Mondous v Commissioner of State Revenue

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL COURT

TAXATION LIST

S CI 2016 04090

SOUHAIL MONDOUS & ANOR	Applicants
v
COMMISSIONER OF STATE REVENUE	Respondent

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JUDGE:	HARGRAVE J
WHERE HELD:	Melbourne
DATE OF HEARING:	13–14 June 2017
DATE OF JUDGMENT:	26 July 2017
CASE MAY BE CITED AS:	Mondous v Commissioner of State Revenue
MEDIUM NEUTRAL CITATION:	[2017] VSC 416
JUDGMENT APPEALED FROM:	[2016] VCAT 1343 (Member Glover)

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ESTOPPEL – Issue estoppel – Whether alternative findings legally indispensable to Tribunal decision – Findings form one of two essential issues for determination – Blair v Curran (1939) 62 CLR 464; Mitsubishi Motors Australia Ltd v Harbord (1997) 69 SASR 75 discussed and applied – Held: legally indispensable.

ESTOPPEL – Issue estoppel – Privity of interest – Objects of a discretionary trust – Whether applicant beneficiaries privies of the trustee in prior Tribunal hearing – Whether trustee represented applicants’ legal interests – Ramsay v Pigram (1968) 118 CLR 271; Tomlinson v Ramsey Food Processing (2015) 256 CLR 507 – Held: no privity of interest.

ABUSE OF PROCESS – Whether challenging alternative findings in later proceeding constituted abuse – Alternative findings plainly wrong – Applicant wife to be considered separately to husband – Tomlinson v Ramsey Food Processing (2015) 256 CLR 507 considered – Held: no abuse of process.

TRUSTS – Whether executed transfer of land from trustee to beneficiaries of discretionary trust both constituted distribution in specie of trust property and the conveyance of an equitable interest in the land – Whether separate document constituting or evidencing trust distribution required – Provisions of trust deed did not require trust distribution to be made in writing – Held: no separate document required; Transfer of land constituted or evidenced both trust distribution and transfer of land.

STAMP DUTY – Whether transfer of land gave effect to a sale or trust distribution – Held: effective distribution – Whether transfer exempt from duty under Exemption (10), Heading V, Schedule 3 of Stamps Act 1958 – Re Ralara Pty Ltd v Comptroller of Stamps (Vic) (1992) 24 ATR 1133 discussed – Held: exempt from duty – Appeal allowed.

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APPEARANCES:	Counsel	Solicitors
For the Applicants	Mr J Korman	Belleli King & Associates
For the Respondent	Mr D J Williams QC with Mr N Kotros	Commissioner of State Revenue

TABLE OF CONTENTS

Background facts................................................................................................................................ 1

The land tax issue arises................................................................................................................... 6

The land tax issue is resolved........................................................................................................ 10

The stamp duty issue arises........................................................................................................... 13

The stamp duty issue is resolved.................................................................................................. 14

Grounds of appeal........................................................................................................................... 17

Were the alternative findings legally indispensable (ground 1)?........................................... 18

Were Mr and Mrs Mondous privies of the trustee (ground 2)?............................................... 27

Is challenging the alternative findings an abuse of process?.................................................. 35

Did the first transfer constitute a distribution in specie (ground 3)?...................................... 37

Is the second transfer exempt from stamp duty (ground 5)?.................................................... 42

Conclusion and orders.................................................................................................................... 48

HIS HONOUR:

In 2013 the Victorian Civil and Administrative Tribunal (‘VCAT’ or ‘the Tribunal’) determined that objections raised by the trustee of a discretionary trust to various land tax assessments issued by the Commissioner of State Revenue should be dismissed. The objections were both alternative and based on inconsistent facts. The trustee applied for leave to appeal to the Court of Appeal on one of the two grounds of objection. Leave to appeal was refused.

In 2014, the Commissioner levied stamp duty on a transfer of land from the trustee to the applicants, Souhail Mondous and his wife, Naila Mondous. Their objection to the stamp duty assessment was disallowed by the Commissioner and the objection was referred to the Tribunal.

In 2016, the Tribunal confirmed the stamp duty assessment on two grounds. First, it decided that Mr and Mrs Mondous were estopped, by an issue estoppel, from raising an issue determined by the Tribunal as part of the land tax objection which had not been pursued in the Court of Appeal. Second, it decided that the stamp duty objection was in any event not sustainable. Mr and Mrs Mondous now seek leave to appeal to this Court. Leave to appeal from the Tribunal is limited to questions of law.[1]
[1]Victorian Civil and Administrative Tribunal Act 1998 s 148(1).

In order to understand the issues, it is necessary to set out the factual narrative in detail.

Background facts

By a deed of trust dated 21 September 1986, Kameel Pty Ltd (‘the trustee’) was appointed as the trustee of ‘The Mondous Family Trust’ (‘the trust’). The trust is a family discretionary trust. The trustee then acquired various real properties which became part of the trust fund. The properties included pieces of land in Berwick, Victoria. The trustee paid stamp duty on the transfer of land to it.

Mr and Mrs Mondous are the ‘specified beneficiaries’ of the trust. Mr Mondous is and was at all relevant times the ‘Guardian’ and the ‘Appointor’ under the trust deed.

From 26 November 2002, Mr Mondous has been the only shareholder in the trustee. Mr Mondous has been the secretary of the trustee since 1986.

Between 8 December 1988 and 7 October 2005, Mr and Mrs Mondous were the only two directors of the trustee. From October 2005, Mr Mondous has been the trustee’s sole director.

Taking the evidence as a whole, it is clear that Mr Mondous treated the trustee as being under his control at all relevant times. In particular, by the time of the land tax proceeding in VCAT and the Court of Appeal, Mr Mondous was in total control of the trustee and the trust to the exclusion of his wife. There is no evidence of any role played by Mrs Mondous in making decisions concerning relevant transactions at issue in the land tax proceedings, except for signing transaction documents; and no evidence that she had any involvement in the conduct of that proceeding or the later stamp duty proceeding giving rise to this application for leave to appeal.

Prior to approval of the plan of subdivision of the Berwick land being granted, Mr and Mrs Mondous obtained council approval to construct a home on one of the lots in the unregistered plan. That lot was later divided into two titles when the plan of subdivision was registered in October 1990. The title particulars for these two lots are certificate of title volume 9981 folios 666 and 667, being the land situate and known as 18–22 Leemak Crescent, Berwick (‘the land’). At this time, construction on the land had commenced but was yet to be completed. Mr and Mrs Mondous moved into their new family home in about 1992.

Following approval of the plan of subdivision and issue of the titles to the land, Mr Mondous met with his solicitor in late 1990 and discussed transferring the land to himself and his wife in their own names. His solicitor consulted the trust deed and advised him that the land should be transferred to him and his wife by way of a distribution from the trust. Mr Mondous agreed with that proposal. As a result, his solicitor prepared an instrument of transfer of land, under which the trustee transferred the land to Mr and Mrs Mondous as joint proprietors (‘the first transfer’). The first transfer is dated 28 December 1990 and was executed on that date. The common seal of the trustee was affixed in the presence of Mr and Mrs Mondous who signed it as directors. They also signed in their personal capacities. The first transfer states that the consideration for the transfer was:

The Transferees’ entitlement to a distribution of corpus pursuant to The Mondous Family Trust Deed dated the 21^st September, 1986.

The first transfer was never lodged with the Titles Office for registration. Had it been, none of the objections and proceedings described in these reasons would have occurred.

On 27 February 1991, the trustee’s solicitor signed a ‘Notice of Disposition of An Interest in Land’ and lodged it with the Commissioner of Land Tax. The obvious purpose of the notice was to bring about the result that, for land tax assessment purposes, the land was disaggregated from other real property owned by the trustee, thus reducing the trustee’s land tax liability by a significant amount.

The solicitor also lodged the first transfer with the Comptroller of Stamps for opinion as to the amount of stamp duty payable. The Comptroller responded by requesting proof by statutory declaration of various matters. On 27 March 1991, Mr Mondous made a statutory declaration answering the Comptroller’s queries, including by stating that he and his wife were specified beneficiaries of the trust from its inception, that the land was acquired by the trustee after that time, and that they were ‘accepting the [land] in their own right’. On this basis, the Comptroller determined that the first transfer was not subject to ad valorem stamp duty and assessed it as a deed requiring only $10 stamp duty.

At this time, it is clear that the trustee and Mr and Mrs Mondous intended to proceed with a transfer of the land in accordance with the first transfer. Things changed, however, by 17 May 1991. By letter dated that day from Mr Mondous’s solicitors to his accountants, his solicitors, rightly or wrongly, raised the possibility that proceeding with the first transfer (referred to in the letter as the ‘proposed transfer’) might have adverse capital gains tax consequences for the trustee and Mr and Mrs Mondous. The solicitors sought accounting advice ‘as to whether in fact the disposition will not be deemed taxable under the Capital Gains Tax Provisions on the transfer to Mr and Mrs Mondous’.

By letter dated 31 May 1991 to Mr Mondous’s solicitors, a different accountant gave advice on the capital gains tax issues and proposed the possibility that Mr and Mrs Mondous might, instead of taking a transfer of the land, lease the land from the trustee until a later time.

By letter dated 30 October 1991 from Mr Mondous’s solicitors to his accountants, the solicitors wrote, confusingly:

RE: KAMEEL PTY LTD TO MONDOUS
…
We are instructed by our Client that it is to proceed with the transfer from the Trust as a distribution of capital and after discussions with your firm has placed the sum of $120,000.00 on that distribution, we assume that you will make the necessary adjustment in the books of the trust.

There was no need to ‘place’ any sum on the distribution effected by the first transfer.

Notwithstanding the terms of that letter, Mr Mondous’s solicitors intended to proceed with a transfer of the land to Mr and Mrs Mondous in accordance with the first transfer. By letter dated 30 October 1991, they sent the first transfer to the mortgagee of the land (State Bank of Victoria) and requested the bank to endorse an order to register on the transfer so that it could be lodged with the Titles Office for registration.

In response, the State Bank wrote to the solicitors on 8 November 1991 and requested an explanation of the circumstances surrounding the distribution of the land to Mr and Mrs Mondous, and confirmation that no other trust property was in the process of being distributed. The bank noted that it would require new security documentation to reflect the change of ownership of the land — I infer so that Mr and Mrs Mondous would be required to mortgage the land to the bank to secure the trustee’s indebtedness to the bank.

The bank’s requests apparently caused Mr Mondous to reconsider. By letter dated 11 November 1991 from his solicitors to the bank, the solicitors asked for the bank to return the first transfer to them: ‘as at this stage our Client is not proceeding with the same.’

