Tesoriero v Chief Commissioner of Stamp Duties

[2001] NSWSC 489

CITATION:	Tesoriero and Anor v. Chief Commissioner of Stamp Duties [2001] NSWSC 489
CURRENT JURISDICTION:	Equity
FILE NUMBER(S):	SC 4888/00
HEARING DATE(S):	22 May to13 June 2001
JUDGMENT DATE:	14 June 2001
PARTIES :	Peter Tesoriero (First Plaintiff) Tonia Tesoriero (Second Plaintiff) Chief Commissioner of Stamp Duties (Defendant)
JUDGMENT OF:	Palmer J

COUNSEL :	P.D. White (Solicitor), M.K. Condon (Plaintiffs) H.R. Sorensen (Defendant)
SOLICITORS:	P.D. White (Plaintiffs) State Crown Solicitor (Defendant)
CATCHWORDS:	STAMP DUTIES - AVOIDANCE SCHEME - Joint venture formed for real estate development - investment vehicle is unit trust in which venturers subscribe for units - Trust Deed contains provisions for issue of "special rights units" to venturers to enable them to acquire townhouses in the development without payment of stamp duty - "special rights units" provisions not complied with - venturers enter into contracts with trustee company for purchase of townhouses and pay consideration - upon completion of the venture several townhouses remain registered in name of trustee company - one of venturers acquires trust units of other venturers - Commissioner assesses acquiring venturer on the basis that venturer acquired majority interest in a "designated landholder" so that acquisition is assessable under s.99E(1) Stamp Duties Act 1920 - ad valorem duty levied upon unencumbered value of townhouses still registered in name of trustee company - townhouses not held as assets of the unit trust but upon bare trusts for the purchasers - assessment set aside. - CONTRACT - OFFER AND ACCEPTANCE - Offer constituted by application to trustee company to acquire townhouses which are assets of a trust - acceptance of offer by resolution of the board of the trustee company to transfer townhouses to the applicants - alternatively, contracts to be inferred from the conduct of the parties in all the circumstances - contracts legally binding. - EQUITY - contract for sale of land - purchaser pays to vendor full consideration for sale of land - title to land remains in the name of the vendor - the vendor holds the land on a bare trust for the purchaser.
LEGISLATION CITED:	Stamp Duties Act 1920 Stamp Duties (Amendment) Act 1987 Strata Titles Act
CASES CITED:	Chang v Registrar of Titles (1976) 137 CLR 177 Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523 Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 97326 K.L.D.E. Pty Ltd v Commissioner of Stamp Duties (Qld) (1984) 155 CLR 288
DECISION:	Plaintiffs' objection to stamp duty assessment upheld; stamp duty assessment set aside.

Introduction

1    In early 1985 a group of investors formed a joint venture to acquire a property in Milson Road, Cremorne, upon which there was a substantial Federation residence called “Holyoak”. Their intention was to redevelop the site as twelve luxury townhouses. 2    The vehicle for the venture was a unit trust called the Cremorne Unit Trust (“CUT”) in which each venturer or the venturer’s company subscribed for units. The trustee of the CUT was Zelino Pty Ltd (“Zelino”) of which the venturers were the directors and, directly or indirectly, the shareholders. There were five venturers, namely Mr Peter Tesoriero jointly with his wife Tonia, Count Felice Sassoli di Bianchi through his company Feangil Pty Ltd (“Feangil”), Mrs Caterina Zanin through a trustee company, Beila Corporation Pty Ltd, Mr Charles Gagliardi through his company Danza Pty Ltd, and Mr Guiseppe Socini. 3    The construction of the new development was completed in 1987. Seven of the townhouses were retained by the venturers or their nominees and five were sold to third parties at a considerable profit. On 14 December 1988 the venturers or their representatives signed final accounts for the venture prepared by an accountant, Mr Budai, and on 16 December 1988 the profits of the venture from the sales to third parties were distributed amongst the venturers or their companies in accordance with the signed accounts. 4    The relationship between the venturers during the construction had often been difficult. They disagreed about many aspects of the construction and about the financial arrangements which should be made to carry the venture to a successful conclusion. 5    As part of the resolution of these disputes it was intended by the venturers that on and from 16 December 1988 control of the trustee company, Zelino, should pass to Mr and Mrs Tesoriero alone. They were to acquire all the shares of Zelino not already held by them. Further, they were to acquire all the issued units in the CUT save for those held by Mr Socini. 