2005.
22 The circumstances in which Dick Turpin Pty Ltd came to be the entity to which the property was transferred are relatively easily explained. Mr Beck gave evidence, which I generally accept, that at a certain point - which I will discuss further below - Messrs Roche, Smith, Murphy and himself agreed, on accounting advice, that the best way to carry into effect the informal agreement between the four of them that the property should be acquired on the basis that each of them controlled a 25% interest in the property, would best be achieved by establishing a unit trust in which each of them held or controlled a 25% interest.
23 To that end, on or about 16 February 2005 a company order form was completed and sent by Mr Beck to FEEST Company Services Pty Ltd of Frankston, Victoria for a "P/L company and hybrid Unit Trust". The applicant company was registered on 18 February 2005 and "The Highwayman Unit Trust" was established by deed which was stamped on 21 March 2005.
24 The shareholders of the applicant company were, at all material times:
Mr Beck - 30 ordinary shares
Mr Roche - 30 ordinary shares
(Page 8)
- Mr Murphy - 15 ordinary shares
Mr Murphy's wife Julie Marie Murphy - 15 ordinary shares
Arrall P/L (a company being associated with Mr Smith and one of the nominees referred to in condition 9 of the contract document) - 30 ordinary shares.
25 The unit holders of The Highwayman Unit Trust were at all material times:
Larkspur Pty Ltd (associated with Mr Beck and referred to as a nominee in condition 9 of the contract document);
Mr Roche;
Frontline Systems Australia Pty Ltd (an entity associated with Mr and Mrs Murphy);
Richard Smith.
26 Under the deed establishing The Highwayman Unit Trust, on the establishment of the Trust, by cl 2.2, the trustee holds the Fund on Trust for the Beneficiaries of the deed. The Fund is defined in cl 1.1.9 to include assets which become subject to the provisions of the deed, and so would include the property upon acquisition.
27 The term "beneficiary" is defined by cl 1.1.3 to mean "a Discretionary Beneficiary or a Unit holder". A "Discretionary Beneficiary" is further defined by cl 1.1.6 to have the meaning given in subclause 12.2, 12.3 and 12.4. Under cl 12.2 where a Unit holder is a natural person and does not act as a trustee of a trust the Unit holders' Class of Discretionary Beneficiaries shall be -
• the spouse of the Unit holder;
• a parent of the Unit holder;
• child or grandchild of the Unit holder;
• any Australian private company of which the Unit holder or his spouse or parent is a director or a shareholder; and
• the trustee of any trust of which the Unit holder or a person being a spouse, parent or child or grandchild or a
- person described in sub-clause 12.2.1 or 12.2.2 is a beneficiary or discretionary object.
28 By cl 12.3 where a Unit holder is a corporation (not acting as a trustee) described in sub-clause 12.2.1, 12.2.2 or 12.2.3 the Unit holders' Class of Discretionary Beneficiaries shall be -
• any director or shareholder of the corporation;
• the spouse of any person described in cl 12.3.1;
• any child or grandchild of any person described in sub-clauses 12.3.1 or 12.3.2;
• any private company incorporated in Australia of which a person described in sub-clauses 12.3.1, 12.3.2, or 12.3.3 is a director or a shareholder;
• or the trustee of any trust of which any persons described in sub-clauses 12.3.1, 12.3.2, 12.3.3 or 12.3.4 is a beneficiary or a discretionary object; but
• does not include the Trustee.
29 Under cl 12.4 where a Unit holder acts as a trustee of a trust, the Unit holders' Class of Discretionary Beneficiaries shall be:
• each beneficiary or discretionary object of the trust of which the Unit holder is trustee;
• the spouse of any person described in cl 12.41;
• any child or grandchild of any person described in sub-clauses 12.4.1 or 12.4.2;
• any private company in which the person described in sub-clauses 12.4.1, 12.4.2 or 12.4.3 is a director or a shareholder;
• the trustee of any trust, whether now existing or hereafter created of which any person described in sub-clauses 12.4.1, 12.4.2, 12.4.3 or 12.4.4 is a beneficiary or a discretionary object.
30 In short, the range of potential beneficiaries under The Highwayman Unit Trust extends beyond the Unit holders themselves.
(Page 10)
31 In circumstances where the transfer of land document executed by the Seller referred to in the contract document and the applicant was plainly not made pursuant to any express term of the contract made on 29 January 2005, it would appear, on the face of the dealings between the relevant parties, that a fresh contract or agreement had, in effect, been made between the Seller and the applicant company at some point after the execution of the earlier contract, possibly as a result of the Seller and the applicant company executing the transfer of land instrument.
Section 74 of the Stamp Duty Act 1921 (WA)
32 At material times, the Commissioner had addressed the practice of using nominee clauses in Commissioner's Practice SD1.2, Stamp Duty - Assessment of Contracts or Agreements Involving Substituted Purchasers and/or Nominee Clauses. Commissioner's Practice SD1.0 was originally issued on 21 October 2003. Commissioner's Practice SD1.2 was issued on 5 October 2004 and had effect as of that date. It was current at the time of the making of the contract in this case on 29 January 2005.
33 Commissioner's Practice SD1.2:
• explains the circumstances in which a nominee clause will be accepted by the Commissioner as satisfying the requirements of s 74(3) of the Stamp Act 1921(WA) (Stamp Act); and
• gives guidance on the evidence required to satisfy the Commissioner that an alternative purchaser meets the requirements of s 74(3a) of the Stamp Act.
34 Section 74(1) of the Stamp Act imposes ad valorem stamp duty on every contract or agreement for the sale of a property. These instruments commonly include documents prepared by a solicitor and the standard form contract for the sale of land or strata title by offer and acceptance, developed by the Real Estate Institute of Western Australia, and used in this particular instance.
