Rojoda Pty Ltd and Commissioner Of State Revenue
[2017] WASAT 35
•23 FEBRUARY 2017
ROJODA PTY LTD and COMMISSIONER OF STATE REVENUE [2017] WASAT 35
| STATE ADMINISTRATIVE TRIBUNAL | Citation No: | [2017] WASAT 35 | |
| DUTIES ACT 2008 (WA),TAXATION ADMINISTRATION ACT 2003 (WA) | |||
| Case No: | CC:1944/2015 | 13 DECEMBER 2016 | |
| Coram: | JUDGE T SHARP (DEPUTY PRESIDENT) | 23/02/17 | |
| 47 | Judgment Part: | 1 of 1 | |
| Result: | Commissioner's decision and assessment affirmed | ||
| A | |||
| PDF Version |
| Parties: | ROJODA PTY LTD COMMISSIONER OF STATE REVENUE |
Catchwords: | Duties Assessment Partnership Partnership assets Dissolution of partnership Winding up of partnership Nature of partner's proprietary rights in partnership assets Declaration of trust in partnership property |
Legislation: | Administration Act 1903 (WA), s 14 Duties Act 2008 (WA), s 9, s 10, s 11(1)(c), s 15(a), s 78, s 78(1), s 78(2), s 119(3), s 119(3)(a), s 139, s 139(2) Partnership Act 1895 (WA), s 7(1), s 30(1), s 30(2), s 32, s 33, s 44(1), s 49, s 50, s 57 State Administrative Tribunal Act 2004 (WA), s 17, s 27, s 29 Taxation Administration Act 2003 (WA), s 40 Transfer of Land Act 1893 (WA) |
Case References: | Atwell v Roberts (2013) 43 WAR 507 Barndon v Chelvanayagam & Ors [2006] WASC 118 Beale v Trinkler [2007] NSWSC 1058 Cameron v Murdoch (1986) 60 ALJR 280; (1986) 63 ALR 575 Cameron v Murdoch [1983] WAR 321 Canny Gabriel Castle Jackson Advertising Pty Ltd v Volume Sales (Finance) Pty Ltd (1974) 131 CLR 321 Commissioner of State Taxation v Cyril Henschke Pty Ltd and Ors (2010) 242 CLR 508 Connell v Bond Corporation Pty Ltd (1992) 8 WAR 352 DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties (NSW) (1982) 149 CLR 431 Hancock Prospecting Pty Ltd v Wright Prospecting Pty Ltd [2012] WASCA 216; (2012) 45 WAR 29 Hendry v Perpetual Executors and Trustees Association of Australia Ltd (1961) 106 CLR 256 In re Bourne, Bourne v Bourne [1906] 2 Ch 427 Livingston v Commissioner of Stamp Duties (Qld) (1960) 107 CLR 411 O'Meagher v Commissioner of State Revenue [2013] WASAT 116; (2013) 96 ATR 57 Re Livanos [1955] St R Qd 362 Ringthane Pty Ltd v Commissioner of State Taxation (WA) (1993) 26 ATR 489 Sze Tu v Lowe [2014] NSWCA 462; (2014) 89 NSWLR 317 |
Orders | 1. The decision of the Commissioner of State Revenue partially allowing the applicant's objection to the assessment of duty is affirmed.,2. The applicant's application is dismissed. |
Summary | Anthony and Maria Scolaro were registered proprietors of a number of properties in West Perth and Mount Lawley as joint tenants. Those properties were the partnership property of the Scolaro Investment Company Partnership, the partners of which were Anthony, Maria and their children. They were also registered proprietors of property in Northbridge, Nedlands and Osborne Park, those being the partnership property of the A & MMR Scolaro Partnership. The partners of that partnership were Anthony and Maria only. ,Anthony Scolaro passed away in February 2011, and both partnerships dissolved. In September 2011, Maria Scolaro became the sole registered proprietor of the relevant properties.,In 2013, Maria Scolaro executed two deeds in relation to the winding up of respectively, the SICP and AMSP Partnerships. The deeds each stated that Maria Scolaro held the relevant properties on trust for the former partners (or the former partner's deceased estates) of each of the partnerships. Maria Scolaro then transferred the relevant properties to a new trustee company (the applicant in this matter).,Both 2013 deeds were lodged with the respondent for the assessment of duty, along with the transfer of land to the applicant. The respondent issued the applicant with a duties assessment notice, against which the applicant lodged an objection. The Commissioner allowed the objection, but only in part, and the applicant sought a review of the Commissioner's decision at the Tribunal.,The issue before the Tribunal comprised a narrow legal question. The applicant said that, on dissolution of the relevant partnerships, the former partners had an identifiable beneficial interest in the land. It therefore argued that the 2013 deeds executed by Maria Scolaro merely confirmed that the land continued to be held on trust, and were not 'declarations of trust' for the purposes of assessing duty. The Commissioner, on the other hand, considered that the 2013 deeds were new declarations of trust and as such attracted duty.,The Tribunal considered both the applicant's and respondent's arguments and the relevant principles in relation to the nature of partnership property. The Tribunal concluded that the 2013 deeds created new equitable interests in the partnership properties, and therefore attracted duty.,The applicant also said that, if the 2013 deeds were found to be declarations of trust, then a reduction in duty should be allowed under s 78 of the Duties Act 2008 (WA). The Tribunal also rejected this argument.,The applicant's application was dismissed. |
JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL ACT : DUTIES ACT 2008 (WA)
- TAXATION ADMINISTRATION ACT 2003 (WA)
- Applicant
AND
COMMISSIONER OF STATE REVENUE
Respondent
Catchwords:
Duties Assessment Partnership Partnership assets Dissolution of partnership Winding up of partnership Nature of partner's proprietary rights in partnership assets Declaration of trust in partnership property
Legislation:
Administration Act 1903 (WA), s 14
Duties Act 2008 (WA), s 9, s 10, s 11(1)(c), s 15(a), s 78, s 78(1), s 78(2), s 119(3), s 119(3)(a), s 139, s 139(2)
Partnership Act 1895 (WA), s 7(1), s 30(1), s 30(2), s 32, s 33, s 44(1), s 49, s 50, s 57
State Administrative Tribunal Act 2004 (WA), s 17, s 27, s 29
Taxation Administration Act 2003 (WA), s 40
Transfer of Land Act 1893 (WA)
Result:
Commissioner's decision and assessment affirmed
Summary of Tribunal's decision:
Anthony and Maria Scolaro were registered proprietors of a number of properties in West Perth and Mount Lawley as joint tenants. Those properties were the partnership property of the Scolaro Investment Company Partnership, the partners of which were Anthony, Maria and their children. They were also registered proprietors of property in Northbridge, Nedlands and Osborne Park, those being the partnership property of the A & MMR Scolaro Partnership. The partners of that partnership were Anthony and Maria only.
Anthony Scolaro passed away in February 2011, and both partnerships dissolved. In September 2011, Maria Scolaro became the sole registered proprietor of the relevant properties.
In 2013, Maria Scolaro executed two deeds in relation to the winding up of respectively, the SICP and AMSP Partnerships. The deeds each stated that Maria Scolaro held the relevant properties on trust for the former partners (or the former partner's deceased estates) of each of the partnerships. Maria Scolaro then transferred the relevant properties to a new trustee company (the applicant in this matter).
Both 2013 deeds were lodged with the respondent for the assessment of duty, along with the transfer of land to the applicant. The respondent issued the applicant with a duties assessment notice, against which the applicant lodged an objection. The Commissioner allowed the objection, but only in part, and the applicant sought a review of the Commissioner's decision at the Tribunal.
The issue before the Tribunal comprised a narrow legal question. The applicant said that, on dissolution of the relevant partnerships, the former partners had an identifiable beneficial interest in the land. It therefore argued that the 2013 deeds executed by Maria Scolaro merely confirmed that the land continued to be held on trust, and were not 'declarations of trust' for the purposes of assessing duty. The Commissioner, on the other hand, considered that the 2013 deeds were new declarations of trust and as such attracted duty.
The Tribunal considered both the applicant's and respondent's arguments and the relevant principles in relation to the nature of partnership property. The Tribunal concluded that the 2013 deeds created new equitable interests in the partnership properties, and therefore attracted duty.
The applicant also said that, if the 2013 deeds were found to be declarations of trust, then a reduction in duty should be allowed under s 78 of the Duties Act 2008 (WA). The Tribunal also rejected this argument.
The applicant's application was dismissed.
Category: A
Representation:
Counsel:
Applicant : Mr S Wright
Respondent : Mr J Thomson SC
Solicitors:
Applicant : Ernst & Young
Respondent : State Solicitor's Office
Case(s) referred to in decision(s):
Atwell v Roberts (2013) 43 WAR 507
Barndon v Chelvanayagam & Ors [2006] WASC 118
Beale v Trinkler [2007] NSWSC 1058
Cameron v Murdoch (1986) 60 ALJR 280; (1986) 63 ALR 575
Cameron v Murdoch [1983] WAR 321
Canny Gabriel Castle Jackson Advertising Pty Ltd v Volume Sales (Finance) Pty Ltd (1974) 131 CLR 321
Commissioner of State Taxation v Cyril Henschke Pty Ltd and Ors (2010) 242 CLR 508
Connell v Bond Corporation Pty Ltd (1992) 8 WAR 352
DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties (NSW) (1982) 149 CLR 431
Hancock Prospecting Pty Ltd v Wright Prospecting Pty Ltd [2012] WASCA 216; (2012) 45 WAR 29
Hendry v Perpetual Executors and Trustees Association of Australia Ltd (1961) 106 CLR 256
In re Bourne, Bourne v Bourne [1906] 2 Ch 427
Livingston v Commissioner of Stamp Duties (Qld) (1960) 107 CLR 411
O'Meagher v Commissioner of State Revenue [2013] WASAT 116; (2013) 96 ATR 57
Re Livanos [1955] St R Qd 362
Ringthane Pty Ltd v Commissioner of State Taxation (WA) (1993) 26 ATR 489
Sze Tu v Lowe [2014] NSWCA 462; (2014) 89 NSWLR 317
Introduction
1 On 30 January 2014, the applicant lodged with the respondent (Commissioner) certain documents for assessment of duty under the Duties Act 2008 (WA) (Duties Act).