In his witness statement tendered in evidence in the stamp duty proceeding referred to below, Mr Mondous gave evidence that he was advised by his solicitor, ‘at some time in 1991, possibly around June 1991’, ‘that it would be better for the [first transfer] to occur by way of contract of sale rather than trust distribution.’ In his witness statement, Mr Mondous gave evidence as to his recollection and understanding of events at this time:

The lawyer and account to reconsider
24In May 1991, subsequent to the above events, my solicitor and my accountant entered into correspondence, which was provided to me, regarding the capital gains tax implications of the trust distribution which occurred in 1990. …
25.I no longer recollect the discussions between myself, my accountant and my solicitor. However, it appears from the copy of a letter sent by my solicitors to my accountants … that in October 1991 my solicitor instructed my accountant to make the necessary adjustments to the books of the Family Trust to reflect the transfer of [the land] as a distribution of capital to myself and my wife and to place a sum of $120,000 on that distribution.
26.I no longer recall precisely when, but I believe at some time in 1991, possibly around June 1991, I was advised that it would be better for the transfer from [the trustee] to myself and my wife to occur by way of contract of sale rather than trust distribution.
27.I do not understand how it is that I was provided with that advice while at the same time my solicitor instructed my accountant to update the Family Trust books to reflect that the property was transferred by way of distribution of capital. Nevertheless, it seems clear from the correspondence that this is what happened.
28.In accordance with that advice, a contract was drawn up by my solicitor at some time in 1991 evidencing that the land had been sold as at 1989 ... I was of the view, and am still of the view, that a contract can state the parties’ agreement as to how their past acts are to be treated. At the time I took possession of the land in 1989 I gave no thought to the question of how, or whether, I was acquiring the land from the trust. I merely took possession of the land for myself and my wife.
29.It was for that reason that I saw nothing wrong in the fact that my solicitor had drafted the contract so as to characterise the transfer of land to reflect the fact that we had taken possession of the land on 28 December 1989, prior to the time the contract was executed, in 1991.
30.In 1997, the contract of sale was varied to extend the period for instalment payments to 28 December 1999 …
Registration of transfer at Titles Office
31.In 1999, a Transfer of Land was lodged with the Titles Office registering the transfer of [the land] from [the trustee] to myself and Naila.
32.My solicitors prepared the Transfer of Land document, which stated that the consideration for the land was $120,000. I was of the view (which I now understand to be wrong at law) that the land had been transferred to me by way of the contract of sale rather than the trust distribution and for that reason I did not realise that the particulars of the 1999 Transfer of Land were incorrect. I and my wife signed the Transfer of Land both on behalf of [the trustee] and on our own behalf.
33.Debts in the amount of $120,000 that were owed by [the trustee] for the Family Trust, to myself and my wife, were written off between 1990 and 1999. I was advised by my accountants that this was done by way of adjustments to [the trustee’s] accounts. Because I was of the mistaken view that the land had been transferred to me by way of the contract of sale, as stated above, I was also of the view that I and my wife were, by writing off these debts, paying [the trustee] the consideration specified in the contract of sale.[2]

[2]Witness statement, Sohail Mondous, 5 June 2016. After the conclusion of argument, the Court was informed that Mr Mondous had been cross-examined on this statement, but the transcript was not in the appeal book or referred to in the submissions of any party; and counsel for Mr and Mrs Mondous relied on it without objection in his submissions.

The contract of sale which Mr Mondous recalls being ‘drawn up by my solicitor at some time in 1991 evidencing that the land had been sold in 1989’, is back-dated to 28 December 1989 (the ‘backdated contract of sale’). The backdated contract of sale was signed by Mr and Mrs Mondous as purchasers but is unexecuted by the trustee as vendor. It records a standard contract of sale for a total purchase price of $120,000, with a deposit of $12,000 having been paid and the residue of $108,000 to be paid on 28 December 1990 or, at Mr and Mrs Mondous’s election, within five years. The backdated contract of sale is an entirely inconsistent transaction with the earlier distribution of the land to Mr and Mrs Mondous under the first transfer.

The land tax issue arises

From 1991 until 1999, the Commissioner acted on the basis that the trustee’s notice of disposition of land to Mr and Mrs Mondous was true. Accordingly, the land was not included in the trustee’s land holdings for the purposes of land tax payable by it during this period. Instead, the land was included in Mr and Mrs Mondous’s land holdings for the purposes of land tax payable by them. The result was that the trustee was relieved of a substantial land tax liability and Mr and Mrs Mondous were subjected to (and paid) a small land tax liability for the same period.

In 1999, the State Revenue Office (‘SRO’) discovered that the trustee remained the registered proprietor of the land. By letters dated 10 February 1999 from the SRO, the SRO notified the trustee and Mr and Mrs Mondous that it had discovered that the trustee remained as the registered owner of the land, that this was inconsistent with the notice of disposition, and sought clarification as to whether the land had in fact been transferred to Mr and Mrs Mondous on 28 December 1990. In response, Mr Mondous sent facsimile copies of the backdated contract of sale and the variation of that contract to the SRO.

Mr Mondous then spoke with an officer from the Legal Branch of the SRO. By letter dated 12 March 1999 to Mr and Mrs Mondous, the SRO legal officer described material aspects of the conversation in the following terms:

Mr Mondous informed me today that [the trustee] continues to be the owner of the Property, and has not transferred the Property to you. He further stated that you rely on the Contract of Sale to claim ownership of the Property for land tax purposes. It therefore appears that you are asserting that, despite the statement made in the Notice of Disposition, [the trustee] did not transfer the Property to you on 28 December 1990, and that you rely only on the above material Mr Mondous has forwarded to this Office.

The SRO Legal Officer then requested further information from Mr Mondous relating to his claim to ownership of the land for land tax purposes based on the backdated contract of sale, possession of the land pursuant to that contract and payment of the deposit and any other part of the purchase price.

In response, Mr Mondous took legal advice. His solicitor wrote to him on 19 March 1999 and advised him to inform the SRO that:

(a) possession of the land was given on 28 December 1989 under the backdated contract of sale;

(b) the trustee has ‘always held [the land] in trust for [Mr and Mrs Mondous and their children]’;

(c) Mr and Mrs Mondous had not paid the residue of purchase price under the backdated contract of sale but that payment had been extended to 28 December 1999; and

(d) the trustee is not obliged to transfer the title to the land into Mr and Mrs Mondous’s name until payment of the residue of the purchase price.

Mr Mondous forwarded a copy of this letter to the SRO Legal Officer. Later, Mr Mondous provided the SRO with a copy of a letter dated 18 August 1999 from his accountant; and orally informed the SRO that part of the purchase price for the land had been paid by a reduction in the trustee’s indebtedness to Mr and Mrs Mondous, by adjustment to a loan account in the books of the trustee.

The SRO’s inquiries also caused Mr Mondous to take steps to transfer the legal title to the land to him and his wife. By instrument of transfer of land dated 4 June 1999, executed under the trustee’s common seal and by Mr and Mrs Mondous on their own account, the trustee purported to transfer ‘all its estate in fee simple’ in the land to Mr and Mrs Mondous as tenants-in-common in equal shares for a stated consideration of $120,000 (‘the second transfer’). The second transfer was then stamped with ad valorem stamp duty on that amount, in the sum of $3,400. The stamp duty was paid, the second transfer was registered, and Mr and Mrs Mondous became owners of the land in August 1999.

The position adopted at this time by Mr Mondous on behalf of the trustee on the one hand, and on behalf of himself and his wife on the other hand, was designed to persuade the Commissioner that he and his wife were buyers in possession of the land under the backdated contract of sale and had paid the trustee at least 15 per cent of the purchase price under that contract. If Mr Mondous had been able to prove these matters, the trustee would have ceased to be an ‘owner’ of the land for the purposes of the Land Tax Act 1958 and, as a result, the value of the land would not have been taken into account in calculating the trustee’s land tax entitlements. In this regard, Mr Mondous was relying upon the ‘buyer in possession ‘ provisions of ss 48 and 49 of the Land Tax Act (the ‘buyer in possession objection’).

The SRO did not accept the buyer in possession objection. By letters dated 14 December 1999 and 25 January 2000, the SRO advised Mr Mondous that the land tax assessments in his and his wife’s names would be cancelled, land tax assessments for the trustee as owner of the land from 1991 to 1999 would be issued, and Mr and Mrs Mondous would be refunded $4,217.01 as an overpayment by them for land tax. The evidence does not reveal the amount of increased land tax payable by the trustee for the relevant tax years.

The trustee objected to this course. Meetings and correspondence between Mr Mondous and his solicitors on the one hand and the SRO on the other ensued. The trustee’s objections were disallowed on the grounds that the trustee remained the owner of the land under s 49 of the Land Tax Act, because it had not been shown that at least 15 per cent of the purchase money had been paid and the discretion to waive that requirement was exercised against the trustee.

Following further meetings and discussions, the SRO issued amended assessments to the trustee and Mr and Mrs Mondous, on the basis that both remained owners of the land during the relevant period.

The trustee objected to the amended assessments against it. On 30 December 2005, the SRO disallowed those objections, on the same grounds as previously given for rejecting the objections to the earlier assessments.

The trustee’s objections were referred to VCAT. For reasons which have not been explained to the Court, the objections were not heard until 28 March 2013.

Prior to the VCAT hearing, the trustee relied only on the buyer in possession objection.[3] Shortly prior to the hearing, however, the trustee engaged new counsel, Mr Jonathan Korman. Mr Korman considered that an alternative ground of objection based on ss 51 and 52 of the Land Tax Act was arguable. For present purposes, it is sufficient to note that s 51 provided that the owner of any equitable estate or interest in land should be assessed and liable in respect of land tax as if the equitable owner was the legal owner, and s 52(1) provided that a trustee of lands for different ‘beneficial owners’ was to be assessed separately for each land held on a separate trust (ie on a disaggregated basis and not an aggregated basis). The alternative objection relied on the first transfer as having conveyed the equitable estate to Mr and Mrs Mondous (‘the equitable transfer objection’).
[3]Kameel Pty Ltd v Commissioner of State Revenue (Unreported, Court of Appeal, Hansen and Tate JJA, 29 August 2013) [5] (‘Court of Appeal Reasons’).

The land tax issue is resolved

The trustee’s objections were heard by a Vice President of VCAT who was a County Court judge. I will refer to her Honour as ‘the judge’.

The Commissioner did not object to the trustee raising the equitable transfer objection. The judge proceeded to determine both objections presented to her for determination.

The judge first considered the equitable transfer objection. The judge summarised this objection as involving whether the first transfer constituted a conveyance of the equitable estate in the land to Mr and Mrs Mondous and, if so:

(1) whether ss 51 and 52 of the Land Tax Act had the effect that Mr and Mrs Mondous were liable for land tax as if they were the legal owners, and the trustee was accordingly not liable for land tax at all;[4] or

(2) if the trustee remained liable for land tax in respect of the land, its tax liability for the land should be calculated separately from all other land holdings held by the trustee on trust for discretionary beneficiaries of the trust.[5]

[4]Kameel Pty Ltd v Commissioner of State (Review and Regulation) [2013] VCAT 1320 [15(a)] (‘the Land Tax Reasons’).

[5]Ibid [38(d)].

The judge did not accept that the first transfer constituted a conveyance of the equitable interest in the land. Alternatively, she held that such a transfer (if established) had nevertheless been ‘revoked’ by the conduct of the trustee and Mr and Mrs Mondous from at least 11 November 1991.[6] These findings involved mixed findings of fact and law. For convenience, I will refer to them as the ‘alternative findings’.
[6]Ibid [93]–[95].

In case she was wrong in her alternative findings, the judge made a legal finding which had the result that the equitable transfer objection failed in any event. In doing so, she accepted the Commissioner’s legal contentions that, ‘even if’ the first transfer conveyed the equitable estate in the land to Mr and Mrs Mondous, ss 51 and 52 provided nevertheless that the trustee remained liable for the land tax which had been assessed on the basis of the trustee’s aggregated land holdings.[7] The judge concluded:

Even if the First Transfer were effective for any period, the Tribunal accepts the analysis made by the Respondent under s 51 and s 52. That is, for the purpose of s 51, while the First Transfer remained unregistered, both vendor and purchaser remain liable for land tax. Furthermore, the Applicant vendor/trustee, does not qualify for a separate calculation of land tax on the land, disaggregated from other land holdings, by reason that there is no identified beneficiary who has acquired a vested interest in such holdings. The authorities to which the Tribunal was referred are directly on point.[8]

[7]Ibid [78]–[82], [96].