35 Where the purchaser named in a contract or agreement differs from the transferee named in the subsequent transfer of land instrument (usually in the form of a standard transfer of land instrument used in this case), s 74(2) of the Stamp Actapplies to charge ad valorem conveyance duty on, what the Commissioner calls, a "sub-sale". In effect there are two transactions and each is on the face of it liable to the ad valorem duty.
(Page 11)
36 However, s 74(3), (3a), (3b) and (3c) of the Stamp Act provide a measure of relief from this rule and allow the subsequent transfer document to be assessed for nominal duty under item 6 of the Second Schedule to the Stamp Act, provided the statutory criteria there set out are satisfied.
37 In Commissioner's Practice SD1.2 the Commissioner notes, as I have observed, that it is common for contracts or agreements to include a provision where the named purchaser specifies a nominee who may purchase the property either with or instead of the named purchaser. This is what is referred to as the "nominee clause", and a variant of it has been used, as we have seen, in this instance.
38 As the Commissioner correctly states in Commissioner's Practice SD1.2, at general law an agent is a person who is authorised to act on behalf of another. For stamp duty purposes, therefore, an "agency relationship" refers to the relationship between the purchaser named on the contract or agreement and the nominee. The named person is the agent and the principal is the nominee.
39 Before any recognition to this agency relationship can be given by the Commissioner for the purposes of imposing duty under the Stamp Act, the requirements of the Stamp Act must be satisfied. In this regard, the issue is not one governed by general law, but is one governed by the requirements of the Stamp Act itself, as laid down by the Parliament.
40 In most respects, then, the issue that arises in this case is governed by s 74 of the Stamp Act.
41 Section 74(1) makes it clear that every contract or agreement, howsoever executed, for the sale of any estate or interest in any property shall be charged with the same ad valorem duty to be paid by the purchaser as if it were an actual conveyance on sale of the estate, interest or property contracted or agreed to be sold.
42 Section 74(2) provides that, subject to s 74, when the name of the purchaser as set out in a contract or agreement referred to in subsection (1) differs from the name of the transferee as set out in the subsequent conveyance or transfer, that conveyance or transfer shall be deemed to be a "separate and distinct transaction" and "shall be subject to ad valorem duty".
43 Then come the relief provisions. Section 74(3) provides that, notwithstanding anything in subsection (2), if -
(Page 12)
- (a) the Commissioner is satisfied that the person named in the contract or agreement concerned as the purchaser was "acting as the agent of the person named in the subsequent conveyance or transfer as the transferee" at the time when that contract or agreement was executed;
(b) the Commissioner endorses on the subsequent conveyance or transfer concerned that the Commissioner is satisfied in relation to the matters referred to in paragraph (a); and
(c) the contract or agreement of sale concerned is stamped,
the same duty as is payable under item 6 of the Second Schedule shall be payable on the subsequent conveyance or transfer.
44 In Commissioner's Practice SD1.2, the Commissioner explains that the requirement for the Commissioner to be satisfied of certain matters ensures that the taxpayer must provide the necessary information to satisfy the Commissioner that he or she is entitled to the relief provided by the section.
45 SD1.2 goes on to explain that the substitution of alternative purchasers may also occur without additional ad valorem duty being payable where the requirements of s 74(3a), (3b) or (3c) are met. In these cases, the alternative purchaser may be substituted on the transfer without the need to include a nominee clause on the contract or agreement.
46 Section 74(3a) of the Stamp Act provides that where a purchaser enters into a contract with the intention of transferring a property to a corporation which was in the process of being incorporated, or a dormant corporation which was in the process of being purchased (for example, a shelf company) nominal duty will apply to the subsequent conveyance or transfer.
47 In Commissioner's Practice SD1.2, the Commissioner says that for this subsection to apply, action "must be underway to incorporate the corporation or purchase the dormant company at the time of entering into the contract or agreement". Duty remains payable on the initial agreement or contract.
48 Section 74(3b) allows nominal duty under Item 6 of the Second Schedule to the Stamp Act to be assessed on transfers to members of a
(Page 13)
- public managed investment scheme where the purchaser's intention at the time the contract or agreement was entered into was that the property would be scheme property.
49 Section 74(3c) allows nominal duty under Item 6 of the Second Schedule to the Stamp Act to be assessed on transfers where the initial purchaser on a contract or agreement is substituted for a related purchaser on the subsequent conveyance or transfer. The substitution may be for the whole or any part of the interest originally acquired in the property. The substituted purchaser must be related to the original purchaser at the time the contract or agreement was entered into.
50 Section 74(3d) specifies the qualifying relationships for the purposes of s 74(3c) where the initial purchaser is an individual.
51 Section 74(3e) specifies the qualifying relationships for the purposes of the s 74(3c) where the initial purchaser is a corporation.
52 Section 74(3f) specifies the qualifying relationships for the purposes of s 74(3c) where the initial purchaser is the trustee of a unit trust.
53 Section 74(3g) specifically limits the application of s 74(3d), (3e) and (3f) to exclude circumstances where the substituted purchaser will not be the legal and beneficial owner of the property. In SD1.2, the Commissioner says that, as a consequence, the substitution of a trustee of a discretionary trust will not be allowed under this section.
54 SD1.2 goes on to set out the Commissioner's practice in relation to nominee clauses, undisclosed nominees, interpretation issues, information requirements, failure to establish an agency relationship and substituted purchasers.
Whether the transfer of land instrument is subject to nominal duty under s 74(3) of the Stamp Act?
55 As we have seen from the concessional rules of the Stamp Act set out above, unless one or other of the statutory circumstances can be satisfied the subsequent transfer of land instrument must be assessed for ad valorem duty and not nominal duty.