2 The Commissioner issued to the applicant a Duties Assessment Notice, against which the applicant lodged an objection
3 The Commissioner allowed the objection, but only in part and under s 40 of the Taxation Administration Act 2003 (WA) (TA Act), the applicant on 17 December 2015 applied to the Tribunal for a review of the Commissioner's decision on that objection.
4 The volume of materials filed by the parties is extensive, but the dispute between the parties concerns what the applicant refers to as a very narrow point of law. The applicant contends that under the law of partnership, where partners hold partnership land as joint tenants, they hold the legal title to the land in trust for themselves as partners with a sui generis fluctuating beneficial interest. Upon the death of a partner, and the dissolution of the partnership, the applicant says, the surviving joint tenant continues to hold the land on the same trust pending a sale of the land or it being dealt with otherwise by agreement. If there are no partnership debts requiring the sale of the land then, upon dissolution, the former partners (and in the case of a deceased former partner, their estate) have an identifiable beneficial interest in the land.
5 The applicant therefore argues that the two documents which are referred to later in these reasons as the 2013 Deeds merely confirm that the land continues to be held subject to the trusts which exist at law and they are 'a helpful narrative to the transactions attracting nominal duty'; applicant's statement of issues, facts and contentions at paragraph 4.
6 The Commissioner, on the other hand, considers that the 2013 Deeds constitute declarations of new trusts and attract ad valorem duty.
Materials before the Tribunal
7 In accordance with orders made by the Tribunal on 14 June 2016, the parties each filed their statements of issues, facts and contentions, along with, in the case of the Commissioner, a bundle of supporting documents (Commissioner's bundle).
8 The parties then filed an agreed statement of issues and facts.
9 Following the filing of written submissions by both parties, the matter was heard before the Tribunal on 13 December 2016, following which the Tribunal reserved its decision.
Agreed facts and issues
10 The parties' agreed statement of facts and issues is dated 13 September 2016 and was filed with the Tribunal on 14 September 2016. These are those facts and issues.
Scolaro Investment Company Partnership
11 On 31 March 1972, the Scolaro Investment Company Partnership (SICP) commenced in accordance with a Deed of Partnership (undated but stamped on 13 April 1972) between Anthony Scolaro, Maria Michela Rosa Scolaro, John Gregory Scolaro, David Joseph Scolaro and Rosana Pamela Scolaro (the SICP Deed of Partnership) (Commissioner's bundle, document 1).
12 At all times from 31 March 1972 to 12 February 2011, the partners in the SICP were:
a) Anthony Scolaro, as to 20%;
b) Maria Scolaro, as to 20%;
c) Rosana Scolaro, as to 20%;
d) John Scolaro, as to 20%; and
e) David Scolaro, as to 20%.
A&MMR Scolaro Partnership
13 On or about 20 June 1986 Anthony Scolaro and Maria Scolaro executed a Deed of Partnership for the A&MMR Scolaro Partnership (AMSP Deed of Partnership and AMSP respectively) which was to have effect from 1 July 1986 (Commissioner's bundle, document 2).
14 At all times from 1 July 1986 to 12 February 2011, the partners in the AMSP were:
a) Anthony Scolaro, as to 50%; and
b) Maria Scolaro, as to 50%.
15 Both partnership businesses involved property ownership and investment.
SICP Properties
16 As at 12 February 2011, Anthony and Maria Scolaro held legal title to the following properties (SICP Properties) as joint tenants:
a) 9 Colin Street West Perth (Lots 1 4 on Strata Plan 9273, Certificates of Title volume 1605, folio numbers 16 19).
b) 1318 Hay Street West Perth (Lot 12 on Plan 123, Certificate of Title volume 1359, folio 470).
c) 50% of 609 Beaufort Street, Mt Lawley (Lot 7 on Plan 2324, Certificate of Title volume 1049, folio 220).
d) 50% of 611 Beaufort Street, Mt Lawley (Lot 6 on Plan 2324 Certificate of Title volume 1026, folio 23).
e) 50% of 621 Beaufort Street, Mt Lawley (Lot 5 on Plan 2324, Certificate of Title volume 1484, folio 451).
f) 50% of 619 623 Beaufort Street, Mt Lawley (Lot 151 on Deposited Plan 30762, Certificate of Title volume 1530, folio 619).
17 As at 12 February 2011, the SICP Properties were partnership property of the SICP.
18 A Deed of Trust dated 16 January 1976 (1976 Deed of Trust) and Deed of Rectification dated 3 February 1976 were executed in relation to the property at 1318 Hay Street, West Perth (Commissioner's bundle, documents 3a and 3b respectively). A Declaration of Trust dated 12 May 1988 (1988 Declaration of Trust) was executed in relation to the property at 9 Colin Street, West Perth (Commissioner's bundle, document 3c). The deeds of trust confirm that the properties referred to in those deeds were purchased in the names of Anthony and Maria Scolaro on behalf of the partners of the SICP (Commissioner's bundle, document 25).
AMSP Properties
19 As at 12 February 2011, Anthony and Maria Scolaro held legal title to the following properties (AMSP Properties) as joint tenants:
a) 63 Aberdeen Street, Northbridge (Lot 5 on Plan 276, Certificate of Title Volume 1435, Folio 261).
b) 57 Aberdeen Street and 271 William Street, Northbridge (Lots 2 and 3 on Plan 276, Certificate of Title Volume 1157, Folio 656).
c) 29 Hampden Road, Nedlands (Lot 283 on Plan 2160, Certificate of Title Volume 1322, Folio 524).
d) 267 279 William Street, Perth (Lots 504 and 506 on Deposited Plan 301674, Certificate of Title Volume 1124, Folio 432).
e) 50% of 9 Neil Street, Osborne Park (Lot 36 on Diagram 34574, Certificate of Title Volume 266, Folio 124A).
20 As at 12 February 2011, the AMSP Properties were partnership property of the AMSP.
21 The properties were accounted for as assets in the balance sheets of the SICP and AMSP, which were lodged with the Australian Taxation Office (Commissioner's bundle, documents 15a 15f for the AMSP; Commissioner's bundle, documents 16a 16d for the SICP).
Anthony Scolaro
22 Anthony Scolaro passed away on 12 February 2011.
23 The will of Anthony Scolaro (Commissioner's bundle, document 4) provided that the balance of his estate was to be divided into equal portions to form three separate testamentary trusts, which are referred to in some subsequent documents as follows (and I will adopt the same terminology):
a) A testamentary trust (JASCO Testamentary Trust) of which John Scolaro was the primary beneficiary.
b) A testamentary trust (RASCO Testamentary Trust) of which Rosana Scolaro was the primary beneficiary.
c) A testamentary trust (DASCO Testamentary Trust) of which David Scolaro was the primary beneficiary.
Dissolution of the AMSP
24 On 12 May 2011, the AMSP dissolved in accordance with the AMSP Deed of Partnership.
25 As at 12 May 2011:
a) the value of each of the AMSP Properties was:
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b) the value of the cash or other current assets of the AMSP exceeded its liabilities.
26 By two separate applications, both dated 6 September 2011, Maria Scolaro applied to become the registered proprietor by survivorship of one of the AMSP Properties, namely the property at 29 Hampden Road, Nedlands (Commissioner's bundle, document 5a) and the SICP Properties, the other AMSP Properties and a number of other properties (Commissioner's bundle, document 5b).
27 On 8 September 2011, Maria Scolaro became the registered proprietor of the property at 29 Hampden Road, Nedlands as the surviving joint tenant of that property. On 26 September 2011, Maria Scolaro also became the registered proprietor of the SICP Properties and the other AMSP Properties as the surviving joint tenant of those properties.
Dissolution of the SICP
28 On 15 March 2012, the SICP dissolved in accordance with the SICP Deed of Partnership.
29 As at 15 March 2012:
a) the value of each of the SICP Properties was:
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b) the value of the cash or other current assets of the SICP exceeded its liabilities.
John Gregory Scolaro
30 John Scolaro died on 7 August 2012 without leaving a valid will. In accordance with s 14 of the Administration Act 1903 (WA) his estate was to be divided as follows:
a) 1/3 passed to his wife Bianca Scolaro.
b) 1/6 passed to his child Diana Scolaro.
c) 1/6 passed to his child Loretta Scolaro.
d) 1/6 passed to his child Christine Irdi.
e) 1/6 passed to his child Emily Scolaro.
31 Neither the AMSP Properties nor the SICP Properties were sold in accordance with the winding up provisions in the AMSP Deed of Partnership and the SICP Deed of Partnership respectively, or otherwise.
AMSP 2013 Deed
32 On 1 December 2013, Maria Scolaro, Rosana Scolaro, David Scolaro, Bianca Scolaro, Diana Scolaro and the Applicant entered into a deed concerning the AMSP (AMSP 2013 Deed) (Commissioner's bundle, document 6).
33 Clause 1 of the AMSP 2013 Deed states as follows:
1. The parties acknowledge and agree that:
a. The option provided for in clause 16 of the Partnership Agreement for Maria Scolaro as the remaining Partner of the Partnership to acquire the late Anthony Scolaro's share in the Partnership has not been exercised, nor does Maria Scolaro wish to exercise that option or acquire that share.
b. The Partnership dissolved on 12 May 2011.
c. On dissolution of the Partnership, the Properties and other assets that were previously held by the Partnership were beneficially owned:
50% by the estate of the late Antony Scolaro; and
50% by Maria Scolaro.
2. Rosana Bonavita and David Scolaro, as the Executors of the estate of the late Anthony Scolaro, hereby transmit pursuant to clause 7 of the Will of Anthony Scolaro the estate's beneficial share of the [AMSP] Properties in the following onethird portions:
a. a onethird portion to Bianca Scolaro and Diana Scolaro as trustees of the JASCO Testamentary Trust;
b. a onethird portion to Rosana Bonavita as trustee of the RASCO Testamentary Trust;
c. a onethird portion to David Scolaro as trustee of the DASCO Testamentary Trust.
