Sayden Pty Limited v Chief Commissioner of State Revenue
[2011] NSWADT 288
•07 December 2011
Administrative Decisions Tribunal
New South Wales
Medium Neutral Citation: Sayden Pty Limited v Chief Commissioner of State Revenue [2011] NSWADT 288 Hearing dates: 4 October 2011 Decision date: 07 December 2011 Jurisdiction: Revenue Division Before: J.Block, judicial member Decision: The decision under review is set aside; there is no order as to costs
Catchwords: Conversion of special trust to fixed trust - use of the relevant statutory language - construction of the word "admits" Legislation Cited: Land Tax Management Act 1956 Cases Cited: See generally the cases cited in the extract from Jacobs' Law of Trusts contained in the body of the decision Texts Cited: Jacobs "Law of Trusts" 7th edition Category: Principal judgment Parties: Sayden Pty Ltd as trustee of the Griffin Property Trust (Applicant)
Chief Commissioner of State Revenue (Respondent)Representation: J Kelly SC and K Munro for the Applicant
G. Kennett SC and T.L.Wong for the Respondent
Munro Lawyers for the Applicant
Crown Solicitor's Office for the Respondent
File Number(s): 116042
REasons for decision
Part A; Preliminary and Background
The Applicant in its capacity as the trustee of the Griffin Property Unit Trust "(the Trust") seeks, in this application the review of a land tax assessment ("the assessment") issued by the Respondent (who is sometimes referred to as the "Chief Commissioner") on 7 January 2011, in respect of the 2011 land tax year ("the relevant year"). In a covering letter to the assessment the Chief Commissioner stated that he regarded the Trust as a special trust pursuant to section 3A of the Land Tax Management Act 1956 ("LTMA" or "the Act") and so that and in consequence the Applicant was not entitled, in respect of the relevant year, to the benefit of the tax threshold in respect of land owned by it. (Section 3AL(2)(b) of and Schedule 2 to the Land Tax Act 1956)
The Applicant contends that the Trust was not in respect of the relevant year a special trust because it satisfied the relevant criteria for a fixed trust set out in section 3A (3B) of the Act and in particular in consequence of an amendment to the Trust Deed (as defined hereafter) pursuant to which a new clause 2 (c) was inserted in the Trust Deed. The Deed of Amendment pursuant to which such clause 2(c) was inserted is referred to more fully later in these reasons.
The Tribunal had before it the documents lodged in terms of section 58 of the Administrative Decisions Tribunal Act 1997. At the hearing of this matter on 4 October 2011 the Tribunal had before it submissions by the parties and in particular the Applicant's submissions dated 8 August 2011 ("AS") the Respondent's submissions dated 8 September 2011 ("RS") and the Applicant's submissions in reply dated 22 September 2011 ("AS2")
At the hearing of this application the Tribunal heard argument by counsel for each of the parties; at the conclusion of the hearing the Tribunal by consent directed that the Applicant should file final submissions within one month and that the Respondent should file final submissions within one month of receipt of the submissions by the Applicant. Final submissions were duly received; the term "AFS" relates to the Applicant's Further Submissions dated in October 2011 while "RFS" relates to the Respondent's final submissions dated 23 November 2011. The Tribunal has drawn on the submissions for the purposes of these reasons.
The Tribunal was also furnished with box files of authorities; all in all the volume of paper produced in this matter is substantial. The Tribunal considers that the main or substantive issue to be determined by it turns on the question of whether the amendment to the Trust Deed made in December 2010 did or did not have the effect that the Trust was a fixed trust in respect of the relevant year; it is in this context that the wording of the new clause 2 (c) of the Trust Deed and in particular the words "the Trustee hereby admits" which appear in the first line are of particular relevance.
I commence as a matter of convenience by including the content of AS under the head of "Facts" and contained in clauses 1 to 17 as follows:
1. The land under question is at 13 Cunningham Street, Moorebank, New South Wales comprised of Lot 10 in Deposited Plan 262283 (' Land ').
2. The Griffin Property Unit Trust was established by deed dated 17 May 2005 with Ichiban Pty Ltd as trustee (' Trust Deed ').
3. On 17 May 2005 Ichiban Pty Ltd resigned as trustee for the Griffin Property Unit Trust and Sayden Pty Ltd was appointed as trustee in its stead.