[8]Ibid [96] (emphasis added).

This legal conclusion by the judge, based on Court of Appeal authority,[9] is now accepted as correct by Mr and Mrs Mondous. Counsel who appeared for the trustee at VCAT and on appeal to the Court of Appeal, and for Mr and Mrs Mondous on this application for leave to appeal, stated to the Court on this application that he was wrong to have raised the equitable transfer issue at the hearing of the land tax objection because, given the judge’s (now accepted) interpretation of the effect of ss 51 and 52 of the Land Tax Act, a finding that the first transfer conveyed the equitable estate in the land to Mr and Mrs Mondous was incapable of relieving the trustee of its obligation to pay land tax on its aggregated land holdings including the land.[10]
[9]Ibid [80], citing Lygon Nominees Pty Ltd v Commissioner of State Revenue (2007) 23 VR 474.
[10]Transcript of Proceedings, Mondous v Commissioner of State Revenue (Supreme Court of Victoria, 2016/04090, Hargrave J, 13 June 2017) 13.24–13.29.

Second, the judge had to decide the buyer in possession objection based on ss 48 and 49 of the Land Tax Act. For those sections to apply, the trustee needed to establish three factors: (1) the existence of an agreement for the sale of the land; (2) that possession of the land had been given to Mr and Mrs Mondous pursuant to that agreement; and (3) that there had been a payment of at least 15 per cent of the purchase price.[11]
[11]Court of Appeal Reasons [23], [30].

As to the first requirement, the judge found that the backdated contract of sale was not an agreement at all but was a sham,[12] and its purported terms had in any event not been adhered to.[13]
[12]VCAT Reasons [89], [87(e)], [87](h)].
[13]Ibid [90]–[92], [107(d)].

As to the second requirement, the judge found that Mr and Mrs Mondous’s possession of the land could not have been pursuant to the sham agreement, as there was no valid agreement for sale.[14]
[14]Ibid [108].

As to the third requirement, the judge was not satisfied that the trustee had proved that 15 per cent of the purchase price had been paid by Mr and Mrs Mondous.[15]
[15]Ibid [90]–[92], [107(d)].

The trustee sought leave to appeal from VCAT’s decision to refuse its objection to the land tax assessments on the basis of the buyer in possession issue under ss 48 and 49. Faced with Court of Appeal authority justifying the judge’s legal conclusion as to the effect of ss 51 and 52, the trustee did not seek leave to appeal on the equitable transfer objection. Leave to appeal was refused.[16]
[16]Court of Appeal Reasons [44].

The stamp duty issue arises

After the land tax issue was resolved, the SRO commenced an investigation aimed at determining whether Mr and Mrs Mondous had paid the required stamp duty on the second transfer. In 1999, relying upon the consideration stated in the second transfer, stamp duty of only $3,400 had been assessed and paid. As a result of the investigations, the SRO decided to amend its stamp duty assessment on the second transfer on the basis that the land should be valued at the date of that transfer, 4 June 1999. The SRO obtained a valuation of the land at that date from the Valuer-General in the sum of $2.575 million. Consequently, stamp duty on the second transfer was assessed in the sum of $141,625. As $3,400 stamp duty had already been paid on the second transfer, a notice of assessment for the difference ($138,225) was issued on 29 September 2014. The amended assessment also included penalties, interest and the cost of the valuation — making a total assessment of $552,900.

Mr and Mrs Mondous objected to the amended assessment. Their objections were disallowed. In a Notice of Determination on Objection dated 26 November 2014, a delegate of the Commissioner gave reasons. Those reasons drew heavily on the Tribunal’s decision in the land tax proceeding. Relevantly, the Notice of Determination reasoned as follows:

(1) The first transfer was referred to as a ‘purported’ transfer of the land to Mr and Mrs Mondous by way of trust distribution.

(2) The second transfer contained the same consideration as that stated in the backdated contract of sale.

(3) In the land tax proceeding, VCAT decided that the backdated contract of sale was a sham and of no legal effect.

(4) As a result, the second transfer was not the result of a pre-existing ‘genuine, legally binding contract’ for the purchase of the land.

(5) As the second transfer was not the result of a sale transaction, the value of the land for stamp duty purposes should be assessed at the date of the transfer.

(6) The first transfer could not be relied upon by Mr and Mrs Mondous because it was ‘abandoned’ (or ‘revoked’ as the judge had described it) for the following reasons:

(a) Mr Mondous’s solicitor informed the State Bank in October and November 1991 that the first transfer was not proceeding at that time;

(b) contractual relations cannot be made retrospectively, the first transfer could not have been based on the backdated contract of sale;

(c) the first transfer and the backdated contract of sale could not ‘logically or legally co-exist’; and

(d) there was ‘no evidence to indicate the basis upon which the [first transfer] is predicated’. Further:

In the absence of any objective evidence that [the land] was distributed as a result of [the first transfer], the Commissioner treats the [first transfer] as having been revoked by the parties and therefore [the trustee] remained the owner of [the land].

The stamp duty issue is resolved

Mr and Mrs Mondous exercised their right to review the refusal of their objection to the stamp duty assessment. The review was heard and determined by a different member of VCAT. The Tribunal confirmed the assessment and published reasons.[17]
[17]Mondous v Commissioner of State Revenue (Review and Regulation) [2016] VCAT 1343 (‘Stamp Duty Reasons’).

At the hearing, Mr and Mrs Mondous contended that the second transfer was exempt from stamp duty under Exemption (10) of Heading VI in the Third Schedule to the Stamps Act 1958. Relevantly, Exemption (10) provides an exemption for:

(10)Any instrument for the conveyance of real property that is subject to a trust to a beneficiary of the trust, if the beneficiary was a beneficiary when the real property was first vested in the trustee of the trust and the trust was not created by a declaration of trust by the person in whom the real property was vested immediately before it vested in the trusts and the conveyance is—
(a)to the beneficiary absolutely …

if, when the real property was first conveyed to a trustee of the first-mentioned trust, the conveyance was duly stamped under this Act or was not liable to duty.[18]

[18]Emphasis added.

The parties agree that the trustee paid the requisite stamp duty when it acquired the Berwick land, that the trustee acquired the land as trustee of the trust, and that Mr and Mrs Mondous were beneficiaries of the trust at that time. The issue under Exemption (10) was whether the second transfer was a conveyance of the land to Mr and Mrs Mondous as beneficiaries of the trust and, if so, whether Exemption (10) was attracted in the circumstances of the case. However, before considering that issue, the Tribunal was required to consider whether Mr and Mrs Mondous were estopped from asserting that they were equitable owners of the land by reason of the first transfer. The Commissioner contended that there was an issue estoppel to this effect, arising out of the alternative findings in the land tax proceeding.

The Tribunal accepted the Commissioner’s issue estoppel contention and found that Mr and Mrs Mondous were estopped from relying upon an equitable transfer of the land to them by the first transfer.[19] The Tribunal reasoned as follows:
[19]Ibid [16]–[33].

(1) The alternative findings were made in the context of the equitable transfer objection raised by the trustee in reliance on ss 51 and 52 of the Land Tax Act.[20]
[20]Ibid [21].

(2) For an issue estoppel to arise, the relevant issue must have been:

(a) directly determined in an earlier legal proceeding, including proceedings in VCAT, between the same parties to the proceeding in which the issue estoppel is relied upon or their privies;[21]
[21]Ibid [18], [29]–[31], citing Blair v Curran (1939) 62 CLR 464, 531.

(b) however, an issue estoppel will only apply to findings of fact which are ‘legally indispensable’ to the conclusion reached by the court or tribunal in the first proceeding.[22]
[22]Ibid [27], citing Blair v Curran (1939) 62 CLR 464, 532.

(3) The trustee was a privy of Mr and Mrs Mondous ‘at all material times’ because:

(a) Mr Mondous is the only current director and shareholder of the trustee; and

(b) although not a director at the time of the land tax proceeding, Mrs Mondous had been director of the trustee since its incorporation in 1986 for almost 20 years (ie until 2005).

In making this finding, the Tribunal did not consider any of the authorities binding it as to the principles to be applied in determining whether a person is a privy of a party to a previous proceeding for issue estoppel purposes.

(4) The alternative findings were legally indispensable to the judge’s conclusion that the equitable transfer objection based on ss 51 and 52 of the Land Tax Act was not made out.[23]

(5) Accordingly, Mr and Mrs Mondous were ‘estopped from asserting against the Commissioner that they obtained equitable interest in the land pursuant to [the first transfer]’.[24]

[23]Ibid [28].

[24]Ibid [32].

The issue estoppel finding was sufficient to dispose of the application to review the Commissioner’s disallowance of Mr and Mrs Mondous’s objection to the stamp duty assessment.[25] However, in case the issue estoppel finding was wrong, the Tribunal proceeded to nevertheless determine their objection.[26]
[25]Ibid [33].
[26]Ibid [34]–[55].

The Tribunal did not consider in its reasons, as an alternative, whether the proceeding before it should be stayed as an abuse of process. Whether or not that issue was argued before the Tribunal member, it was clearly raised by the Commissioner on this application for leave to appeal and argued without objection by Mr and Mrs Mondous.

The Tribunal’s conclusions in deciding that, in any event, Mr and Mrs Mondous’s objection to the assessment should fail, may be summarised as follows:

(1) The first transfer did not evidence or constitute a distribution in specie of the land from the trustee to Mr and Mrs Mondous.[27]

(2) It was not possible for the trustee to transfer only its ‘valueless legal interest in the land when it executed [the second transfer]’.[28]

(3) The second transfer was not within the words of Exemption (10), because that exemption does not apply to transfers on sale, the second transfer is consistent only with a sale, and the second transfer did not, in any event, state expressly that it was to the applicants as beneficiaries.[29]

[27]Ibid [34]–[39].

[28]Ibid [40]–[47].

[29]Ibid [48]–[55].

The Tribunal’s reasons for these conclusions are considered below.

Grounds of appeal

In summary, the proposed grounds of appeal, as stated and developed in argument, are as follows:

(1) Ground 1. The Tribunal erred in finding that the alternative findings in the land tax proceeding were legally indispensable to the judge’s ultimate conclusion that ss 51 and 52 of the Land Tax Act did not have the effect of relieving the trustee of liability for land tax.

(2) Ground 2. The Tribunal erred in finding that Mr and Mrs Mondous were privies of the trustee.

(3) Ground 3. The Tribunal erred in finding that there was no distribution in specie of the land to Mr and Mrs Mondous by reason of the first transfer.

(4) Ground 4. It is not necessary for Exemption (10) to apply for the instrument of transfer or conveyance to expressly state that it is made to a ‘beneficiary’ or ‘beneficiaries’. This ground of appeal is conceded by the Commissioner.

(5) Ground 5. The Tribunal erred in failing to find that, once the first transfer had taken effect as a distribution in specie which transferred the equitable interest to Mr and Mrs Mondous, and in the absence of a re-conveyance of that interest from Mr and Mrs Mondous to the trustee, the trustee thereafter had no power to deal with its legal interest in the land except by transferring the legal title to Mr and Mrs Mondous by transfer of land registered under the Transfer of Land Act 1958.

Each of these grounds raises a question of law or mixed fact and law.

I will consider these grounds of appeal, and the abuse of process issue raised by the Commissioner, under the following headings:

(1) Were the alternative findings legally indispensable (ground 1)?

