LR Corrie Glen Pty Ltd v Chief Commissioner of State Revenue
[2014] NSWCATAD 33
•24 March 2014
NSW Civil and Administrative Tribunal
New South Wales
Medium Neutral Citation: LR Corrie Glen Pty Ltd v Chief Commissioner of State Revenue [2014] NSWCATAD 33 Hearing dates: Decided on the papers. Final submissions received 7 March 2014 Decision date: 24 March 2014 Jurisdiction: Administrative and Equal Opportunity Division Before: N S Isenberg, Senior Member Decision: The decision of the Chief Commissioner under review is confirmed.
Catchwords: Stamp duty - establishment of a trust relating to unidentified property - declaration of trust - s58(2) Duties Act 1997. Legislation Cited: Administrative Decisions Review Act 1997 (formerly Administrative Decisions Tribunal Act 1997)Civil and Administrative Tribunal Act 2013
Duties Act 1997
Interpretation Act 1987
Stamp Duties Act 1920 (repealed)
Taxation Administration Act 1996Cases Cited: D.K.L.R. Holding Co. (No. 2) Pty Ltd v The Commissioner of Stamp Duties (1981-1982) 149 CLR 431
Legal Services Board v Gillespie Jones [2013] HCA 35
Kauter v Hilton (1953) 90 CLR 86
Tooheys Limited and others v Commissioner of Stamp Duties (N.S.W.) [1960-1961] 105 CLR 602Category: Principal judgment Parties: LR Corrie Glen Pty Ltd (ACN 159 137 587) (Applicant)
Chief Commissioner of State Revenue (Respondent)Representation: 2020 Legal Solutions (Applicant)
Crown Solicitor's Office (Respondent)
File Number(s): 136063
reasons for decision
Background
This matter commenced in the Administrative Decisions Tribunal (ADT) in 2013 in accordance with the then Administrative Decisions Tribunal Act 1997. This decision is made in the Civil and Administrative Tribunal (this "Tribunal") in accordance with the Civil and Administrative Tribunal Act 2013 ("NCAT Act") following the merger of the ADT into this Tribunal.
On 1 May 2013 the Respondent ("the Chief Commissioner") issued a Duties Notice of Assessment assessing duty and imposing interest on a document signed by LR Corrie Glen Pty Ltd (the Applicant) as "Trustee" and Super Corrie Glen Pty Ltd as "Beneficiary" (in its capacity as trustee of the Corrie Glen Fund). The document is named "Corrie Glen Fund Security Trust Rules" ("the Document"). The Respondent assessed the Document with fixed duty of $500 in accordance with s58(2) of the Duties Act 1997 and imposed interest of $33.95 in accordance with s17 of the Duties Act for late lodgement of the document for stamping.
By letter dated 27 May 2013 the Applicant's solicitors submitted that s58(2) did not apply to the Document and requested the withdrawal of the assessment. The Office of State Revenue ("OSR") responded by letter on 31 May 2013 explaining the OSR's reasoning as to the application of s58(2). On 1 July 2013 in a telephone conversation with an officer of the OSR, the solicitor for the Applicant advised that she would object to the assessment in the Administrative Decisions Tribunal ("ADT"). The matter had not previously been treated as an objection and it was referred to the review branch of the OSR for further review. The Applicant's solicitor's letter of 27 May 2013 was accepted as an objection under s86 of the Taxation Administration Act 1996 ("TA Act"). By letter dated 1 August 2013 the Chief Commissioner disallowed the objection. On 9 September 2013 the Applicant lodged with the ADT an application for review of the decision to disallow the objection.
Pursuant to consent orders made in the ADT on 5 November 2013 and in accordance with s50 of the NCAT Act the issues in this matter are dealt with on the papers in the absence of the parties.
Powers of Tribunal on review
On a review the Tribunal may confirm or revoke the decision of the Chief Commissioner and make orders as to costs or otherwise as it thinks fit, s101(1) of the TA Act.
Issues
The issue is whether the decision of the Chief Commissioner to impose duty of $500 pursuant to s58(2) of the Duties Act is correct.
The Applicant's Case
The Applicant's case is set out in the reasons which accompanied the Application for Review by the ADT, submissions filed on 25 November 2013 with the ADT ("AS"), submissions in reply filed 22 January 2014 with this Tribunal ("ASR"), and submissions on authorities received on 7 March 2014 ("ASA").
The thrust of the Applicant's argument is that the Document "was established so as to identify a set of rules that would apply in the event that any future declaration of trust, or trusts was or were entered into on the part of the named parties ..."(AS first paragraph) and "the Security Trust Rules do not declare a trust. On examination of the Duties Act, there requires to be a declaration of trust before there is a dutiable transaction." (AS third and fourth paragraphs).
The Applicant states "The Respondent has failed to satisfy s58 of the Duties Act 1997, in confirming that the instrument in question ... is an Establishment of a Trust. There being no establishment of a trust the Chief Commissioner of State Revenue cannot assess the instrument as dutiable under s58(2)." (ASR [1]).