56 The most obvious and first question arising is whether, in the circumstances of this case, it can be said that the Buyer nominated in the offer accepted by the Seller on 29 January 2005, had an agency relationship with the applicant company, Dick Turpin Pty Ltd.
(Page 14)
57 Section 74(3) of the Stamp Act provides that:
"(3) Notwithstanding anything in subsection (2), if ¾
(a) the Commissioner is satisfied that the person named in the contract or agreement concerned as the purchaser was acting as the agent of the person named in the subsequent conveyance or transfer as the transferee at the time when that contract or agreement was executed;
(b) the Commissioner endorses on the subsequent conveyance or transfer concerned that the Commissioner is satisfied in relation to the matters referred to in paragraph (a); and
(c) the contract or agreement of sale concerned is stamped,
the same duty as is payable under item 6 of the Second Schedule shall be payable on the subsequent conveyance or transfer."
• the Commissioner (or the Tribunal in review proceedings) is satisfied that the person named in the contract or agreement concerned as the purchaser was acting as the agent of the person named in the subsequent conveyance or transfer as the transferee; and
• that agency relationship subsisted at the time when that contract or agreement was executed.
59 In the circumstances in the present case, the "Buyer" described in the contract must have been acting as the agent of Dick Turpin Pty Ltd, at the time when that contract was executed by the vendor on 29 January 2005, for the concession to be made.
60 The simple fact of the matter is that, as of 29 January 2005, the applicant did not exist. It was incorporated at some later time.
61 While a question may arise as to whether the purchasers did in fact act in contemplation of an entity such as the applicant being created with
(Page 15)
- the purpose of transferring the property to it, this does not address the question whether the Buyer as of 29 January 2005 actually acted as agent of the applicant.
62 In my view, in the circumstances, it is not open to conclude that the persons named in the contract as the Buyer were capable as a matter of fact and law of acting as the agent of Dick Turpin Pty Ltd, the applicant, at the time when the contract was executed because the company did not then exist.
63 I find then that the applicant is not entitled to any nominal duty concession under s 74(3).
Section 74(3a) of the Stamp Act
64 Section 74(3a) of the Stamp Act provides that:
"(3a) Notwithstanding subsection (2), if -
(a) the person named as purchaser in a contract or agreement referred to in subsection (1) entered into the contract or agreement with the intention that the property concerned would be transferred to -
(i) a corporation that the person intended to be incorporated; or
(ii) a dormant corporation, the shares in which the person intended to be acquired;
(b) at the time the contract or agreement was entered into action was being taken to incorporate the corporation or acquire the shares in the dormant corporation; and
(c) duty has been paid on the contract or agreement under subsection (1),
a conveyance or transfer of the property by the vendor under the contract or agreement to the corporation after it has been incorporated or after the shares in it have been acquired, as the case requires, shall be charged with duty under item 6 of the Second Schedule."
(Page 16)
65 The nominal duty concession under this subsection does not depend, as in the case of subsection (3), on the Commissioner being "satisfied" about certain things, but rather about certain things being the fact, namely:
• the fact that the person named as purchaser entered into the contract or agreement with the intention that the property concerned would be transferred to –
(i) a corporation that the person intended to be incorporated; or
(ii) a dormant corporation, the shares in which the person intended to be acquired;
• at the time the contract or agreement was entered into "action was being taken" to incorporate the corporation or acquire the shares in the dormant corporation; and
• duty has been paid on the contract or agreement under subsection (1).
66 In this case the "person named as purchaser" in the contract document were the persons described as "Buyer". At the very least they included Messrs Roche, Beck and Smith. Mr Beck says that the "Buyer" was also intended to include Mr Murphy. (For reasons given later I do not consider Mr Murphy was one of the Buyers described in the contract, although for the purposes of considering this concession issue it does not matter whether he is or is not).
67 The question is whether the Buyer so described entered into the contract with the Seller with the intention that the property concerned would be transferred to a corporation that they intended to be incorporated, or to a dormant corporation the shares in which they intended to be acquired.
68 On the basis of Mr Beck's evidence to the Tribunal, I accept there was a general intention by the Buyer, along the lines expressed in evidence by Mr Beck, that an appropriate corporate structure should be established to hold the property concerned in a manner which reflected the intention of Messrs Roche, Beck, Murphy and Smith that they should each hold or control a 25% interest in the property.
69 However, what is not entirely clear from all of the evidence, including the terms in which the contract was actually made as of
(Page 17)
- 29 January 2005, is the extent to which the purchasers had actually agreed between them as of that date that the property concerned would be transferred either to a particular corporation that they intended to incorporate; or to a dormant corporation, the shares of which they intended to acquire.
70 A dormant corporation is defined by s 74(1aa) to mean a corporation that has been dormant from when it was incorporated. The word "dormant" has the meaning given by s 75JAA.
71 The evidence in this case that I referred to earlier plainly suggests that the applicant company had not lain dormant since its incorporation, that is to say it is not a shelf company as described in the vernacular that was acquired by Mr Beck and others, the shares of which were transferred, rather it was in fact registered in Victoria on 18 February 2005 (see exhibit 2, s 24 bundle of documents filed by the Commissioner of State Revenue, page 26) and Mr Beck and others have held the shares in the applicant since registration.
72 As we know, the applicant company was registered on the basis it should be the trustee of a unit trust, which was established at the same time as the company was registered, which in turn is called The Highwayman Unit Trust.
73 The primary question so far as s 74(3a) is concerned, is whether it can be said on the evidence that the purchasers entered into the contract with the intention that the property concerned would be transferred to the corporation that they intended to be incorporated.
74 In his evidence, for example as explained in a statutory declaration made 17 July 2006 (exhibit 2, pages 94-95), Mr Beck explains that he, Mr Murphy and Mr Roche had been interested during 2004 in purchasing a hotel in York. An initial proposal had been unsuccessful. By late 2004 Mr Smith had joined the "consortium" interested in acquiring a hotel. In late 2004, the Greenhills Inn was on the market. This is the property the subject of the contract in this case.