6    While the venturers disagreed amongst themselves from the very beginning about virtually every aspect of the conduct of the venture, on one matter they were in enthusiastic agreement: everything possible should be done to avoid having to share any part of their profits from the venture with the revenue authorities. In that endeavour they were earnestly abetted by Mr Budai. 7    From their earliest discussions in 1984 the venturers focussed upon minimising or avoiding altogether income tax and stamp duty. The Trust Deed for the CUT was drafted with the assistance of a revenue specialist, Mr David Raphael. It contained a complicated stamp duty avoidance mechanism involving the creation of “special rights units”. The mechanism might have worked if all of the levers and switches had been pushed and pulled in the ordained sequence and at the designated propitious times. But, like so many of these subtle and sophistical tax schemes, cleverness in devising was not attended by diligence in execution. 8    Moreover, as fate would have it, the stamp duty legislation was amended significantly during the life of the venture so that the utility of the special rights units mechanism in the Trust Deed was cast into doubt. The very complexity of the mechanism came back to haunt the venturers in ways which I will later recount. 9    On 10 June 1987 the Stamp Duties (Amendment) Act 1987 took effect. The purpose of the amending Act, as stated in its long title, was “to overcome certain practices by which the payment of duty is avoided or reduced” . The amending Act inserted a new Division, Division 30, entitled “Acquisition of Company and Unit Trust Interests Dutiable as Conveyances of Land”. 10    Section 99E of the Act, as amended, required a person who had acquired a majority interest in a “designated landholder” to lodge with the Chief Commissioner of Stamp Duties a statement in respect of the acquisition within two months after the interest had been acquired. Under s.99F(1), a statement lodged under s.99E was chargeable with ad valorem duty. 11    By letter dated 6 July 1994 to Mr and Mrs Tesoriero the Chief Commissioner gave notice that a statement required by s.99E of the Act had not been lodged and that he had, accordingly, made an assessment pursuant to s.127B of the Act. 12    In a letter accompanying that notice the Commissioner explained that the assessment arose out of the acquisition by Mr and Mrs Tesoriero on 16 December 1988 of all shares in Zelino and all the interests in the CUT other than the shares and units held by Mr Socini and those already held by themselves. The duty was calculated by reference to the unencumbered value of those apartments in the development which were still registered in the name of Zelino as at 16 December 1988. On the basis that Mr and Mrs Tesoriero had acquired 750,000 of the 950,000 issued units in the CUT and that as at 16 December 1988 Zelino still held as trustee of the CUT five apartments valued by the Valuer General at $5,150,000, the Commissioner assessed duty at $209,120. To this was added 100% fine, so that the total amount payable pursuant to the assessment was $418,240. 13    By letter dated 14 September 1994 Mr and Mrs Tesoriero objected to the assessment. By letter dated 25 July 1995, the Commissioner disallowed the objection. Mr and Mrs Tesoriero commenced these proceedings against the Commissioner in September 1995. They seek orders that their objection to the Commissioner’s assessment be allowed or else be remitted to the Commissioner to be dealt with according to law. 14    In accordance with an order of Smart J. made in September 1997, these proceedings have been heard at the same time as proceedings brought by Zelino and Mr and Mrs Tesoriero against Mr Budai (5622/92), the evidence in one being evidence in the other. Mr Budai had unsuccessfully sought to be added as a party to these proceedings. He is being represented in proceedings 5622/92 by his wife, Dr P. Budai. Dr Budai has not made any submissions in relation to the issues between Mr and Mrs Tesoriero and the Commissioner which I now have to determine. Facts 15    The CUT was constituted by a Deed of Trust executed by Zelino and dated 19 October 1984. It provides for two broad categories of units to be issued, namely units to which special rights are attached and ordinary units. 16    Clause 2(a) of the Deed provides that the Trustee is to accept cash from the unitholders and that “in default of a resolution being made in terms of sub-clause (d)” the beneficial interest in the Trust Fund is to be divided into units having a certain cash value per unit. Units issued under Clause 2(a) may be regarded as ordinary units. 