Shand v Chief Commissioner of State Revenue

Case •

[2025] NSWSC 818

•

25 July 2025

No judgment structure available for this case.

Supreme Court


New South Wales

Medium Neutral Citation: Shand v Chief Commissioner of State Revenue [2025] NSWSC 818
Hearing dates: 1 July 2025
Date of orders: 25 July 2025
Decision date: 25 July 2025
Jurisdiction:Equity - Revenue List
Before: Hmelnitsky J
Decision:

1.   The summons is dismissed.

2.   The parties are directed to file and serve evidence and short submissions on the question of costs on or before 8 August 2025.

3.   The parties are directed to file and serve evidence and short submissions in reply on the question of costs on or before 15 August 2025.

Catchwords:

TAXES AND DUTIES — Dutiable transactions — Dutiable property — Agreement for sale or transfer — Where executor purchased land forming part of residue of unadministered estate in her personal capacity — Whether transaction was an ‘agreement’ under s 8(1)(b)(i) of the Duties Act 1997 (NSW) — Meaning of agreement

TAXES AND DUTIES — Dutiable transactions — Dutiable property — Surrender of an interest in land — Land forming part of residue of unadministered estate — Whether other residuary beneficiaries’ interests were ‘interests in land’ under s 8(1)(b)(iii) of the Duties Act — Nature of interests of residuary beneficiaries — Whether interests of residuary beneficiaries were ‘surrendered’ in transfer of land to executor

Legislation Cited:

Conveyancing Act 1919 (NSW) ss 7, 24 and 54A

Duties Act 1997 (NSW) ss 7, 8, 9, 11, 29, 63, 147, 158, 158A and 159

Probate and Administration Act 1898 (NSW) s 44

State Revenue and Fines Legislation Amendment (Miscellaneous) Act 2022 (NSW)

Taxation Administration Act 1996 (NSW) s 97

Cases Cited:

Attorney-General v Heywood (1887) 19 QBD 326

Baxter v Chief Commissioner of State Revenue [2024] NSWCATAD 153

Boensch v Pascoe (2019) 268 CLR 593; [2019] HCA 49

Clay v Clay (2002) 202 CLR 410; [2001] HCA 9

Commissioner of Stamp Duties (Qld) v Livingston (1964) 112 CLR 12; [1964] HCA 54

Commissioner of State Revenue (WA) v Rojoda Pty Ltd (2020) 268 CLR 281; [2020] HCA 7

Conexa Sydney Holdings Pty Ltd v Chief Commissioner of State Revenue (NSW) [2025] NSWCA 20

Craig v Federal Commissioner of Taxation (1945) 70 CLR 441; [1945] HCA 1

Denton v Donner (1856) 23 Beav 285

Dr Barnardo’s Homes v Special Income Tax Commissioners [1921] 2 AC 1

Gartside v Inland Revenue Commissioners [1968] AC 553

Gulland v Federal Commissioner of Taxation (1983) 72 FLR 362; [1983] WASC 189

Hiralal v Hiralal [2013] NSWSC 984; (2013) 10 ASTLR 300

Horton v Jones (1935) 53 CLR 475; [1935] HCA 7

In re Ponder [1921] 2 Ch 59

In the estate of Dunn [1963] VR 165

Ingram v Inland Revenue Commissioners [1997] 4 All ER 395

Ingram v Inland Revenue Commissioners [2000] 1 AC 293

Leedale (Inspector of Taxes) v Lewis [1982] 1 WLR 1319

Lord Sudeley v Attorney-General [1897] AC 11

MacRobertson Miller Airline Services v Commissioner of State Taxation (WA) (1975) 133 CLR 125; [1975] HCA 55

Minister Administering National Parks and Wildlife Act 1974 v Halloran [2004] NSWCA 118; (2004) 12 BPR 22391

Official Receiver in Bankruptcy v Schultz (1990) 170 CLR 306; [1990] HCA 45

Osborne v Federal Commissioner of Taxation (1921) 29 CLR 169; [1921] HCA 10

Rakmy Pty Ltd v Commissioner of State Revenue (Vic) [2017] VSC 237

Re Australand Holdings Ltd [2005] NSWSC 835; (2005) 219 ALR 728

Re One Funds Management Ltd [2023] FCA 1212

Tito v Waddell (No 2) [1977] Ch 106

Williams v Scott [1900] AC 499

Texts Cited:

J Glister and P Ridge (eds), Fault Lines in Equity (2012, Hart Publishing)

Category:Principal judgment
Parties: Fiona Shand (Plaintiff)
Chief Commissioner of State Revenue (Defendant)
Representation:

Counsel:
D Lewis (Plaintiff)
S Kanagaratnam (Defendant)

Solicitors:
Crown Solicitor’s Office (Defendant)
File Number(s): 2024/333395
Publication restriction: Nil

JUDGMENT

  1. The interesting question at the heart of these proceedings concerns the nature of the transaction that occurred when the plaintiff, who was the executor of her mother’s deceased estate, entered into a contract with herself to acquire a property that was owned by her in her capacity as executor. The parties agree that, one way or another, a ‘transaction’ within the meaning of s 8(1)(b) of the Duties Act 1997 (NSW) occurred upon execution of the contract. The dispute is as to whether that transaction was a ‘surrender of an interest in land’ by the other beneficiaries within the meaning of s 8(1)(b)(iii), as the plaintiff contends, or an ‘agreement for the sale or transfer of dutiable property’ within the meaning of s 8(1)(b)(i), as the defendant contends. The parties accept that if the transaction was neither of these things, it was nevertheless within the scope of s 8(1)(b)(ix) and dutiable on that basis.

  2. The difference between the parties’ competing primary positions is best understood by reference to the uncontroversial facts which give rise to the dispute.

  3. The plaintiff’s mother, Robin Shand, died in 2022. She was survived by four children, including the plaintiff. Mrs Shand had made a last will and testament on 6 August 2019 (the Will) which nominated the plaintiff as executor. Probate of Mrs Shand’s estate was granted to the plaintiff on 29 September 2022.

  4. After providing for some specific gifts and subject to some matters I will mention below, the residue of Mrs Shand’s estate was to be held on separate testamentary trusts for the benefit of each of her children and their respective families. One of these testamentary trusts was to be established for the plaintiff and her family. That trust was to receive 27.3% of the residue of the estate.

  5. One of the assets of the estate was a house in Bondi Junction (the Property), which was owned unencumbered. On 15 December 2022, the plaintiff caused a transmission application to be lodged, as a result of which she became the registered proprietor of the Property. The transmission application identified the applicant as being the plaintiff in her capacity as executor.

  6. The plaintiff appointed a real estate agent for the purpose of marketing the Property for sale at a public auction. An auction was held on 3 October 2023 and the plaintiff was the winning bidder. The same day, she executed a standard form contract for the sale of land in which she was identified as both vendor and purchaser (the Contract). Where the Contract identified the plaintiff as purchaser, it did so as ‘Fiona Campbell Shand (in her personal capacity)’. The purchase price was $5,010,000 and time for completion was 19 January 2024.

  7. Completion seems to have occurred in accordance with the Contract. On 19 January 2024, the plaintiff caused a transfer to be lodged, in which she was identified as both vendor and purchaser. Although there was no evidence about this, I was informed that the plaintiff paid the whole of the purchase price.

  8. The issue in dispute concerns the way Chapter 2 of the Duties Act applies in these circumstances. That Chapter charges duty on ‘transfers’ of dutiable property (s 8(1)(a)) and on a range of ‘transactions’ identified in s 8(1)(b). It is common ground that execution of the Contract was not a transfer. The transactions described in subsection (1)(b) include:

(i)    an agreement for the sale or transfer of dutiable property,

…

(iii)    a surrender of an interest in land in New South Wales,

…

(ix)    another transaction that results in a change in beneficial ownership of dutiable property, other than an excluded transaction.

