JWW Nominees Pty Ltd v The Treasurer - [2004] SASC 163

SUPREME COURT OF SOUTH AUSTRALIA
(Full Court)
JWW NOMINEES PTY LTD AND ORS v THE TREASURER AND ANOR
Judgment of The Full Court
(The Honourable Chief Justice Doyle, The Honourable Justice Prior and The Honourable Justice Perry)
8 June 2004
TAXES AND DUTIES - STAMP DUTIES - WHAT TRANSACTIONS OR INSTRUMENTS ARE LIABLE - CONVEYANCE OR TRANSFER OF SALE
The appellants were the vendors and purchasers of units in a unit trust constituted for the benefit of the members of the family of the founder - before the sale, the trustee, a limited company, entered into a transaction which left it owing a debt of approximately $15 million, being the value of the assets held by the trust, to another family company - the appellants claimed that as a consequence the value of the units the subject of contract of sale was reduced to a nominal amount of $15 - the Commissioner of Stamps declined to assess duty on the basis of a consideration of $15 but claimed to be entitled to disregard the transaction leading to the creation of the debt owed by the trustee, and in consequence assess duty on the full value of the assets, approximately $15 million - the Commissioner’s assessment was upheld on appeal to a single judge of this Court - on further appeal to the Full Court, the court held that the transaction resulting in the creation of the debt owed by the trustee was made for a purpose other than reducing the value of the trust property and was not granted or made in favour of the transferee, within the meaning of s 60A of the Stamp Duties Act 1923 - the Court held further that the transaction was not effected by an instrument executed in order to avoid or evade the payment of duty within the meaning of s 70 of the Act - duty should be assessed as for a consideration of $15 - appeal allowed.
Stamp Duties Act 1923 s 60A(1), s 60A(4a), s 70(1) and s 71, referred to.
Commissioner of Stamp Duties (Qld) v Hopkins (1945-46) 71 CLR 351; Chief Commissioner of Stamp Duties v Buckle and Ors (1998) 192 CLR 226, considered.

JWW NOMINEES PTY LTD AND ORS v THE TREASURER AND ANOR
[2004] SASC 163
Full Court: Doyle CJ, Prior and Perry JJ

DOYLE CJ. I agree with the orders proposed by Perry J, and with his reasons for making those orders. There is nothing that I wish to add to those reasons. Accordingly, I would allow the appeal.
PRIOR J. I agree with the reasons given by Perry J and with the orders which he proposes.
PERRY J. This is an appeal under the Stamp Duties Act 1923 (“the Act”) concerning stamp duty imposed upon the transfer of certain interests in a unit trust known as Victoria Square Shopping Centre Unit Trust (“the unit trust”).
Victoria Square Shopping Centre Pty Ltd (“the trustee”) is the trustee of the unit trust which was established by a deed of settlement dated 24 May 1979.
As at June 1996 the unit holders in the unit trust were three companies, which were in turn the trustees of three discretionary trusts established to benefit members of the family of Jack William Henry Weinert (“Mr Weinert”) and Shirley Margurite Weinert (“Mrs Weinert”). They had two children, a son and a daughter.
The three companies which were the trustees of the discretionary trusts were JWW Nominees Pty Ltd (“JWW Nominees”), PAS Nominees Pty Ltd (“PAS Nominees”) and Weinert Nominees Pty Ltd (“Weinert Nominees”). The companies were all controlled by Mr and Mrs Weinert. Mr Weinert was the appointor of each discretionary trust.
The total number of units in the unit trust was fifteen class “I” units. Prior to certain transactions entered into in 1997, each of the three companies held five units.
The trustee held the leases for and operated the Victoria Square Shopping Centre, one of three shopping centres in South Australia the operation of which was controlled by Mr and Mrs Weinert.
By a written agreement dated 6 June 1997 (“the sale and purchase agreement”), Mr and Mrs Weinert, JWW Nominees, PAS Nominees and Weinert Nominees agreed to sell their respective shares in the trust and their respective units in the unit trust to Esplanade Markets Ltd “and/or nominee”.
Pursuant to the sale and purchase agreement instruments transferring the units in the unit trust to third parties nominated by Esplanade Markets Ltd were executed by the vendors on 30 June 1997.
The instruments of transfer of the units specified the consideration for the sale of each unit as $1, making a total of $15.
The Commissioner of State Taxation declined to stamp the instruments of transfer of the units for the amount of the stated consideration. Instead, the Commissioner determined the market value of the units transferred as amounting to a total of $16,025,288, and assessed the stamp duty on that amount. In the result, the Commissioner assessed stamp duty at $702,588.