17    Clause 2(d) permits the Trustee, in its sole discretion, to determine to divide the units to be issued into “the number of classes set forth in the Sixth Schedule” . The Sixth Schedule provides that, pursuant to a resolution of not less than 95% in number and value of holders of “A” to “C” class unitholders, exclusive rights to occupy and use specified parts of the building to be erected on the land acquired by the Trust may be attached to any one or more of the “D” to “O” class units. Amongst other rights, the holder of a unit within any of the classes “D” to “O” has the right to require the Trustee to transfer to him the title to such part of the building exclusively occupied by him without any consideration, in which event the unitholder’s unit is deemed to have been repurchased by the Trustee. 18    A determination by the Trustee pursuant to Clause 2(d) of the Trust Deed to issue “D” to “O” class units may be made not later than twenty-four hours after the Trustee accepts cash pursuant to Clause 2(a) of the Trust Deed. There is no provision in the Deed for extending the twenty-four hour period. Further, such a determination is to be recorded as a Trustee’s resolution in minutes to be kept in accordance with the Deed. 19    It is common ground between the parties that the requirements of Clause 2(d) were never observed either as to the time within which a determination by the Trustee was to be made or as to how it was to be recorded. 20    In early 1985 the unitholders in the CUT paid to Zelino a total of $950,000 by way of subscription for units. It appears, however, that no unit certificates were issued. All unitholders and Zelino clearly proceeded, however, on the basis that 950,000 units had validly been issued to the unitholders. Those units could only be regarded as ordinary units issued pursuant to Clause 2(a) of the Trust Deed. 21    It is to be noted that by Clause 20(b) of the Deed, the Trust may be determined by a resolution passed by the unitholders holding not less than 75% of the units then issued and that, in accordance with Clause 21(a), upon a determination of the Trust the nett assets are to be distributed amongst unitholders in proportion to the number of units for which they are respectively registered as holders. 22    By late 1986 the construction of the townhouses was well under way. It was contemplated that upon completion a Strata Plan would be registered so that each of the twelve townhouses would have its own separate title under the Strata Titles Act . The venturers were minded to acquire some of the townhouses for themselves and to sell others to third parties. 23    At a meeting of directors of Zelino on 14 October 1986 at which all venturers were represented it was resolved to fix “the relative values” of the lots in the proposed Strata Plan at specified amounts. 24    At a meeting of directors of Zelino on 27 October 1986 it was resolved that “where possible transfer of strata lots be achieved in accordance with memorandum dated 29/9/86 from F. Budai in respect of issue of special rights units” . As I have mentioned, special rights units were never issued in accordance with the provisions of the Trust Deed. 25    By a notice to Zelino dated 29 October 1986 Mr and Mrs Tesoriero advised that they “elect[ed] to acquire strata lots 3 and 12 in the Holyoak project in accordance with the procedures for distribution that have been agreed upon by the Board” . The reference to “strata lots 3 and 12” was a reference to those lots as they appeared in the draft Strata Plan for the building. The Strata Plan was not finally registered until 8 September 1987. 26    The price to be paid by Mr and Mrs Tesoriero for Lot 12, a penthouse which they intended to occupy themselves, was $930,000, as determined by the resolution of Zelino’s directors on 14 October 1986. The price for Lot 3, as so determined, was $380,000. 27    By a notice to Zelino dated 5 November 1986 Feangil gave a similar notice electing to acquire “the exclusive beneficial ownership of Lot 8” . The price for Lot 8, as determined by Zelino’s directors on 14 October 1986, was $615,000. 28    At a meeting of directors of Zelino on 12 November 1986 it was resolved as follows:
“ MOTION:
Re Units 8 and 12. As a consequence of notice of acceptance dated 19/10/86, the Board authorises documents to be prepared to transfer Lot 12 for $930,000, less 2% to P & T Tesoriero, and other terms that will ensure that Zelino is in no way disadvantaged had it completed the sale to Mr Robertson.