  1. If the transaction was dutiable under paragraph (iii), the parties agree that duty was payable on 72.7% of the value of the Property because, in that event, duty would only be payable by reference to the value of the interests in land surrendered to the plaintiff by the other beneficiaries. On the other hand, if the transaction was dutiable under either paragraph (i) or (ix), duty was payable on the whole of the value of the Property because the dutiable property that was the subject of the agreement or other transaction was the Property itself. I will explain why this is so later in these reasons.

Some additional facts

The Will

  1. Clause 3.1 of the Will appointed the plaintiff to be ‘Executor and Trustee of this Will’. The expression ‘Executor’ was defined to mean ‘the person… named or referred to in paragraph 3 while acting and my personal representatives for the time being…’. The expression ‘Trustee’ was defined to mean ‘each Trustee contemplated in paragraph 6 while acting, the persons named or referred to in paragraph 3 while acting, and any one or more of them’. There is a slight infelicity of expression here, because the Will contemplated that there would be at least three separate ‘Trustees’ of the testamentary trusts. I do not however think this matters. The Will elsewhere distinguishes between the Executor of the Will and the role of Trustee of the testamentary trusts and it is otherwise clear that the plaintiff was not appointed Trustee of all four trusts. The Will also makes clear what the powers of the Executor were to be.

  2. Clause 5 provided for some specific gifts to children and grandchildren, including gifts of artworks as well as gifts of the proceeds of sale of artworks.

  3. Clause 6 provided for the whole of the residue to go to four separate testamentary trusts. The plaintiff was to become trustee of two such trusts, the first being a trust for one of her brothers and his children (the Robin Shand No 1 Testamentary Trust) and the second being a trust for her and her own children (the Robin Shand No 2 Testamentary Trust). For each other sibling, that sibling was the trustee of a separate testamentary trust.

  4. To the Robin Shand No 1 Testamentary Trust, which was for the benefit of one of her sons, the testator gave a property (being a property owned by the testator in which that son lived) plus a 18.1% share of the residue of the estate. To each other testamentary trust, the testator gave the remainder of the residue of the estate in equal shares. That is, each other trust was to receive a 27.3% share of the residue.

  5. Clause 6.1 was entitled Robin Shand No 1 Testamentary Trust. It provided as follows:

“6.1    Robin Shand No 1 Testamentary Trust

Subject to paragraph 7 (If no Beneficiaries), I give Simon’s Residence and a 18.1% share of the residue of my estate (with any monies held in accordance with paragraph 4.1) to the Robin Shand No 1 Testamentary Trust, to which the provisions of Part 2 of this Will and the following terms are to apply:

(a)    Trustee means:

(i)    Fiona, while she is able and willing to act;

and thereafter

(ii)    Fiona’s legal personal representative while that legal personal representative is able and willing to act;

(b)    Principal Beneficiary means Simon;

(c)   each of the following is a No 1 Trust Beneficiary:

(i)    the Principal Beneficiary;

(ii)    any corporation or trust in which another No 1 Trust Beneficiary is a director or holds a share or other entitlement or interest (whether vested or contingent and including a right to be considered as a discretionary beneficiary) other than a corporation that is or was the Trustee of the Robin Shand No 1 Testamentary Trust;

(d)    on and from the date of death of the Principal Beneficiary, the remaining capital and income of the Robin Shand No 1 Testamentary Trust must be Distributed as follows:

(i)    a one third share to the Robin Shand No 2 Testamentary Trust;

(ii)    a one third share to the Robin Shand No 3 Testamentary Trust; and

(iii)    a one third share to the Robin Shand No 4 Testamentary Trust.”

  1. Clause 6.6 was as follows:

“6.6    Specific gift instead of trust

If the Principal Beneficiary of a Testamentary Trust so requests and my Executor agrees, the Principal Beneficiary is to be entitled to take, by direct payment or transfer as a specific gift, the whole or any part of the residue of my estate that is intended for that trust. If the whole is to be directly paid or transferred to that Principal Beneficiary, then that trust is not to be established.”

  1. Part 2 of the Will specified the terms of the testamentary trusts. The testamentary trusts were to be discretionary, both as to capital and income, until the ‘Vesting Day’ which was to be 80 years from Mrs Shand’s death unless brought forward by the applicable Trustee.

  2. Clauses 20 and 21 were relevantly as follows:

“20    Distribution of capital

Until the Vesting Day, the Trustees have the power to Distribute the capital of the Trust Fund as the Trustees think fit to or for the benefit of:

(a)    the Beneficiaries; or

(b) one or more of the Beneficiaries exclusive of the others and in such shares or proportions as the Trustees may determine. Without limiting this power, the Trustees are entitled to Distribute any capital of the Trust Fund to a Beneficiary where the income to which the Beneficiary becomes presently entitled as a consequence of a determination by the Trustee under clause 21.1 is less than the share of the Net Income on which the Beneficiary is liable to tax under the Income Tax Assessment Act 1936 or the Income Tax Assessment Act 1997.

21    Distribution of Income

21.1    The Trustees may, at any time before the end of a Financial Year (or such other time as permitted under tax law), determine to do either or both of the following with respect to all or part of the Income of a Testamentary Trust for that Financial Year:

(a)    Distribute it to the Beneficiaries (or one of more of them) of that Testamentary Trust living or in existence at the time of the determination; or

(b)    accumulate it (including for a particular purpose).”

  1. Clause 15.2(r)(i)(A) provided that a Trustee had power to ‘…dispose of (including to sell, transfer, hire or lease) Trust Fund Assets to, or to lend or advance any Trust Fund moneys to…a Trustee in their personal capacity or in their capacity as Trustee or trustee of any other trust’. The expression ‘Trust Fund Assets’ was defined by clause 2.1 to mean the assets given to each testamentary trust provided for under clause 6 of the Will, as well as any additions or accretions to those assets.

  2. It is also relevant to note clause 11(a), which provided that the ‘Executor’ was to have ‘the powers in Part 2 of this Will as if the Executor was a Trustee’.

The administration of the estate

  1. The plaintiff has taken and is continuing to take steps to administer her mother’s estate.

  2. The inventory of assets prepared for the purpose of the grant of probate disclosed assets with a total value of $8,802,648.52. Of this, $3,350,000 represented the estimated value of the Property.

  3. By about the middle of 2023, the plaintiff had gotten in most of the assets of the estate. She had caused the property that was to be held on the terms of the Robin Shand No 1 Testamentary Trust to be transmitted to herself. She had dealt with her mother’s household contents, jewellery and other personal effects. She had arranged for monies in her mother’s bank accounts to be transferred into an account in her name as executor for the purpose of administering the estate. By the time of the auction of the Property in October 2023, the only assets of the estate that had not been dealt with were the Property, some artworks and a loan to one of the plaintiff’s siblings, which according to clause 4.3 was to be set off against that sibling’s entitlements under the Will. Liabilities had all been either discharged or provided for.

  4. The estate also owned shares in a private company that held cash and shares, as well as a loan receivable. As executor, the plaintiff took steps to become the shareholder and director of that company. Its assets have now been sold and steps are being taken for the company to be liquidated. After selling shares and other investments, the company held around $2,427,827 in cash.

  5. As such, by the time of the auction of the Property, the administration of the estate was nearing completion. The only ongoing expenses related to the plaintiff’s ongoing care of her mother’s dog and a small amount of insurance on some artworks that had not been sold as contemplated by clause 5 of the Will, the net proceeds of which were to be distributed as a specific gift.