The Applicant substantially relies on the importance of the heading of s58, namely "58 Establishment of a trust relating to unidentified property and non-dutiable property" and states "The heading of s58 is clear and precise, and in the absence of any other definition it has to be read as such.".(ASR [2]) Accordingly as the Document is not a declaration of trust and does not establish a trust it is not liable to duty under section 58.
The Applicant also submits that clauses 34 and 35 of the Interpretation Act 1987 NSW support its submission that s 58 requires the "establishment of a trust" as set out in its heading.
The Respondent's Case
The Respondent relies on documents filed pursuant to section 58 of the Administrative Decisions Tribunal Act 1997 and written submissions and authorities filed with the ADT on 17 December 2013 ("RS"). The Respondent's case is summarised at [2] and [3] in RS and those submissions include an analysis of the provisions of s58(2) and the application of those provisions to the Document.
The Respondent submits that s58(2) of the Duties Act creates a statutory obligation to pay a fee of $500 upon the execution of an instrument which provides for future vesting of property in a trustee for the benefit of a beneficiary mentioned in the instrument. In contrast to the general ad valorem provision in sections 8-9 of the Duties Act which require property to be identified for there to be a dutiable declaration of trust, s58 does not require the property which will be the subject of the future trusted to be identified in the instrument. The Document meets the relevant criteria for the imposition of the fee under s58.
Consideration
There is no dispute as to the contents of the Document. The dispute revolves around s58(2) of the Duties Act and the extent, if any, of its application to the Document. Relevantly s58 is as follows:
"58 Establishment of a trust relating to unidentified property and non-dutiable property
(1) Duty of $500 is chargeable in respect of an instrument executed in New South Wales that declares a trust over New South Wales property none of which is dutiable property.
(2) Duty of $500 is chargeable in respect of an instrument executed in New South Wales that declares that property, although not identified in the instrument, when vested in the person executing the instrument is to be held in trust for a person or persons or a purpose or purposes mentioned in the instrument.
(3) It is immaterial whether or not the beneficial owner or person entitled to appoint the property has joined in or assented to the instrument.
(4) A liability for duty charged by this section arises when the instrument is first executed.
(5) Duty charged by this section is payable by the person declaring the trust.
(6) This section does not apply in respect of any property that is a marketable security, if the marketable security is not dutiable property."
The Respondent's submission at [16] divides s58(2) into the following relevant elements and questions:
(1) Is there an instrument?
(2) Was it executed in New South Wales?
(3) Has there been a declaration that some unidentified property is to be held on trust by the person executing the instrument?
(3) Is the person or purpose for whose benefit the property is to be held on trust mentioned in the instrument?
"Instrument" is defined at clause 1 in the Dictionary of the Duties Act to include "a written document and a written statement." I find that the Document is an instrument.
There is no dispute that the Document was executed in New South Wales.
Does the Document declare "that property, although not identified in the instrument, when vested in the person executing the instrument is to be held in trust"? This issue is a major point of contention.
The Document is at tab [2] in the s58 documents. The wording of the Document includes:
"INTRODUCTION
A. These Rules identify the Trustee and Beneficiaries of any future Declaration of Trust made pursuant to these Rules.
B. The Trustee may enter into agreements for the purchase of freehold property or other assets (the Trust property), at the direction of the Beneficiary.
C. The Beneficiary will provide to the Trustee the consideration for purchase of the freehold property or other assets and the Trustee will agree to hold the freehold property and other assets subject to the rules set out in this agreement.
IT IS AGREED
1. That this Document sets out the rules which will apply to any declarations of Trust that may be made by the trustee in favour of the Beneficiary.
2...
3. FUTURE DECLARATIONS OF TRUST
Each freehold property or other asset acquired by the Trustee on behalf of the Beneficiary shall comprise a separate trust and be held under a separate trust arrangement. The trustee will make a separate declaration of trust for each property or other asset acquired by the trustee to hold the trust property upon trust for the Beneficiary absolutely. This declaration shall be made in the form set out in clause 11 of these Rules."
The Respondent submits that s58(2) cannot require a "declaration of trust" as defined in s8 of the Duties Act because both under the statutory definition and at general law there must be certainty of subject matter in order to constitute a trust. The Respondent relies on Legal Services Board v Gillespie Jones [2013] HCA 35 (14 August 2013) (French CJ, Hayne, Crennan, Kiefel, Bell, Gageler and Keane JJ) and Kauter v Hilton [1953] HCA 95; (1953) 90 CLR 86 at 97 per Dixon CJ, William and Fullagar JJ.
In Kauter v Hilton the High Court, as constituted above, referred at 97 to "the established rule that in order to constitute a trust the intention to do so must be clear and that it must also be clear what property is subject to the trust and reasonably certain who are the beneficiaries." This statement was approved by Bell, Gageler and Keane JJ at [116] in Legal Services Board v Gillespie Jones.
Section 8 of the Duties Act relevantly states:
"8 Imposition of duty on certain transactions concerning dutiable property
(1) This Chapter charges duty on:
(a) ...,
(b) the following transactions:
(i)...