75 Mr Beck then states:
"In early 2005 when it became clear that we would ultimately purchase the property, more attention was given to the structure that would be employed to hold and operate the property. I entered into discussions with my accountant (Mr Bob Hornsby)
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- and with Steve Murphy's accountant (Mr Bryan Nizette) as to the best structure.
For various reasons, principally because various self managed superannuation funds were involved, and taking the purchasers' personal circumstances into account, it was agreed between me and the two accountants, that the best structure to employ was for a company to be formed to own and operate the business, and for a unit trust to be formed to hold the real estate. The company was to have dual roles being: owning and operating the business of Greenhills Inn in its own right; and acting as trustee of the unit trust holding the land and buildings for the benefit of the members of the consortium.
I then discussed this approach with the other members of the consortium and also with Richard Smith's accountant. We all agreed that that was the structure we would use and I was given the 'go-ahead' to purchase the company and the unit trust.
In early February I approached a company called FEEST, a Victorian company specialising in selling companies trusts superannuation funds etc. I instructed them to form Dick Turpin P/L and the Highway Unit Trust. The shareholders and unit holders of the company and trust respectively were members of the consortium, with each member having 25% ownership …"
76 As a result, Mr Beck says that at all times it was intended that Dick Turpin Pty Ltd be the owner and operator of the business and that The Highwayman Unit Trust be the legal owner of the real estate with the beneficiaries of the trust being members of the consortium.
77 Mr Hornsby, Mr Beck's accountant, also signed a statement (dated 12 July 2006) addressing the advice and involvement he had in the matter (exhibit 2, page 96). Mr Hornsby effectively confirms what Mr Beck says, to the effect that he told Mr Beck that it was not permissible for a superannuation fund to be involved in running a business and that "the best plan was probably to form a company to own the business itself and for a unit trust to own the real estate". Mr Hornsby says that he told Mr Beck that the superannuation fund was allowed to own units in a unit trust.
78 Mr Hornsby also says that in "early 2005" Mr Beck told him that the offer to buy the Greenhills Inn had been accepted and that he needed to
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- set up the company and unit trust. Mr Hornsby says that by March 2005 the applicant company had been set up.
79 No evidence from either Mr Roche or Mr Smith was received by the Tribunal in any form such as a statutory declaration, witness statement or direct evidence to the Tribunal. Mr Murphy provided a short written statement (exhibit 5) confirming that at material times Mr Beck had effectively been acting for and on behalf of himself and Luke Murphy; and he was also briefly cross-examined by counsel for the Commissioner.
80 I find it difficult on all the evidence to conclude that, as at the date the contract was made – 29 January 2005 – all the purchasers actually entered into the contract with the requisite intention that the property concerned would be transferred to a corporation that they intended to be incorporated.
81 The facts plainly show that Mr Beck added the name of the applicant company as one of the nominees for the purposes of condition 9 of the contract, after the date the contract was executed.
82 The fact that, as at the date the contract was made – 29 January 2005 – Mr Beck, Mr Smith and Mr Beck on behalf of Mr Murphy's interests, had nominated nominees A-E in condition 9 of the contract – being various superannuation funds, a family trust, and individuals - strongly suggests to me, and I find, that the proposed purchasers had not together formed an intention as of 29 January 2005 that the property concerned would be transferred to a corporate trustee of a unit trust.
83 I find on the totality of the evidence that while Mr Beck may have been contemplating such an outcome, either the advice he had received and/or the plans he had begun to formulate had not sufficiently crystallised, so far as all of the purchasers were concerned, as at 29 January 2005, so as to constitute a clear intention that satisfies the requirements of the sub-section.
84 Additionally, I find that at the time the contract was entered into – 29 January 2005 - action was not "being taken" to incorporate the applicant company. At best, at that point, consistent with the finding I have just made, the idea that a corporate trustee of a unit trust might be the best vehicle for managing the property in the interests of all concerned had not crystallised into the form of any final decision or precise action. Clearly enough, after 29 January 2005 there was a point at which Mr Beck ordered the registration of a corporation which was to act as the trustee of a unit trust. At that point, at least, one might surmise that all of the
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- proposed purchasers agreed in that course of action, and then the idea crystallised into action.
85 In these circumstances, I am unable to conclude that at the time the contract was entered into on 29 January 2005, any relevant action was being taken to incorporate the corporation.
86 As a result, I need not deal with the further submission made on behalf of the Commissioner that s 74(3a) cannot be relied on in the case where the purchasers have the intention that the property concerned would be transferred to a corporation that will be a corporate trustee of a unit trust. I would say, however, that I am not at all convinced by the submission. The submission relies on a broad reading of the Stamp Act, and especially s 74 to suggest that when taken in context, subsection (3a) only has in contemplation a corporation that is intended to take the property in its own right. In this regard, counsel for the Commissioner makes reference to s 74(3f) and 74(3g) which make special reference to a unit trustee and a trustee of a discretionary trust to suggest that these provisions show that special provision has been made for a corporate trustee of unit trust and therefore it cannot be considered an entity that fall under subsection (3a).
87 As I say, I am far from convinced about the strength of this submission. I can see no reason why the ordinary words utilised in subsection (3a) – "a corporation that the person intended to be incorporated" - should not be read literally and include any corporation that the person intended to be incorporated, whether or not it is they further intended that the corporation should act as the trustee of a unit trust or any other trust.
88 However, as I say, it is not necessary for me finally to decide this issue because I am unable to find that the applicant satisfies the primary requirements of s 74(3a)(a) and (b).