  6. The plaintiff submitted that by the time of the auction the residue had been ‘effectively’ ascertained in the sense that the plaintiff did not require the assets of the estate for the purpose of meeting liabilities. I accept that this is a largely accurate statement of the facts, although there is a legally important difference between ‘ascertained’ and ‘nearly ascertained’ in this context: see Lord Sudeley v Attorney-General [1897] AC 11 (‘Lord Sudeley’s case’) at 15 (Lord Halsbury LC); Dr Barnardo’s Homes v Special Income Tax Commissioners [1921] 2 AC 1 (‘Barnado’s Homes’) at 10 (Viscount Cave).

  7. There is no direct evidence as to what has occurred in the administration of the estate since the execution of the Contract on 3 October 2023. There is evidence that a transfer was lodged on 19 January 2024, although it effected nothing because there was no change in the registered owner. As already mentioned, I was informed that the plaintiff paid the whole of the purchase price. However, there was no evidence as to how the purchase price was paid and how those funds were dealt with by the plaintiff as executor. There is no evidence that the testamentary trusts have been established yet.

  8. There was no suggestion in the evidence that the plaintiff intended to or in fact did appropriate the Property in satisfaction of any of her entitlements under the Will. Nor was there any suggestion that the steps she took to acquire the Property were the subject of any kind of agreement among the beneficiaries: cf s 63(2) of the Duties Act. There is no evidence that the other beneficiaries were aware of the transaction at the time it occurred.

Assessment, objection and application for review

  1. On 16 January 2024, the defendant issued a notice of assessment. The basis of the assessment was that the Contract was an agreement within the meaning of s 8(1)(b)(i) of the Duties Act. An objection was disallowed on 12 July 2024. The plaintiff filed a summons on 9 September 2024 in which she applied for a review of the assessment under s 97 of the Taxation Administration Act 1996 (NSW).

The Duties Act 1997

  1. Although I have already mentioned the key paragraphs of s 8(1)(b), it is helpful to see them in their slightly wider setting. Section 8 includes the following:

(1)     This Chapter charges duty on—

(a)     a transfer of dutiable property, and

(b)     the following transactions—

(i)     an agreement for the sale or transfer of dutiable property,

…

(iii)     a surrender of an interest in land in New South Wales,

…

(ix)     another transaction that results in a change in beneficial ownership of dutiable property, other than an excluded transaction.

…

(2)     Such a transfer or transaction is a dutiable transaction for the purposes of this Act.

…

(3)     In this Chapter—

beneficial ownership includes ownership of dutiable property by a person as trustee of a trust.

change in beneficial ownership includes the following—

(a)     the creation of dutiable property,

(b)     the extinguishment of dutiable property,

(c)     a change in equitable interests in dutiable property,

(d)     dutiable property becoming the subject of a trust,

(e)     dutiable property ceasing to be the subject of a trust.

  1. The identification of which paragraph in s 8(1)(b) applies to a transaction has important consequences for how the balance of Chapter 2 operates. That is because dutiable transactions that are not ‘transfers’ are deemed to be transfers for the purposes of the balance of the provisions: s 9(1). To give effect to that deeming, the table in s 9(2) identifies the property that is taken to be transferred and the person to whom it is transferred for each transaction specified in s 8(1)(b). The table relevantly provides:

Column 1

Column 2

Column 3

Column 4

Dutiable transaction

Property transferred

Transferee

When transfer occurs

agreement for sale or transfer

the property agreed to be sold or transferred

the purchaser or transferee

when the agreement is entered into

…

…

…

…

surrender

the surrendered property

the person to whom the property is surrendered

when the surrender takes place

…

…

…

…

another transaction that results in a change in beneficial ownership of dutiable property

the property the beneficial ownership of which is changed

the person who obtains the beneficial ownership or whose beneficial ownership is increased

when beneficial ownership changes

  1. Given my other conclusions, it will be unnecessary to determine how s 9 applies when a transaction meets the description of both (i) and (iii) in s 8(1)(b). So far as paragraph (ix) is concerned, the position is as explained by Senior Member MacIntyre in Baxter v Chief Commissioner of State Revenue [2024] NSWCATAD 153 (‘Baxter’) at [53], namely:

“Section 8(1)(b)(ix) applies to ‘another transaction’ that results in a change in beneficial ownership of dutiable property, subject to relevant exclusions. In other words, transactions referred to in the preceding paragraphs (i) to (viii) of s 8(1)(b) are brought to duty, if they fall within any of these particular paragraphs. Where such a transaction produces a change in beneficial ownership of dutiable property, it will be taxed under the relevant paragraph (i) to (viii). Where, however, a transaction that results in a change in beneficial ownership does not fall within any of these paragraphs, as ‘another transaction’ that results in a change in beneficial ownership of dutiable property, it should fall with paragraph (ix). In this regard, paragraph (ix) operates as a ‘catch all’ provision that may bring to duty relevant transactions that escape the preceding eight paragraphs.”

  1. The plaintiff’s case is that the applicable transaction was a surrender to her of interests in land within the meaning of paragraph (iii) of s 8(1)(b) by all of the other residuary beneficiaries of the estate, with the consequence that the property taken to be transferred for duty purposes was their combined 72.7% interest in the Property. She also contends that the transaction was not an agreement within the meaning of paragraph (i). That being so, and consistently with what was said in Baxter, she submits that paragraph (ix) can have no application. She did not however submit that the transaction would not otherwise be within the scope of paragraph (ix).

The issues in dispute

  1. The argument before me proceeded on the basis that there were two main issues in dispute. The first was whether the Contract was an ‘agreement’ as that expression is used in s 8(1)(b)(i). The second was whether the interest, if any, which the residuary beneficiaries had in the Property, can be described as an ‘interest in land’ as that expression is used in s 8(1)(b)(iii) and whether the entry into the Contract can appropriately be characterised as the ‘surrender’ by the residuary beneficiaries other than the plaintiff of those interests.

Was the Contract an ‘agreement’?

  1. The expression ‘agreement’ in Australian duties legislation has generally been taken to have its ordinary legal meaning of a binding contract: see for example MacRobertson Miller Airline Services v Commissioner of State Taxation (WA) (1975) 133 CLR 125; [1975] HCA 55 at 144-145 (Jacobs J), 135 (Barwick CJ), 136 and 139-140 (Stephen J).

  2. The proposition that, as a matter of contract law, there must be at least two parties to a contract, is long standing. It has been said for a very long time, and it has been said often, that a person cannot contract only with himself or herself: Williams v Scott [1900] AC 499 at 503; Denton v Donner (1856) 23 Beav 285 at 290.

  3. This proposition may be contrasted with the so-called equitable rule against self-dealing, explained by Megarry V-C in Tito v Waddell (No 2) [1977] Ch 106 at 241 as follows:

“The self-dealing rule is … that if a trustee sells the trust property to himself, the sale is voidable by any beneficiary ex debito justitiae, however fair the transaction. The fair-dealing rule is … that if a trustee purchases the beneficial interest of any of his beneficiaries, the transaction is not voidable ex debito justitiae, but can be set aside by the beneficiary unless the trustee can show that he has taken no advantage of his position and has made full disclosure to the beneficiary, and that the transaction is fair and honest.”

  1. See also Clay v Clay (2002) 202 CLR 410; [2001] HCA 9 at [51]-[52].

  2. The two propositions are quite distinct. The former concerns the question of whether a contract has come into being. The latter concerns the consequences in equity of attempts by a trustee to gain a benefit for himself or herself. However, it would not be correct to assume that the equitable rule rests on the premise that it is otherwise possible for a trustee to contract with himself or herself in the first place. In fact, properly understood, the equitable rule represents the conflation of several ideas, including the proposition that a person cannot contract with himself or herself. As Edelman J explained (writing extra-judicially) in ‘The Fiduciary Self Dealing Rule’, which appeared as a chapter in J Glister and P Ridge (eds), Fault Lines in Equity (2012, Hart Publishing) at 108-112:

“This self dealing scenario has deep roots. The orthodoxy quoted above from Tito v Waddell and Clay v Clay can be traced back as far as Lord King. However, the immediate difficulty in this scenario of a beneficiary having a power to set aside the transaction is that it is a nonsense. There is no transaction to set aside. A purchase of property requires two parties. A sale of an asset by a legal owner to himself has no effect on legal relations. Millett LJ succinctly described this as the ‘two party rule’.”