(2) Were Mr and Mrs Mondous privies of the trustee (ground 2)?

(3) Is challenging the alternative findings an abuse of process?

(4) Did the first transfer constitute a distribution in specie (ground 3)?

(5) Is the second transfer exempt from stamp duty (ground 5)?

Were the alternative findings legally indispensable (ground 1)?

The Commissioner contends that the Tribunal was right to conclude that the alternative findings were legally indispensable to the decision in the land tax proceeding to reject the equitable transfer objection, because those findings were the judge’s principal reason for rejecting the objection.

I accept that the judge first expressed her rejection of the objection on the basis of the alternative findings. Having listed some ‘concerns’ about the circumstances surrounding the first transfer, including that the first transfer and the second transfer were ‘entirely different transactions and cannot logically or legally co-exist’,[30] and that there was no document in evidence (other than the first transfer) recording a decision of the trustee to distribute the land to Mr and Mrs Mondous as beneficiaries,[31] the judge concluded:

Effect of First Transfer
93.The Applicant purports to characterise the First Transfer as a document which conveyed an equitable interest, which remained extant, until the Second Transfer, purportedly based upon an entirely different transaction, conveyed legal title. In the Tribunal’s view, such characterisation cannot be sustained upon any legal analysis.
94.If the First Transfer is taken to have been effected at least by the date upon which it was stamped, namely April 1991, then it may be accepted as effective to convey an equitable interest to the purchasers with effect from the 1992 land tax year. However, by no later than 11 November 1991, the purchasers had evidenced an intention not to proceed with the First Transfer and at no future time was the First Transfer again referred to.
95.In these circumstances, and in the absence of any objective evidence that the distribution in specie was otherwise effected in the accounts of the trust for the relevant financial year, the Tribunal treats the First Transfer as having been revoked by the parties. Accordingly, the Applicant remains the owner of the Land.[32]

[30]Land Tax Reasons [86(c)].

[31]Ibid [86(d)].

[32]Ibid [93]–[95].

The judge then gave a further reason why the equitable transfer objection should fail, based on the proper interpretation of the combined effect of those sections:

96.Even if the First Transfer were effective for any period, the Tribunal accepts the analysis made by the Respondent under s 51 and s 52. That is, for the purpose of s 51, while the First Transfer remained unregistered, both vendor and purchaser remain liable for land tax. Furthermore, the Applicant vendor/trustee, does not qualify for a separate calculation of land tax on the land, disaggregated from other land holdings, by reason that there is no identified beneficiary who has acquired a vested interest in such holdings. The authorities to which the Tribunal was referred are directly on point. [33]

[33]Ibid [96] (emphasis added).

The judge had earlier summarised the Commissioner’s contentions directed to meet a finding that the first transfer gave Mr and Mrs Mondous an equitable interest in the land.[34] The Commissioner’s submission was that where, as here, the trustee held other lands on various discretionary trusts, ss 51 and 52 would not have the effect that the trustee would cease to be the owner of the land for land tax purposes. Accordingly, the trustee would in any event remain liable to pay land tax on an aggregated basis including the value of the land.[35]
[34]Ibid [78].
[35]Ibid [78]–[82] citing Lygon Nominees Pty Ltd v Commissioner of State Revenue (2007) 23 VR 474.

In Lygon Nominees Pty Ltd v Commissioner of State Revenue,[36] the Court of Appeal considered the application of ss 51 and 52 of the Land Tax Act in circumstances where a company was the trustee of 11 discretionary trusts and one unit trust and, in each capacity, held one or more pieces of land in severalty as legal owner. Redlich JA (Ashley JA and Bell AJA agreeing) held that there were no ‘beneficial owners’ of any of the lands owned by the trustee in its capacity as trustee of the discretionary trusts, and the value of those lands should therefore be aggregated with the value of the lands held subject to the unit trust (where it was arguable that the unit holders were ‘beneficial owners’). Redlich JA reasoned as follows:
[36](2007) 23 VR 474.

(1) The phrase ‘beneficial owners’ in s 52(1) had the same meaning as ‘the owner of an equitable estate or interest’ in s 51 and s 52(2).[37]
[37]Ibid 480–9 [26]–[52], [90].

(2) That ‘neither the objects of the power of appointment nor the takers in default of appointment in the discretionary trusts fell within the description of a beneficial owner because their equitable interest did not vest in possession’.[38]

(3) As to objects of a power of appointment under a discretionary trust deed, and subject to the terms of the deed at issue, an object of a discretionary trust does not have a proprietary interest in the assets of the trust.[39] Accordingly, objects of the discretionary trusts were not ‘beneficial owners’ under s 52(1) of the Land Tax Act. The equitable interest of an object is limited to an equitable entitlement to call upon the trustee to administer the trust in accordance with its terms and is a mere expectancy.[40]

(4) Although the interests of the unit holders in the one unit trust may collectively have been the ‘beneficial owners’ of the land held by the trustee in that capacity, this had no significance to the operation of s 52(1) because the lands held by the trustee under the discretionary trusts were not held for any identifiable ‘beneficial owners’ within the meaning of that sub-section.[41]

[38]Ibid 489–97 [53]–[83].

[39]Ibid 493–7 [69]–[83].

[40]Ibid 493–6 [69]–[78].

[41]Ibid 498–9 [87]–[90].

Redlich JA expressed his conclusion in the following terms:

Conclusion
The phrase ‘beneficial owners‘ in s 52 has the same meaning as ‘the owner of an equitable estate or interest’ in s 51. The owner must be entitled, in equity, to the freehold estate in possession in relation to the land the subject of the trust. With the possible exception of the unit holders of the Thornbury unit trust, there were no ‘beneficial owners’ of land held by the trustee subject to any discretionary trust. The objects of the power of appointment under the trusts did not have any equitable estate or interest in the said lands and were not beneficial owners. The takers in default of appointment under the trusts were not beneficial owners. Accordingly, at each of the relevant dates of assessment, the appellant was not the owner of different lands in severalty in trust for different beneficial owners within the meaning of s 52 of the Land Tax Act.[42]

[42]Ibid 498–9 [90].

The reasoning in Lygon Nominees as to the nature of the interest of an object of a discretionary trust is consistent with the statements of the High Court in Kennon v Spry.[43]
[43](2008) 238 CLR 366, 393–4 [74]–[78] (French CJ), 408 [125] (Gummow and Hayne JJ), 417-8 [160] (Heydon J).

The reasoning in Lygon Nominees is directly applicable to the facts of this case. The judge was correct to hold that ‘even if’ the first transfer had conveyed the equitable estate in the land to Mr and Mrs Mondous and that transfer had not been ‘revoked’, s 52(1) would not have supported the trustee’s objection. Although those circumstances would have made Mr and Mrs Mondous liable to be assessed for land tax under s 51, the trustee would also have remained liable for that tax under s 52(1). Moreover, as all other lands owned by the trustee were held by the trustee on discretionary trusts in respect of which there were no ‘beneficial owners’, the trustee remained liable for land tax on the aggregate value of all lands held by it as trustee.

In determining whether a finding of fact was legally indispensable to an earlier decision for the purposes of issue estoppel, it is necessary to refer to the decision of Dixon J in Blair v Curran.[44] Dixon J stated that an issue estoppel ‘covers only those matters which the prior judgment, decree or order necessarily established as the legal foundation or justification of it conclusion’,[45] or ‘what is legally indispensable to the conclusion’.[46] His Honour then considered the distinction between findings of ‘evidentiary facts’, which do not give rise to an issue estoppel, and factual findings which are ‘fundamental to the decision arrived at’, which may give rise to an issue estoppel.[47] His Honour continued:

The difficulty in the actual application of these conceptions is to distinguish the matters fundamental or cardinal to the prior decision or judgment, decree or order or necessarily involved in it as its legal justification or foundation from matters which even though actually raised and decided as being in the circumstances of the case the determining considerations, yet are not in point of law the essential foundation or groundwork of the judgment, decree or order.[48]

[44](1939) 62 CLR 464.

[45]Ibid 531 (emphasis added).

[46]Ibid 532.

[47]Ibid 532–3.

[48]Ibid 533 (emphasis added).

Mr and Mrs Mondous contend that the two alternative findings, although expressed by the judge as being determinative of the objection at the first hurdle, did not involve the rejection of an essential ingredient of the equitable transfer objection. Although the judge first considered whether the first transfer effected a conveyance of the equitable interest in the land to Mr and Mrs Mondous and, if so, whether that transfer was revoked,[49] she then proceeded to conclude that it would have made no difference if an equitable assignment had been established and not revoked: because the trustee would nevertheless have remained liable for land tax on an aggregated basis, as assessed.[50] The latter finding, based on Lygon Nominees as to the effect of ss 51 and 52 of the Land Tax Act in similar circumstances, is contended to be the only ‘legal foundation’ of the judge’s rejection of the objection based on those sections. Put another way, it is contended that the alternative findings were not findings on ‘an ultimate issue of fact or law which was necessarily resolved as a step’ in the judge’s reasons for rejecting the objection.[51]
[49]Land Tax Reasons [93]–[95].
[50]Ibid [96].
[51]Tomlinson v Ramsey Food Processing Pty Ltd (2015) 256 CLR 507, 517 [22] (emphasis added).

I do not accept these contentions. They involve too narrow a reading of the authorities. The approach of Doyle CJ in Mitsubishi Motors Australia Ltd v Harbord[52] should, in my opinion, be applied. In Mitsubishi, Doyle CJ (Matheson and Olsson JJ agreeing) considered whether an issue estoppel was created by findings of a District Court judge in a negligence action brought by a worker against Mitsubishi. The worker alleged that he injured his lower back when he slipped on some oil in the course of his employment, and that the oil was present at his workplace due to Mitsubishi’s negligence. The District Court judge rejected the worker’s claims for two reasons. First, Mitsubishi did not fail to take proper care to prevent spillages of oil at the workplace and was therefore not negligent. Second, because the worker did not slip on oil in the manner he alleged.[53] In these circumstances, Doyle CJ held that confining the issue estoppel to the judge’s finding that there was no negligence was ‘too narrow an approach’.[54] Doyle CJ expressed his conclusions in the following way:

It seems to me that the critical issues before the District Court were these. First, whether Mitsubishi failed to take the identified precautions against the presence of oil on the floor. Secondly, whether oil was present on the floor. Thirdly, whether the plaintiff slipped on the oil. Fourthly, whether that slip caused injury to the plaintiff’s back. A failure to establish anyone of these four ultimate facts or groups of fact was sufficient to defeat Mr Kowalski’s claim.
In my opinion, as the passages that I have set out from the judgment of the District Court indicate, the judge found against Mr Kowalski on the first matter and on the third matter. He has not found in terms that there was no oil on the floor, only that Mitsubishi did not fail to take proper precautions. Nor has he found in terms that the plaintiff did not somehow sustain a back injury on 9 May 1989.
It seems to me that the two matters which I have identified are ‘the actual ground upon which the existence of the right was negatived’. It was not necessary to decide both of them, a decision on either one would have sufficed to defeat the claim. In that sense neither was essential to the conclusion reached. But I think that Dixon J [in Blair v Curran] cannot have intended such a narrow meaning when he referred to ‘the essential foundation or groundwork of the judgment’.
Accordingly, I agree with the judge below that the two findings referred to do give rise to an estoppel. The declaration made by the judge, which is incorporated in the formal order of the court, was that Mr Kowalski is estopped from claiming ‘that he suffered an injury to his lower back on the 9^th day of May 1989 as a consequence of slipping on oil in the rework area whilst in the course of his employment by Mitsubishi ...‘. I consider that that declaration was rightly made.[55]

[52](1997) 69 SASR 75.