Section 74(3c), (3d), (3e) and (3f) of the Stamp Act
89 Section 74(3c) of the Stamp Act provides that:
"(3c) Notwithstanding subsection (2), if -
(a) a contract or agreement referred to in subsection (1) is entered into; and
(b) duty has been paid on the contract or agreement under subsection (1),
- a conveyance or transfer of the property concerned by the vendor under the contract or agreement -
(c) to the extent of the whole or any part of the interest that the purchaser would have acquired in the property if the contract or agreement had been completed; and
(d) to a person who at the time the contract or agreement was entered into was related to that purchaser,
shall be charged with duty under item 6 of the Second Schedule."
90 To gain a concession that nominal duty should be paid on a subsequent conveyance or transfer of property under this subsection, two things need to be established:
• that the whole or any part of the interest that the purchaser would have acquired in the property if the contract or agreement had been completed; and
• the conveyance or transfer is to a person who at the time the contract or agreement was entered into, was related to the purchaser.
91 Section 74(3d), (3e) and (3f) explain the circumstances in which persons are to be considered "related" to a purchaser.
92 In this case, as we know, the person to whom the property concerned was in fact transferred was the applicant company, as a corporate trustee of a unit trust in which various persons or entities held the units or with the beneficiaries.
93 Section 74(3d) provides that:
"(3d) For the purposes of subsection (3c), the following persons are related to a purchaser who is an individual -
(a) the purchaser's spouse or de facto partner;
(b) a parent or remoter lineal ancestor of the purchaser or the purchaser's spouse or de facto partner;
- (c) a child or remoter lineal descendant of the purchaser or the purchaser's spouse or de facto partner;
(d) a brother or sister of the purchaser or the purchaser's spouse or de facto partner;
(e) a corporation if -
(i) the purchaser is the sole shareholder of the corporation; or
(ii) the purchaser is a shareholder of the corporation and is related (within the meaning of this section) to each of the other shareholders;
(f) a unit trustee in the unit trustee's capacity as trustee of a unit trust if -
(i) the purchaser is the sole unit holder in the unit trust; or
(ii) the purchaser is a unit holder in the unit trust and is related (within the meaning of this section) to each of the other unit holders."
95 Subsection (3d) then suggests that a number of persons are "related" to a purchaser who is an individual. They include under subsection (3d)(f) a unit trustee in the unit trustee's capacity as trustee of a unit trust if –
(i) the purchaser is the sole unit holder in the unit trust; or
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- (ii) the purchaser is a unit holder in the unit trust and is related (within the meaning of this section) to each of the other unit holders.
96 As a matter of fact, the entity to which the property concerned was transferred is a unit trustee. However, the question is whether the applicant company is a unit trustee and the unit trustee's capacity as trustee of a unit trust satisfies subparagraphs (i) and (ii).
97 Again, as a matter of fact, I find that subparagraphs (i) and (ii) are not satisfied. In this case "the purchaser" includes at least Messrs Roche, Beck and Smith (and, on Mr Beck's view, Mr Murphy). Those three (or four) persons are neither collectively, nor individually, the holders of the units in the unit trust. As noted earlier, the unit holder in respect of Mr Beck's interests is Larkspur Pty Ltd. The unit holder in respect of Mr Murphy's interests is Frontline Systems Australia Pty Limited. Only Mr Roche and Mr Smith individually hold units in The Highwayman Unit Trust.
98 Furthermore, I find that not only is "the purchaser" not "the unit holder in the unit trust" but also that the "purchaser" is not "related … to each of the other unit holders". This much is immediately accepted by Mr Beck. That is to say, each of the three (or four) individual purchasers is not a spouse or defacto partner, parent, child, brother or sister, etc of the other in order to establish the relatedness required by s 74(3d)(a)-(f).
99 In these circumstances, no nominal duty concession arises under s 74(3c).
100 Section 74(3e) is irrelevant in these circumstances to the application of s 74(3c) because it only applies where a person is related to a purchaser that is a corporation. The applicant does not argue that the relevant purchaser was a corporation. Plainly the purchaser was the three (or four) individuals mentioned.
101 The next question is whether s 74(3f) is relevant to the application of s 74(3c).
102 Section 74(3f) provides that:
"(3f) For the purposes of subsection (3c), a person is related to a purchaser that is a unit trustee if -
- (a) the person is the sole unit holder in the unit trust; or
(b) the person is a unit holder in the unit trust and, if the person were a purchaser, would be related (within the meaning of this section) to each of the other unit holders."
103 In this case the purchaser is not a unit trustee. Again, it must be noted that when these subsections referred to "a person" they are referring to the person to whom the property is actually transferred. The "purchaser" in each case is a reference to the purchaser under the initial contract or agreement that is referred to in s 74(1).
104 In circumstances such as these, where the "Buyer" in the initial contract was the three (or four) individuals, there was no unit trust involved and so s 74(3f) is not relevant to the resolution of these proceedings.
105 This point is also well made in Commissioner's Practice SD 1.2 at page 3 where it is stated:
"Section 74(3f) specifies the qualifying relationships for the purposes of s 74(3c) where the initial purchaser is the trustee of a unit trust."
Conclusion as to concessions available under s 74 of the Stamp Act
106 I find, therefore, that none of the provisions in s 74 that would result in nominal rather than ad valorem duty being paid under s 74 apply in the case of the transfer of land instrument in favour of the applicant.
Section 73AA(1)(f) of the Stamp Act
107 A further issue arises in this case, in the event that no concession is available under s 74, and that is whether only nominal duty should be paid on the transfer of land instrument in favour of the applicant by reason of s 73AA(1)(f) of the Stamp Act.