  1. His Honour’s reference to the ‘two party rule’ was to the judgment of Millett LJ in Ingram v Inland Revenue Commissioners [1997] 4 All ER 395 at 423e-f where his Lordship said:

“The proposition that a man cannot contract with a nominee for himself requires close examination. Several different objections may be made to such a transaction, and it is necessary to distinguish between them. One, with which alone we are concerned, is that there cannot be a contract unless there are at least two parties to it. … It is directed to the intrinsic validity of the contract, and applies whether the principal is a beneficial owner or a trustee. It is based on what may conveniently be called the two-party rule.”

  1. His Lordship dissented in the result in that case, but not on this point. See the reasons of Nourse LJ at 401d-f. I further note that His Lordship’s reasons were approved on appeal by the House of Lords: Ingram v Inland Revenue Commissioners [2000] 1 AC 293 (‘Ingram’) at 305D and 310G.

  2. The reasoning in Ingram was approved in Clay v Clay where the Court said at [51]:

“Shortly stated, the ‘self-dealing rule’ is that the sale by the trustee of the trust property to himself is voidable by any beneficiary ex debito justitiae, however honest and fair the transaction and ‘even if [the sale] is at a price higher than that which could be obtained on the open market’. This ‘rule’ may represent the conflation of several principles. First, at common law in such circumstances the contract lacked ‘intrinsic validity’; there was no contract which could be sued upon, the principle being ‘that no man can be at the same time plaintiff and defendant’.”

  1. The proposition gained further support in Boensch v Pascoe (2019) 268 CLR 593; [2019] HCA 49 at [99], where Bell, Nettle, Gordon and Edelman JJ said:

“In turn, the legal basis upon which the arrangement is supposed to have prejudiced Mr Boensch's right of indemnity, either wholly or in part, was and remains almost entirely unexplained. Neither of the trust instruments purported to deprive Mr Boensch of his right of indemnity on the basis of any such arrangement. If, as was posited in submissions for Mr Boensch, the alleged arrangement was made with himself only (purporting to act in different capacities), then it would lack ‘intrinsic validity’ in contract and be ‘of itself inoperative’ as a waiver.”

  1. The specific question of whether a trustee may contract with itself in another capacity was considered by Bryson JA (Spigelman CJ and Ipp JA agreeing) in Minister Administering National Parks and Wildlife Act 1974 v Halloran [2004] NSWCA 118; (2004) 12 BPR 22,391 (‘Halloran’). His Honour said at [54]:

“Transactions in which Pacinette in its own interest dealt with the Pacinette Property Trust, or with itself in the capacity of the trustee of the Pacinette Property Trust, involve conceptual difficulties which cannot be resolved. The documents relating to these transactions speak as if there were dealings between two persons, Pacinette in its own interest and Pacinette as trustee of the Pacinette Property Trust; there can be no contractual relationship in that form, whether for the issue of ordinary units or for their redemption in consideration of the purchase of real property. A trustee cannot contractually deal with itself so as to sell trust property to itself in some capacity other than as trustee; the closest approximation to such a transaction which conceptually can take place is that a trustee can discharge itself from a trust obligation in respect of a property, but only if it has authority under the constitution of the trust or in some other way to do so. Such events are commonly referred to as self-dealing but this use of language is not entirely accurate. On the false assumption that a trustee in its personal capacity and in its trustee capacity are different persons see Suncorp Insurance and Finance v Commissioner of Stamp Duties [1998] 2 Qd R 285 at 305-306 (Davies JA).”

  1. The defendant pointed out that there is first-instance authority for the proposition that a trustee may contract with itself where it does so in a different capacity. In Gulland v Federal Commissioner of Taxation (1983) 72 FLR 362; [1983] WASC 189 (‘Gulland’) at 380, Kennedy J said:

“It is commonly asserted that the rule of equity that a trustee may not purchase part of the trust estate rests upon two reasons, first, that a man may not be both vendor and purchaser and, secondly, that there may not be a conflict of duty and interest: see, for example, Halsbury’s Laws of England (4th ed) vol 16 para 1457. It is also frequently said to be based on the proposition that a person cannot be at the same time both plaintiff and defendant. But if the first reason be correct, then one may well wonder how it is that a purchase is possible, as it undoubtedly is, where express authority is contained in the trust instrument or where the trustee purchases with authority from the beneficiaries …”.

  1. The plaintiff submitted that this reasoning is somewhat unsatisfactory in that it assumes that the rule against self-dealing cannot rest on the proposition that ‘a man may not be both vendor and purchaser’ because such a purchase is ‘undoubtedly’ possible where there is express authority in the trust instrument to do so, or where the beneficiaries authorise the transaction. I agree. As the plaintiff submitted, the reasoning is in this respect somewhat question-begging.

  2. The defendant also referred to Re Australand Holdings Ltd [2005] NSWSC 835; (2005) 219 ALR 728 where, after referring to Gulland, Barrett J said at [20]:

“On the whole, and having regard to the authorities, I am disposed to think that it is possible and permissible for a trustee of one trust to contract with himself or herself as trustee of another trust but, of course, with subsequent difficulties of conflict of duty and duty or duty and interest which may in a particular case call for resolution at by way of vacating the field and acquiescence in an arrangement for some other person to become trustee of one of the trusts or two persons to become new trustees of the respective trusts. The Court of Appeal's decision in Cinema Plus Ltd v Australia and New Zealand Banking Group Ltd [2000] 49 NSWLR 513 shows that what the common law may regard as a ‘conceptual improbability’ may well be viewed differently in an equitable context such as this.”

  1. However, his Honour appears not to have expressed a concluded view on the issue. At [21] he added:

“In the present case, however, there is no need to come to any concluded view on the question whether AWIL as trustee of one trust may sue AWIL as trustee of the other trust. This is because the stapling deed has other parties as well.”

  1. What was said at paragraph [20] has been taken to be authority for the proposition that a party may contract with itself where it does so in a different capacity: Rakmy Pty Ltd v Commissioner of State Revenue (Vic) [2017] VSC 237 at [50] fn 31; Re One Funds Management Ltd [2023] FCA 1212 at [31].

  2. In my view, what was said by Bryson JA at [54] of Halloran correctly states the position. It is consistent with what was said by the High Court in Clay v Clay and Boensch v Pascoe. The contrary authority on which the defendant relies is difficult to reconcile with appellate authority. To the extent it rests on what was said in Gulland, that reasoning does not cause me to doubt anything said subsequently either by the High Court or the Court of Appeal.

  3. The defendant also relied on s 24 of the Conveyancing Act 1919 (NSW). That section is as follows:

A person may assure property to himself or herself, or to himself or herself and others.

  1. The expression ‘assurance’ is defined in s 7 to include a ‘conveyance and a disposition made otherwise than by will’, and the word ‘assure’ has a corresponding meaning. ‘Disposition’ is defined also in s 7 to mean ‘a conveyance, and also an acknowledgment under section 83 of the Probate and Administration Act 1898, vesting instrument, declaration of trust, disclaimer, release and every other assurance of property by any instrument except a will, and also a release, devise, bequest, or an appointment of property contained in a will’.