4. Sayden Pty Ltd is also the trustee for the Griffin Family Trust.
5. The Griffin Family Trust is a so-called 'special trust' for the purposes of the Land Tax Management Act 1956 (NSW) (' LTMA ').
6. The Griffin Family Trust was until 23 November 2010 the registered owner of the freehold estate of the Land.
7. On 23 November 2010 Sayden Pty Ltd as trustee for the Griffin Family Trust granted to Sayden as trustee for the Griffin Property Unit Trust a life estate in the Land based on the lives of Michael Francis Griffin and Keiko Ichida Griffin.
8. On 11 December 2010, the Trust Deed of the Griffin Property Unit Trust was amended pursuant to the power to amend contained in clause 20 of the Trust Deed, by Deed of Amendment between Sayden Pty Limited as the Trustee and Mike Griffin and Keiko Ichida-Griffin as trustees for the Griffin Super Fund as the Registered Holder, by the inclusion into the provisions of the Deed of Trust of the Griffin Property Unit Trust a new clause 2(c) (' Deed of Amendment ').
9. At all relevant times there have been no Special Units (as defined in the Trust Deed) issued in relation to the Griffin Property Unit Trust.
Terms of the Trust Deed and Deed of Amendment
10. The term "Registered Holder" is defined in the Trust Deed of the Griffin Property Unit Trust in clause 1 (f) as follows:
"Registered Holder" means the person for the time being registered under the provisions of this Deed as the holder of a Unit and includes persons jointly so registered."
11. "Unit" is defined in clause 1(i) of the Trust Deed as follows:
"Unit" means an undivided part or share in the Trust Fund as described in clause 5 hereof.
12. "Special Unit" is defined in clause 1(g) of the Trust Deed as follows:
"Special Unit" means any unit issued by the Trustee in accordance with Clause 6 hereof and, except where the context does not so allow, a Unit shall include a Special Unit."
13. Clause 2 of the Trust Deed establishes the trust fund and provides that the Trustee hereby admits and declares that it will henceforth hold all moneys and property forming part of the Trust Fund upon the trusts herein declared.
14. Clause 3 of the Trust Deed provides that the Trustee is to hold the capital and income of the Trust Fund upon trust for the Registered Holders in proportion to the number of Units held by them. Subclause (c) provides that the Registered Holder shall be entitled as herein provided to a beneficial interest as a Registered Holder in the Trust Fund but the Registered Holder shall not be entitled other than as herein provided to interfere with or to question the exercise or non-exercise by the Trustee of its rights and powers in dealing with the Trust Fund or any part thereof, to exercise any rights powers or privileges in respect of any investment forming part of the Trust Fund or to require the transfer to him of any of the assets or property which from time to time constitute the Trust Fund.
15. Clause 5 of the Trust Deed contains a provision relating to the Units, and subclause (a) provides that the beneficial interest in the Fund shall be divided into Units. Subclause (b) provides that every Unit shall confer an interest in the Fund in accordance with the provisions of clause 3 but shall not confer any interest in any particular part of the Fund or of any investment but only such interest in the Fund as is conferred on a Registered Holder under the provisions of the Deed.
16. Clause 6 of the Trust Deed contains a provision relating to Special Units as follows:
"Special Units
Notwithstanding the provisions of clause 5 hereof the Trustee shall be entitled to issue units and classes of units pursuant to this Clause 6 at the Trustee's discretion ("Special Units"). The rights which will be attributable to Special Units will be those which will be set out in the certificate which issues in respect of the particular Special Units. If there is any inconsistency between the provisions set out in the certificate and those contained in this Deed then the provisions of the certificate shall prevail. Any certificate issued in respect of Special Units shall be signed by the Trustee. If there is no certificate issued for Special Units or if the certificate does not contain any terms or rights in respect of that Special Unit then the provisions of the Deed shall apply. Without limiting the generality hereof it is acknowledged that classes of units may be issued which will be referable to specific property only and notwithstanding the provisions of Clause 5 may confer specific interests in respect of specific property."