108 Section 73AA(1) provides that:
"(1) A conveyance or transfer -
(a) made for effectuating the appointment of a new trustee, or the retirement of a trustee, whether the trust is expressed or implied;
- (b) made to a beneficiary by a trustee or by another person in a fiduciary capacity, except a discretionary trustee or a unit trustee, under any trust whether express or implied;
(c) made to a beneficiary by a discretionary trustee under any trust whether express or implied otherwise than in the exercise of any power of appointment;
(d) made by a discretionary trustee, in the exercise of a power of appointment over the property conveyed or transferred, to a beneficiary who is an individual for his own use and benefit, if ¾
(i) at the time when the discretionary trustee acquired the property conveyed or transferred the beneficiary was named or described in the instrument which created the power of appointment as a beneficiary or as a member of a class of beneficiaries in whose favour the discretionary trustee was empowered by that instrument to appoint the property; and
(ii) evidence of the acquisition by the discretionary trustee, as such trustee, of the property conveyed or transferred is produced to the Commissioner with that conveyance or transfer;
(e) made to the holder of a unit in a unit trust scheme by a unit trustee if ¾
(i) evidence of the acquisition by the unit trustee, as trustee of that unit trust scheme, of the property conveyed or transferred is produced to the Commissioner with that conveyance or transfer; and
(ii) the Commissioner is satisfied that ¾
(I) the conveyance or transfer has the effect of reducing the rights of the
- holder of the unit in respect of the property held by the unit trustee to the extent of the property, or the value of the property, conveyed or transferred; and
- (II) the conveyance or transfer does not have the effect of varying, abrogating or altering the rights of the holder or holders of other units under the unit trust scheme in respect of the remaining property held by the unit trustee;
- or
(f) not otherwise coming within this section but which the Commissioner is satisfied -
(i) does not pass a beneficial interest in the property conveyed or transferred;
(ii) is not made in contemplation of the passing of a beneficial interest therein; and
(iii) is not part of, or made pursuant to, a scheme whereby any beneficial interest in the property conveyed or transferred, whether vested or contingent, has passed or will or may pass,
shall be charged with duty in accordance with item 6 of the Second Schedule."
109 I respectfully agree with what His Honour Judge Chaney said in Serana Pty Ltd and Commissioner of State Revenue [2006] WASAT 78 at [35], to the effect that the words in s 73AA(1)(f) - "not otherwise coming within this section" - must be construed as a reference to conveyances or transfers which do not meet all of the conditions specified by the earlier paragraphs. I also agree with what His Honour further observed at [35]:
"What the legislation contemplates is that, notwithstanding that a conveyance or transfer may not satisfy the descriptions in the
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- earlier paragraphs, par (f) enables the Commissioner to examine the substance of the transaction and determine whether he is satisfied that it meets the three identified requirements, in which case duty is assessed in accordance with item 6 of the Second Schedule."
110 In this case, the parties acknowledge that s 73AA(1)(a)-(e) do not cover the present case. Thus the question is whether s 73AA(1)(f) has any application.
111 The critical question leading to the application of this provision is whether a conveyance or transfer not otherwise coming within the section, is one which, as a matter of fact or law –
• does not pass a beneficial interest in the property conveyed or transferred;
• is not made in contemplation of the passing of the beneficial interest therein; and
• is not part of, or made pursuant to, a scheme whereby any beneficial interest in the property conveyed or transferred, whether vested or contingent, has passed or will or may pass.
112 Putting the matter more positively, the primary question is whether, in the instant case, the transfer of land instrument passes a beneficial interest in the property transferred to the applicant corporate trustee.
113 On the facts in Serana, Judge Chaney found that no beneficial interest passed in a deed of variation to an existing trust deed. He also found that the deed was not made in contemplation of the passing of the beneficial interest in the property. He finally found that the variation was not part of or made pursuant to a "scheme" whereby any beneficial interest in the property conveyed or transferred, whether vested or contingent, has passed or will or may pass.
114 In this case, put broadly, the applicant contends that the interest it received in the property concerned was a mere legal interest, given its status as a corporate trustee; and that the "beneficial interest" in the property concerned went to the unit holders in the unit trust and the relevant beneficiaries identified by the trust. Looked at in that way, the applicant says, the beneficial interest so identified is the same (or
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- substantially the same) as the beneficial interest held by the purchasers (or their nominees) under the initial contract.
115 Section 73AA(1)(a)-(f), in my view, is concerned with conveyances or transfers of interests that reflect an existing, underlying holding of beneficial interests in property. In each case, referred to in (a)-(e) the conveyance or transfer does not affect the continuation of the existing, underlying beneficial interests in the property. In each case, in effect, the legal interest is the subject of a conveyance or transfer without affecting the beneficial interest. I consider s 73AA(1)(f) should be interpreted in a similar way.
116 On the face of it, it is difficult to see how the transfer of land instrument in this case, whereby the applicant company became registered as the proprietor of the land, albeit as a corporate trustee in favour of beneficial interests ordered by unit trust, is of this nature. Rather, the purpose of the transfer to the applicant corporate trustee, was to ensure that all of the interests ordered by the unit trust would be brought into existence, for the first time.
117 The interests actually created by the initial contract executed on 29 January 2005, are not entirely clear. First, I think it is right to say, in the circumstances of this case, that the persons who gain a beneficial interest in the property concerned under the contract as executed on 29 January 2005, included the stated "Buyer" namely, Messrs Roche, Beck and Smith.
118 As a matter of fact, I find that Mr Murphy was not one of the specified purchasers. The alteration to the offer made by Mr Beck, by which he added the words "and or nominee" after his name in the description of the Buyer, simply enabled the interests of Mr Murphy (which Mr Beck had undertaken to represent) to be protected. Once that alteration was made and the contract was executed in those terms, Mr Beck was able to nominate the superannuation fund of Mr Murphy, the first of the nominees listed in condition 9 of the contract, to be a purchaser. Without that change to the offer, the clear right of Mr Beck to add the entity associated with Mr Murphy was not clear. He would have been dependent on Mr Smith –who was not closely acquainted with Mr Murphy – making the nomination.