[53]Ibid 95.

[54]Ibid.

[55]Ibid 96 (emphasis added).

In Commonwealth of Australia v Cockatoo Dockyard Pty Ltd,[56] Tobias JA (Giles and Santow JJA agreeing) considered Mitsubishi and summarised its effect in the following terms:

209In my view, it would be illogical to surmise that an issue estoppel could not arise simply because two complete but alternative routes may be taken to arrive at the relevant conclusion. Each issue found in favour of Mitsubishi constituted an alternative or separate basis for the District Court’s decision, and each of those bases was capable of supporting that decision in its own right. Neither was only ancillary to the other; thus, as I have noted above, a decision on either of the two issues so determined would have sufficed to defeat the workers’ claim. As a result, while neither was of itself essential to the conclusion reached (in that they were true alternative bases for the decision), both findings were capable of giving rise to an issue estoppel as each was equally indispensable to the worker succeeding.
210As [Doyle CJ] noted when considering the judgment of Dixon J in Blair v Curran, his Honour could not have intended to give a narrow meaning to what he referred to as ‘the essential foundation or groundwork of the judgment’. Accordingly, the fact that neither issue was essential in the narrow sense did not prevent each issue constituting ‘the essential foundation’ of the District Court’s judgment.[57]

[56][2006] NSWCA 322 [205]–[210].

[57]Ibid (emphasis added).

I accept the reasoning in Mitsubishi and Cockatoo Dockyard, which is apposite to the facts of this case. Here, the essential issues for determination by the judge on the equitable transfer objection were as follows:

(1) Was the first transfer effective to convey the equitable interest in the land to Mr and Mrs Mondous (a question of mixed fact and law)?

(2) If so, did the equitable transfer have the result that the trustee was not, by operation of ss 51 and 52 of the Land Tax Act, liable for land tax in respect of the land or was liable for land tax on the land on a disaggregated basis?

To succeed on its equitable transfer objection, the trustee needed to succeed on both issues. To defeat the objection, the Commissioner needed only to persuade the Tribunal that the trustee had failed to establish one or other of them. In the result, as in Mitsubishi, the losing party (the trustee) lost on both issues. On this basis, I find that the alternative findings in this case were legally indispensable to the judge’s decision to reject the equitable transfer objection.

I have considered whether the decision of Chernov JA (Winneke P and Charles JA agreeing) in Glen Eira City Council v Kingston City Council,[58] compels me to reach a different result. In my opinion, it does not. I respectfully adopt the analysis of Glen Eira by Tobias JA in Cockatoo Dockyard.[59]
[58][2001] VSCA 150.
[59][2006] NSWCA 322 [211]–[223].

Before leaving the legal indispensability issue, I should note two other submissions made by Mr and Mrs Mondous to support their contention that the alternative findings were not legally indispensable to the result in the land tax proceeding.

First, reliance was placed upon the obiter dicta comments of Tate JA in the Court of Appeal Reasons that, because the equitable transfer objection was advanced at the hearing before the judge ‘without leave’, it was entertained by the judge without ‘jurisdiction’,[60] because s 26(1)(a) of the Land Tax Act provides:

(1) Upon any review or appeal under this Act —
(a)unless the Court or the Tribunal otherwise orders, the taxpayer shall be limited to the grounds stated in the objection and the Commissioner shall be limited to the grounds upon which he has disallowed the objection.[61]

[60]Court of Appeal Reasons [9].

[61]Emphasis added.

On this basis, Mr and Mrs Mondous contend that a decision made in excess of jurisdiction cannot have been legally indispensable to the judge’s conclusion. I reject this argument. Although the judge did not formally order that the trustee have leave to amend its grounds of objection, the equitable transfer objection was advanced at the hearing without objection by the Commissioner. In other words, the judge permitted or allowed the equitable transfer objection to be argued by consent of the Commissioner. In my opinion, s 26(1)(a) is procedural and not jurisdictional in nature. By permitting the equitable transfer objection to be raised and argued, and determining the objection, the judge impliedly ordered by consent that the trustee was not limited to the buyer in possession objection contained in the trustee’s earlier written form of objection.

Second, Mr and Mrs Mondous contend that, because the equitable transfer objection failed on the legal ground that ss 51 and 52 of the Land Tax Act did not operate as they contended, because of Court of Appeal authority standing in their way, the alternative findings could not be appealed because success on such an appeal would not affect the ultimate determination of the objection. Reliance was placed upon the decision of Gleeson CJ in Murphy v Abi-Saab,[62] where his Honour said:

A practical test of whether a decision is fundamental is to ask whether it is possible to appeal against the finding. Since finality of litigation is a primary object of the principle underlying issue estoppel, it would be incongruous if the doctrine operated so as to force a litigant to appeal in order to displace part of the reasoning of a Court whilst having no intention, and perhaps no hope, of displacing the judgment.

[62](1995) 37 NSWLR 280, 288 (citations omitted).

I do not accept this submission. I agree with Doyle CJ’s interpretation of the above-quoted passage from Abi-Saab in Mitsubishi that:

I take [Gleeson CJ] to mean that it would be unjust if a party, in whose favour the Court decided, was estopped as to issues decided against that party. It could be unjust because that party, having an ultimate judgment in the party’s favour, was unable to appeal and to challenge the adverse findings made.[63]

[63](1997) 69 SASR 75, 94 (emphasis added).

Even on this basis, Doyle CJ doubted whether Gleeson CJ’s statement of a ‘practical test’ was one which could be universally applied.[64]
[64]Ibid.

Further, the trustee in fact appealed against the dismissal of its buyer in possession objection in the land tax proceeding, with the intention of reversing the judge’s decision on that objection. In doing so, the trustee contended for a position which was directly inconsistent with the first transfer having effected a conveyance of the equitable interest in the land, which had not been revoked or otherwise reversed. In other words, having advanced two inconsistent objections before the judge, a deliberate decision was made to accept the judge’s conclusion on one (the equitable transfer objection) and only appeal on the other (the buyer in possession objection).

I turn to consider the privity requirement for the establishment of an issue estoppel.

Were Mr and Mrs Mondous privies of the trustee (ground 2)?

In Blair v Curran, Dixon J stated:

[a] judicial determination directly involving an issue of fact or of law disposes once for all of the issue, so that it cannot afterwards be raised between the same parties or their privies.[65]

[65](1939) 62 CLR 464, 531 (emphasis added).

In Ramsay v Pigram,[66] the plaintiff, Mr Pigram, was injured in a motor vehicle collision with a car driven by a police officer in the course of his employment by the Government of New South Wales. He sued the Government for breach of its duty to him by the negligent conduct of its agent, the police officer. The Government appointed Mr Ramsay as ‘the nominal defendant’ under State legislation. Before Mr Pigram’s action was commenced, the police officer had successfully sued Mr Pigram in the District Court for his injuries caused by the collision, and recovered a judgment based on jury findings that Mr Pigram had caused the collision and the police officer had not been guilty of contributory negligence.
[66](1968) 118 CLR 271.

On this basis, the Government (through Mr Ramsay) pleaded issue estoppel as a complete answer to Mr Pigram’s claims. Mr Pigram’s demurrer to that pleading was upheld in the New South Wales Court of Appeal, on the basis that there was no identity of parties and no relevant privity between the Government and the police officer.[67]
[67]Ibid 275.

An appeal to the High Court was dismissed. Barwick CJ emphasised that an issue estoppel ‘must be mutual’,[68] in the sense that the estoppel operates for and against each party to the earlier proceeding or their privies. Although he acknowledged that there will rarely be any practicality in drawing the distinction between the duty of the employer and the duty of the employee in a motor vehicle collision context, Barwick CJ nevertheless held it was important to maintain a distinction in that case.[69] As a result, an issue estoppel did not arise because the District Court verdict decided only that the police officer had not breached his personal duty to Mr Pigram, and there were no findings as to any breach by the Government of its duty to him.[70] However, recognising that some people might think this result was ‘a very narrow ground’[71] Barwick CJ considered whether the Government was a privy of the police officer:

Of the three classes of privies of blood, of title and of interest, the only one which is submitted and indeed could be submitted to be relevant is that of a privy in interest. But I am unable to conclude that the Government or the Police Department was in this sense a privy of the police officer. The basic requirement of a privy in interest is that the privy must claim under or through the person of whom he is said to be a privy. Here it is quite clear that the Government had no interest in the action between the respondent and the police officer: nor can it be said that the action brought by the police officer was brought by him in any sense on behalf of the Government or that in relation to the defence of contributory negligence the respondent could have been treating the Government as the real ‘defendant’ to that claim. In every respect the action between the respondent and the police officer was personal to each of them, neither being in any sense in relation to the action or any of the issues involved in it, representative of another. Nor [in the second proceeding] can it be said that the Government in any sense claims under or in virtue of the police officer or of any right of his, or that it derives any relevant interest through him.[72]

[68]Ibid 276.

[69]Ibid 278.

[70]Ibid 278–9.

[71]Ibid 279.

[72]Ibid (emphasis added).

In Tomlinson v Ramsey Food Processing,[73] the High Court considered whether Mr Tomlinson was privy in interest with the Fair Work Ombudsman in earlier District Court proceedings. The plurality judgment commenced by quoting what was described as the ‘pithy’[74] and ‘comparatively narrow principle’[75] in Ramsay v Pigram, that the ‘basic requirement of a privy in interest is that the privy must claim under or through the person of whom he is said to be a privy’,[76] and continued:

33Consistently with the rationale for the principle, the explanation demonstrates that a party to a later proceeding (A) can be privy in interest with a party to an earlier proceeding (B) on either of two bases. One basis is that A might have had some legal interest in the outcome of the earlier proceeding which was represented by B, or that B has some legal interest in the outcome of the later proceeding which is represented by A. The extent to which the representation by A or B will be sufficient to bind the other is the critical issue which will be explored later in these reasons. The other basis is that, after that earlier proceeding was concluded by judgment, A might have acquired from B some legal interest in respect of which B would be affected by an estoppel which A then relies on in the later proceeding.
34Other bases on which a person might potentially be privy in interest with a party need not be explored. For present purposes, it is sufficient to focus on one operation of the first basis illustrated by the application of the principle in Ramsay v Pigram: where A has a legal interest in the outcome of the earlier proceeding which was represented by B.
35Subsequent applications of the principle in Ramsay v Pigram have for the most part correctly emphasised that the interest of the privy must in each case be a legal interest: an economic or other interest on the part of A in the outcome of the earlier proceeding is insufficient. Those applications have also correctly emphasised that, absent a legal interest, such influence as A might have had over the conduct of the earlier proceeding is irrelevant even if that influence amounted to control. Thus, directors of a company, who also held shares in its parent company, were held not to be estopped from pursuing a later action to recover damages to compensate for a loss on their own account in circumstances where they had stood to gain financially from an earlier action by the company claiming damages for loss on the company’s account. That was despite the directors having been found to have exercised effective control over the company’s conduct of that earlier action. The constraint on the conduct of A in such circumstances lies not in an estoppel but, in an appropriate case, in abuse of process.
…
40Traditional forms of representation which bind those represented to estoppels include representation by an agent, representation by a trustee, representation by a tutor or a guardian, and representation by another person under rules of court which permit representation of numerous persons who have the same interest in a proceeding. To those traditional forms of representation can be added representation by a representative party in a modern class action. Each of those forms of representation is typically the subject of fiduciary duties imposed on the representing party or of procedures overseen by the court (of which opt-in or opt-out procedures and approval of settlements in representative or class actions are examples), or of both, which guard against collateral risks of representation, including the risk to a represented person of the detriment of an estoppel operating in a subsequent proceeding outweighing the benefit to that person of participating in the current proceeding.[77]

[73](2015) 256 CLR 507.