Pursuant to s 82 of the Taxation Administration Act 1996, by a Notice of Objection dated 13 March 1998, the parties to the sale and purchase agreement (insofar as it effected a sale of the units as opposed to the shares) objected to the assessment.
They claimed that the assessment of stamp duty should have been on the basis of the stated consideration of $15.
By letter dated 21 April 2002, the Treasurer confirmed the assessment and disallowed the objection.
By a Notice of Appeal filed in this Court on 20 June 2002, the appellants appealed against the Treasurer’s disallowance of the objection.
The appeal was listed before a single judge of the court (“the appeal judge”). By order dated 4 July 2003, he dismissed the appeal, save for an agreed reduction of the amount of the assessment of stamp duty to $611,490.
By a Notice of Appeal dated 18 July 2003, the appellants appealed to the Full Court.
In order to understand the issues raised on the appeal, it is necessary to give a more detailed account of the factual background surrounding the relevant transactions.
Factual Background
The relevant facts may be drawn from various documents which were tendered before the appeal judge, and oral evidence taken by him.
The documents included a statement of agreed facts; an agreed book of documents comprising a number of annexures to the statement of agreed facts; a statutory declaration which had been sworn by Mr Weinert and which had been provided to the Commissioner of Stamps in answer to a request by him for information prior to the making of the assessment the subject of the appeal; and an affidavit of Ronald George Brumby (“Mr Brumby”) a director and the secretary of the group of Weinert controlled companies involved in the transactions in question.
Evidence was given by Mr Brumby when he was presented for cross-examination by counsel for the respondents. No other oral evidence was given at the hearing.
In his statutory declaration, Mr Weinert explained that by June 1997 the future state of his health had become uncertain due to bouts of cancer. He did not think that his son and daughter were interested in continuing to own and manage the shopping centres, more particularly the Victoria Square Shopping Centre.
For some time before 1997 he had taken advice from his legal adviser John Tucker as to the ongoing ownership and control of the Victoria Square Shopping Centre, in the event that he could no longer manage the business.
At that time, there was what Mr Brumby described in evidence as “great family disruption … that was giving him concern”. Of particular concern was “that on his death either one of his children ... [might] ... bring pressure to bear on his wife to deal with the trusts in a way he didn’t intend”.
A further factor of concern was that the ground lease for the Victoria Square leaseholds was due to terminate in 2018. Mr Weinert’s perception was that as that date approached, there would be a gradual diminution in value of the lease of the Victoria Square Shopping Centre.
In view of these concerns, Mr Weinert decided to offer his various shopping centre interests for sale on the open market, including the lease of the Victoria Square Shopping Centre. The proceeds of sale would effectively realise the capital value of the shopping centres, which would enable him to distribute the capital amongst the beneficiaries. This would avoid the uncertainties attendant upon the manner in which distributions from the trust might be effected when he no longer had control of them.
In late 1996 he instructed agents, Richard Ellis and Jones Lang Wootton to sell the shopping centres.
He put a price on the Victoria Square Shopping Centre which he considered equal to its value, namely $15 million.
There were no expressions of interest to buy for that price, except that in early 1997, there was an approach by a Melbourne solicitor, Mr Garrick Gray, acting on behalf of a syndicate of Melbourne based investors. Mr Gray made enquiries over a period of some three months between about February and April 1997.
At that stage his enquiries came to nothing, as Mr Gray wanted a substantial amount of the purchase price to remain by way of vendor finance, a requirement which Mr Weinert would not agree to.
In view of the lack of a satisfactory response to his efforts to sell the shopping centres, more particularly Victoria Square Shopping Centre, in May 1997 Mr Weinert instructed Mr Tucker to proceed with a restructuring of the unit trust along lines which had earlier been discussed between them. This involved distributing at that stage, without waiting for a buyer, the surplus capital in the trust to the family members.
As the first step in that restructuring, a bill facility was created which would enable bills of exchange to be drawn by the trustee on another company controlled by Mr Weinert, Waterloo Well Pty Ltd (“Waterloo Well”) to a maximum of $20 million. The facility was established by a written agreement dated 13 May 1997 entered into between Waterloo Well, the trustee and Mr Weinert.
As part of the agreement, Mr Weinert agreed to underwrite the capacity of Waterloo Well to honour any of the negotiable instruments which might be issued by the trustee pursuant to the bill facility agreement. Pursuant to the agreement, the trustee was obliged to repay the total amount of bills accepted by Waterloo Well on demand by Waterloo Well.