17. On 11 December 2010 by Deed of Amendment a new clause 2(c) was inserted as follows:
"2(c) Notwithstanding any other provision of this Deed, the Trustee hereby admits that the Registered Holders:
are presently entitled to a fixed proportion of any distribution of income or capital of the trust, made by the Trustee, based on the proportion of income or capital units which each person owned in the Trust; and
are presently entitled to all of the income and capital of the Trust, subject to the payment of the expenses properly incurred by the Trustee in the authorized administration of the Trust; and
may require the Trustee to wind up the Trust and distribute either the land or the net proceeds of the sale of the land; and
the Trustee shall not remove, restrict or otherwise affect by the exercise of any discretion, or by a failure to exercise any discretion, paragraphs (i), (ii) and (iii) of this sub-clause."
The term "Amending Deed" refers to the Deed of Amendment set out in clause 17 of AS; unless the context requires otherwise defined terms in AS and quoted in the preceding clause have the same meanings.
Part B. The contention by the Applicant entitled "the Respondent's concession"
In AF2 and under the head of "the Respondent's concession the Applicant contended (at length and in clauses 1 to 17) that "there is nothing further for the Tribunal to adjudicate and the Applicant's appeal should be allowed". The Applicant's contentions in this particular context were dealt with at length by Mr. Kelly in his opening argument and indeed constituted a substantial part of it. The Tribunal does not consider it necessary to recite the content of AF2 in this particular context and similarly does not consider it necessary to refer to Mr. Kelly's argument in this context at the hearing. At the hearing the Tribunal referred to its power and duty to formulate the correct and preferable decision and indicated, on a preliminary basis, that it had doubts as to the validity of the Applicant's contentions in this particular regard.
In the result the Applicant abandoned the argument referred to in the preceding clause; clause 10 of AFS reads as follows:
10. The Applicant concedes that the Tribunal has the jurisdiction and power to correct the decision of the Respondent to treat the Applicant as a special trust and assess land tax for the 2011 year on that basis and does not press its point under the privative provisions of section 103A of the Taxation Administration Act 1996.
The contentions by the Applicant referred to in this Part B are relevant only as to costs. Although the Applicant did not in either of AS or AS2 make any mention of or claim for costs and although it similarly made no such mention during the hearing it has in AFS contended that it is entitled to costs pursuant to section 88(1)(a) of the Administrative Decisions Tribunal Act.
Part C The substantive issue
There does not appear to be any dispute as to the fact that the Amending Deed was made in order to bring the Trust within subsections (3A) and (3B) of section 3A of the Act; those subsections read as follows:
"(3A) If a trust satisfies the relevant criteria, the persons who are beneficiaries of the trust under the trust deed are taken to be owners of an equitable estate in the land that is subject of the trust and, accordingly, the trust is taken to be a fixed trust.
Note: Under section 25, owners of an equitable estate or interest in land are liable in respect of land tax as if they were legal owners of the land. Owners of an equitable estate in land are treated as secondary taxpayers.
(3B) For the purposes of this section, the "relevant criteria" are as follows:
(a) the trust deed specifically provides that the beneficiaries of the trust:
(i) are presently entitled to the income of the trust, subject only to payment of proper expenses by and of the trustee relating to the administration of the trust, and
(ii) are presently entitled to the capital of the trust, and may require the trustee to wind up the trust and distribute the trust property or the net proceeds of the trust property,
(b) the entitlements referred to in paragraph (a) cannot be removed, restricted or otherwise affected by the exercise of any discretion, or by a failure to exercise any discretion conferred on a person by the trust deed."
The Respondent submits that the words "the Trustee hereby admits" in the first line of the new clause 2(c) inserted in the Trust Deed do not have the effect that the Trust Deed as amended by the Amending Deed satisfied the relevant criteria. (It will be noted that the wording of the new clause 2(c) otherwise mirrors the relevant statutory wording.)
The Respondent contends inter alia that the word "admits" should be construed in such manner that it relates to a right which existed prior to the admission; it is on this basis that the Respondent contends that the Trust Deed as amended lacks the necessary operative words which would convert it from a special trust to a fixed trust.