  2. I do not take s 24 to alter the general law position that a person may not contract with himself or herself. Rather, the section deals with conveyances and dispositions that might ordinarily be the subject of, and which might otherwise be effected through performance of, a contract. The section does in that way alter the general law position, as the High Court pointed out in Clay v Clay at [52]. However, it does not do so by generally authorising a person to enter a contract with himself or herself. See the helpful discussion of this issue in ‘The Fiduciary Self Dealing Rule’ with reference to s 72(3) of the Law of Property Act 1925 (UK), which is to the same effect as s 24.

How should the word ‘agreement’ in s 8(1)(b)(i) be construed?

  1. The defendant submitted that the expression ‘agreement’ is not defined in the Duties Act and that it should be given a wide meaning that includes agreements between the same person acting in distinct capacities. It was submitted that it should not be given its ‘narrow’ ordinary legal meaning of a binding contract. I am unable to discern from the language of s 8 an intention that ‘agreement’ should be read in that way. Given my conclusions as to the state of the general law on this issue, there is good reason not to do so. Many agreements ‘between’ a single person are likely to be altogether ineffective as contracts at general law for precisely the reason explained in Ingram. I do not see why the Duties Act should be construed in a way that includes those ‘agreements’ that are ineffective at law to affect ownership of property.

  2. That being said, the point will often not make much difference. It is still perfectly possible (including by reference to s 24 of the Conveyancing Act) for a trustee or executor to do things unilaterally that have legal consequences for how property is held. It is just that the law of contract is unlikely to have anything to say about it. So, for example, despite what was said in Halloran about the inability of Pacinette to enter into a contract with itself for the issue of ordinary units in the trust of which it was also trustee, it does not seem to have been doubted that Pacinette as trustee could nevertheless cause itself to obtain a beneficial interest in the units of the trust: see [55]. Similarly, a trustee may in some circumstances exercise a power to appropriate property to itself, which is what the plaintiff says happened in this case.

  3. In my view, the Contract was not an agreement for the sale or transfer of dutiable property within the meaning of s 8(1)(b)(i).

Did the Contract involve the surrender of interests in land?

  1. The principal question here is whether the interests, if any, which the beneficiaries had in relation to the Property as at 3 October 2023 were interests in land within the meaning of s 8(1)(b)(iii). It is only if they were interests in land that it becomes necessary to consider the further question of whether such interests were surrendered.

  2. The plaintiff does not dispute that upon the grant of probate, s 44 of the Probate and Administration Act 1898 (NSW) vested, with retrospective effect from the date of Mrs Shand’s death, the entirety of Mrs Shand’s real and personal estate in the plaintiff as executor. Nor does she dispute the effect of this, as explained by Viscount Radcliffe in Commissioner of Stamp Duties (Qld) v Livingston (1964) 112 CLR 12; [1964] HCA 54 (‘Livingston’) at 17, where his Lordship said:

“… whatever property came to the executor virtute officii came to him in full ownership, without distinction between legal and equitable interests. The whole property was his. He held it for the purposes of carrying out the functions and duties of the administration, not for his own benefit; and these duties could be enforced upon him by the Court of Chancery, if application had to be made for that purpose by a creditor or beneficiary interested in the estate.”

  1. As his Lordship further explained at 18:

“What equity did not do was to recognize or create for residuary legatees a beneficial interest in the assets in the executor’s hands during the course of the administration.”

  1. The plaintiff also does not dispute the correctness of the conclusion in that case (and the like conclusions in relation to the same issue in Lord Sudeley’s case, Barnardo’s Homes and elsewhere) that a residuary beneficiary of an unadministered estate has no ownership interest in any particular asset of the estate. She does not cavil with what was said by Viscount Cave in Barnardo’s Homes at 10, namely:

“When the personal estate of a testator has been fully administered by his executors and the net residue ascertained, the residuary legatee is entitled to have the residue as so ascertained, with any accrued income, transferred and paid to him; but until that time he has no property in any specific investment forming part of the estate or in the income of any such investment, and both corpus and income are the property of the executors and are applicable by them as a mixed fund for the purposes of administration.”

  1. In Livingston, after referring to Lord Sudeley’s case, Viscount Radcliffe said at 18:

“Just as Mr. Tollemache’s right in the mortgages of the New Zealand land were the property of his executors for the purposes of the administration of his estate and no one else had any property interest in them, so Mr. Livingston’s property in Queensland, real or personal, was vested in his executors in full right, and no beneficial property interest in any item of it belonged to Mrs. Coulson at the date of her death. In their Lordships’ opinion the decision of the Sudeley Case is conclusive on this issue.” (footnotes omitted)

  1. The plaintiff’s point, rather, is that the word ‘interest’ in s 8(1)(b)(iii) of the Duties Act is not used in this technical legal sense. As she correctly points out, the word ‘interest’ is protean and its meaning must in each case be identified by applying the ordinary principles of statutory construction. She submits that matters of text and context support the conclusion that the word is used in its popular or general sense in paragraph (iii). Once it is appreciated that a residuary beneficiary of an unadministered estate does have an interest – in this sense – in the assets of the estate even before the residue has been ascertained, it can be seen that the interests of the other beneficiaries of her mother’s estate were interests in the Property capable of being surrendered within the meaning of the section. After all, in Lord Sudeley’s case, Lord Halsbury LC said at 15 that ‘it would be quite true to say’ that Lady Sudeley ‘had an interest in these New Zealand mortgages – that she had a claim on them: in a loose and general way of speaking, nobody would deny that that was a fair statement’. The plaintiff points to numerous authorities in which the interest of a residuary beneficiary in assets of an unadministered estate have been taken to be an ‘interest’ or ‘property’ in particular statutory contexts.

  1. Much of the premise of the plaintiff’s case can be accepted. The word ‘interest’ is, as she submits, inherently flexible (as to which, see Livingston at 22-23) and is often used in revenue legislation in a popular rather than a technical sense: Craig v Federal Commissioner of Taxation (1945) 70 CLR 441; [1945] HCA 1 at 446.

  2. It is also true that in an appropriate statutory context, the rights of a discretionary object of a trust may be considered to give rise to an interest in the assets of the trust, at least for some purposes.

  3. In Gartside v Inland Revenue Commissioners [1968] AC 553 (‘Gartside’), for example, the relevant question was whether a discretionary object had an ‘interest in possession’ within the meaning of s 43 of the Finance Act 1940 (UK). In Leedale (Inspector of Taxes) v Lewis [1982] 1 WLR 1319 (‘Lewis’), the relevant question was whether the discretionary object had an ‘interest in…settled property’ for the purposes of s 42 of the Finance Act 1965 (UK). In both of these cases, Lord Wilberforce noted that the word ‘interest’ may have either a loose or strict meaning, depending on the context: Gartside at 617; Lewis at 1329.

  4. Although in Gartside it was held that the particular expression in s 43 did not include the rights of a discretionary object, nonetheless both Lord Reid at 612 and Lord Wilberforce at 619-620 approved what had been said in Attorney-General v Heywood (1887) 19 QBD 326, where it was held that the notion of an ‘interest in…property’ for the purposes of s 38(2)(c) of the Customs and Inland Revenue Act 1881 (UK) included the rights of a discretionary object of a discretionary trust.

  5. In each case, the question was approached as one of statutory construction. In Gartside, Lord Reid pointed out at 603-605 that a particular difficulty with reading the expression ‘interest’ as including discretionary objects of a trust was that when the effects of ss 2 and 7 of the Finance Act 1940 (UK) were taken into account, the result would be that estate duty would be charged on the whole of the property of the trust every time a discretionary object died. As Lord Fraser later said of this circumstance in Lewis at 1327, the scheme of the legislation ‘…could not be operated unless the precise extent of the interest could be identified’. That is, the legislative scheme was unworkable if ‘interest in possession’ included the rights of discretionary objects.