The intention was that by utilising the bill facility, the trustee could furnish to the trustees of the family trusts bills of exchange representing their entitlement to the excess capital in the trust. The trustees were to negotiate the bills to another Weinert controlled company, Ladbroke Pty Ltd (“Ladbroke”), which was in turn entitled to call upon Waterloo Well for payment.
In this way, the total net value of the underlying assets of the unit trust, mainly comprising a series of leasehold interests, would be distributed to the beneficiaries.
In his statutory declaration Mr Weinert explained the taking of those steps in the following way:
“Given the estate planning issues with which I was concerned, and the apparent lack of interest from institutions in purchasing victoria square shopping centre for cash at the price I required I made the decision to act on the advice I had received from Mr Tucker. This was to crystallise debts within the Victoria Square Shopping Centre Unit Trust which could then be directed through the discretionary trusts holding the units in that trust to the estate planning objectives to which I wished to give effect. On that being accomplished I could plan to pass the control of management of the victoria square shopping centre, if it were not sold during my lifetime, to my son knowing that the interests I wished to confer on others had been secured.”
Having regard to the manner in which it was intended that the transaction was to be executed, the trustee would be left owing to Waterloo Well the amount drawn down from Waterloo Well by means of the bills of exchange. Effectively, that amount would equal the net value of the assets of the trust.
In his statutory declaration, Mr Weinert explained the working out of the transaction in this way:
“This process was to result in identified sums being payable to the discretionary trusts in accordance with my estate planning requirements and also fixed the value for the property held in the Victoria Square Shopping Centre Unit Trust. It was to create a liability for the amount of the capital revaluation of that property as between Victoria Square Shopping Centre Unit Trust and Waterloo Well which amount could be collected in the event of the issue or sale of units in the Victoria Square Shopping Centre Unit Trust to a third party.”
Mr Weinert was concerned to see to it that the transaction was implemented by 30 June 1997, which he regarded as a convenient date upon which to effect the distribution to the beneficiaries of the surplus capital in the trust.
In his statutory declaration, Mr Weinert stated that while the documents were being prepared by Mr Tucker to implement the transaction, the agents continued to invite offers for the purchase of the Victoria Square Shopping Centre. At about this time, Mr Weinert received an offer from Garrick Gray to purchase the units, provided that the procedures associated with the distribution of capital were carried out.
The statements in Mr Weinert’s statutory declaration explaining the matters to which I have so far referred are consistent with the account given in Mr Brumby’s affidavit and oral evidence.
Mr Brumby’s evidence was that after he had been told by Mr Weinert of Mr Gray’s offer, thereafter he and Mr Tucker assisted Mr Weinert to negotiate with Mr Gray. He said that Mr Gray expressed interest in utilising the existing unit trust structure to furnish a means by which a group of investors might, through a syndicate, purchase the shopping centre.
Negotiations to that end culminated in the execution of the sale and purchase agreement.
As I have already explained, the purchase price was expressed to be $15.00, that is $1.00 per unit.
Paragraph 12 of the sale and purchase agreement contains a number of stipulations under the heading “Purchaser Acknowledgments”.
Subparagraph 12.15 is of particular significance. It provides:
“12.15The Company [the trustee] is liable at the date hereof and will remain liable at the Settlement Date to pay on demand the liability set out in the Balance Sheet other than the Mortgage Debt and that in order for the company to obtain the muniments of title for the Land and for the Investments the Company will need to repay or discharge the liabilities (including the Mortgage Debt).
The balance sheet comprises the second schedule to the agreement. It shows as a “Current Liability” a debt due to Ladbroke of $14.2 million, and a balance of assets over liabilities of $15.
No explanation was given in evidence as to why Ladbroke, rather than Waterloo Well, is shown as the creditor to whom the liability representing the net asset value of the trust was owed.
In a further balance sheet, annexed to a further agreement entered into in October 1997, being an agreement which varied the agreement for sale and purchase, the creditor for that amount, together with other amounts not relevant for present purposes, is shown as Waterloo Well.
No point was taken by the parties on the hearing of the appeal as to this discrepancy, and nothing turns on it. Neither was any point taken over the expression in paragraph 12.15 “The Company is liable at the date hereof ...”. The liability did not arise until 30 June 1997.
Settlement of the contract for sale and purchase was to be on the Settlement Date, defined in the agreement to be 31 July 1997, or such other date as might be agreed.
It was not intended that settlement of the sale take place on 30 June 1997, which was the date at which the balance sheet was struck.
However, it is clear that what the parties intended was that the balance sheet expressed to be as at 30 June 1997 would remain as a static indication of the financial position of the trustee as at the date of settlement.