As a consequence of Notice, the Board authorises documents be prepared to transfer Lot 8 to Count F. Sassoli for $615,000 less 2%.
…

MOTION:
As there are two unit holders prepared to accept Strata Lot 3, procedure laid down in F. Budai letted [sic] dated 27/9/86 shall be followed inparticular [sic] that any unit holder wishing to acquire lot 3 shall deliver to 18 The Bulwark, Castlecrag by noon 18 November a binding offer in writing of the consideration that he/she is prepared to make to accept this Strata Lot. The offer should remain sealed and opened in the presence of the Board or a committee of the Board.
…

MOTION:
Any further election to acquire Strata Lots shall be dealt with at a Board Meeting immediately either to accept a bid or where more than one unit holder indicates an interest in a particular Strata Lot sealed bids to be called for within 7 days, delivered to a time and place determinable. Bids to be gross value and unit holders to be allowed 2% reduction.
…

MOTION:
Procedure for acquiring a Strata Lot set out in letter of 27/9/86 of F. Budai’s letter, be amended so the offer by unit holders for Strata Lots be fixed and not be varied in proportion to the achieved prices for lots sold to outside purchasers.
…”
29    By a notice to Zelino dated 17 November 1986 Mr Tesoriero offered the amount $381,111 “for special rights units” in respect of Lot 3. At the meeting of directors of Zelino on 16 December 1986 it was resolved that, there being only one bid for Lot 3, namely that of Mr Tesoriero, “the consideration for that lot be reverted to the original amount in the directors’ meeting dated 14/10/86 for $380,000 [sic] . Documents be prepared to transfer to P. and T. Tesoriero Lot 3 for $380,000 less 2%” . 30    By a notice to Zelino dated 17 December 1986 Mr and Mrs Tesoriero gave “formal notice of our election to acquire strata lots 4 and 11 in the proposed Strata Plan for the Holyoak project subject to the procedures that have been agreed upon and resolved unanimously by the Board” . By notice also dated 17 December 1986 Mrs Zanin gave a notice in the same terms in respect of Lot 9 in the proposed Strata Plan. 31    At a meeting of directors of Zelino on 11 March 1987 it was resolved as follows:
“The following two motions were then both passed unanimously:
1. ‘As a consequence of a notice of acceptance dated 17th December 1986 the board authorises that documents be prepared for the issue of special rights units in the Cremorne Unit Trust for proposed strata lots 11 and 4 for $620,000 and $450,000 respectively less 2% to Peter and Tonia Tesoriero on terms that will ensure that Zelino Pty Limited is in no way more disadvantaged than if it had sold these units to outside purchasers.
2. ‘As a consequence of a notice of acceptance dated 17th December 1986 the board authorises that documents be prepared for the issue of special rights units in the Cremorne Unit Trust for the proposed Strata Lot 9 for $600,000 to Beila Corporation Pty Limited on terms that will ensure that Zelino Pty Limited is in no way more disadvantaged than if had [sic] sold this unit to an outside purchaser.’”
32    At a meeting of directors of Zelino on 9 July 1987 it was resolved that:
“Applicants for special rights units meet all their commitments on the 14/8/87 irrespective of the ability of the Company to deliver good title. Upon meeting their obligations they will have the right of occupancy. The purchaser of special rights units shall have the right to assume any obligations of the Company to Midlands to satisfy their commitments, so long as they accept the liabilities that those commitments encompass and upon so satisfying those commitments they shall have the right to require Zelino to procure discharges of mortgages on their respective lots.”