  6. Lewis, by contrast to Gartside, concerned provisions that triggered capital gains tax in respect of property held by the trustee of a non-resident trust and then apportioned the resulting liability among resident beneficiaries ‘in such manner as is just and reasonable’. Their Lordships saw the ability of the revenue authorities to apportion the resulting liability as supporting the conclusion that the interests of discretionary objects of trusts were within the scope of the provision: see 1327, 1329 and 1330. The scheme of the legislation in Lewis was in this respect quite different to that considered in Gartside.

  7. The plaintiff also pointed out that the interest of a beneficiary to property in an unadministered estate is ‘property’ within the meaning of the Bankruptcy Act 1966 (Cth): Official Receiver in Bankruptcy v Schultz (1990) 170 CLR 306; [1990] HCA 45 (‘Schultz’).

  8. The plaintiff placed significant reliance on Schultz. Mrs Schultz was a beneficiary of the estate of Mrs Pereira, who died at a time when Mrs Schultz was a bankrupt. Under the will, Mrs Pereira’s house was to be held by trustees for Mrs Schultz. Mrs Schultz was also a residuary beneficiary. After Mrs Pereira died and while Mrs Schultz was still a bankrupt, Mrs Pereira’s husband made a successful claim for a family provision order, as a result of which he became entitled to the house under the trust instead of Mrs Schultz. Mrs Schultz was then discharged from bankruptcy. A subsequent appeal resulted in a variation of the family provision order, whereby Mr Pereira obtained a life interest in the house. The result was that, following the appeal, Mrs Schultz became entitled to an interest in remainder in the house. The administration of Mrs Pereira’s estate was incomplete at all relevant times.

  9. The Official Receiver claimed Mrs Schultz’s interest in remainder in the house as part of her bankrupt estate.

  10. At 312, the Court said:

“Not only does the legal ownership in the property not vest in the named beneficiary at the time of death of the testator, nor does the equitable ownership. That emerges from the Privy Council's decision in Commissioner of Stamp Duties (Q.) v. Livingston. The reason for this is that, prior to administration of the deceased estate, there is no specific property capable of constituting the subject property of any trust in favour of the beneficiary. It could not be said at that stage what part or parts of the testator's property would need to be realized for the purposes of administration. So it was held that the beneficiary does not have a proprietary interest in each of the assets which are the subject of the devise or bequest such that he or she can say ‘this is mine’ or ‘this belongs to me’. Although Livingston was concerned with a residuary estate, the observations it contains apply with equal force in the case of a specific bequest or devise. The parties here are agreed on that point.” (footnotes omitted)

  1. The plaintiff especially relies on what their Honours said at 313-314. Because of the weight she places on this passage, I will set it out in full:

“The right which any beneficiary has in an unadministered estate springs from the duty of the executor to administer the estate, to preserve the assets and to deal with them in the proper manner. Each beneficiary has an interest in seeing that the whole of the assets are treated in accordance with the executor's duties. In that sense, the beneficiaries as a class may be said to have an interest in the entire estate. But it does not follow that each piece of property which goes to make up the estate is held on a particular trust for the beneficiary named as its intended recipient upon completion of administration: Horton v. Jones. Whether or not the estate is held on a trust for the beneficiaries as a class in the usual sense in which the word ‘trust’ is used, so as to confer a specific proprietary interest, as distinct from a general, non-specific interest, upon all beneficiaries, is not something which arises for consideration in this case.

Nevertheless, Mrs. Schultz acquired upon the death of Mrs. Pereira a right to have the deceased estate administered in accordance with the duties of the executors. Though not the legal or equitable owner of the assets which were the subject of the devise and bequest in her favour, she had, by virtue of the chose in action created by that devise and bequest, an expectation that the assets would pass to her upon completion of the administration, subject to their being realized to meet any outstanding liabilities and to defray the costs of administration, and an interest in respect of those assets. That interest was derived from and dependent upon the chose in action. The interest is of such a kind that, when a beneficiary transmits a chose in action (or part thereof), or that chose in action passes by operation of law, such as under the Bankruptcy Act, that transmission naturally encompasses not only the chose in action but also the expected fruits of that chose in action: Horton v. Jones; In re Leigh's Will Trusts.” (footnotes omitted)

  1. The plaintiff submitted that this passage, properly understood, involves a recognition that a residuary beneficiary of an unadministered estate does obtain an interest in the assets of the estate, even before the residuary has been ascertained.

  2. I am unable to accept that that is what their Honours were saying. The question in issue was whether Mrs Schultz’s interest in remainder was ‘property’ within the definition in s 5(1) of the Bankruptcy Act 1966 (Cth). ‘Property’ was defined to include ‘real or personal property of every description…, and includes any estate, interest or profit, whether present or future, vested or contingent, arising out of or incident to any such real of personal property’.

  3. There was no doubt that Mrs Schultz had a right to ensure the due administration of Mrs Pereira’s estate. There was also no doubt that this right was property as defined. As the Court pointed out, Mrs Schultz’s right to due administration did not make her the owner of any of the estate’s assets, but it did give her ‘an interest in respect of those assets’ (my emphasis). The Court found that this property, being a chose in action against the executor of the estate, would naturally bring with it an expectation of receiving the fruits of that chose in action, being the interest in remainder. Such an expected interest, although future and contingent, was within the broad statutory definition of ‘property’ because of its relationship to the chose in action which was otherwise ‘property’. The decision does not rest on the conclusion that Mrs Schultz had an interest in the house as a matter of general law. It is also relevant to note that such interest as she had in the house did not exist by virtue of the house forming part of the residue which had not been ascertained. The Official Receiver’s claim was only as to the interest she had in the house by reason of the specific devise, not as to her interest in the unascertained residue. The case says nothing about Mrs Schultz’s interest in any property forming part of the residue.

  4. The plaintiff also relied on Horton v Jones (1935) 53 CLR 475; [1935] HCA 7. In that case, the High Court held that an oral contract under which the defendant promised to make a will in favour of the plaintiff in respect of his own interest in his deceased father’s unadministered estate was unenforceable. A majority of the Court found that because the estate included land, the unwritten contract was unenforceable by reason of s 54A of the Conveyancing Act. Rich and Dixon JJ said at 486-487:

“It was suggested that because the deceased had no more than a right to have the estates of his deceased children administered in due course and to receive the net surplus, and that these estates in turn comprised no more than an analogous right in the residue of his father's estate, no right in any specific asset in the estate of the deceased's father subsisted in the deceased. This may at once be conceded (cf. Lord Sudeley v. Attorney-General; Vanneck v. Benham; Barnardo's Homes v. Special Income Tax Commissioners; Baker v. Archer-Shee; and In re Rowe). But it is not the consequence that no right of property subsisted in the deceased, nor that no right of property subsisted involving an interest in land. The deceased possessed equitable rights enforceable in respect of the assets considered as a whole. It is true that he had no immediate right to possession or enjoyment and that his precise rights involved, at any rate prima facie, administration, and possibly necessitated conversion and calling in of investments. But, none the less, he had more than a mere equity. He had an equitable interest and it related to assets which included interests in lands. (See Cooper v. Cooper; Blake v. Bayne; Brook v. Bradley; Ashworth v. Munn; In re Dawson; Pattisson v. Bathurst).” (footnotes omitted)

  1. The decision supports the conclusion that the expression ‘interest in land’ as used in s 54A of the Conveyancing Act includes the interest of a residuary beneficiary in the assets of an unadministered estate. However, neither that case nor Schultz, nor any other authority, supports any particular construction of s 8(1)(b)(iii) of the Duties Act. At most, Horton v Jones shows that the expression ‘interest in land’ may include such an equitable interest in an appropriate statutory setting. The question, therefore, must be addressed first and foremost as one of statutory construction.