More particularly, this meant that the purchaser was contracting to purchase on the basis that the purchase price of $15 would represent the balance indicated on the balance sheet as at the date of settlement, and that effectively the purchaser would take over the liability to Waterloo Well, which in turn was an amount approximating the net value of the underlying assets held by the trust.
The transaction insofar as it concerned the Weinert interests was carried out on 30 June 1997.
As recorded in the statement of agreed facts, at a meeting of the directors of the trustee held on that day, a resolution was passed that the trustee:
·Revalue the assets held in the trust at an amount of $14 million.
·After allowing for the cost of certain capital improvements, to “distribute the amount of the resulting capital revaluation reserve and all other amounts standing to the credit of the trust fund in the books of account of the trust in excess of the settled sum to the holders of ordinary units pro rata to the unit holdings and for that purpose and to repay the balances outstanding on their loan and other accounts, the Company [the trustee] issue bills of exchange …”.
The proposed distribution was stated to be subject to the unit holders agreeing to accept bills of exchange in full satisfaction of their entitlements to the distributions.
Meetings of the directors of each of the companies which held the units were convened on the same day, that is, 30 June 1997. At the meetings it was recorded that each unit holder received a bill of exchange in full satisfaction and discharge of their rights and entitlements to distributions from the trust. The effect of the resolutions recording those matters meant that the distribution intended by Mr Weinert proceeded whether or not the sale went ahead.
The total amount of the three bills of exchange was $15,888,262.12.
The minutes of each of the companies holding the units also record resolutions (in the same terms in each case), that the company invest the proceeds of the bill of exchange on deposit, repayable on 24 hours call, with Ladbroke. The investment was to be made by negotiating the bill of exchange in each case to Ladbroke.
On 30 June 1997, the companies also executed instruments of transfer of the units. By then, Esplanade Markets Ltd had nominated the entities which were to take the transfers of the units. The transfers were as follows:
·5 units held by JWW Nominees Pty Ltd to JA Pickworth Investments Pty Ltd;
·2.5 units held by PAS Nominees Pty Ltd to JA Pickworth Investments Pty Ltd
·2.5 units held by PAS Nominees Pty Ltd to Fourjaysa Pty Ltd;
·1.25 units held by Weinert Nominees to Fourjaysa Pty Ltd; and
·3.75 units held by Weinert Nominees to Australian Retail Property Investments Pty Ltd (‘ARP Investments’)”
Each instrument of transfer recorded a consideration for the sale of the units at the rate of $1 per unit, making a total of $15 which reflects the balance of assets and liabilities of the trust as expressed in the balance sheet as at 30 June 1997.
Mr and Mrs Weinert, the trustee, Esplanade Markets and the entities which were the parties to the instruments of transfer of the units were all parties to an agreement in writing described as the Variation Agreement dated 10 October 1997.
The Variation Agreement altered and clarified a number of the terms of the sale. Some of the matters dealt with were:
The settlement date was fixed as 10 October 1997.
The nomination of the various purchasing entities was acknowledged.
An amended balance sheet, to which I have already referred, was substituted.
The manner in which the deposit paid under the contract of sale and purchase was to be applied was defined.

Various adjustments to be made between the parties were recorded.
The parties to the Variation Agreement acknowledged that the trustee had been served with a demand by Waterloo Well for repayment of $19,888,262. This substantially exceeded the amount which had been distributed to the beneficiaries by way of the balance of assets held in the trust. The explanation is that other moneys had been advanced by Waterloo Well for other considerations that are not relevant to the argument on appeal.
I do not pause to refer in any further detail to the Variation Agreement, as it was accorded only passing reference during the course of addresses on the hearing of the appeal, and it was not relied upon by any of the parties as supporting any particular line of argument.
To finance the repayment due to Waterloo Well, the purchasers under the agreement for sale and purchase took out a loan from State Bank of New South Wales, trading as Colonial State Bank. The conditions upon which the bank was prepared to lend to the purchasers included a provision:
“10.The bank’s solicitor is to be satisfied with the structure of the sale of the units in the Victoria Square Shopping Centre Unit Trust and that no stamp duty is payable by the purchaser.”
The agreement for sale and purchase provided that the purchasers were to pay “all stamp duty and any government fees” payable with respect to the transaction.
In his affidavit, Mr Brumby explains that after the Commissioner of Stamps had issued the assessment in question, the purchasers approached Mr Weinert for assistance in funding payment of the assessed duty. The purchasers indicated that they did not have the necessary funds. Eventually, Mr Weinert agreed to pay $300,000 towards the amount assessed.