Clause 3
3. Maria Scolaro, as the trustee holding the titles of the [AMSP] Properties, confirms that, following the transmission at clause 2 above, she holds the [AMSP] Properties on trust as follows:
• a 50% or 3/6ths interest in the [AMSP] Properties is held for the benefit of herself, Maria Scolaro, as a previous 50% Partner in the former Partnership;
• a l/6th interest in the [AMSP] Properties is held for Bianca Scolaro and Diana Scolaro as the trustees of the JASCO Testamentary Trust;
• a l/6th interest in the [AMSP] Properties is held for Rosana Bonavita as the trustee of the RASCO Testamentary Trust;
• a l/6th interest in the [AMSP] Properties is held for David Scolaro as the trustee of the DASCO Testamentary Trust.
(In the case of 9 Neil Street, Osborne Park, the above applies to the 50% share in that property held by Maria Scolaro as trustee.)
P. After the above transmission [pursuant to the will of the Anthony Scolaro], the [AMSP] Properties will therefore be beneficially owned as follows:
• 50% or 3/6ths by Maria Scolaro as a previous 50% Partner in the former Partnership (see recital I);
• l/6th by the JASCO Testamentary Trust, which is transmitted a onethird portion of the 50% share of the estate of the late Anthony Scolaro (see recitals I and J);
• l/6th by the RASCO Testamentary Trust, which is transmitted a onethird portion of the 50% share of the estate of the late Anthony Scolaro (see recitals I and J);
• 1/6th by the DASCO Testamentary Trust, which is transmitted a onethird portion of the 50% share of the estate of the late Anthony Scolaro (see recitals I and J).
(In the case of 9 Neil Street, Osborne Park, the above applies to the 50% share in that property that was previously held by the former Partnership.)
4. Following the steps at clauses 2 and 3 above, Maria Scolaro resigns as trustee of the [AMSP] Properties, and the parties agree that the New Trustee is appointed as replacement trustee of the [AMSP] Properties in her place. Transfers shall be prepared and executed to transfer the legal title of the [AMSP] Properties from Maria Scolaro to the New Trustee. These transfers will transfer the legal title to the Properties only, and the beneficial ownership of the [AMSP] Properties will remain unchanged as set out in clause 3 above.
SICP 2013 Deed
37 On 1 December 2013, Maria Scolaro, Rosana Scolaro, David Scolaro, Bianca Scolaro, Diana Scolaro and the applicant entered into a deed concerning the SICP (SICP 2013 Deed) (Commissioner's bundle, document 7).
38 Clause 1 of the SICP 2013 Deed states as follows:
1. The parties acknowledge and agree that:
a. Maria Scolaro as surviving spouse has elected not to succeed to the share of the Partnership of the late Anthony Scolaro for the purposes of clause 17 of the Deed of Partnership.
b. The surviving partners of the Partnership have elected not to succeed to the share of the Partnership of the late Anthony Scolaro for the purposes of clause 17 of the Deed of Partnership.
c. The Partnership dissolved on 15 March 2012.
d. On dissolution of the Partnership, the Properties and other assets that were previously held by the Partnership were beneficially owned:
20% by the estate of the late Anthony Scolaro;
20% by Maria Scolaro;
20% by Rosana Bonavita;
20% by John Scolaro;
20% by David Scolaro.
40 Clauses 2 and the first clause numbered 3 of the SICP 2013 Deed state as follows:
2. Rosana Bonavita and David Scolaro, as the Executors of the estate of the late Anthony Scolaro, hereby transmit pursuant to clause 7 of the Will of Anthony Scolaro that estate's beneficial share of the [SICP] Properties in the following onethird portions:
a. a onethird portion to Bianca Scolaro and Diana Scolaro as trustees of the JASCO Testamentary Trust;
b. a onethird portion to Rosana Bonavita as trustee of the RASCO Testamentary Trust;
c. a onethird portion to David Scolaro as trustee of the DASCO Testamentary Trust.
3. Diana Scolaro, as the Administrator of the estate of the late John Scolaro, hereby transmits pursuant to the Administration Act that estate's beneficial share of the [SICP] Properties in the following portions:
a. a onethird portion to Bianca Scolaro;
b. a onesixth portion to each of Diana Scolaro, Loretta Scolaro, Christine Irdi and Emily Scolaro.
Clause 3
3. Maria Scolaro, as the trustee holding the titles of the [SICP] Properties, confirms that, following the transmissions at clauses 2 and 3 above, she holds the [SICP] Properties on trust as follows:
• a 6/30thsor 20% interest in the [SICP] Properties is held for the benefit of herself, Maria Scolaro, as a previous 50% Partner in the former [AMSP], which partnership held a 40% interest in the Scolaro Investment Company Partnership;
• a 2/30ths interest in the [SICP] Properties is held for Bianca Scolaro and Diana Scolaro as the trustees of the JASCO Testamentary Trust;
• a 2/30ths interest in the [SICP] Properties is held for Rosana Bonavita as the trustee of the RASCO Testamentary Trust;
• a 2/30ths interest in the [SICP] Properties is held for David Scolaro as the trustee of the DASCO Testamentary Trust;
• a 6/30ths or 20% interest in the [SICP] Properties is held for the benefit of Rosana Bonavita as a previous 20% Partner in the former Partnership;
• a 6/30ths or 20% interest in the [SICP] Properties is held for the benefit of David Scolaro as a previous 20% Partner in the former Partnership;
• a 2/30ths interest in the [SICP] Properties is held for Bianca Scolaro;
• a 1/30ths interest in the [SICP] Properties is held for Diana Scolaro;
• a l/30ths interest in the [SICP] Properties is held for Loretta Scolaro;
• a l/30ths interest in the [SICP] Properties is held for Christine Irdi;
• a 1/30ths interest in the [SICP] Properties is held for Emily Scolaro.
(In the case of the [SICP] Properties in which the former Partnership held a 50% interest, the above applies to that 50% interest in those Properties.)
V. After the above transmission [pursuant to the will of Anthony Scolaro], the [SICP] Properties will therefore be beneficially owned as follows:
• 6/30ths or 20% by Maria Scolaro as a previous 50% partner in the former [AMSP] (see recitals K and L);
• 2/30ths by the JASCO Testamentary Trust, which is transmitted a one-third portion of the 20% (6/30ths) share of the estate of the late Anthony Scolaro (see recitals K, L and M);
• 2/30ths by the RASCO Testamentary Trust, which is transmitted a one-third portion of the 20% (6/30ths) share of the estate of the late Anthony Scolaro (see recitals K, L and M);
• 2/30ths by the DASCO Testamentary Trust, which is transmitted a one-third portion of the 20% (6/30ths) share of the estate of the late Anthony Scolaro (see recitals K, L and M);
• 6/30ths or 20% by Rosana Donavita (see recitals J and L);
• 6/30ths or 20% by David Scolaro (see recitals J and L);
• 2/30ths by Bianca Scolaro, who is transmitted a one-third portion of the 20% (6/30ths) interest in the Properties of the late John Scolaro (see recitals J, L and U);
• 1/30th by Diana Scolaro, who is transmitted a one-sixth portion of the 20% (6/30ths) interest in the Properties of the late John Scolaro (see recitals J, L and U);
• 1/30th by Loretta Scolaro, who is transmitted a one-sixth portion of the 20% (6/30ths) interest in the Properties of the late John Scolaro (see recitals J, L and U);
• 1/30th by Christine Irdi, who is transmitted a one-sixth portion of the 20% (6/30ths) interest in the Properties of the late John Scolaro (see recitals J, Land U);
• 1/30th by Emily Scolaro, who is transmitted a one-sixth portion of the 20% (6/30ths) interest in the Properties of the late John Scolaro (see recitals J, L and U).
(In the case of the Properties in which the former Partnership held a 50% interest, the above applies to that 50% interest in those Properties.)
4. Following the steps at clauses 2 and 3 above, Maria Scolaro resigns as trustee of the [SICP] Properties, and the parties agree that the New Trustee is appointed as replacement trustee of the [SICP] Properties in her place. Transfers shall be prepared and executed to transfer the legal title of the [SICP] Properties from Maria Scolaro to the New Trustee. (In the case of the [SICP] Properties in which the former Partnership held a 50% interest, the transfer will be of the legal title to a 50% interest in the [SICP] Properties.) These transfers will transfer the legal title to the [SICP] Properties only, and the beneficial ownership of the [SICP] Properties will remain unchanged as set out in clause 3 above.
Transfer of land to the applicant
43 On 1 December 2013, Maria Scolaro executed a transfer under the Transfer of Land Act 1893 (WA) to transfer the AMSP Properties and the SICP Properties to the applicant (Transfer to the applicant) (Commissioner's bundle, document 8). The applicant became the registered proprietor on 13 March 2015. The applicant is a company whose shareholders and directors are Rosana, David and Diana Scolaro.
Lodgement of deeds and First Duties Assessment Notice
44 On 30 January 2014, the Transfer to the applicant, the AMSP 2013 Deed and the SICP 2013 Deed were lodged with the Commissioner for assessment under the Duties Act under a covering letter dated 30 January 2014, requesting the imposition of nominal duty on the AMSP 2013 Deed, the SICP 2013 Deed and the Transfer to the applicant (Commissioner's bundle, document 9). The AMSP Deed of Partnership and the SICP Deed of Partnership and the will of Anthony Scolaro were also provided to the Commissioner at this time.
45 The documents referred to in the preceding paragraph were lodged together with a Deed of Appointment and Retirement of Trustee of Discretionary Trust executed on 26 November 2013 and a transfer of land from Maria Scolaro to ASDAD Pty Ltd executed on 1 December 2013 (Transfer to ASDAD Pty Ltd), under a covering letter dated 30 January 2014 which requested the imposition of nominal duty. The Discretionary Trust Deed for the Tony Scolaro Family Trust executed on 10 February 1997 and Notice of Resignation as Trustee dated 1 December 2013 were also provided to the Commissioner (Commissioner's bundle, documents 10a 10b).