  2. The plaintiff advanced two particular matters of statutory context to support her submission that the word ‘interest’ in s 8(1)(b)(iii) is used in a wide and popular sense. The first concerns the way the Duties Act deals with deceased estates in s 63(2). The second concerns the way the Duties Act deals with the valuation of partnership interests. I will consider each in turn.

Section 63(2)

  1. Section 63(2) of the Duties Act is as follows:

If a transfer of dutiable property is made by a legal personal representative of a deceased person to a beneficiary under an agreement (whether or not in writing) between the beneficiary and one or more other beneficiaries to vary the trusts contained in a will of the deceased person or arising on intestacy, the dutiable value of the dutiable property is to be reduced by the portion of the dutiable value that is referable to the dutiable property to which the beneficiary had an entitlement arising under the trusts contained in the will or arising on intestacy.

  1. The plaintiff submitted that her proposed construction of s 8(1)(b)(iii) is more coherent with s 63(2). She submitted that a construction of s 8(1)(b)(iii) that did not recognise the interest of a residuary beneficiary in an unadministered estate would appropriately be described as absurd in the light of s 63(2): cf Osborne v Federal Commissioner of Taxation (1921) 29 CLR 169; [1921] HCA 10 at 176.

  2. The plaintiff submitted that the general scheme of s 63(2) is that where an asset is transferred by a legal personal representative to a beneficiary, duty is only exigible in respect of the portion of that asset that exceeds the beneficiary’s entitlement. So, for example, where a beneficiary is entitled to 60% of an asset and the whole asset is transferred, duty is only payable as to the additional 40%.

  3. The plaintiff makes two points about this. The first is that on the defendant’s construction of s 8(1)(b)(iii), prior to the introduction of paragraph (ix) a transaction of the kind now in issue would not have been captured by s 8 at all, ‘even though she receives a greater interest in the asset than she was entitled to under the will’. Her second point is that subsequent to the introduction of paragraph (ix), the same transaction results in the executor being subject to duty on the entirety of the value of the asset, ‘regardless of the extent to which she was entitled to the asset as a residuary beneficiary. That is, regardless of whether [she] was interested as to 5% or 95% in the asset as a residuary beneficiary, she would still be liable to duty on the whole’ (emphasis in original).

  4. Both of these outcomes – before and after the introduction of paragraph (ix) – were submitted to be discordant with the scheme effected by s 63(2).

  5. The difficulty with attempting to construe s 8 by reference to s 63(2) is that the provisions deal with quite different circumstances. Section 8 is concerned with transfers and transactions generally. Section 63, on the other hand, is concerned with specific kinds of transactions involving dutiable property in deceased estates.

  6. To the extent it deals with such transactions, it does so in specific ways. Section 63(1) is concerned with transactions whereby a person’s entitlements to dutiable property under a will are fulfilled in some way, such as by transfer, appropriation or transmission. Section 63(2) is concerned with transfers by a legal personal representative to a beneficiary where there has been an agreement to vary the trusts. Where s 63(2) applies, the duty on the transfer is reduced but only to the extent that the dutiable value is referable to the beneficiary’s pre-existing entitlement to the property. It generally only reduces dutiable value to the extent the transfer is taken in lieu of or in satisfaction of an entitlement under the will, notwithstanding that the beneficiaries may have agreed otherwise.

  7. I therefore do not think the policy of s 63(2) is accurately expressed as being to ensure that where a legal personal representative transfers property to a beneficiary, ‘duty is only exigible in respect of the portion of that asset that exceeds that beneficiary’s entitlement’, as the plaintiff put it. The difficulty with that statement is that it leaves out the critical fact that the dutiable value of the property is only reduced to the extent it is ‘referable’ to the beneficiary’s entitlement. Ordinarily, this means that the section only applies where and to the extent the property is transferred in full or partial satisfaction of the beneficiary’s entitlement. If, as in this case, the beneficiary’s entitlement is left intact by the transfer, it is impossible to say that the value of the property (or the consideration for it) is at all referable to the beneficiary’s entitlement.

  8. It follows that what occurred in this case was not a transaction of a kind with which s 63(2) is concerned. The plaintiff did not acquire the Property in partial satisfaction of her entitlement under the Will or under the Robin Shand No 2 Testamentary Trust. The plaintiff will still become the principal beneficiary of the Robin Shand No 2 Testamentary Trust and that trust will still receive 27.3% of the residue of the estate, which has not been diminished in value by reason of the transaction. The only change to the interests of the plaintiff and the other beneficiaries under the Will is that the residuary estate now includes the cash that the plaintiff paid for the Property, rather than the Property.

  9. It is this fact more than any other that shows the difficulty with the plaintiff’s construction. If I were to accept her construction of s 8(1)(b)(iii), she would pay duty as if she had appropriated the Property in partial satisfaction of her entitlements under the Will, which she has not done. That would be an outcome that would be inimical to the policy of s 63(2).

Section 29(3)

  1. Section 11(1) of the Duties Act relevantly provides:

(1)     Dutiable property is any of the following—

(a)     land in New South Wales,

…

(i)     a partnership interest, being an interest in a partnership that has partnership property that is dutiable property elsewhere referred to in this section,

…

(l)     an interest in any dutiable property referred to in the preceding paragraphs of this section, except to the extent that— …

  1. Section 29 contains rules for working out the dutiable value of partnership interests. Broadly, subsection (1) provides that the dutiable value of a partnership interest reflects the proportion of the partnership assets that are themselves dutiable property.

  2. Subsection (3) is particularly relevant to the plaintiff’s argument. Together with its note, it provides as follows:

(3) If the property of a partnership includes a land-related asset and an interest in the land-related asset is transferred as a result of the transfer of the partnership interest, the dutiable value of the partnership interest is to be reduced by the dutiable value of the interest in the land-related asset that is transferred, but only if ad valorem duty under this Chapter has been paid or is payable on the transfer of the interest in the land-related asset.

Note.

For example, 3 partners jointly hold land valued at $9 million and other non-dutiable property valued at $3 million. The partnership has liabilities of $6 million. One partner retires, and is paid $2 million for his or her partnership interest. The retiring partner transfers a one-third interest in the land to the remaining partners. Duty is payable at an ad valorem rate on the transfer of the one-third interest in the land. The transfer of the interest in land has a dutiable value of $3 million. Under this section, the partnership interest has a dutiable value of $1.5 million (DV = $2M × $9M/$12M). As the dutiable value of the interest in land transferred exceeds the dutiable value of the partnership interest transferred, the minimum duty would be payable on the transfer of the partnership interest.

  1. The plaintiff submitted that s 29 proceeds on the assumption that the transfer of a partnership interest includes a transfer of an ‘interest’ in each of the partnership assets. This, she submitted, demonstrates that the Duties Act treats the interest of a partner in respect of partnership assets as an ‘interest’ for the purposes of the Act.