The Legal Issues
A. The s 60A Issue
Relevantly, s 60A of the Act provides as follows:
“60A(1) Subject to subsection (2), a reference in this Act (other than in Part 4) to the value of property conveyed or transferred is a reference to the market value of the property-
(a)in the case of a conveyance on sale-as at the date of the sale; or
(b)in any other case-as at the date of the conveyance,
assuming, in either case, that the property had, at that date, been free from any encumbrances.
(2)In the case of a conveyance on sale, the Commissioner may treat the consideration for the sale as being the value of the property conveyed or transferred unless it appears to the Commissioner that the consideration may be less than the value of the property as referred to in subsection (1).
(3)Where no evidence of the value of property conveyed or transferred, or comprising or forming part of the consideration for a conveyance, is furnished to the Commissioner, or the evidence so furnished is, in his opinion, unsatisfactory, the Commissioner may cause a valuation of the property to be made by some person appointed by him and may assess the duty payable by reference to that valuation.
(4)The Commissioner may, having regard to the merits of the case, charge the whole or a part of the expenses of, or incidental to, the making of a valuation pursuant to subsection (3) to the person liable to pay the duty and may recover the amount so charged from him as a debt due to the Crown.
(4a)Where an interest, agreement or arrangement (granted or made on or after 7 January 1997) in respect of property has the effect of reducing the value of the property, the Commissioner may, for the purposes of assessing the duty payable on a conveyance of the property, disregard the existence of the interest, agreement or arrangement unless a person liable to pay the duty satisfies the Commissioner that the interest, agreement or arrangement-
(a)was granted or made for a purpose other than reducing the value of the property; and
(b)was not granted or made in favour of the transferee or a person related to the transferee.
(4b)……….”
The issue which arises under this section is whether there was an “arrangement … in respect of property ….[which had]… the effect of reducing the value of the property” within the meaning of s 60A(4a), the property being the property represented by the units.
If the answer to that question is yes, the further question arises whether the Commissioner should have been satisfied that the arrangement:
“(a)was granted or made for a purpose other than reducing the value of the property; and
(b)was not granted or made in favour of the transferee or person related to the transferee.”
B. The Characterisation Issue
Section 4 of the Act relevantly provides:
“(1)Subject to the exemptions contained in Schedule 2 and the other provisions of this Act, the stamp duties specified in that Schedule are charged in respect of the instruments specified in that Schedule.
(2).....”
For the purposes of levying stamp duty, the Act distinguishes, inter alia, between a conveyance or transfer on sale of property on the one hand, and a conveyance operating as a voluntary disposition inter vivos on the other hand.
Section 60 of the Act defines a conveyance on sale in terms which would include the instrument of transfer of the units in question.
Section 71 of the Act deals with voluntary dispositions inter vivos. Relevantly, the section provides:
“71(1)    The value for the purposes of this Act of the property conveyed by any conveyance operating as a voluntary disposition inter vivos shall be declared in the conveyance.
************
(3)    For the purposes of this Act, the following instruments shall, subject to this section, be deemed to be conveyances operating as voluntary dispositions inter vivos:
(a)an instrument to which subsection (4) applies effecting or acknowledging, evidencing or recording, any of the following transactions:
(i)a transfer of property to a person who takes as trustee; or
(ii)a declaration of trust; or
(iii)the creation of an interest in property subject to a trust; or
(iv)a transfer of an interest in property subject to a trust; or
(v)the surrender or renunciation of an interest in property subject to a trust; or
(vi)the redemption, cancellation or extinguishment of an interest in property subject to a trust;
whether or not any consideration is given for the transaction; or
(b)an instrument to which paragraph (a) does not apply, being a conveyance that is not chargeable with duty as a conveyance on sale.
(4)    This subsection applies to any instrument that relates to land, a financial product or a unit under a unit trust scheme, or an interest in land, a financial product or a unit under a unit trust scheme.
(4a) ………”
The stamp duty imposed on various instruments and exemptions to the imposition of duty are set out in Schedule 2 to the Act. The amount of duty imposed upon a conveyance or transfer on sale of property is expressed to be payable with respect to a
“... conveyance or transfer on sale of any property (not otherwise charged), including contract or agreement for sale”. (Schedule 2, clause 3(1).) (emphasis added).
The duty payable on conveyances operating as voluntary dispositions inter vivos is separately provided for in clause 4 of Schedule 2.
The issue which arises with respect to the characterisation for stamp duty purposes of the instrument of transfer of the units in question is whether the instrument is to be characterised as a conveyance on sale or a conveyance operating as a voluntary disposition inter vivos.
The position taken by the appellants, by reference to s 71(3)(iv) and (4), is that it was a voluntary disposition inter vivos, and for the purposes of the imposition of duty was not to be regarded as a conveyance on sale.