46 On 25 August 2014, the Commissioner issued to the applicant a Duties Assessment Notice, accompanied by a Statement of Grounds of Assessment dated 22 August 2014, in the amount of $814,533.75 (Commissioner's bundle, documents 18a 18b), comprising:
a) $20 assessed on the Transfer to the applicant under s 119(3) of the Duties Act;
b) $20 assessed on the Transfer to ASDAD Pty Ltd under s 119(3) of the Duties Act; and
c) $814,493.75 assessed on the AMSP 2013 Deed and the SICP 2013 Deed as agreements to transfer dutiable property under s 78 of the Duties Act.
Objection
47 On 24 October 2014, the applicant objected to the Duties Assessment Notice (Commissioner's bundle, document 19).
48 On 1 December 2014, the applicant paid duty of $814,493.75 to the Commissioner.
Commissioner's decision on the objection and Second Duties Assessment Notice
49 By letter dated 6 November 2015, the Commissioner informed the applicant that the objection was allowed in part (Commissioner's bundle, document 26). On 8 December 2015, the Commissioner issued a Duties Assessment Notice setting out the new duty assessment as follows (Commissioner's bundle, document 27):
a) $20 assessed on the declaration of trust in clause 3 of the AMSP 2013 Deed insofar as it gives effect to the distribution of Anthony Scolaro's estate, under s 139(2) of the Duties Act;
b) $20 assessed on the declaration of trust in clause 3 of the SICP 2013 Deed insofar as it gives effect to the distribution of Anthony Scolaro and John Scolaro's estates, under s 139(2) of the Duties Act;
c) $359,565 assessed on a declaration of trust by the operation of clause 3 of the AMSP 2013 Deed, under s 10 and s 11(1)(c) of the Duties Act; and
d) $347,720 assessed on a declaration of trust by the operation of clause 3 of the SICP 2013 Deed, under s 10 and s 11(1)(c) of the Duties Act.
50 On 9 December 2015, the Commissioner refunded to the applicant the amount of $110,042.00, which included interest in the sum of $2,833.25.
Application to the Tribunal
51 On 17 December 2015 the applicant applied to the Tribunal to review the Commissioner's decision on the objection (Commissioner's bundle, document 28).
Issues
52 The parties agree that the question before the Tribunal is whether the SICP 2013 Deed and the AMSP 2013 Deed (together the 2013 Deeds) constitute dutiable transactions in respect of which duty is imposed under s 10 of the Duties Act.
53 The term 'dutiable transactions' is defined in s 11(1)(c) to mean 'declarations of trust over dutiable property'. It is not disputed that the 2013 Deeds pertain to land in Western Australia which is 'dutiable property' under s 15(a) of the Duties Act.
54 Accordingly, the primary issue in contention is whether the 2013 Deeds constitute 'declarations of trust' as defined in s 9 of the Duties Act.
55 The following subissues arise from the primary issue:
a) Was the relationship between the legal owners of the partnership properties and the other partners during the existence of the partnerships a trustee/beneficiary relationship under which the partners had any particular interest in any of the AMSP or the SICP Properties?
b) Was the relationship between the legal owners of the properties and the other partners or the beneficiaries of their estates, postdissolution of the partnerships and until execution of the 2013 Deeds, a trustee/beneficiary relationship under which the other partners or the beneficiaries of their estates had any particular interest in any of the AMSP or the SICP Properties?
c) Is the relationship between the legal owners of the properties and the persons for whom the properties are held on trust after the execution of the 2013 Deeds, a trustee/beneficiary relationship under which the persons named in the 2013 Deeds have particular interests in the AMSP or the SICP Properties?
d) Did clause 3 of the AMSP 2013 Deed, either alone or read together with recital P of that deed, constitute a declaration of trust as defined in s 9 of the Duties Act?
e) Did the second clause numbered 3 of the SICP 2013 Deed, either alone or read together with recital V of that deed, constitute a declaration of trust as defined in s 9 of the Duties Act?
Legislation
56 The relevant legislative provisions are set out below.
State Administrative Tribunal Act 2004 (WA)
17. What comes within review jurisdiction
(1) If the matter that an enabling Act gives the Tribunal jurisdiction to deal with is a matter that expressly or necessarily involves a review of a decision, the matter comes within the Tribunal's review jurisdiction.
(2) A matter referred to the Tribunal under section 44(3) comes within the Tribunal's review jurisdiction.
(3) Where subsection (1) or (2) applies the decision is a reviewable decision for the purposes of this Act.
…
27. Nature of review proceedings
(1) The review of a reviewable decision is to be by way of a hearing de novo, and it is not confined to matters that were before the decisionmaker but may involve the consideration of new material whether or not it existed at the time the decision was made.
(2) The purpose of the review is to produce the correct and preferable decision at the time of the decision upon the review.
(3) The reasons for decision provided by the decisionmaker, or any grounds for review set out in the application, do not limit the Tribunal in conducting a proceeding for the review of a decision.
…
29. Tribunal's powers in review jurisdiction
(1) The Tribunal has, when dealing with a matter in the exercise of its review jurisdiction, functions and discretions corresponding to those exercisable by the decisionmaker in making the reviewable decision.
(2) Subsection (1) does not limit the powers given by this Act or the enabling Act to the Tribunal.
(3) The Tribunal may
(a) affirm the decision that is being reviewed; or
(b) vary the decision that is being reviewed; or
(c) set aside the decision that is being reviewed and
(i) substitute its own decision; or
(ii) send the matter back to the decisionmaker for reconsideration in accordance with any directions or recommendations that the Tribunal considers appropriate,
and, in any case, may make any order the Tribunal considers appropriate.
(4) The fact that a decision is made on reconsideration as required under subsection (3)(c)(ii), does not prevent the decision from being open to review by the Tribunal.
(5) The decisionmaker's decision as affirmed or varied by the Tribunal or a decision that the Tribunal substitutes for the decisionmaker's decision
(a) is to be regarded as, and given effect as, a decision of the decisionmaker; and
(b) unless the enabling Act states otherwise or the Tribunal orders otherwise, is to be regarded as having effect, or having had effect, from the time when the decision reviewed would have, or would have had, effect.
(6) Without limiting subsection (5)(a), the decisionmaker has power to do anything necessary to implement the Tribunal's decision.
(7) Despite subsection (5)(a), the decision as affirmed, varied, or substituted is not again open to review by the Tribunal as a decision of the decisionmaker.
(8) Subsection (5)(a) does not affect an appeal under Part 5 against the Tribunal's decision.
(9) To avoid doubt it is declared that this section and section 27 do not extend to requiring or enabling the Tribunal to deal with a matter that is different in essence from the matter that was before the decisionmaker.
9. Terms used
…
declaration of trust means any declaration (other than by a will) that any identified property vested or to be vested in the person making the declaration is or is to be held in trust for the person or persons, or the purpose or purposes, mentioned in the declaration although the beneficial owner of the property, or the person entitled to appoint the property, may not have joined in or assented to the declaration;
…
10. Transfer duty imposed
Duty is imposed on dutiable transactions.
11. Dutiable transaction
(1) Subject to subsection (2), any of the following is a dutiable transaction
…
(c) a declaration of trust over dutiable property;
…
Any of the following is dutiable property
(a) land in Western Australia;
…
78. Transfer of dutiable property of partnership to retiring partner, dutiable value of
(1) This section applies if, on a person (the retiring partner) ceasing to be a partner in a partnership because of the retiring partner's retirement from the partnership or its dissolution, dutiable property of the partnership is transferred or agreed to be transferred to the retiring partner.
(2) The dutiable value of a transfer of, or an agreement for the transfer of, dutiable property to the retiring partner must be reduced by an amount calculated by applying the retiring partner's partnership interest in the partnership to the unencumbered value of the dutiable property immediately before the retirement or dissolution.
Note for this subsection:
Example for subsection (2)
A, B and C are in partnership in equal shares. B had a onethird partnership interest immediately before retiring. On B ceasing to be a partner, A and C transfer land to B. The dutiable value of the land acquired by B will be reduced by onethird.
119. Transactions related to changes in trustees and managed investment schemes
…
- (3) Nominal duty is chargeable on a transfer, or agreement for the transfer, of dutiable property
(a) to a trustee as a consequence of the retirement of a trustee or the appointment of a new trustee if the transfer is not a scheme or arrangement, or part of a scheme or arrangement, for conferring an interest, in relation to the trust property, on a new trustee or any other person, whether as a beneficiary or otherwise, to the detriment of the beneficial interest or potential beneficial interest of any person; or
(b) as a consequence of the retirement of a responsible entity of a managed investment scheme or the appointment of a new responsible entity of a managed investment scheme if the only beneficial interest acquired by a person in relation to the property as a result of the transfer is a beneficial interest acquired by the replacement or new responsible entity solely because of its appointment as responsible entity for the scheme; or
(c) as a consequence of an old public unit trust that has become a managed investment scheme if, after the transfer takes place, the members of the managed investment scheme have the same beneficial interests in the scheme's property as they had in the old public unit trust's property before the instrument was executed.
…
(2) Nominal duty is chargeable on the following dutiable transactions
(a) a transfer, or agreement for the transfer, of dutiable property to the extent that
(i) the transfer gives effect to a distribution in the estate of a deceased person; and
(ii) there is no consideration for the agreement or transfer;
(b) a declaration of trust over dutiable property to the extent that it gives effect to a distribution in the estate of a deceased person;
(c) a vesting of dutiable property by, or as a consequence of, a court order made
(i) under the Family Provision Act 1972; or
(ii) under the Trustees Act 1962 section 65 on an application under the Family Provision Act 1972.
7. Meaning of 'partnership'
(1) Partnership is the relation which subsists between persons carrying on a business in common with a view of profit.
…
30. Meaning of 'partnership property'
(1) All property and rights and interests in property originally brought into the partnership stock, or acquired, whether by purchase or otherwise, on account of the firm or for the purposes and in the course of the partnership business, are called in this Act partnership property, and must be held and applied by the partners exclusively for the purposes of the partnership, and in accordance with the partnership agreement.
(2) Provided that the legal estate or interest in any land which is partnership property shall devolve according to the nature and tenure thereof, and the general rules of law thereto applicable, but in trust so far as necessary for the persons beneficially interested in the land under this section.