119 However much the four men, and Mr Beck, intended that Mr Murphy should be part of the dealing, the simple fact remains that he was not one of the purchasers and his interests could only be
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- accommodated through Mr Beck nominating his interests pursuant to the terms of the agreement.
120 Where a contract contains a nominee clause but the ultimate transferee is not identified in the contract, authority suggests that the act of transferring a property into the ultimate transferee's name is a reflection only of the purchaser's right to nominate the person to whom the conveyance should be made: Tonelli v Komirra Pty Ltd [1972] VR 737; Harry v Fidelty Nominees Pty Ltd (1985) 41 SASR 458; J R Stevens Holdings Pty Ltd v Von Begensey (1992) 5 BPR 11, 543.
121 This reflects the logical proposition that a vendor would not expect to bind themselves to sue an unknown nominee in the place of a named purchaser, in the event that action for breach of contract is required: Harry v Fidelty Nominees Pty Ltd at 460. Of course, in such circumstances, a vendor might be more than happy to have the named purchaser and a range of nominees to sue. But therein lies the difficulty.
122 Where a contract contains a nominee clause and the nominee is identified in the contract, the authorities suggest that the named nominee may, in some cases, be considered the "purchaser" and not merely a person to whom the named purchaser may direct the vendor to transfer the property.
123 However, all of the cases dealing with nominee clauses turn on their particular facts and, in some circumstances, the statutory circumstances in which issues arise.
124 For example, in Re Ma Hong and Commissioner of State Revenue (2004) 58 ATR 138 at 145 and Re People's Investment Co Pty Ltd and Commissioner of State Revenue (2004) 58 ATR 127 at 136, the issue was not who was a party to a contract, but whether the nominee was "another person (the first purchaser)" being the term used in s 31 of the then applicable Duties Act 2000 (Vic).
125 In Parland Pty Ltd v Mariposa Pty Ltd (1995) 5 Tas R 121 at 130, the Court found that a new contract was substituted to provide for the named nominee and the former contract was amended such as to include a named nominee as purchaser, in circumstances where the nominated purchaser was known to the vendor.
126 On the other hand, in Gibbs v Williams (1992) 8 SR (WA) 244 at 246, Healy J held that the words "and/or nominee", where the contract terms identified the nominee as the plaintiff's mother were "not intended
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- to state who were the persons assuming the obligations of the purchasers, but were used merely to confer a power on the plaintiff to nominate his mother, to whom, along with himself or in her own name, as the case may be, the transfer was to be made".
127 In the present case, it is unclear whether all the nominees listed in condition 9 were intended to take an ultimate transfer. In the case of Mr Smith, for example, he seems to have kept his options open by nominating three nominees. The time for deciding which, if any, of those entities should be nominated, in the place of, or in addition to, the primary purchaser, had not arrived at the time the contract was made. Thus the notion that each of those nominees associated with a primary purchaser should be considered a purchaser under the contract is difficult to accept.
128 Thus it is not surprising to note what was said in Salter v Gilbertson (2003) 6 VR 466 at 473:
"it is a strong thing to regard the words 'or nominee' as authorising [a named purchaser], unilaterally and in his or her own absolute discretion, to nominate a purchaser to stand in the place of [a named practitioner], with all the attendant consequences for [the vendor]. For such a construction, 'compelling language' is required…"
129 In Harry v Fidelty Nominees Pty Ltd, at the time of execution of contract, the ultimate transferee was not named as a nominee in the contract. However, prior to settlement notification of the nominee to take the property had been given to the vendor. In that case, it was held the named purchaser was clearly entitled to nominate the purchaser to whom the transfer of the land should be made.
130 In this case, at material times, no such nomination of the entities listed in condition 9 as at the date of the execution of the contract on 29 January 2005, was ever made prior to settlement. Rather, after the contract was made, the name of the applicant company was unilaterally added by Mr Beck. As noted earlier, it seems that the vendor was happy to go along with the transfer on those terms. Plainly, all of the entities named in the original contract were also happy to proceed in that way.
131 In effect, I consider a fresh contract was made and acted upon by the execution of the transfer of land instrument in favour of Dick Turpin Pty Ltd. Thus, there was no "novation" or amendment to the initial contract in these circumstances. There is no evidence to show, for example, that the applicant corporate trustee agreed to perform the purchasers' obligations
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- under the initial contract, although it might be argued that the vendor, by implication, acted on the basis of the contract as altered by Mr Beck after 29 January 2005. That contract was stamped. The transfer of land instrument obviously followed that event. The applicant company became the transferee.
132 However, I prefer the view, on the basis of the evidence before the Tribunal, that in effect a fresh contract was made that is evidenced by the execution of the transfer of land instrument by the parties to that document and that the terms of that agreement effectively incorporated the terms of the initial contract executed on 29 January 2005. That does not mean that the earlier contract was the subject of novation or amendment, merely that it was adopted by those parties and provided the terms and conditions of the contract.
133 As a result, it seems to me that a transfer of the legal interest in the property concerned to Dick Turpin Pty Ltd as trustee of The Highwayman Unit Trust and the creation of beneficial interests in the various Unit holders, that include entities associated with Mr Beck and Mr Murphy, necessarily means that a beneficial interest did pass upon the transfer in the property so transferred. These beneficial interests were different in their nature and extent following the transfer to the corporate trustee from those that had earlier existed under the contract.