  1. Although the note is only explanatory and does not form part of the operative provisions (as to which, see s 7), the plaintiff submitted that the note nevertheless illustrates the typical situation in which s 29(3) applies, being that ‘on the transfer of an interest in the partnership, there is a transfer of an interest in the land that is a partnership asset’. The significance of this proposition for the plaintiff’s case is that the interest of a partner in partnership assets is non-specific and can be likened to the interest of a residuary beneficiary of an unadministered estate in the assets of the estate. In this respect, I note that in Commissioner of State Revenue (WA) v Rojoda Pty Ltd (2020) 268 CLR 281; [2020] HCA 7 at [57], the High Court said:

“In Livingston v Commissioner of Stamp Duties (Qld), Kitto J referred to In re Holland as establishing that a partner has an interest in ‘every piece of property which belongs to the partnership’. This interest in every piece of property is the fluctuating, unascertained interest in relation to the entire partnership property. As his Honour continued, that interest ‘consists not of a title to specific property but of a right to a proportion of the surplus after the realization of the assets and payment of the debts and liabilities of the partnership’. His Honour reiterated that the interest was not a ‘definite’ share or interest in a particular asset’ nor a ‘right to any part’ of it’.” (footnotes omitted)

  1. The plaintiff submitted that the expression ‘interest’ in s 8(1)(b)(iii) should be understood to extend to such a non-specific interest as that of a residuary beneficiary in an unadministered estate, since that is the sense in which the word ‘interest’ is used in dealing with the interests of partners in partnership assets in s 29(3).

  2. Whilst I accept that the Duties Act assumes that the value of an interest in a partnership will ordinarily reflect the value of the partner’s share of partnership assets, I do not accept that s 29(3) (or its note, or indeed any other provision) proceeds on an assumption that a partner has an ‘interest’ in all partnership assets within the meaning of that expression in the Duties Act.

  3. Section 29(3) does not operate in quite the way the plaintiff contends. Its operation may be understood by reference to the particular risk of double taxation with which it is concerned. Because the value of a partnership interest will ordinarily include the value of the partner’s partnership share of partnership assets (even if the partner is not the legal owner of the asset), there is a risk of double duty where those partnership assets are separately sold as a result of the transfer of the partnership interest. However, the circumstance that gives rise to the risk of double duty is not that the same ‘interest’ (in the statutory sense) is conveyed twice. It is that one transaction (the transfer of the partnership interest) will be at a value that reflects the value of the underlying assets, while the other transaction (the transfer of the partnership assets) will be of an interest in those same assets. It is only where both transactions occur that the risk of double duty arises.

  4. This seems to be exactly what is contemplated by the note to s 29(3). That is, a partner might sell a partnership interest and also sell land that is partnership property. But it will not always be so, because the partner may not be the legal owner of the partnership property in the first place. The reference in s 29(3) to the interest of a partner in partnership assets is a reference to the interest the partner may have separately from their interest as partner. That interest may or may not be transferred at the same time as the partnership interest. The note and the section itself are concerned with the case where it is.

  5. None of this involves an assumption that a transfer of a partnership interest involves the transfer of an ‘interest’ in the partnership assets. The only assumption is that the value of a partnership interest will reflect the partner’s partnership share of assets of which the partner may or may not be the legal owner. In my view, the way the Duties Act deals with the valuation of partnership interests is not a basis to conclude that the word ‘interest’ in the Act should be understood in its popular, vernacular sense, whether in the context of partnerships or otherwise.

How should the words ‘interest in land’ in s 8(1)(b)(iii) be construed?

  1. It remains necessary to determine what the provision actually means. For the reasons just explained, I have not found the contextual matters on which the plaintiff relies to be of much assistance in this regard.

  2. The expression ‘interest in land’ is used in various places in the Duties Act, including in Chapter 4 where it is of central importance in identifying the ‘land holdings’ of a ‘landholder’. Section 147(1) provides that a land holding is ‘an interest in land other than the estate or interest of a mortgagee, chargee or other secured creditor, subject to this section’. In Conexa Sydney Holdings Pty Ltd v Chief Commissioner of State Revenue (NSW) [2025] NSWCA 20 (‘Conexa’), Payne JA suggested that the reference to ‘an interest in land’ in this definition was apt to invoke ‘general law concepts’. However, his Honour pointed out that, ‘as a statutory notion, it is not necessarily limited by general law concepts’: [136]. Basten AJA said that the expression was ‘a reference to the relationship between the defined space and a legal person’: [182]. It is fair to say that neither Payne JA (with whom Ward P, Stern and McHugh JJA agreed) nor Basten AJA adopted a popular or vernacular meaning of the expression.

  3. It is also relevant to note the ways in which the concept of having an interest in land is extended by Part 3 of Chapter 4. Section 158A deems certain entities to hold interests in land where they are held through ‘linked entities’. The expression ‘linked entity’ includes various ‘entities’, including ‘trusts’ and ‘partnerships’, in a chain of ownership: s 158. Section 159 deems potential capital beneficiaries of discretionary trusts to own or to otherwise be entitled to the property held by the trustee. The legislation assumes that the right of a potential capital beneficiary of a discretionary trust is not an ‘interest in land’ owned by the trustee, as that expression is used in s 147. These provisions do not deal with the interests of a residuary beneficiary of an unadministered estate. They do however assume that the concept of having an ‘interest in land’ is one that is, at least in the first instance, concerned with general law concepts of beneficial ownership.

  4. In my view, the expression is used in s 8(1)(b)(iii) in the same way as it is used in s 147, as explained in Conexa. That is, it at least includes general law concepts of beneficial ownership in land but is not limited by them. It is not used in the popular sense of the words. It is not used in a way that includes the non-specific, fluctuating interest concerning all estate assets that is commensurate with the right of a residuary beneficiary to the due administration of an estate prior to the ascertainment of the residue.

  5. This conclusion means that the plaintiff cannot succeed in relation to s 8(1)(b)(iii). Given that the transaction was otherwise within the scope of s 8(1)(b)(ix) and that the assessment can be supported on that footing, it follows that the summons must be dismissed.

One additional matter

  1. Against the possibility that I am wrong about the meaning of ‘interest in land’ in s 8(1)(b)(iii), there is one further matter that warrants comment. A necessary aspect of the plaintiff’s case concerning s 8(1)(b)(iii) is that the other residuary beneficiaries of Mrs Shand’s estate surrendered their interests in the Property but that the plaintiff did not. I have some difficulty with this notion.

  2. As I pointed out above, the plaintiff did not take the Property in satisfaction of any entitlement as a residuary beneficiary. Just like the other beneficiaries, the plaintiff’s rights to the residue remain entirely intact. Just like her siblings, she can no longer claim to have an interest in or in relation to the Property by virtue of being a residuary beneficiary. When she exercised her power to appropriate the Property to herself, she as much as the others lost any right she had as beneficiary in relation to the Property. This is not a case where the plaintiff has, in effect, bought out the entitlements of the other beneficiaries in order to take her own entitlements as beneficiary up to 100% so far as the Property is concerned. In fact, the circumstance that she is now the sole proprietor of the Property in her own right has nothing at all to do with the fact that she is a beneficiary. It results entirely from the exercise of her power as Executor under clause 15.2(r)(i)(A) of the Will. The exercise of that power affected the rights of all residuary beneficiaries equally, including her own.

  3. That being so, and if the plaintiff is right in saying that the other beneficiaries ‘surrendered’ their interests in the Property in return for commensurate claims to the cash residue, then it is very difficult to see why the same cannot be said about the plaintiff. If, contrary to my conclusion above, s 8(1)(b)(iii) does apply, then the interests ‘surrendered’ would be the interests of all beneficiaries including the plaintiff. However, because this is a matter about which there were no submissions and because it is unnecessary for me to decide the point, I will not express a final view about it.

Orders

  1. It is appropriate in these circumstances for the summons to be dismissed. The parties asked for an opportunity to address me on costs. The orders and directions will therefore be as follows.

  1. The summons is dismissed.

  2. The parties are directed to file and serve evidence and short submissions on the question of costs on or before 8 August 2025.

  3. The parties are directed to file and serve evidence and short submissions in reply on the question of costs on or before 15 August 2025.

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Decision last updated: 25 July 2025

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Baxter v Chief Commissioner of State Revenue [2024] NSWCATAD 153
Boensch v Pascoe [2019] HCA 49
Boensch v Pascoe [2019] HCA 49