…
32. Conversion of real into personal estate
Where land has become partnership property, it shall, unless the contrary intention appears, be treated as between the partners (including the representatives of a deceased partner), and also as between the heirs of a deceased partner and his executors or administrators, as personal and not real estate.
33. Meaning of 'partner's share'
The share of a partner in the partnership property at any time is the proportion of the then existing partnership assets to which he would be entitled if the whole were realised and converted into money, and after all the then existing debts and liabilities of the firm had been discharged.
44. Dissolution by death, bankruptcy, assignment or charge
(1) Subject to any agreement between the partners every partnership is also dissolved by the death or bankruptcy of any partner.
…
49. Authority for purposes of winding up
(1) After the dissolution of a partnership, the authority of each partner to bind the firm, and the other rights and obligations of the partners, continue notwithstanding the dissolution, so far as may be necessary to wind up the affairs of the partnership, and to complete transactions begun but unfinished at the time of the dissolution, but not otherwise.
(2) Despite subsection (1), the firm is in no case bound by the acts of a partner who has become bankrupt.
(3) Subsection (2) does not affect the liability of any person who has, after the bankruptcy, represented himself or knowingly suffered himself to be represented as a partner of the bankrupt.
50. Application of partnership property
On the dissolution of a partnership every partner is entitled, as against the other partners in the firm, and all persons claiming through them in respect of their interests as partners, to have the property of the partnership applied in payment of the debts and liabilities of the firm, and to have the surplus assets after such payment applied in payment of what may be due to the partners respectively, after deducting what may be due from them as partners to the firm; and for that purpose any partner or his representatives may, on the termination of the partnership, apply to the court to wind up the business and affairs of the firm.
57. Rules for distribution of assets on final settlement of accounts
(1) In settling accounts between the partners after a dissolution of partnership, the rules set out in subsections (2) and (3) shall, subject to any agreement, be observed.
(2) Losses, including losses and deficiencies of capital shall be paid first out of profits, next out of capital, and lastly, if necessary, by the partners individually in the proportion in which they were entitled to share profits.
(3) The assets of the firm, including the sums, if any, contributed by the partners to make up losses or deficiencies of capital, shall be applied in the following manner and order
(a) in paying the debts and liabilities of the firm to persons who are not partners therein;
(b) in paying to each partner rateably what is due from the firm to him for advances as distinguished from capital;
(c) in paying to each partner rateably what is due from the firm to him in respect of capital;
(d) the ultimate residue, if any, shall be divided among the partners in the proportion in which profits are divisible.
40. Right of review by State Administrative Tribunal
(1) A person dissatisfied with the Commissioner's decision on an objection or on an application for an extension of time for lodging an objection may apply to the State Administrative Tribunal for a review of the decision.
…
Certain principles apply
57 In the Commissioner's statement of issues, facts and contentions, certain principles are set out relating to the nature of a partner's interests in partnership property. I summarise those principles here, as stated by the Commissioner, noting that the applicant does not accept the correctness of all of them.
1) Where the legal estate in partnership land is held by some or all of the partners as joint tenants, it will be presumed in equity, in the absence of an express agreement to the contrary, that they hold it on trust for all the partners as tenants in common in the same proportions as those in which they are entitled to share in the partnership assets; Barndon v Chelvanayagam & Ors [2006] WASC 118 at [37].
2) There is an implied trust for sale for the purpose of realising the assets and distributing to the partners their interest; Re Livanos [1955] St R Qd 362 (Re Livanos) at 366 and the reference to Inre Bourne, Bourne v Bourne [1906] 2 Ch 427 at 432 433.
3) A partner's interest is a chose in action, which consists of a right to a proportion of the surplus after the realisation of the assets and payment of the debts and liabilities of the partnership. The interest of a partner in an asset of the partnership is characterised as beneficial or equitable, sui generis and of a nonspecific kind. It is not a fixed proportion of each item, nor is it an immediately ascertainable quantity of the item. It is an indefinite and fluctuating interest. The interest can be ascertained finally only upon completion of the liquidation and the identification of any surplus share; Canny Gabriel Castle Jackson Advertising Pty Ltd v Volume Sales (Finance) Pty Ltd (1974) 131 CLR 321 (Canny Gabriel) at 327 328; Commissioner of State Taxation v Cyril Henschke Pty Ltd and Ors (2010) 242 CLR 508 (Henschke) at 517 518; Hancock Prospecting Pty Ltd v Wright Prospecting Pty Ltd [2012] WASCA 216; (2012) 45 WAR 29 (Hancock) at [41] [42].
4) Whilst partners have a proprietary interest in every asset of the partnership, they do not have specific title in, or entitlement to exercise proprietary rights over, any individual asset: Canny Gabriel at 327; Connell v Bond Corporation Pty Ltd (1992) 8 WAR 352 (Connell) at 373. They could not claim to have any particular asset apportioned to his or her share or transferred to him or her; Connell at 374.
5) A partner can pass his or her beneficial interest in particular partnership assets, in circumstances where the partnership is dissolved but not wound up and the assets do not have to be sold on the winding up of the partnership to pay partnership debts; Connell at 373; Ringthane Pty Ltd v Commissioner of State Taxation(WA) (1993) 26 ATR 489 (Ringthane).
6) Partnership property is not trust property or property 'held on trust'. It is property to be applied for the purpose of the partnership in accordance with the relevant partnership legislation. Upon the death of one of two partners and the dissolution of the partnership, the surviving partner who accrues the partnership estate, although frequently called a 'trustee', does not hold the partnership property for the benefit of particular persons as a trustee in any strict or technical sense; Sze Tu v Lowe [2014] NSWCA 462; (2014) 89 NSWLR 317 (Sze Tu) at [123] [127] and the cases referred to in that decision.
Application of those principles
58 The Commissioner then goes on to apply those principles to the facts in this case.
59 With regard to the AMSP, Anthony and Maria Scolaro were the only partners. Immediately prior to 12 February 2011, they were the registered proprietors of the AMSP Properties as joint tenants. It is the Commissioner's view that each of them held the AMSP Properties on trust for the other as tenants in common in equity in the same proportions as those in which the partners were entitled to share in the partnership assets (that is, 50% for each of the partners). Anthony and Maria Scolaro each had a 50% beneficial interest in the partnership property, including the AMSP Properties, pursuant to s 30(2) of the Partnership Act 1895 (WA) (Partnership Act), and in equity.
60 Following Anthony Scolaro's death, the AMSP dissolved on 12 May 2011. Subsequently, in September 2011, Maria Scolaro became the sole registered proprietor of the AMSP Properties. The Commissioner says that from the time when Maria Scolaro was registered as the sole proprietor of the AMSP Properties, she held these properties in equity to be dealt with as provided by the Partnership Act upon the dissolution of the AMSP. The executors of Anthony Scolaro's estate under his will then had a right against Maria Scolaro to ensure that she dealt with the AMSP Properties as required by the Partnership Act upon the dissolution of the AMSP. The executors of Anthony Scolaro's estate held that right against Maria Scolaro for the benefit of the trustees of the three testamentary trusts of which John Scolaro, Rosana Scolaro and David Scolaro were the respective beneficiaries.
61 Turning to the SICP, immediately prior to 12 February 2011, Anthony and Maria Scolaro were the registered proprietors of the SICP Properties as joint tenants. The Commissioner says that there was an equitable presumption that Anthony and Maria Scolaro held the properties on trust for all the partners, namely, Anthony Scolaro, Maria Scolaro, John Gregory Scolaro, David Joseph Scolaro and Rosana Pamela Scolaro, as tenants in common in equity in the same proportions as those in which the partners were entitled to share in the partnership assets (that is, 20% for each of the five partners). The partners each had a 20% beneficial interest in the partnership property, including the SICP Properties, pursuant to s 30(2) of the Partnership Act, and in equity. The 1976 Deed of Trust and the 1988 Declaration of Trust confirm this arrangement in relation to the properties the subject of those documents.
62 Following Anthony Scolaro's death, the SICP dissolved on 15 March 2012. Prior to then, in September 2011, Maria Scolaro had become the sole registered proprietor of the SICP Properties. The Commissioner considers that from the time when Maria Scolaro was registered as the sole proprietor of the SICP Properties, she held these properties in equity to be dealt with as provided by the Partnership Act, including upon the dissolution of the SICP. The executors of Anthony Scolaro's estate held rights against Maria Scolaro to ensure that she dealt with the SICP Properties for the benefit of the partners of the SICP, and ultimately that she dealt with a 20% proportion of these rights for the benefit of the trustees of the three testamentary trusts of which John Scolaro, Rosana Scolaro and David Scolaro were the respective beneficiaries.
63 It is the Commissioner's view that, on dissolution of the AMSP (on 12 May 2011) and the SICP (on 15 March 2012), the partners and Anthony Scolaro's estate under his will, were entitled to have the assets, relevantly, the AMSP Properties and the SICP Properties respectively, sold and applied in accordance with s 57 of the Partnership Act. In the absence of an agreement to the contrary, s 50 of the Partnership Act implies a right to have the assets sold for cash. The AMSP Deed of Partnership and the SICP Deed of Partnership contain analogous provisions.
64 Upon John Scolaro's death on 12 August 2012, John Scolaro's entitlement in respect of the SICP, as a partner of the SICP, and the AMSP, as a beneficiary under Anthony Scolaro's will, was held by his executors for the benefit of the beneficiaries of his estate (Bianca Scolaro, Diana Scolaro, Loretta Scolaro, Christine Irdi and Emily Scolaro).
65 Therefore, the former partners and Anthony Scolaro's and John Scolaro's estates had a right to a proportion of the surplus after the realisation of the assets and payment of the debts and liabilities of the partnership.
66 The AMSP and the SICP did not continue after dissolution. However, the partnerships were not wound up in accordance with the Partnership Act or the partnership deeds.
67 The Commissioner submits that there were no trust arrangements in the sense of a bare trust in relation to the AMSP Properties and the SICP Properties, either during the existence of the AMSP and the SICP or upon the death of Anthony Scolaro and dissolution of the partnerships, between Maria Scolaro and the surviving partners, the estate of Anthony Scolaro and the estate of John Scolaro. In particular, Maria Scolaro did not hold the partnership properties on trust for any particular beneficiaries.