134 Whereas, as purchasers under the contract, Messrs Roche, Beck and Smith had a beneficial interest in the property concerned as purchasers under a contract, following the transfer of the estate and interest of the vendor in the property concerned to the corporate trustee, Mr Roche had an interest as the holder of a number of units in the unit trust. Mr Beck indirectly had an interest through Larkspur Pty Ltd in a number of units in the unit trust, Mr and Mrs Murphy had an indirect interest in the property concerned, through an entity called Frontline Systems, and Mr Smith had a direct interest as the holder of a number of units in the unit trust.
135 The capacity of a person who holds a unit in a unit trust to beneficially enjoy the property to which the unit trust is itself entitled, is, as a matter of law and equity, quite different from the type of interest that the individual purchasers had under the contract. As purchasers under the contract, for example, apart from anything else, the purchasers could insist on the performance of the contract as a person entitled to be registered as the registered proprietor of the land.
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136 Further, as direct or indirect holders of equitable interests through the unit trust, the rights and interests of these persons was fundamentally changed.
137 Moreover, there is no precise correlation between the range of entities of other persons who have interests through the interest created by the unit trust, and the purchasers under the initial contract. That observation is true whether or not Mr Murphy were to be considered one of the purchasers under the initial contract.
138 In this case, the Commissioner, through counsel, accepts that "there is no evidence suggesting that the conveyance or transfer was made in contemplation of a passing of a beneficial interest therein" for the purposes of s 73AA(1)(f)(ii) of the Stamp Act. I am not sure that I fully understand the acceptance of the Commissioner in that regard because, if one accepts that there is no complete correlation between the beneficial interests identifiable following the transfer to the applicant company and the beneficial interests that existed under the contract as initially executed on 29 January 2005, (as the Commissioner otherwise argues) then the transfer surely was made in contemplation of the passing of the beneficial interest.
139 Be that as it may, the Commissioner does contend that the transfer was part of a "scheme" whereby the beneficial interest in the property transferred, vested or contingent, has passed or will or may pass.
140 The Commissioner contends that in the present case, the scheme consists of:
• the Buyer clause in condition 9 of the Offer and Acceptance contract;
the terms of The Highwayman Unit Trust Deed which allows for the issue of additional units under cl 4.1, redemption of units under cl 7.1 and cl 7.2, transfer of units under cl 8, the existence of a Unit Holders' Class of Discretionary Beneficiaries under cl 12 and the variation of the Trust under clauses 16 and 17.
141 The Commissioner contends that in this case the scheme contended for gives rise to a structure or state of affairs which may enable the passing of beneficial interest in the future, since the unit trust in question does not restrict the unit holding to the transferor and the unit holding can be altered. Consequently, the Commissioner contends that it can be seen
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- that the transfer of the property concerned is part of, or made pursuant to, a scheme whereby a beneficial interest in the property transferred may pass in the future.
142 A contention along these lines was also put to Judge Chaney in Serana. In the event, at [53], on the facts of the case before him, where there was a trust in place before and after the transfer, Judge Chaney concluded that the same class of beneficiaries enjoys effectively the same rights in relation to the trust property before and after the transfer. His Honour added at [54], that even if it is accepted that one trustee may exercise its discretions differently from the other, there is no reason to suspect that the deed has been executed as part of any scheme to achieve that end.
143 In Serana at [49], Judge Chaney accepted the Commissioner's contention that the expression "scheme" should bear its ordinary meaning, namely a "plan of action devised in order to obtain some end; a purpose together with a system of measures contrived for its accomplishment; a project, enterprise often with unfavourable notion, a self seeking or underhand project, a plot (Oxford English Dictionary)".
144 Thus Judge Chaney at [50] thought that a word "scheme" in s 73AA(1)(f)(iii) must refer to something more than the single transaction effected by the document which is being assessed for duty. The words "is not part of, or made pursuant to" suggest that the document being assessed is one element of a broader "system of measures" designed to pass, or lead to the passing of, a beneficial interest in the property conveyed. Thus he considered that if the document being assessed is the only transaction or step leading to the passing of a beneficial interest in property, then it will not meet the requirements of par (i) or (ii) of s 73AA(1)(f).
145 While the Commissioner presses an analysis of the notion of a "scheme" that seems to differ from that found by Judge Chaney in Serana there is no need to deal with that issue here, s 73AA(1)(f)(ii) and (iii) do not come into play at all in a case like the present. Where the applicant corporation was not in any agency relationship with the purchasers named in the initial contract, and where none of the concession provisions of s 74 that might be considered relevant has any application to the circumstances of the case, then the transfer of the interest of the vendor in the property concerned to the applicant corporation plainly involved the transfer of a beneficial interest to the transferee. It is not to the point that the applicant corporation as transferred is merely a trustee and only acquires a legal estate in the property so transferred. The fact is that the beneficial interest
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- was also transferred and is now held and enjoyed pursuant to the terms of The Highwayman Unit Trust.
146 Once these circumstances are appreciated, there is no need to address the questions whether s 73AA(1)(f)(ii) and (iii) are or are not satisfied, because they are simply not relevant.
Conclusion on the s 73AA(1)(f )issue
147 It follows that the applicant is not entitled to a concession under s 73AA(1)(f) of the Stamp Act so that only nominal duty is payable instead of ad valorem duty.
Conclusion and order
148 For the reasons set out above, the Tribunal is satisfied that the Commissioner of State Revenue made the correct and preferable decision when he decided that ad valorem duty is payable on the transfer of land instrument in this case and dismissed the objection to his ruling.
149 The Tribunal makes the following orders:
1. The decision of the Commissioner of State Revenue to impose ad valorem duty on the transfer of land instrument executed by the applicant is affirmed.
2. The application of the applicant for review of the Commissioner's decision to refuse its objection to the decision to impose ad valorem duty is dismissed.
I certify that this and the preceding [149] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
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JUSTICE M L BARKER, PRESIDENT
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