(ii) a declaration of trust over dutiable property,
(iii)...
(2) Such a ... transaction is a "dutiable transaction" for the purposes of this Act.
(3) In this Chapter:"declaration of trust" means any declaration (other than by a will or testamentary instrument) that any identified property vested or to be vested in the person making the declaration is or is to be held in trust for the person or persons, or the purpose or purposes, mentioned in the declaration although the beneficial owner of the property, or the person entitled to appoint the property, may not have joined in or assented to the declaration."
The parties agree that the Document did not establish a trust and that there is no identified property, accordingly s8 does not apply. The Applicant submits that as there is no trust and the heading of s58 requires the establishment of a trust in order for duty of $500 to be levied, no duty is chargeable. The Respondent submits that if a trust was established or declared it would be subject to duty in accordance with s8, however the Document falls within the description in s58(2), accordingly the Document is charged with $500 duty.
Paragraph 2 of the second schedule to the former Stamp Duties Act 1920, under the heading "Declaration of Trust", levied duty on "any instrument declaring that any property vested or to be vested in the person executing the same is or shall be held in trust for the person or persons mentioned therein...". This provision was considered by the High Court in D.K.L.R. Holding Co. (No. 2) Pty Ltd v The Commissioner of Stamp Duties (1981-1982) 149 CLR 431 ("DKLR"). At 437 Gibbs CJ said "It is unnecessary to consider whether the document described as a declaration of trust was properly so called in the ordinary sense of that expression if it falls within the description of "Declaration of Trust" in the second schedule which extends to instruments that do not immediately subject any property to a trust." At 458 Mason J, with whom Stephen J agreed, when referring to the judgment of Dixon CJ in Tooheys Limited and others v Commissioner of Stamp Duties (N.S.W.) [1960-1961] 105 CLR 602 when considering the same paragraph in the Stamp Duties Act, said the words "to be vested" made it clear that the relevant paragraph "was not looking to a completely constituted trust or to one in which the declarant had some enforceable rights in the property still "to be vested in them"".
Mason J also said at 449 "it is a fundamental principle of the law relating to stamp duties that duty is levied on instruments, not on the underlying transactions to which they give effect"
At 471 Brennan J said "Instruments which have no legal operation as well as instruments which are effective declarations of trust are brought to charge by par. (2) if their terms answer the statutory description. It is not necessary to enquire as to the likelihood of the property becoming vested in the declarant, or as to the intentions or expectations of the declarant or of the person in whom the property is presently vested" and at 472 "It is a curious, perhaps an unjust, consequence of this construction that duty is charged upon an instrument which is devoid of legal effect at the time when it is executed and which may fail in its intended purposes and so remain devoid of legal effect."
Accordingly, I find that whether or not the Document has any immediate effect, it is subject to duty of $500 if it comes within the ambit of s58(2).
At [2] in ASR the Applicant submits:
"S58 has to be read in its whole context and there are accordingly two elements that are to be satisfied under this section,
a) the establishment of a trust; and
b) that such a trust relates to or deals with unidentified property and/or non-dutiable property.
Section 58(1) in particular deals with the establishment of a trust for non-dutiable property. Section 58(2) accordingly, and by inference, deals with establishment of a trust for unidentified property."
At the end of ASA the Applicant submits "clauses 34 and 35 of the Interpretation Act 1987 support its submission that s58 requires the "establishment of a trust" as set out in its heading."
The Applicant's submission in relation to the Interpretation Act misconstrues sections 34 and 35 of that Act. Section 35 provides that the heading of s58 of the Duties Act is not part of that Act. Section 34 relevantly provides that extrinsic materials not forming part of an Act may be given consideration in confirming the meaning of certain provisions of the Act, or determining the meaning of provisions if they are ambiguous or obscure or if the ordinary meaning having regard to its context would lead to a result that is manifestly absurd or unreasonable. The Applicant does not address in any substantial manner the express wording of s58(2) of the Duties Act nor does the Applicant deal with the Respondent's submissions regarding that wording, preferring instead to focus on the heading of section 58 and dealing with s58(2) by implication having regard to the wording of s58(1).
I find that, notwithstanding the use of the words "establishment of a trust" in the heading of section 58 of the Duties Act, duty may be chargeable pursuant to s58(2) in respect of an instrument that declares that property when vested in the person executing the instrument is to be held in trust even though a completely constituted trust may not have been established by the instrument
The fourth of the elements identified by the Respondent in 58(2) is whether a person or purpose for whose benefit the property is to be held on trust is mentioned in the Document. Clearly clause 3 of the Document means that any relevant property or other asset acquired by the named trustee shall be held "upon trust for the Beneficiary absolutely".
Decision
The Applicant has the onus of proving its case in a review by the Tribunal, s100(3) of the TA Act. Having regard to the above findings on the material before me, the Applicant has not satisfied me that it is more likely than not that the decision of the Chief Commissioner under review is incorrect.
The correct and preferable decision of this Tribunal is that the decision of the Chief Commissioner under review is confirmed.
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I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales.
Registrar
Decision last updated: 24 March 2014
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