[74]Ibid 521 [30].

[75]Ibid 519 [27].

[76]Ibid 515 [17], quoting Ramsay v Pilgrim (1968) 118 CLR 271, 279.

[77]Ibid 521–2 [33]–[35], 524 [40]. (emphasis added) (citations omitted).

Nettle J delivered a separate concurring judgment. Nettle J stated:

95It is established by the decided cases that privity of interest exists where party and privy share the same interest, in the sense that they are equally entitled to assert a discrete legal right; or where they share an interest by reason of an established legal or equitable relationship, such as agency or trusteeship; or, in some of the more recently decided cases, where the privy claims ‘under or through’ or ‘on account of or for the benefit of’ the party in a manner which is sufficiently analogous to one or other of the same interest or established legal or equitable relationship cases to warrant its inclusion. But the problem is in deciding what is sufficiently analogous.
96Plainly, ‘on account of or for the benefit of’ includes cases where a trustee has sued or defended on behalf of a beneficiary and where a party to a proceeding relies on the putative privy’s title.
…
98The approach in this country, therefore, remains one of identifying characteristics of a relationship between party and privy which, although not amounting to a shared same interest or established legal or equitable relationship like agency or trusteeship, are sufficiently analogous to the established categories of sufficient connection to warrant inclusion in the concept. And, for present purposes, the important characteristics of the established forms of representation which emerge from the decided cases appear to be that a principal is generally able to control the conduct of an agent, and that the imposition of fiduciary duties on certain kinds of representatives has the effect of guiding the representative’s conduct and providing remedies to the principal on default.[78]

[78]Ibid 539 [95]–[96], 540 [98] (emphasis added).

The Tribunal’s lack of any legal analysis on the privity issue has been noted. The Commissioner nevertheless contends that the Tribunal’s conclusion on the privity issue was correct. For the reasons given below, I do not accept that Mr and Mrs Mondous were privies of the trustee in the land tax proceeding. Nor can it be said that Mr and Mrs Mondous’s objections in the stamp duty proceeding amount to claims by them under or through the trustee.

The Commissioner’s contentions commenced with a ‘threshold issue’ expressed in its written submissions in the following terms:

In any event, there is a threshold issue here. To the extent that the question of privity is one of fact and degree, or at least not one of law, the ground is incompetent. Mr and Mrs Mondous did not dispute below that there was privity. It is difficult therefore to accuse the Tribunal of any error, let alone legal error. The Tribunal’s privity finding was open to it on the evidence. The evidence emphasised by the Tribunal was that [Mr and Mrs Mondous controlled the trustee as] their family trustee company …[79]

[79]Commissioner’s Written Submissions [41] including the footnote.

I do not accept that there is such a threshold issue. As I have said, the Tribunal member did not in his reasons consider any of the relevant legal principles to be applied in determining whether a person is a privy of a party to a previous proceeding for issue estoppel purposes. The issue is clearly one of mixed fact and law, and the Tribunal member’s reasons were obviously wrong. The mere fact that Mr Mondous controlled the trustee at all relevant times during the land tax proceeding is, on its own, plainly insufficient to make him a privy of the trustee for the purposes of the land tax proceeding.[80]
[80]Tomlinson v Ramsey Food Processing Pty Ltd (2015) 256 CLR 507, 522 [35].

The Commissioner contends that Mr and Mrs Mondous were privies of the trustee on the following basis:

38.As explained recently by the High Court in Tomlinson, a party to litigation (M) will be privy in interest with a party to earlier litigation (K) if M had some legal interest in the outcome of the earlier litigation that was represented by K; provided that this representation by K was as agent, trustee, tutor or guardian, or as a fiduciary otherwise, or was otherwise representation of such a nature as to have protected M from being subjected to an estoppel unjustifiably. For example, M might have had no opportunity to present evidence or otherwise to exercise control over K’s presentation of the claim in the earlier litigation. On the other hand, M might have authorised the assertion of the claim, from which it stood to benefit. In the latter situation, the justice of binding M to an estoppel is apparent — with the benefit of the claim comes the burden of the estoppel.
39.[The trustee] and Mr and Mrs Mondous are privies, in respect of the relevant finding. When the relevant claim was put in the earlier litigation, [the trustee] was a family company owned and controlled by Mr Mondous. It was also trustee of the Mondous family trust, thereby owing fiduciary obligations to the Mondouses. They authorised the claim that was put. It was put by [the trustee] on their behalf. They had the opportunity to give evidence. Mr Mondous in fact chose to do so. Plainly, Mr and Mrs Mondous stood to benefit, legally, from the acceptance of the claim, as the would-be beneficial owners of the land. [the trustee] represented that legal interest. The justice of binding the Mondouses to an estoppel is readily apparent.
40.Incidentally but unnecessarily, acceptance of the claim would also have led to Mr and Mrs Mondous being liable directly for the land tax, as outlined above, albeit tax potentially calculated on a more beneficial basis. [The trustee] represented that legal interest of the Mondouses too.[81]

[81]Commissioner’s Written Submissions [38]–[40] (emphasis added) (citations omitted).

These contentions may be summarised as follows:

(1) The Commissioner accepts both the need to identify a legal interest (which includes an equitable interest) of Mr and Mrs Mondous in the outcome of the land tax proceeding, and to establish that such interest was represented by the trustee in that proceeding.[82]
[82]Ibid [38].

(2) The Commissioner contends that Mr and Mrs Mondous’s legal interest was constituted by the following two matters:

(a) They ‘stood to benefit, legally, from the acceptance of the [equitable transfer objection], as the would-be beneficial owners of the land’;[83] or
[83]Ibid [39].

(b) The land tax payable by them if the equitable transfer objection succeeded would be ‘tax potentially calculated on a more beneficial basis’.[84]
[84]Ibid [40].

(3) The trustee represented those legal interests because:

(a) it was a trustee of a family discretionary trust controlled by Mr Mondous which owed fiduciary duties to Mr and Mrs Mondous as objects of the discretionary power under the trust deed;[85]
[85]Ibid [39].

(b) Mr and Mrs Mondous authorised the trustee to make the equitable transfer objection in the land tax proceeding;[86]
[86]Ibid.

(c) Mr and Mrs Mondous had the opportunity to give evidence and otherwise control the trustee’s conduct of the land tax proceeding; and

(d) it was therefore just that Mr and Mrs Mondous should be bound by an issue estoppel in respect of the alternative findings because they stood to benefit from acceptance of the equitable transfer objection.[87]

[87]Ibid.

I do not accept these contentions. In my opinion, Mr and Mrs Mondous had no legal interest in the outcome of the land tax proceeding. Mr Mondous’s control of the trustee’s conduct of the land tax proceeding did not make him a privy of the trustee in that proceeding, and there is no evidence that Mrs Mondous authorised the trustee to make the equitable transfer objection or otherwise had any role in the manner in which the trustee conducted the land tax proceeding. My reasons follow.

It is first necessary to consider an anterior question, namely, whether the court, in determining the privity issue, is bound to accept the alternative findings made by the judge or should determine the legal effect of the first transfer for itself. In my opinion, the court should determine the issue for itself. However, it does not matter in this case because, as appears below, Mr and Mrs Mondous were not privies of the trustee in the land tax proceeding on either basis.

First, the alternative findings were wrong. For the reasons given below, I have concluded that:

(1) The first transfer recorded and constituted both an effective exercise of the trustee’s power to distribute the land to Mr and Mrs Mondous in specie and an instrument capable of registration under the Transfer of Land Act.

(2) Upon and following execution of the first transfer, the trustee held the land on a bare trust for Mr and Mrs Mondous.

(3) That legal position could only be altered by an instrument in writing signed by Mr and Mrs Mondous. No such instrument has been identified by the Commissioner. The position could not be ‘revoked’ by conduct.

Second, although the bare trust relationship between the trustee and Mr and Mrs Mondous falls within one of the traditional categories of privity,[88] it cannot be said that the trustee was representing Mr and Mrs Mondous’s interests, as beneficial owners of the land, in seeking to expunge or reduce the trustee’s land tax liability. The purpose of the objections was to leave Mr and Mrs Mondous in the exact position they had been in during the relevant tax years. Following the Notice of Disposition, they had been assessed as liable for land tax on the land and had paid that tax. The trustee was not seeking to reverse that position. Nor had Mr and Mrs Mondous objected to their land tax assessments. By its objections, the trustee sought only to eliminate or reduce its own liability to pay land tax on the land. Thus, the land tax objections were pursued only for the trustee’s benefit, albeit in its capacity as trustee of the trust with fiduciary duties to all potential objects of its power of appointment as a class.
[88]Tomlinson v Ramsay Food Processing Pty Ltd (2015) 256 CLR 507, 524 [40] (plurality), 540 [98] (Nettle J).

Further, the result in the land tax proceeding could have had no effect on Mr and Mrs Mondous’s beneficial ownership of the land. The trustee was, therefore, not representing Mr and Mrs Mondous as beneficial owners of the land in any way. It was simply objecting to the basis upon which it had been assessed for land tax.

The same result follows if the judge was right in making the alternative findings. The effect of the judge’s findings as a whole is that Mr and Mrs Mondous were mere objects of discretionary trust. It is clear that this did not give them any legal or equitable interest in the assets of the trust.[89] In these circumstances, the mere fact that Mr Mondous (and not Mrs Mondous) controlled the trustee’s conduct of the land tax proceeding is insufficient to make Mr and Mrs Mondous privies of the trustee in that proceeding. Control of a corporate litigant, even when coupled with a shareholding in the company, is insufficient for the purposes of making the controller a privy of the company.[90] There is no material distinction to be drawn between a case such as the present, where the control is over a corporate trustee of a discretionary trust, and the director and shareholder circumstances discussed by the plurality in Tomlinson v Ramsay Food Processing.[91]
[89]Kennon v Spry (2008) 238 CLR 366, 393–4 [74]–[78] (French CJ), 408 [125] (Gummow and Hayne JJ), 417–8 [160] (Heydon J).
[90]Tomlinson v Ramsay Food Processing Pty Ltd (2015) 256 CLR 507, 522 [35]; Sheraz Pty Ltd v Vegas Enterprises Pty Ltd (2015) 319 ALR 709, 730–2 [102]–[111].
[91]Tomlinson v Ramsay Food Processing Pty Ltd (2015) 256 CLR 507, 522 [35].

An issue estoppel has not been established. Accordingly, I turn to consider the Commissioner’s contention, to the effect that the Tribunal Member was correct to dismiss Mr and Mrs Mondous’s objections in the stamp duty proceeding on the ground that it would be an abuse of process for them to re-litigate the alternative findings.

Is challenging the alternative findings an abuse of process?

If Mr and Mrs Mondous were not privies of the trustee in the land tax proceeding, the facts may nevertheless indicate that they, or Mr Mondous at least, are acting in an abuse of process by seeking to challenge the alternative findings in the stamp duty proceeding. As noted in the plurality judgment in Tomlinson v Ramsey Food Processing, abuse of process ‘is inherently broader and more flexible than [issue] estoppel … [and] is capable of application in any circumstances in which the use of a court’s procedures would be unjustifiably oppressive to a party or would bring the administration of justice into disrepute.’[92]
[92]Ibid 518–19 [25]. See also Effem Foods Pty Ltd v Trawl Industries of Australia Pty Ltd (in liq) (1993) 43 FCR 510, 543 (Burchett J).