68 The Commissioner says that clause 3 of the operative provisions of the 2013 Deeds, (in the case of the SICP 2013 Deed, the second clause numbered 3) in combination with recital P of AMSP 2013 Deed and recital V of SICP 2013, create new trusts in relation to the subject land, under which the beneficiaries of the respective trusts, as named in the 2013 Deeds, have a proprietary and equitable interest in the land in the shares set out in the 2013 Deeds. The nature of the trust arrangement and the beneficiaries' interests under the trusts referred to in the 2013 Deeds is different to the relationship between partners and the interests of the partners and the estate of the deceased former partners of the former partnerships.
69 Therefore, the Commissioner says, the assertion in clause 3 of the operative provisions of the 2013 Deeds, (in the case of the SICP 2013 Deed, the second clause numbered 3) in combination with recital P of AMSP 2013 Deed and recital V of SICP 2013 Deed respectively, declare that the properties to which they refer shall be held on trust for the persons mentioned therein and, therefore, constitute 'declarations of trust' as defined in s 9 of the Duties Act.
70 The Commissioner says that there was no trust in respect of which the applicant could be appointed as a new trustee until the declarations of trust under clause 3 of the operative provisions of the 2013 Deeds.
71 The Commissioner's conclusions in relation to the issues are therefore as follows:
a) The Commissioner says that the relationship between the legal owners of the partnership properties and the other partners, both during the existence of the partnerships and following the dissolution of the partnerships, until execution of the 2013 Deeds, was not a trustee/beneficiary relationship which gave the other partners or the beneficiaries of their estates any particular interest in any of the AMSP or SICP Properties.
b) The Commissioner also says that the relationship between the legal owner of the properties and the persons for whom the properties were held on trust after the execution of the 2013 Deeds was a trustee/beneficiary relationship which gave the persons named in the 2013 Deeds particular interests in the AMSP or SICP Properties.
c) The Commissioner considers that the 2013 Deeds constitute 'declarations of trust' as defined in s 9 of the Duties Act.
d) The Commissioner therefore concludes that the 2013 Deeds constitute dutiable transactions in respect of which duty is imposed under s 10 of the Duties Act.
Applicant's position
72 The applicant takes issue with a number of the Commissioner's assertions.
Particular interests arise as a matter of law upon dissolution
73 The applicant says that, where on dissolution of a partnership, land which is partnership property is not required to be sold in order to pay partnership debts, the former partners have an identifiable beneficial interest in the land commensurate with their partnership interest, and not just a sui generis right to share in the proceeds of sale of the land; Connell at 373 per Malcolm CJ citing Cameron v Murdoch (1986) 60 ALJR 280; (1986) 63 ALR 575 (Cameron v Murdoch).
74 In Cameron v Murdoch a partner in a partnership provided in his will that a particular property (which was found to be partnership property) was to be held by his trustee in trust for certain specified persons as tenants in common in equal shares. It was contended by one of the parties that the devise in the will was ineffective to pass any interest in the property because at the date of the will the interest of the partners in that property could not be ascertained. At 63 ALR at 598 the Privy Council did not accept that contention, saying: 'There was no suggestion that, on the winding up of the original partnership it would be necessary to sell [the property], or any part of it, in order to pay off partnership debts. That being so, their Lordships consider that there is no difficulty in supporting the finding of Brinsden J that the amount of [the testator's] equitable interest in [the property] at the date of [the] will was' his proportional share in the partnership (including as a result of the intestacy of one of the other partners).
75 Brinsden J, whose decision (Cameron v Murdoch [1983] WAR 321) was upheld by the Privy Council in Cameron v Murdoch, at 343 referred to the interest of a partner in a partnership as being a proprietary interest in each and every item of property but being an indefinite and fluctuating interest which at any given moment is in proportion to his share in the ultimate surplus on winding up. However his Honour went on to say: '[a]s at the date of Jack's death his interest in the former partnership which was dissolved as at the date of James' death was then no longer an indefinite and fluctuating interest, but had become one third of the value of the total assets on taking final accounts there being no debts of which I am aware … '. In reaching that finding, Brinsden J applied (amongst other things) the decision of the High Court in Hendry v Perpetual Executors and Trustees Association of Australia Ltd (1961) 106 CLR 256. In that case (at 266) the Court cited with approval an earlier case in which it was said that 'when a dissolved partnership is to be, or is in the course of being, wound up, each partner or his estate retains an interest in every single asset of the former partnership which remains unrealized or unappropriated, and that that interest is proportionate to his share in the totality of the surplus assets of the partnership'.
76 The applicant says that Cameron v Murdoch was followed by the Supreme Court in Ringthane, where Seaman J at 494 held that a partner could during the term of a partnership enter into an enforceable agreement to sell particular partnership property upon dissolution of the partnership.
77 The applicant contends that, given that the assets of the partnership in each case exceeded the relevant liabilities, upon dissolution of the AMSP and the SICP following Anthony Scolaro's death:
a) the beneficial interests of Anthony and Maria Scolaro in the AMSP Properties were interests as tenants in common in equal shares in each of the AMSP Properties. In accordance with Anthony Scolaro's will, his 50% interest passed as to one third to each of his nominated beneficiaries; and
(b) the beneficial interests of Anthony, Maria, Rosana, John and David Scolaro in the SICP Properties were 20% interests as tenants in common in each of the SICP Properties. In accordance with Anthony Scolaro's will, his 20% interest passed as to one third to each of his nominated beneficiaries.
78 The applicant considers that the Commissioner has erred when the Commissioner denies the references in the Partnership Act and in the relevant authorities to land being 'held on trust' give rise to a trust. The applicant says that the Commissioner refers elliptically to the AMSP Properties and the SICP Properties as being held 'in equity', but does not justify the implicit proposition that property can be held 'in equity' in such circumstances without the existence of a trust. This proposition, the applicant says, appears to be based on an erroneous application of comments made in Sze Tu.
Relationship between Maria Scolaro and beneficiaries under the AMSP 2013 Deed
79 The applicant also does not agree with the Commissioner's conclusion that the 2013 Deeds create new trusts in relation to, respectively, the AMSP Properties and the SICP Properties.
Construction of the AMSP 2013 Deed
80 The applicant says that the starting point for any analysis of the position following the execution of the AMSP 2013 Deed must be to construe the deed itself.
81 The parties to the AMSP 2013 Deed are:
a) Maria Scolaro, who held legal title to the Properties and had a 50% partnership interest in the AMSP.
b) Rosana Bonavita (nee Scolaro), who was:
i) one of the executors of the estate of Anthony Scolaro, which estate had a 50% partnership interest in the AMSP;
ii) trustee of the RASCO Testamentary Trust, which was one of the beneficiaries of the estate of Anthony Scolaro and therefore entitled to one third of his 50% partnership interest in the AMSP;
c) David Scolaro, who was:
i) the other executor of the estate of Anthony Scolaro, which estate had a 50% partnership interest in the AMSP;
ii) trustee of the DASCO Testamentary Trust, which was one of the beneficiaries of the estate of Anthony Scolaro and therefore entitled to one third of his 50% partnership interest in the AMSP;
d) Bianca Scolaro, who was one of the trustees of the JASCO Testamentary Trust, which was one of the beneficiaries of the estate of Anthony Scolaro and therefore entitled to one third of his 50% partnership interest in the AMSP;
e) Diana Scolaro, who was the other trustee of the JASCO Testamentary Trust, which was one of the beneficiaries of the estate of Anthony Scolaro and therefore entitled to one third of his 50% partnership interest in the AMSP; and
f) the applicant.
82 By clause 1 of the AMSP 2013 Deed, the parties acknowledge and agree that the AMSP had by that time dissolved and that on dissolution the AMSP Properties and other assets were beneficially owned 50% by the estate of Anthony Scolaro and 50% by Maria Scolaro.
83 By clause 2, the executors of the estate of Anthony Scolaro transferred Anthony's beneficial interest in each of the AMSP Properties, to his beneficiaries.
84 By clause 3, Maria Scolaro, who at that time was the sole registered proprietor of each of the AMSP Properties and who is described as 'the trustee holding the titles to the [AMSP] Properties', 'confirms that, following the transmission at clause 2 above, she holds the Properties' on trust in the manner described.
85 In clause 4 all parties agree that the applicant is appointed as trustee of the AMSP Properties.
Declaration of trust
86 The applicant contends that:
a) The plain wording of clause 3 is not a declaration of trust. Rather, it is a purported confirmation of what is considered by Maria Scolaro to be an existing legal position.
b) Clause 3 is not a purported confirmation of any previous oral or written declaration of trust by Maria Scolaro. The trust is said to have arisen as a result of the dissolution of the AMSP (clause 1) and the transmission by the executors of the estate of Anthony Scolaro (clause 2).
87 The expression 'declaration of trust', the applicant says, must take its meaning from the Duties Act and is not necessarily confined to what would constitute a declaration of trust under the general law. A 'declaration of trust' is relevantly defined in s 9 of the Duties Act as meaning any declaration that any identified property vested in the person making the declaration is held in trust for the persons mentioned in the declaration. Nevertheless, in the context of the Duties Act the words 'declaration' and 'is held' must be interpreted as referring to an act that has the effect at law of creating a trust. It could not, in the applicant's view, sensibly be interpreted as including every statement acknowledging or referencing the fact that a trust already exists. The applicant says that if this is not the case, then dutiable transactions would arise every time a trustee referred, orally or in writing, to the existence of the trust, for example, in a conversation, email, letter or deed concerning the trust property.
88 The applicant says that there is nothing in the language or context of clause 3 of the AMSP 2013 Deed to indicate an intention to create or bring into existence a trust. In addition to the contention above about the language of the clause itself, it is plain from the recitals (particularly recitals I and P) that at the time of entering into the deed Maria Scolaro believed that a trust already existed. To construe clause 3 as a declaration of trust would be contrary to that assumption.