The arguments raised in this particular context (and on both sides) are in some respects lengthy and complex but I do not consider it necessary to refer to them in detail. Most of clause 3 of RFS is however, and as a matter of completeness, included in these reasons as follows::
(a) The requirement that the trust deed "specifically provide" for the matters set out in s 3A(3B)(a) of the LTMA cannot be satisfied by merely repeating the statutory language in the trust deed. This is because:
i. the statutory language of s 3A(3B)(a) is framed in an intentionally broad manner, to ensure that the drafter of the trust deed has some latitude in determining the nature of the present entitlements to be conferred;
ii. the phrase "specifically provides" emphasises that a level of detail or specificity is required in the trust deed to give effect to the otherwise general nature of the entitlements referred to in s 3A(3B)(a). Language borrowed from s 3A(3B)(a) which describes a class of entitlements in general terms, does not achieve that object;
iii. a provision in a trust deed which merely repeats the statutory language would be void for uncertainty or its operation would so unclear that it would fail to satisfy the requirement that the trust deed "specifically provide[]" for the matters set out in s 3A(3B)(a);
(b) Clause 2(c) of the Trust Deed is not sufficient to allow the trust to be characterised as a "fixed trust" under s 3A(3A) and (3B), for at least the following reasons:
i. clauses 2(c)(i) and (ii) of the Trust Deed provide that the Registered Holders are presently entitled to "a fixed proportion" and "all of" the capital of the trust, respectively. These clauses, to the extent that they purport to confer upon the unit holders a present entitlement to the capital of the Trust, are void for uncertainty because the Trust Deed does not explain how the present entitlement is manifested. Even if it could not be said that a court would hold them void, they still fall short of the requirement for specific provision . For example, it is unclear whether the present entitlement is in relation to specific assets of the Trust Fund (ie., a right to have assets transferred to the Registered Holder in specie) or whether the present entitlement is a right to redeem units in the Trust, which the Trustee has no discretion to refuse;
ii. clause 2(c)(iii) of the Trust Deed provides that the "Registered Holders . . . may require the Trustee to wind up the Trust and distribute either the land or the net proceeds of sale of the land." As the Trust Deed defines the singular to include the plural and vice versa, it is entirely uncertain as to whether the drafter of the deed intended that the power could be exercised by each individual beneficiary or by all of the beneficiaries acting together;
(c) the use of the word "notwithstanding" in clause 2(c) compounds the uncertainty created by the inclusion of clause 2(c) in the Trust Deed, as it is unclear which of the remaining clauses in the Trust Deed continue to have effect, having regard to the inconsistency between clause 2(c) and other clauses of the Trust Deed, including 3(c)(iii), 5(b) and 9(b). The Applicant has declined to give any explanation as to how the Trust Deed should be interpreted to reconcile these inconsistencies;
(d) the rule in Saunders v Vautier cannot assist the Applicant to establish that that Trust Deed satisfies the relevant criteria. This is because:
i. section 3A(3B) requires the trust deed to "specifically provide" for the matters set out in the remainder of the subsection. The rule in Saunders v Vautier applies by operation of law and therefore cannot enable compliance with the requirements of s 3A(3B);
ii. further or in the alternative, the reasoning given by the High Court in CPT Custodian demonstrates that the rule in Saunders v Vautier does not give rise to a present entitlement to income or capital of a trust, as "Equity often regards as done that which ought to be done, but not necessarily that which merely could be done" ;
(e) the remaining clauses of the Trust Deed are inconsistent with the relevant criterion stated in ss 3A(3B)(a)(ii) of the LTMA , as they do not confer upon the unit holders a present entitlement to the capital of the trust; and
(f) the Trust therefore cannot satisfy the relevant criteria for a fixed trust, and must be a "special trust" within the meaning of ss 3A(1) of the LTMA .
Although the "admits" wording is not in my view the most desirable wording available and although somewhat different wording would have been preferable, It is my view that it is correct in a matter such as this to apply the practical and purposive approach and for which the Applicant contends, and not the detached and literal approach favoured by the Respondent. See Jacobs" Law of Trust 7 th edition as follows:
"It has become fashionable to say that in construing settlements, the court should adopt an approach which is 'practical and purposive, rather than detached and literal'. [ Mettoy Pension Trustees Ltd v Evans [1991] 2 All ER 513 at 537; [1990] 1 WLR 1587 at 1610; Lock v Westpac Banking Corp (1991) 25 NSWLR 593 at 602, noted (1993) 67 ALJ 70; Re UEB Indusries Ltd Pension Plan [1992] 1 NZLR 294 at 297; In re Scientific Investment Pension Plan Trusts [1999] Ch 53 at 62; [1998] 3 All ER 154 at 161; Collins v AMP Superannuation Ltd (1997) 75 FCR 565 at 580; 147 ALR 243 at 256; Nick Kritharas Holdings Ltd (in liq) v Gatsios Holdings Pty Ltd (2001) 38 ASCR 57 at [18] - [19]; Local Government Superannuation Board v Thorne (2002) 76 ALD 569 at [34]. See [2941].] But it may be doubted as Warner J himself observed in Mettoy Pension Trustees whether this does any more than encapsulate that which was explained by Lord Upjohn, itself well understood and not novel. [ Caboche v Ramsay (1993) 119 ALR 215 at 232 - 3; Wilson v Law Debenture Trust Corporation plc [1995] 2 All ER 337 at 347 -8].