In this case, the Commissioner contends that it would be an abuse of process for Mr and Mrs Mondous to be permitted to contend in the stamp duty proceeding that the alternative findings were wrong. In summary, the Commissioner contends that Mr and Mrs Mondous’s contentions to this effect involve them in re-litigating the issues leading to those findings, in circumstances where:

(1) Mr Mondous was in complete control of the trustee’s conduct in the land tax proceeding; and

(2) that conduct included Mr Mondous, presumably on legal advice, instructing the trustee’s lawyers to abandon the equitable transfer objection on appeal — and appeal only on the inconsistent buyer in possession objection. This involved an admission that the alternative findings were correct.

For the following reasons, I do not accept the Commissioner’s submissions in this regard.

First, for the reasons given below, the alternative findings were wrong. If that be the case, it would be unjust to now shut out Mr and Mrs Mondous from re-litigating those findings in circumstances where they were not parties to the land tax proceeding or privies of the trustee in that proceeding.[93]
[93]Cf Haines v Australian Broadcasting Corporation (1995) 43 NSWLR 404, 414.

Second, the land tax proceeding was heard about 14 years after the second transfer was registered. However, the Commissioner had not then issued an amended stamp duty assessment. Accordingly, in making tactical decisions as to the objections to be pursued by the trustee in the land tax proceeding, Mr Mondous was deprived of the opportunity to consider his and Mrs Mondous’s stamp duty position.

Third, the trustee paid stamp duty when it acquired the Berwick land from which the land was later subdivided. It acquired that land as trustee of the trust. When the Notice of Disposition was given to the Commissioner, together with a copy of the trust deed, the Commissioner was persuaded that no additional stamp duty was payable by Mr and Mrs Mondous, presumably on the basis that the disposition was a distribution of the land in specie to them by the trustee. In these circumstances, if the first transfer remained effective as at the time the second transfer was lodged for registration, it is arguable that the second transfer is exempt from stamp duty. It would not unduly oppress the Commissioner, or bring the administration of justice into disrepute, to allow Mr and Mrs Mondous the opportunity to have that argument determined by a court.

Fourth, the position of Mrs Mondous must be considered separately from that of Mr Mondous in any event. Even if Mr Mondous’s control of the trustee’s conduct in the land tax proceeding gave rise to an issue estoppel against him, or provided good grounds to conclude that he was engaging in an abuse of process by prosecuting his objection in the stamp duty proceeding, Mrs Mondous’s position is in stark contrast. She is currently the owner of a one half share of the land as a tenant in common. The transfer of land to her should be assessed in that context. Given the lack of any evidence of her involvement in the land tax proceeding, it cannot be an abuse of process for her to now seek to have her day in court and dispute the correctness of the alternative findings.

Taking all these factors together, I am not satisfied that it would be unjustifiably oppressive to the Commissioner, or bring the administration of justice into disrepute, for Mr and Mrs Mondous to contend in the stamp duty proceeding that the alternative findings were wrong. I find that the prosecution by Mr and Mrs Mondous of their objections in the stamp duty proceeding involves no abuse of process.

Did the first transfer constitute a distribution in specie (ground 3)?

This ground of appeal challenges the alternative findings. As I have said, the alternative findings were in my opinion wrong. My reasons follow.

The Commissioner contends that the judge in the land tax proceeding, and the Tribunal in the stamp duty proceeding, correctly held that the first transfer did not evidence a distribution of the land in specie to Mr and Mrs Mondous by way of trust distribution, for the following reasons.

First, the Commissioner contends that the consideration stated in the first transfer — being Mr and Mrs Mondous’s ‘entitlement to a distribution of corpus pursuant to the Mondous Family Trust Deed’ — was plainly incorrect as a matter of law, because Mr and Mrs Mondous had no such entitlement under a discretionary trust deed. They were mere objects of a discretionary trust.

I do not accept this submission. Although I accept that there was no such entitlement in the absence of a decision by the trustee to make a distribution, or transfer, the first transfer must be looked at in a common sense way and given a business-like interpretation. It is a formal instrument executed by the trustee under its common seal affixed in the presence of Mr and Mrs Mondous. In the context of the relevant provisions of the trust deed (set out below), the reference in the first transfer to Mr and Mrs Mondous’s ‘entitlement’ would have been understood by them as recording their decision (as directors of the trustee) to transfer the land to themselves. Read in this way, the first transfer does two things: (1) it records a decision by the trustee to distribute the land in specie to Mr and Mrs Mondous; and (2) it constitutes a transfer of the land to them in a registrable form under the Transfer of Land Act.

There was no reason for the trustee to execute the first transfer if no decision had been made to distribute the land to Mr and Mrs Mondous. The Commissioner’s interpretation assumes that the stated consideration is intended to be a summary of the entitlements of Mr and Mrs Mondous under the terms of the trust deed. There is no evidence to support that assumption, and it makes no commercial sense.

This interpretation of the first transfer is supported by the general principle of contract interpretation, that ‘parties are unlikely to have intended to agree to something … legally ineffective’.[94]
[94]Bank of Credit and Commerce International SA v Ali [2002] 1 AC 251, 269 (Lord Hoffmann), quoted in Lewison, The Interpretation of Contracts (Sweet & Maxwell, 6^th ed, 2015) at 425, para [7.16].

Second, the Commissioner contends that the judge was correct in searching for a separate document recording the trustee’s decision to distribute the land in specie to Mr and Mrs Mondous. Reliance was placed upon the decision of Mr GAA Nettle (as his Honour then was) in Re Ralara Pty Ltd v Comptroller of Stamps (Vic).[95] The Commissioner contends that this decision stands for the proposition that it is the exercise of a trustee’s power of appointment that creates the equitable entitlement in the appointee, which entitlement is then ‘given effect to, not effected, by the transfer instrument’.[96] While I accept that there must be a separate decision by the trustee of a discretionary trust to distribute an asset to a beneficiary, Ralara does not stand for the proposition that such a decision must be recorded in or constituted by a document which is separate from the formal transfer instrument (in this case, the first transfer).
[95](1992) 24 ATR 1133.
[96]Commissioner’s Written Submissions [46] (emphasis in original).

Further, whether or not a separate document recording or constituting the exercise of a trustee’s power is necessary is governed by the terms of the trust deed at issue. In this case, the trust deed permits, but does not require, such a document. The relevant provisions of the trust deed are as follows:

(1)‘the Trust Fund’ is defined to include ‘property’ transferred to the trustee as an addition to the Trust Fund. This clearly includes the land.
(2)A determination by the trustee to pay, apply, set aside or accumulate income in any financial year ‘may’ be made ‘by oral declaration or by written statement whether or not published to any person’ (emphasis added) — clause 3(2)(f).
(3)Subject to express provision to the contrary, every discretion vested in the trustee is absolute and uncontrolled — clause 10.
(4)The discretion of the trustee is limited by the need to obtain the consent of the Guardian (Mr Mondous) before exercising the ‘restricted powers’ contained in sub-clauses 6(1), (2) and (3) — clause 10(3), read together with the definition of ‘restricted powers’ in clause 10(7).
(5)By clause 6(1), the trustee had a discretion, subject only to the consent of Mr Mondous as Guardian, to ‘convey or transfer the whole or any part of the Trust Fund … to any beneficiary for his own use and benefit’ (emphasis added).
(6)By clause 17(2), any exercise by the trustee of any power, discretion or authority conferred by the deed:
may be made (but without derogating from anything contained in clause 3(2)(f) hereof) –
(a) in writing signed [by the trustee]; or
(b) by a resolution duly passed at a meeting of [the trustee] or;
(c)in the case of a sole corporate Trustee in the manner set out in sub-clause [17(4)] … (emphasis added)

(7)Clause 17(4) provides that a corporate trustee, as in this case:
may exercise or concur in exercising any discretion or power hereby conferred on the Trustee by a resolution of such corporation or company or by a resolution of its Board of Directors or governing body … (emphasis added)

In my opinion, there is nothing in the trust deed which requires the trustee to make or record the exercise of its power and discretions by a document which is separate from an instrument or other document giving effect to the decision to exercise a power or discretion. It may do so, but it is not required to do so. In any event, the exercise of the trustee’s power and discretion to transfer the land to Mr and Mrs Mondous was made in writing and signed by the trustee when it affixed its common seal to the first transfer, as contemplated by clause 17(2)(a) of the trust deed.

This application for leave to appeal is not, however, an application for leave to appeal from the alternative findings made by the judge. It is an application for leave to appeal from the decision of the Tribunal in the stamp duty proceeding. While the Tribunal member summarised the alternative findings in his reasons,[97] and found that Mr and Mrs Mondous were estopped from asserting against the Commissioner that they obtained equitable interests in the land under the first transfer,[98] the Tribunal member nevertheless gave his own reasons as to why the first transfer did not convey beneficial ownership in the land to Mr and Mrs Mondous. The Tribunal member’s further reasons were as follows.
[97]Stamp Duty Reasons [24]–[26].
[98]Ibid [32].

First, the first transfer was mistakenly expressed as a transfer by the trustee to Mr and Mrs Mondous of ‘all his estate or interest’ in the land.[99] The obvious mistake is of no significance. It provides no reason for denying the legal effect of the first transfer.
[99]Ibid [34], [38] (emphasis added).

Second, the Tribunal member reasoned that the operative words of the first transfer — ‘the [trustee] for the consideration expressed transfers to the transferee all his estate and interest in the fee simple in the land described’ — were ‘inapt to express the trustee’s creation rather than transfer of beneficial interests under the [trust deed]’.[100] In the Tribunal member’s view:

When pursuant to clause 6 of the [trust deed] the trustee makes a distribution of trust corpus, and interest in trust corpus is created rather than transferred.[101]

[100]Ibid [36].

[101]Ibid [37] (emphasis added).

In my opinion, this reason does not withstand scrutiny. Clause 6 of the trust deed expressly states that the trustee has the power to ‘convey or transfer the whole or any part of the Trust Fund’. The suggested distinction between creation and transfer or beneficial ownership of the land appears to coincide with the judge’s approach in the land tax proceeding, namely, that it was necessary to have documentary proof of the trustee’s decision under clause 6(1) which was separate and distinct from the first transfer. For the reasons given above, there is no requirement for there to be a separate document.

Third, the Tribunal member stated that: ‘Nothing was transferred in the 28 December 1990 distribution transaction. No relevant interest existed or was previously owned by the trustee.’[102] The Tribunal member cited two authorities for these reasons: DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties (NSW)[103] and Ford & Lee: The Law of Trusts.[104] I have read the DKLR and the extract from Ford & Lee. Neither supports the propositions contended for by the Tribunal member as quoted above. The pinpoint reference to DKLR is from the dissenting judgment of Brennan J. It does not support the Tribunal member’s reasons. Nor can I find any support for those reasons in the referenced paragraphs from Ford & Lee. Doing the best I can to interpret the Tribunal member’s brief reasons in this regard, they appear to relate to the suggested distinction between creation and transfer of beneficial ownership.
[102]Ibid [38].
[103](1982) 149 CLR 431, 474 (Brennan J).
[104]Online and loose-leaf, Thomson Reuters 2016, at [1.8750]–[1.8850].

I conclude that the Tribunal member erred in law in concluding that the first transfer did not convey beneficial ownership of the land to Mr and Mrs Mondous.

Is the second transfer exempt from stamp duty (ground 5)?