89 Furthermore, the applicant considers that it is apparent from recital Q of the AMSP 2013 Deed that Maria Scolaro was not seeking to create or alter in any way the beneficial ownership of the AMSP Properties. To the contrary, it is evident that the purpose of the AMSP 2013 Deed is to effect a transfer of the legal ownership of the AMSP Properties to a corporate entity thus freeing Maria Scolaro from the obligations she had as a trustee without altering any beneficial entitlements in respect of the AMSP Properties.
90 The applicant disagrees with the Commissioner's contentions that the AMSP 2013 Deed creates new trusts. Recital E of the AMSP 2013 Deed describes Maria Scolaro as the 'sole surviving trustee of the [AMSP] Properties' and states that the AMSP Properties 'continued to be held on trust for the Partnership'. Recital F also describes Maria Scolaro as the 'sole surviving trustee'. Recital I states that it was on dissolution of the Partnership that the former partners each held a 50% 'beneficial interest in the assets of the former Partnership, consistent with their previous 50% interests in the former Partnership'. Accordingly, the deed proceeds on the assumption that the AMSP Properties and other assets were beneficially owned by the former partners as of 12 May 2011. Clause 3 does not declare that the Properties 'shall be held on trust'.
91 The applicant says that if legal title to the AMSP Properties was held by Maria Scolaro, but the AMSP Properties were beneficially owned as to 50% each by Maria Scolaro and the estate of Anthony Scolaro, as the deed assumes, then it follows a trust must have already existed by the time the deed was entered into. The language of operative clauses 1 and 2 is consistent with the recitals. There is no basis for construing clause 3 as being objectively intended to declare a trust. Nor does clause 3 purport to evidence an oral declaration of trust made at an earlier time. The assumption in the recitals and operative provisions of the deed is that this happened as a matter of law 'on dissolution of the Partnership'. Hence clause 3, construed in the context of the deed as a whole, cannot be construed as a declaration of trust.
Effect of AMSP 2013 Deed
92 The applicant contends that clause 1 of the AMSP 2013 Deed accurately reflects the true legal position. That is, as at the date of the deed, the beneficial interests of the former partners in each AMSP Property was ascertainable.
93 Clause 2 of the AMSP Deed effected a transmission of the interest of Anthony Scolaro as a tenant in common as to 50% of each AMSP Property, to the beneficiaries of his estate, in accordance with his will. This attracts nominal duty under s 139 of the Duties Act.
94 As contended above, clause 3 then confirmed the existence of the trust which as at the date of the AMSP 2013 Deed already existed as a matter of law. That was an incident of, and as a step preliminary to, the second principal purpose of the deed which was to change trustee by clause 4. Even if the trust could be described as a trust for sale for the purpose of realising the assets and distributing to the partners their interest, as at the date of the AMSP 2013 Deed those assets (the AMSP Properties) had not been disposed of. It is that trust which is referred to in clause 3.
95 The applicant takes issue with the Commissioner's contention that a new trust arises from the assertion in clause 3 'in combination with recital P'. The applicant says that there is no reason to construe the recitals as having operative effect. Recitals can be used to alter the interpretation of an operative provision only if the operative provision is ambiguous. The applicant submits that recital P assists in the interpretation of the deed only in that it confirms the 'confirmation' in operative clause 3 reflected an understanding by Maria Scolaro that while she was the legal owner of the AMSP Properties they were beneficially owned by others, that is, she already held them in trust. Recital P cannot be construed as evidencing an oral declaration of trust because it is expressed in the future tense, being a statement of understanding as to what will be the respective beneficial interests of the parties following the transmission in accordance with clause 2.
96 The applicant says that clause 4 constitutes an agreement to transfer the AMSP Properties to a new trustee. It does not contain nor constitute a declaration of trust by the applicant. The clause proceeds on the basis that a trust already exists. That is consistent with Re Livanos at 366, which confirms that because the legal ownership of land which is partnership property remains distinct from the beneficial ownership, following the death of a partner the legal estate remains subject to the same trust for dissolution of the partnership and that trust may be enforced by the surviving partners against 'anyone in whom partnership land had vested'.
97 Therefore the applicant considers that nominal duty only is payable in accordance with s 119(3)(a) of the Duties Act in respect of the change of trustee brought about by clause 4.
Section 78(2) of the Duties Act
98 The applicant then turns to consider s 78(2) of the Duties Act. In O'Meagher v Commissioner of State Revenue [2013] WASAT 116; (2013) 96 ATR 57 (O'Meagher) at [52] the Tribunal said that when a partnership is dissolved, the property of the partnership is either sold or dealt with otherwise by agreement. The Tribunal rejected an argument that 'the mere act of agreeing that the partnership property is not to be sold means that the legal interests which the parties have in the partnership property somehow becomes beneficial interests'.
99 In this case, the applicant says, there is no evidence of an agreement of that kind, or of any agreement to treat the AMSP Properties as land (as opposed to personalty), which has brought to an end the trust for sale of the AMSP Properties following dissolution of the partnerships. The applicant says that even if, contrary to the above contentions, the trust for sale for the purpose of realising the assets and distributing to the partners their interest had come to an end prior to clause 3 of the AMSP 2013 Deed then that could only have occurred because clause 1 of the AMSP 2013 Deed constitutes or evidences an agreement amongst the former partners (or their executors) to transfer the AMSP Properties beneficially to Maria Scolaro and the estate of Anthony Scolaro as tenants in common in equal shares freed from any obligations arising from the former partnership.
100 Such an agreement to transfer would be a dutiable transaction. However under s 78(2) of the Duties Act the dutiable value of the interest transferred is reduced by each of those partners partnership interest in respect of the AMSP Properties. That reduces the dutiable value to nil, since each former partner received no greater percentage interest as a tenant in common than their percentage interest in the partnership. The applicant considers that this is consistent with the evident purpose of s 78, which is to not apply duty to a transfer of property upon dissolution of a partnership where there is no change in the underlying beneficial ownership of the property.
101 Hence, even if there was any agreement that brought the original trust to an end, the AMSP 2013 Deed does what the Tribunal said in O'Meagher could have been, but was not done, in that case.
102 On that basis, clause 3 of the AMSP 2013 Deed confirms that, because the AMSP Properties are still in the legal ownership of Maria Scolaro, she holds them on trust under a new trust that arose as a consequence of the transactions evidenced or effected by clauses 1 and 2. That new trust would be a bare trust for herself and the beneficiaries of the estate of Anthony Scolaro as tenants in common. Clause 3 still could not constitute a declaration of trust because the trust already existed as a matter of law by reason of the continued separation of legal and beneficial interests in the AMSP Properties. To construe such a confirmation as a dutiable declaration of trust would be inconsistent with what the applicant regards as the evident purpose of s 78 of the Duties Act, namely to not apply duty to a transfer of property upon dissolution of a partnership where there is no change in the underlying beneficial ownership of the property.
SICP 2013 Deed
103 Turning to the SICP 2013 Deed, the applicant says the above contentions regarding the AMSP 2013 Deed are repeated in relation to the SICP 2013 Deed.
Conclusion
104 The applicant's conclusions in relation to the issues are therefore as follows:
a) The relationship between the legal owners of the AMSP Properties and the SICP Properties and the other partners was:
i) during the existence of the partnerships, a trustee/beneficiary relationship in respect of which the interests of the partners in each Property was a sui generis equitable interest; and
ii) postdissolution of the partnerships until execution of the 2013 Deeds, a trustee/beneficiary relationship, operative by law, which gave the other partners or beneficiaries of their estates any particular interest in the Properties.
Alternatively, the trustee/beneficiary relationship arose by agreement between the former partners (including by their executors and administrator) by, or evidenced by, clause 1 of the 2013 Deeds, to which s 78(2) of the Duties Act applies.
c) The 2013 Deeds did not constitute 'declarations of trust' as defined in s 9 of the Duties Act. Clause 3 of each of the 2013 Deeds simply confirmed the existing trusts as an incident of the two principal purposes of the deeds, being to effect a transmission of interests to the estates of deceased persons and change the trustee holding legal title to the AMSP Properties and the SICP Properties.
d) The 2013 Deeds did not constitute dutiable transactions in respect of which duty is imposed under s 10 of the Duties Act.
Findings
Issues and facts
105 The determinative issue in this case is whether, as the Commissioner maintains, the 2013 Deeds created new equitable interests in the partnership land by declaring new trusts, and are consequently dutiable, or as the applicant maintains, the 2013 Deeds merely confirmed existing equitable interests in the partnership land, and are therefore not properly the subject of duty.
106 The facts in this matter are not in dispute. The Agreed Statement of Issues and Facts which is set out in full earlier in these reasons provide the factual basis of the present dispute. It is unnecessary to repeat those facts.
Nature of a partner's interest in partnership property
107 The nature of a partner's interest in partnership property was described by McLure P (with the concurrence of the other members of the Court) in Hancock at [41] [43], and I respectfully agree with her Honour's analysis.
108 After setting out the text of s 33 of the Partnership Act, McLure P said that:
a) a partner's share in the property of the partnership is a right to his or her proportion of the surplus after the realisation of assets and payment of debts and liabilities;
b) the 'right' referred to is a present equitable chose in action;
c) the source and nature of the right is related to the requirement that partnership property must be held and applied by the partners exclusively for the purposes of the partnership;
d) partners are not entitled in their individual capacity to exercise proprietary rights over any partnership asset;
e) as a consequence, the interest of a partner in an asset of the partnership is characterised as equitable, sui generis and of a nonspecific kind;
f) each partner has an undivided interest in the whole of the assets of the partnership;
g) the interest of a partner in partnership assets is not a fixed proportion of each item, nor is it an immediately ascertainable quantity of the item; it is an indefinite and fluctuating interest.
109 In making these statements, McLure P relied upon High Court authority, including Canny Gabriel at 327, Henschke at 517 518 and Livingston v Commissioner of Stamp Duties (Qld) (1960) 107 CLR 411 at 453.
110 To the extent that the applicant suggests that Cameron v Murdoch is authority for the proposition that partners have a specific beneficial interest in each partnership asset that will continue after dissolution, or that there is some form of incomplete trustee/beneficiary relationship which matures after dissolution, I reject that suggestion. The Privy Council specifically agreed with the High Court's decision in Canny Gabriel that a partner has an interest in every partnership asset: see Canny Gabriel at 327 328. That is one of the decisions upon which McLure P relied.