The position taken by the respondents is that the instruments answered the description in both categories, and that it was open for the Commissioner to impose duty under either category.
C. The Section 70 Issue
Section 70 of the Act is in the following terms:
“70.(1) Subject to subsection (2), an instrument executed in order, either directly or indirectly, to avoid or evade the payment of the duty payable upon a conveyance on sale is void.
(2)Where a third party relying in good faith on an instrument that is void by virtue of subsection (1) purports to acquire an interest in property subject to the instrument, the instrument shall, for the purposes of that transaction, be treated as valid, provided that it is duly stamped as a conveyance on sale.”
If the proper characterisation of the instruments of transfer of the units is that they were conveyances on sale, the issue arises whether they, or other instruments executed as part of the overall transaction, were executed “… in order, either directly or indirectly, to avoid or evade the payment of the duty payable” upon the conveyance within the meaning of s 70(1). If the answer to that question is yes, the instruments were void, subject to the saving provisions of subsection (2).
A question arises also as to just what documents involved in the transaction, apart from the instruments of transfer of the units, should properly be regarded as instruments for the purposes of s 70(1).
The Judgment under Appeal
After observing that stamp duty is levied on instruments, the appeal judge stated that he was entitled to have regard to extrinsic evidence in order to determine the real nature of the transaction to which the particular instrument or instruments relate.[1]
[1] Citing Commissioner of Stamp Duties (Qld) v Hopkins (1945-46) 71 CLR 351 at 360-361.
The appeal judge then dealt with the background circumstances to the transaction. In doing so he did not refer specifically to any of the evidence which was tendered before him, neither did he make any finding as to the credit of Mr Brumby. He did not refer to or deal with the detailed explanation which had been given in Mr Weinert’s statutory declaration and in Mr Brumby’s affidavit and oral evidence of the underlying purpose for which the restructuring of the trust was discussed and proceeded with as between Mr Tucker, Mr Weinert and Mr Brumby.
After referring to the discussions earlier in 1997 between the Weinert interests and Mr Gray, the appeal judge found:
“At an unspecified date, probably in or about May 1997, a solicitor for the Weinert interests discussed the possible restructure of the trust with Mr Gray.”
I do not read that passage as conveying the inference that Mr Gray or his clients made any contribution as to the nature or terms of the restructure, or that the negotiations with Mr Gray had any effect on the nature of the restructuring or the manner in which it was carried out.
However, if he did mean to suggest that to be the case, with respect to him, such a finding would not be in accordance with the evidence. In my view, it is clear on the evidence that the proposed restructure and the distribution of the excess capital in the trust to the beneficiaries was planned and executed independently of the sale of the units.
Having regard to the evidence, there is no reason to suppose that the restructuring and distribution of excess capital would not have gone ahead, even if a sale had not been effected to Mr Gray’s clients. As will be seen, in my view, that is an important consideration in determining the appeal.
The appeal judge went on to hold:
“23.Had the restructuring not occurred the units at the time of transfer would have reflected the underlying value of the assets of the trust.”
He went on to dismiss the submission made by counsel for the appellants that there was no agreement or arrangement within the meaning of s 60A(4a) of the Act in respect of the units. Rather, he held that the “… agreement or arrangements in respect of the units, however characterised, had the effect of reducing the value of the units”. He held this to be the direct effect of the agreement or arrangements.
Insofar as the appellants had submitted that the trustee’s decision to make a capital distribution was not an “agreement or an arrangement”, the appeal judge held:
“25.…. the syndicate would not proceed to continue to negotiate a purchase unless the proposed restructure formed part of the agreement, and further, unless the restructure was implemented prior to settlement. The acts of the trustee were more than mere acts under and consistent with the terms of the unit trust deed. The acts of the trustee were undertaken so that agreement could be reached and transfer of control of the underlying assets could take place….” (emphasis added)
The words which I have italicised are a critical finding.
In my view, that finding does not stand analysis against the evidence as to the trustee’s purpose in effecting the restructuring.
He went on to reject what he described as the appellant’s “submission as to purpose”. Rather, he held that:
“The agreement or arrangements entered into were designed to facilitate the disposal of the underlying assets to the syndicate.”
He further held that the appellants failed to satisfy either limb of the proviso to s 60A(4a).
The appeal judge concluded that the Commissioner was entitled to disregard “a number of agreement and arrangements”. The appeal judge did not describe or identify the agreement and arrangements specifically. He simply stated:
“31.They were the agreements and arrangements that effected the restructure.”
The appeal judge went on to address the case under s 70 of the Act.