Exemption (10) is set out above. As I have said, there is no issue in this case that Mr and Mrs Mondous were beneficiaries of the trust when the trustee acquired the Berwick land, from which the land is derived by subdivision, and paid stamp duty on the related transfer of land. However, in order to fall within Exemption (10), the conveyance of the land to Mr and Mrs Mondous must have been to them in their capacity as beneficiaries, and not in their capacity as purchasers.[105]
[105]Re Ralara Pty Ltd v Comptroller of Stamps (Vic) (1992) 24 ATR 1133, 1140–2 [16]–[21].

In Re Ralara, Mr GAA Nettle (as his Honour then was) decided that:

As I now read Exemption (10) it is capable of applying to a transfer from a trustee to any beneficiary, provided the transfer is effected in accordance with a power of appointment contained in the trust instrument or in satisfaction of a beneficial entitlement created by the trust instrument. Thus I consider that Exemption (10) is capable of applying to a transfer from a trustee to the object of a discretionary trust if the transfer is made pursuant to a power of appointment in favour of the object.[106]

[106]Ibid 1142 [22] (emphasis added).

Earlier in his reasons, his Honour decided that Exemption (10) has no application to ‘conveyances on sale’ by a trustee to a beneficiary.[107] On this basis the Tribunal member reasoned that Exemption (10) had no application to the second transfer because the second transfer did not, on its face, state that it was a transfer to Mr and Mrs Mondous as ‘beneficiaries’. The absence of those words on the second transfer, combined with the fact that a consideration of $120,000 was stated, meant that Exemption (10) did not apply.[108]
[107]Ibid 1140–2 [16]–[21].
[108]Stamp Duty Reasons [53]–[55].

On appeal, the Commissioner accepts that it is unnecessary for the second transfer to specifically state that it is a transfer of land to Mr and Mrs Mondous in their capacity as ‘beneficiaries’. However, the Commissioner contends that the stated consideration of $120,000 in the second transfer is consistent only with it being a transfer of land based on an agreement by the trustee to sell the land to Mr and Mrs Mondous, rather than a distribution to a beneficiary; and the evidence shows that Mr Mondous believed and intended that the second transfer was giving effect to the backdated contract of sale. The Commissioner’s submissions involved the following steps.

First, in order for Mr and Mrs Mondous to succeed in their objection based on Exemption (10), they need to establish that the consideration stated in the second transfer is mistaken. In effect, that involves a claim for rectification of the document. Such a claim could not succeed, given that Mr Mondous was on both sides of the transaction and he believed and intended that the second transfer was giving effect to the backdated contract of sale.

Second, Mr Mondous’s own evidence, when read as a whole, demonstrated that the first transfer was not preceded by a binding decision by the trustee to transfer the land to Mr and Mrs Mondous. Instead, the court should infer that the first transfer was executed and submitted to the Comptroller of Stamps for opinion ‘in case [Mr Mondous] decided to go down that path’, or to be ‘held in escrow on the possibility’ that the first transfer would be lodged for registration.

Third, consistent with the judge’s reasoning in the land tax proceeding, the evidence establishes that Mr Mondous intended to revoke, renounce or abandon any effective distribution of the land in specie to Mr and Mrs Mondous under the first transfer.

Fourth, accepting that the backdated contract of sale was a legally ineffective sham, the second transfer was nevertheless consistent with the existence of a prior oral agreement between the trustee and Mr and Mrs Mondous (in effect, an agreement by Mr Mondous with himself and his wife) for the sale of the land at a purchase price of $120,000. That was the case advanced by the trustee, on Mr Mondous’s instructions, in the unsuccessful application to the Court of Appeal for leave to appeal in the land tax proceeding. I note that the Court of Appeal did not determine this issue because it had not been raised at first instance before the judge.[109] Further, the judge’s finding in the land tax proceeding that the backdated contract of sale was a sham was not challenged by the trustee in this application for leave to appeal.
[109]Court of Appeal Reasons [25]–[26].

I do not accept these contentions. My reasons follow.

First, I do not accept that the legal nature of the transaction giving rise to the second transfer should be determined by Mr Mondous’s belief and intention. That belief and intention is not in dispute. However, it is clear that Mr Mondous’s belief and intention were erroneous, for the following reasons:

(1)For the reasons given above, the first transfer constituted a valid conveyance of the equitable interest in the land to Mr and Mrs Mondous.
(2)In these circumstances, in the absence of a re-transfer of the equitable interest in the land back to the trustee, constituted by a document effecting such a re-transfer which was signed by the trustee,[110] the trustee had no interest in the land to sell to Mr and Mrs Mondous. To the contrary, as a bare trustee of the land for Mr and Mrs Mondous, the trustee was under an obligation to transfer the legal interest to Mr and Mrs Mondous for no consideration.
(3)In these circumstances, the reference in the second transfer to a transfer consideration of $120,000, although consistent with a sale, does not reveal the legal operation of the second transfer.

[110]Property Law Act 1958 s 53(1)(a).

In Commissioner of Stamp Duties (Queensland) v Hopkins,[111] the High Court considered whether a written instrument constituted a ‘settlement’ for the purposes of stamp duty legislation. The majority (Rich and Dixon JJ) held that it did. Latham CJ dissented. But all three judges agreed that extrinsic evidence is admissible to determine the real nature of the underlying transaction to which a dutiable instrument relates, for the purposes of ascertaining the amount of stamp duty which is payable on that instrument.
[111](1945) 71 CLR 351.

Dixon J accepted that the court can ‘look outside the instrument’ to ascertain its operation for stamp duty purposes.[112] He accepted the statement of the rule in Halsbury’s Laws of England that:

The question whether an instrument is duly stamped, or as to what stamp is required, is in general determined by what appears upon the face of it to be its legal operation when first executed so as to capable of that operation, but the court is not bound by the apparent tenour of an instrument, and will decide according to the real nature of the transaction, receiving, if necessary, extrinsic evidence.[113]

[112]Ibid 378.

[113]Ibid (emphasis added).

Rich J agreed. He stated that the instrument in question:

does not stand by itself, and to treat it as doing so would give a wrong idea of the nature and course of the transaction of which it formed only a part. To understand the transaction, it is necessary to take into account certain matters extrinsic to the document.[114]

[114]Ibid 369.

Latham CJ agreed on this issue and stated:

It is true that…Stamp Duty Acts impose duties upon instruments and not upon transactions. It is obvious that you can stick a stamp or impress a stamp upon an instrument, but not upon a transaction. But, in order to determine whether an instrument is dutiable, it is nevertheless necessary to ascertain the legal operation of the instrument, i.e., to determine the nature of the transaction which it accomplishes. Thus, for example, if a person purported to make a conveyance or settlement of land in which he had no interest whatever, the instrument would not be dutiable as a conveyance or settlement, because it would not produce any legal effect whatever in relation to the property with which it purported to deal…[115]

[115]Ibid 360 (emphasis added).

In this case, for the reasons given, the second transfer accomplished only a transfer of the trustee’s legal interest in the land to Mr and Mrs Mondous. That transfer was in accordance with the trustee’s obligation arising from the execution of the first transfer. The fact that Mr Mondous may have believed, for land tax purposes, that the trustee was entitled to sell the legal and beneficial interests in the land to him and his wife is not to the point. In the absence of a re-transfer of the equitable estate by Mr and Mrs Mondous to the trustee, the purported transfer of the land by way of sale, as recorded in the second transfer, had no legal effect.

Second, I reject the Commissioner’s contention that, because from March 1991 Mr Mondous commenced giving consideration to not proceeding with the first transfer, and later decided not to do so, the court should infer that the first transfer does not evidence a binding decision by the trustee to transfer the land to Mr and Mrs Mondous under clause 6(1) of the trust deed. The evidence clearly establishes that there was a firm intention to proceed with the first transfer until March 1991, and reconsideration after that time cannot support an inference that, at the time it was executed, the first transfer was meant to be no more than a possible means of transferring the land to Mr and Mrs Mondous by way of trust distribution.

Third, Mr Mondous’s intention to abandon the trust distribution under the first transfer and, instead, proceed with the backdated contract of sale in order to support the trustee’s buyer in possession objection to the amended land tax assessment, does not alter the legal position as to beneficial ownership of the land. As I have said, that result could only have been accomplished by a re-transfer of the equitable interest in the land to the trustee by an instrument signed by Mr and Mrs Mondous. The Commissioner did not identify any such instrument.

Fourth, I do not accept that the court should infer that there was an oral agreement between the trustee and Mr and Mrs Mondous for the sale of the land at a purchase price of $120,000 and that the second transfer gave legal effect to that prior oral agreement. Taking the evidence as a whole, it is clear that Mr Mondous believed the second transfer was giving effect to the backdated contract of sale as varied. For the reasons given, that belief and intention is of no legal consequence for the legal operation of the second transfer. Any oral agreement to the effect of the backdated contract of sale would not alter this position.

Before stating my conclusion on this ground of appeal, I should note a finding of law by the Tribunal that it is ‘not possible to transfer only a bare legal interest under the Torrens system’,[116] and that, accordingly, a ‘construction’ of the second transfer as conveying only the ‘bare legal title’ was ‘not sustainable’.[117] This aspect of the Tribunal’s reasons was not debated on this application, and none of the authorities cited by the Tribunal were included in the book of authorities provided by the parties. I have, however, considered them. Although I accept that it may not be possible for the beneficial owner of land under the Torrens system to transfer only ‘the bare legal interest’, while retaining the equitable interest,[118] that is not what has happened in this case. The trustee acquired the land as trustee of the trust. By the first transfer, the trustee transferred the equitable estate to Mr and Mrs Mondous and, as a result, thereafter held the land upon a bare trust for them. By transferring the legal estate to Mr and Mrs Mondous under the second transfer when registered under the Transfer of Land Act, the trustee merely fulfilled its equitable obligation to do so.
[116]Stamp Duty Reasons [45].
[117]Ibid [47].
[118]DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties (NSW) (1982) 149 CLR 431, 442 (Gibbs CJ), 463 (Aickin J), 473–4 (Brennan J).

I conclude that the legal operation of the second transfer was to do no more than transfer the land into Mr and Mrs Mondous’s names as registered proprietors for the purposes of the Transfer of Land Act. In other words, it enabled the Register of Titles to reflect Mr and Mrs Mondous’s beneficial ownership of the land since the execution of the first transfer.

Conclusion and orders

For the above reasons:

(1) The Tribunal erred in law in finding that Mr and Mrs Mondous were privies of the trustee. The issue estoppel finding cannot stand.

(2) The Commissioner’s alternative contention based on abuse of process has not been established.

(3) The Tribunal erred in law in finding that the first transfer did not effect a transfer of the equitable estate in the land to Mr and Mrs Mondous.

(4) The Tribunal erred in law in finding that the second transfer gave effect to a sale of the land to Mr and Mrs Mondous.

(5) The Tribunal erred in law in failing to find that the second transfer constituted a conveyance of the land to Mr and Mrs Mondous in their capacity as beneficiaries of a bare trust, which trust arose from the transfer of the equitable estate in the land to them under the first transfer, and that Exemption (10) therefore applied.

Leave to appeal is granted. The appeal is allowed. In lieu of the Tribunal’s decision, it will be ordered that Mr and Mrs Mondous’s objection to the notice of stamp duty assessment no. 6974401 and dated 29 September 2014 will be allowed; with the result that the second transfer is exempt from stamp duty. I will hear the parties as to the precise form of orders and as to costs.

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[2017] VSC 416

26 July 2017