111 As Malcolm CJ said in Connell at 373, a partner has a present equitable interest in the assets comprising the partnership property and in each of those assets, but it is an interest which will not take effect in possession unless and until the partnership is dissolved. The measure of the partner's equitable interest is his entitlement to enforce a sale and division of the proceeds upon dissolution.
112 The New South Wales Court of Appeal has also specifically accepted that the interest of partners in partnership property is not equivalent to the equitable estate created by a trust; Sze Tu at [118] [127].
113 It follows that, in respect of the AMSP Properties and the SICP Properties, all that the partners in the SICP and the AMSP had during the existence of those partnerships was a right, upon dissolution of the partnership, to see the partnership assets distributed in accordance with the partnership agreement after payment of partnership debts.
114 It follows that the first subissue, which I repeat here, namely:
Was the relationship between the legal owners of the partnership properties and the other partners during the existence of the partnerships a trustee/beneficiary relationship under which the partners had any particular interest in any of the AMSP or SICP Properties?
- should be answered in the negative.
The effect of dissolution upon the surviving partners' rights and upon rights of deceased estate
115 I reiterate that a partner's share in the property of the partnership is a right to his or her proportion of the surplus after the realisation of assets and payment of debts and liabilities; Hancock at [41].
116 In my view, it follows from the nature of this right that the right will continue to exist upon and after dissolution of the partnership, until the realisation of assets, the payment of debts and liabilities and the distribution of assets (in specie or by way of payment of the net proceeds of sale).
117 This conclusion is supported by Lindley and Banks on Partnership (Sweet & Maxwell, 19th ed, 2010) (Lindley and Banks) at [1909]:
In the event of a general dissolution, each partner will again be entitled to insist on the partnership assets being applied towards payment of the firm's debts and liabilities and a division of any surplus proceeds. Until such time as those assets are either sold or divided in specie, it is submitted that each partner's share will have the same proprietary character as it had prior to the dissolution.
118 It is also supported in relation to interests in land by the observations of Brereton J in Beale v Trinkler [2007] NSWSC 1058 at [8]. After referring to the same passage from Lindley and Banks (albeit from the 18th ed, but the words of the relevant paragraph [1910] are the same), his Honour said:
It is also worth observing that, in respect of shares in partnership land, the authors of the current edition refer to what Lord Lindley wrote prior to the Partnership Act, namely that it followed, from the principle that a share of a partner is nothing more than his or her proportion of the partnership assets after they are liquidated, that in equity a share in a partnership, whether its property consisted of land or not, must be viewed as personal and not real estate, unless that were inconsistent with the agreement between the parties. This indicates that, absent agreement to the contrary, if partners held interests in land in the same proportions as their interests in the partnership, and that land was an asset of the partnership, then their interests in that land would not be as joint tenants or tenantsincommon in real estate, but a personal interest which arose from the operation of the contract of partnership on the legal interests in the land.
119 There are observations to the same effect by Buss JA in Atwell v Roberts (2013) 43 WAR 507 at [142] [143] where his Honour said:
A partner's share in the partnership is a chose in action, namely, a right to his or her proportion of the surplus after the realisation of assets and the payment of debts and liabilities. The share is not a title to specific property. However, a partner has an interest in every asset of the partnership. This interest has been described as a 'beneficial interest', but the interest is sui generis. See Canny Gabriel Castle Jackson Advertising Pty Ltd v Volume Sales (Finance) Pty Ltd [1974] HCA 22; (1974) 131 CLR 321, 327 - 328 (McTiernan, Menzies & Mason JJ). In Perpetual Executors & Trustees Association of Australia Ltd v Federal Commissioner of Taxation (Thomas' case) [No 2] [1955] HCA 66; (1955) 94 CLR 1, Dixon CJ described a partner's interest with respect to partnership assets as 'a right in respect of assets but ... a right, or a congeries of rights, growing out of the partnership articles' (15). See also s 33 of the Act; Cyril Henschke [22] - [27].
On dissolution, each partner retains a 'beneficial interest' in every asset of the partnership. See Hendry v Perpetual Executors and Trustees Association of Australia Ltd [1961] HCA 44; (1961) 106 CLR 256, 265 266 (Taylor & Menzies JJ). This interest continues to subsist until the partnership has been actually or notionally wound up. Actual winding up involves realisation of the partnership assets and payment of the partnership debts and liabilities before distributing any surplus among the partners according to their rights and interests. A notional winding up, instead of an actual winding up, may occur if the partners agree to that course of action; for example, 'if the parties agree on a sale to one or more of the remaining partners of the shares of the outgoing partner, or if there is a provision in the partnership agreement to that effect': Rushton [9].
120 The principles are subject to any agreement of the former partners (or a deceased partner's estate). As McLure P observed in Hancock at [43], partners could, by agreement, alter the status of partnership property. I consider that this would apply equally to the continuing rights of former partners after dissolution of a partnership.
121 The second subissue, again repeated here, namely:
Was the relationship between the legal owners of the properties and the other partners or the beneficiaries of their estates, postdissolution of the partnerships and until execution of the 2013 Deeds, a trustee/beneficiary relationship under which the other partners or the beneficiaries of their estates had any particular interest in any of the AMSP or SICP Properties?
- should be answered in the negative.
The effect of the 2013 Deeds
122 The 2013 Deeds both state that the beneficial interests of deceased partners are transmitted to the beneficiaries, and purport to confirm that the former partners have the same interests in the partnership properties as they had in the partnerships prior to them being dissolved.
123 I consider that, following the 2013 Deeds coming into effect, the AMSP Properties and the SICP Properties are held upon bare trusts for each of the former partners and the beneficiaries of the deceased estates. Clause 3 of each Deed states that Maria Scolaro holds the properties on specified trusts.
124 This does not seem to be disputed by the applicant and the question is whether the 2013 Deeds themselves brought about this legal position, or whether they confirmed the preexisting beneficial ownership of the partnership properties.
125 I have considered this question as a matter of substance, and the legal effect of the 2013 Deeds rather than the form of the words used.
126 It follows from my findings on the first two subissues that the 2013 Deeds did not confirm the preexisting beneficial ownership of the partnership properties. Rather, the 2013 Deeds represent an arrangement between the former partners and the estates of the deceased partners which had the effect of altering the status of partnership property from property which was to be used to satisfy their contractual rights of due administration of the partnership, to property held upon new trusts for them.
127 The third subissue, again repeated here, namely:
Is the relationship between the legal owners of the properties and the persons for whom the properties are held on trust after the execution of the 2013 Deeds, a trustee/beneficiary relationship under which the persons named in the 2013 Deeds have particular interests in the AMSP or SICP Properties?
- should be answered in the affirmative.
128 The fourth subissue, again repeated here, namely:
Did clause 3 of the AMSP 2013 Deed, either alone or read together with recital P of that deed, constitute a declaration of trust as defined in s 9 of the Duties Act?
- should be answered in the affirmative.
129 The fifth subissue, again repeated here, namely:
Did the second clause numbered 3 of the SICP 2013 Deed, either alone or read together with recital V of that deed, constitute a declaration of trust as defined in s 9 of the Duties Act?
- should be answered in the affirmative.
The operation of s 78(2) of the Duties Act
130 Section 78(2) of the Duties Act provides relief from duty where there is a distribution of partnership property to former partners.
131 Section 78(1) provides that s 78 applies:
... if, on a person (the retiring partner) ceasing to be a partner in a partnership because of the retiring partner's retirement from the partnership or its dissolution, dutiable property of the partnership is transferred or agreed to be transferred to the retiring partner.
132 The dutiable property must be the 'property of the partnership'. In the present case, the dutiable property of the partnership consists of the partnership properties. These properties are 'land in Western Australia' within the meaning of the definition of 'dutiable property' contained in s 15(a) of the Duties Act. The definition of 'land' in s 3 of the Duties Act includes any estate or interest in land.
133 Section 78(2) provides that:
The dutiable value of a transfer of, or an agreement for the transfer of, dutiable property to the retiring partner must be reduced by an amount calculated by applying the retiring partner's partnership interest in the partnership to the unencumbered value of the dutiable property immediately before the retirement or dissolution.
134 The question which arises is whether the 2013 Deeds are transfers of, or agreements for the transfer of, the partnership properties to the former partners and the estates of the former partners.
135 In my view, the 2013 Deeds do not transfer or represent an agreement to transfer legal title to the partnership properties.
136 As I have already found, the effect of the 2013 Deeds is to give the former partners or their estates beneficial ownership of the properties where they did not have that previously. Accordingly, the trusts created by the 2013 Deeds created a new equitable ownership of the partnership properties, rather than transferring any preexisting equitable ownership.
137 It is well established that there does not exist, at all points in time, a concept of separate legal and equitable ownership in land. In DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties (NSW) (1982) 149 CLR 431 at 463, Aickin J said:
If one person has both the legal estate and the entire beneficial interest in the land he holds an entire and unqualified legal interest and not two separate interests, one legal and the other equitable. If he first holds the legal estate upon trust for some other person and thereafter that other person transfers to him the entire equitable interest, then again the firstnamed person does not hold two separate interests, one the legal and the other the equitable estate; he holds a single entire interest he is the absolute owner of an estate in fee simple in the land. The equitable interest merges into the legal estate to comprise a single absolute interest in the land. It is a fundamental principle of both the common law and of equity that the holder of an estate in fee simple cannot be a trustee of that fee simple for himself for what he holds is a single estate, being the largest estate in land known to law.
138 It follows that, when Maria Scolaro declared that she held the partnership properties upon bare trusts for the former partners, and the deceased estates of former partners, she created new equitable interests in the partnership properties and she did not transfer any preexisting equitable ownership of the partnership properties to the former partners, and the deceased estates.
139 Accordingly, there is no relief from duty available under s 78(2) of the Duties Act.
Orders
1. The decision of the Commissioner of State Revenue partially allowing the applicant's objection to the assessment of duty is affirmed.
2. The applicant's application is dismissed.
I certify that this and the preceding [139] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
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JUDGE T SHARP, DEPUTY PRESIDENT
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