In doing so, he did not consider the question whether the transfer of the units operated as a “conveyance on sale” within the meaning of s 70(1). I do not make that observation critically, as he found that in view of the conclusions which he reached as to s 60A(4a), it was unnecessary to reach a conclusion on the application of s 70.
As to s 70, he did not express a concluded view. He stated:
“It would appear that even if the Commissioner could not rely upon the provisions of s 60A(4a) it may have been possible to have treated the instruments giving effect to the restructure and capital distribution as being void pursuant to the terms of s 70.”
Findings on Appeal
Section 60A(4a) in its application to the circumstances of this case, requires identification of an “arrangement”. Mr Kourakis QC of counsel for the respondents contended:[2]
[2] Respondents’ outline of submissions, page 3, par 5.
“The arrangement between the appellants which had the effect of reducing the value of the units consisted of the following elements:
(a)The agreement between Garrick Gray and Jack Weinert ‘towards mid-1997’ that the sale and purchase would proceed on the basis that the distribution would be effected and the debt created; …….
(b)The preparation of the bill facility agreement, 13 May 1997; ……
(c)The incorporation into the agreement for sale and purchase of terms that ensured that the purchaser was buying the units subject to the debt; …….
(d)The resolution of the trustee to effect the distribution; ……
(e)The issuing of the bills of exchange; ………
(f)The acceptance of the bills of exchange by the unit holders; …….
(g)The demand by Waterloo Well for payment; ………
(h)The endorsement of consideration for the units on the transfer forms of $1 per unit; ………..
(i)The application for opinion…..”
He further submitted that the “property” the value of which was diminished was the beneficial interest of the unit holders in the underlying assets of the unit trust represented by the units, which he described as choses in action.
I would accept that for the purposes of s 60A(4a) an “arrangement” may comprise a number of linked transactions or elements.
If it is correct to characterise the elements identified by Mr Kourakis QC for the purposes of this case in the terms which he suggests, that is, as an “arrangement”, I would agree that it had the effect of reducing the value of the units.
The units identify the proportion of the value of the underlying assets of the trust which represents the beneficial interest of the unit holder. If the value of the underlying assets is reduced, the value of the unit is correspondingly reduced.
I would accept that in the circumstances of this case there was a reduction in value. This arose by reason of the fact that the trustee incurred a substantial debt and was entitled to be indemnified with respect to the debt from the trust assets.[3]
[3] Chief Commissioner of Stamp Duties v Buckle and Ors (1998) 192 CLR 226 at 245-246.
If that analysis is correct, for the appellants to succeed with respect to their case as to the application of s 60A, the onus fell on the appellants to satisfy both limbs of the proviso to subsection (4a).
I have already referred to the evidence as to Mr Weinert’s motivation in conceiving and proceeding with the restructuring and with the distribution to the beneficiaries of the surplus capital in the trust.
As I have pointed out, the appeal judge did not deal with that evidence. Rather, he appeared to have concluded that because the syndicate represented by Mr Gray was only prepared to continue negotiations and enter into the agreement for sale and purchase on condition that the proposed restructure proceeded, this gave rise to the inference that there was an “arrangement” for the purpose of reducing the value of the property.
In my opinion, that was not a conclusion which was justified on the evidence.
While it is true that the vendors of the units accepted as a condition of sale that the distribution of capital would occur before settlement, that circumstance does not preclude a finding that whatever “arrangement” was in existence was for a purpose other than reducing the value of the property.
In circumstances where, as I find on the evidence to be the case, Mr Weinert would have proceeded with the restructuring and distribution of capital irrespective of whether or not an agreement for sale was made, and where the purpose of the distribution of capital was for what might be described as estate family planning purposes, the transaction pursuant to which the restructuring took place, however broadly the transaction was to be construed, was for a purpose “other than reducing the value of the property”.
To the extent that it is necessary to make factual findings as to the nature and purpose of the transactions in question, it is necessary to deal with the evidence tendered at the hearing before the appeal judge.
Mr Kourakis QC of counsel for the respondents commented on the fact that Mr Weinert was not called to give evidence at the hearing.
Mr Weinert’s counsel informed the appeal judge that Mr Weinert was too ill to attend court and give evidence. This was not conceded by the respondents, and the appeal judge suggested that a medical certificate be obtained.
In the events that happened, no such certificate was tendered. Mr Weinert has since died.
At the outset of the hearing, the respondents consented to the tender of Mr Weinert’s statutory declaration, to which I have already made reference. In the course of that declaration, Mr Weinert states that:
“... by June 1997 the future state of my health had become uncertain due to bouts of cancer.”
In any event, Mr Kourakis QC did not mount any serious attack on Mr Weinert’s credit.