"Very often, the fiscal background - the drafting of provisions in order to comply with, or take advantage of, favourable tax treatment - is another important consideration in construing the documents. [See, for example, Mettoy Pension Trustees Ltd v Evans [1991] 2 All ER 513 at 537; [1990] 1 WLR 1587 at 1610; Re Landau [1998] Ch 223 at 233; [1997] 3 All ER 322 at 329; International Power plc v Healy [2001] 2 All ER 417 at [18] - [26]; [2001] 1 WLR 864]. "
See also Byrnes v Kendle [2011] HCA 26 at [111]; (2011) 279 ALR 212 at 240 [11] where Heydon & Crennan JJ approved what was said in Mettoy at 537.
The Respondent contends in RFS that it is not sufficient in an amending deed simply to mirror the words of the statute and that more is required... I do not agree; it is my view that a deed which mirrors the statute is sufficient to achieve the result sought. To hold otherwise would require a technical approach which would not constitute the correct and preferable decision. It follows that the decision under review should be set aside and the assessment must be altered so as to allow the threshold to which I have referred
Part D Costs
As set out previously the Applicant now (and somewhat belatedly) seeks an order for costs. Clause 12 of AFS reads as follows:
12. It is submitted that, objectively viewed, the respondent:
(a) pursuant to subsection (a) of section 88(1A) has by his conduct, unnecessarily disadvantaged the Applicant by abandoning in the respondent's submissions filed on 8 September 2011 the reasons in his letter of 9 March 2011 ("Initial Decision") on which the Applicant's application and original submissions in the appeal were based, and by calling into question in the respondent's submissions a matter which the respondent had earlier conceded, namely whether the provisions inserted by clause 2(c) of the Amending Deed accord with the 'relevant criteria' in the LTMA;
(b) pursuant to subsection (a)(ii) of section 88(1A) has by his conduct, unnecessarily disadvantaged the Applicant by failing to comply with sections 49(3) and 58(1)(a) of the ADT Act and by delaying their submissions;
(c) pursuant to subsection (b) of section 88(1A) has been responsible for prolonging unreasonably the time taken to complete the proceedings;
(d) pursuant to subsection (c) of section 88(1A) has made a number of submissions to the effect that the new sub-clause 2(c) does not satisfy the 'relevant criteria', none of which is sustainable, accordingly has made a claim that has no tenable basis in law; and
(e) pursuant to subsection (d) of section 88(1A), due to his conduct as set out above in paragraph (a) and in pursuing a number of matters that have no tenable basis in law, has increased the complexity of the matter beyond what should have been necessary.
The Applicant is in my view entitled to contend that there has in the course of this matter been some change of position by the Respondent (although to detail the changes is not necessary) but then similarly the Applicant has also changed its position and as to which see in particular Part B above. The Respondent in clauses 59 and 60 of RFS suggests that costs should not be dealt with at this stage but should await this decision and so that this question should be left open; he has indicated also that he may wish to seek a separate hearing as to costs. It is my view that this may be the desirable course in some cases but that this is not such a case.
This decision is in favour of the Applicant but it cannot be contended that the Chief Commissioner does not have an arguable case. Having considered the various subsections of section 881A and having regard in particular but not only, to clause 18 above this does not appear to me to be a case in which a costs order is appropriate,
Part E Conclusion
The decision under review is set aside on the basis that the Trust should in respect of the relevant year be assessed as a fixed trust and not a special trust; the Tribunal does not make any order as to costs.
Decision last updated: 07 December 2011
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