Indeed, Mr Kourakis QC did not seek to impugn the credit of either Mr Weinert or Mr Brumby. Rather, he relied on what he described as the “objective effect” of the relevant instruments.
It is true that the terms in which the documentation giving expression to a transaction are drawn up may lead the court to reject evidence as to purpose or intent by participants or others associated with the transaction.
But in this case, the evidence of Mr Weinert (in his statutory declaration) and Mr Brumby’s affidavit and oral evidence given when he was cross-examined on his affidavit, were all in the same terms which consistently identified Mr Weinert’s underlying purpose to be that of effecting a distribution by 30 June to members of his family of the value of the underlying assets of the trust. There was nothing in the documentation to suggest that that evidence should be rejected in favour of some other view as to Mr Weinert’s purpose.

On the hearing of the appeal, Mr Kourakis QC contended:
“In my submission, the motive is the family planning purpose, but the purpose remains one of reducing the value of the unit, that is its necessary effect; the way in which the family planning purpose is to be achieved is to reduce the value of the unit, and in that sort of situation, in my submission, it remains valid to speak of the only purpose, if you like being reduction [in value] of the unit.”[4]
[4] Transcript of oral submissions, page 74.
In my view, with respect to him, that submission confuses “purpose” and “effect”. Mr Weinert’s purpose was to distribute the trust assets to the family. While this had the incidental effect of reducing the value of the units, the distribution was planned and the steps necessary to effect it had begun before a buyer was found. In those circumstances, the reduction in value could not properly be described as Mr Weinert’s purpose, or the purpose of the transfers within the meaning of s 60A(4a)(a).
With respect to him, in my view, in the following passage from his reasons for judgment, the appeal judge fell into the same error, that is, by confusing “purpose” and “effect”:
“28The appellants’ submission as to purpose should also be rejected. The purpose of the Weinert interests was to dispose of control of the underlying assets and to distribute the proceeds to the Weinert family members through their family trusts. The agreement or arrangements entered into were designed to facilitate the disposal of the underlying assets to the syndicate. It is incorrect to suggest the agreement and arrangements only had an incidental effect in reducing the value of the units. The agreement and arrangements had a direct effect on reducing the value of the units.”
Furthermore, in my view, the second limb of the proviso to s 60A(4a) was, in those circumstances, made out. In particular, it does not follow that because the purchasers took advantage of the reduction in value of the property, that the reduction was “granted or made” in their favour.
The reduction in value was a consequence of the carrying out of Mr Weinert’s intention to distribute the excess capital in the trust to the beneficiaries. It did not answer to the description of an arrangement “granted or made in favour” of the purchasers. The words “in their favour” whatever they may mean in other contexts, suggest that the arrangement should be made for the purchaser’s purposes, rather than for the purposes, in this case, of the Weinert interests.
So far as s 70 is concerned, as I have said, the appeal judge did not find it necessary to address the question whether or not, for the purposes of that section, the instrument of transfer of the units should properly be regarded as a “conveyance on sale”.
In that respect, the concession by the respondents that the instrument of transfer of the units operated as a “voluntary disposition inter vivos”, albeit answering to the description of a conveyance on sale as well, creates a difficulty for the respondents.
The difficulty arises by reason of the words in par 3(1) of Schedule 2:
“Conveyance or transfer on sale of any property (not otherwise charged).” (emphasis added)
It seems to me that, reading the schedule together with the relevant provisions of the Act, duty may not be imposed upon an instrument which otherwise might answer to the description of a conveyance or transfer on sale if the duty may be imposed on some other basis.
Reading par 3 and par 4 of Schedule 2 together, if the instrument can properly be described as a “voluntary disposition inter vivos”, that must be taken to be its characterisation for the purpose of the charging of duty.
If that view was to be correct, s 70 ceases to be of potential application.
It is, however, unnecessary to decide that question, as, for the reasons given with respect to the application of s 60A(4a), it could not be said that the instruments in question were executed “in order to avoid or evade the payment of the duty payable”. This is so, whether the word “instrument” should be construed narrowly, either to apply to the instruments of transfer of the units, or more broadly to encompass the other documents which were executed in order to effect the restructuring of the trusts and the sale and purchase agreement.
Conclusion
For these reasons, in my opinion, neither s 60A nor s 70 of the Act operated so as to have the effect contended for by the respondents.
I would allow the appeal and make the following orders:
(1)that the order under appeal be quashed;
(2)that there be substituted an order allowing the appellant’s appeal from the Minister’s determination of the objection;
(3)that the assessment in question be revoked; and
(4)substituting an assessment on the basis that the value of the property conveyed is $15