33    The “obligations of the Company to Midlands” referred to in the resolution are in fact the obligations of the venturers themselves to Midland International Aust Ltd (“Midlands”) under a contract for loan dated 15 August 1985 whereunder Midlands had advanced the sum of $2,675,000 to the venturers for the purpose of construction of the development, on the security of a first mortgage over the property. The venturers had in turn provided the money to Zelino. 34    At a meeting of directors of Zelino on 13 August 1987 the following resolutions were passed:
“… that from the funds due to be received on 14/8/87, the Company offset $240,000 due from P. Tesoriero against the funds borrowed from P. Tesoriero at 23% …
… that when Title Documents issue the Company prepare and execute mortgage documents over proposed Lot 8 for Feangil to the amount of $610,000. The mortgage to be discharged upon Feangil receiving clear title.”
35    It should be noted that as at the time of this meeting Mr and Mrs Tesoriero and Mr Tesoriero’s brother had advanced a total of some one million dollars to the CUT. Further, it should be noted that $610,000 had been calculated as the nett purchase price to be paid by Feangil for Lot 8 after adjustment to the agreed price of $615,000. 36    On 14 August 1987 the loan account of Mr and Mrs Tesoriero with the CUT was debited with the sum of $2,903,350, being the purchase price for Lots 3, 4, 11 and 12, and credited with the sum of $1,903,250, being the amount of the Midlands loan for which they assumed liability on that day. On the same day Zelino received $610,000 from Feangil in respect of the acquisition of Lot 8. 37    On 21 August 1987 Zelino received $510,000 from Mrs Zanin in respect of the acquisition of Lot 9 and Mrs Zanin went into occupation of that apartment. On 9 September 1987 Mr and Mrs Tesoriero took possession of Lots 3, 4, 11 and 12. They occupied Lot 12 as their residence and at some time afterwards leased Lots 3, 4 and 11 pursuant to leases entered into by Zelino as lessor, at their direction. 38    At a meeting of directors of Zelino on 19 September 1987 it was resolved that documents be prepared to transfer Lot 2 to Mr Socini for a price of $600,000, less 2%. The purchase price was apparently paid by Mr Socini assuming liability for a corresponding amount of the Midlands loan. Mr Socini took occupation of Lot 2 on the same day. 39    By early September 1988 Mr and Mrs Tesoriero had, by means of a loan from another financier, procured the discharge of the Midlands mortgage over Lots 3, 4, 11 and 12 in accordance with the liability which they had assumed on 14 August 1987. Mrs Zanin had procured the discharge of the Midlands mortgage over Lot 9, and Feangil had procured the discharge of the Midlands mortgage over Lot 8. 40    As I have noted, the Strata Plan for the development was registered on 8 September 1987. Between July and October 1987 Zelino sold to third parties those units which the venturers did not want for themselves, namely Lots 1, 5, 6, 7 and 10. Upon completion of those contracts title was transferred by Zelino to the purchasers. Submissions 41 Despite the fact that no transfers of shares in Zelino or transfers of units in the CUT were delivered to Mr and Mrs Tesoriero on 16 December 1998, neither party disputes that on that day Mr and Mrs Tesoriero acquired the beneficial title, if not the legal title, to all shares in Zelino not already held by them and to all units in the CUT not already held by them, other than the units held by Mr Socini. 42 The Commissioner submits that on 16 December 1988 Zelino was still registered as the proprietor of Lots 2, 3, 4, 11 and 12 and that it held that land as trustee of the CUT. Accordingly, says the Commissioner, the CUT was a “designated landholder” as defined by s.99A of the Stamp Duties Act 1920 , as amended. The CUT was a “designated landholder” because, being a “private unit trust scheme” as defined by s.99A(1), it was a “landholder” for the purposes of Division 30 and Zelino, as trustee of the CUT, owned land in New South Wales in its capacity as Trustee of that private unit trust scheme, as required by s.99A(2)(b) of the Act. The unencumbered value of the land, being the five strata title units, was unquestionably not less than one million dollars, as required by the definition of “designated landholder”. 43 In those circumstances, the Commissioner submits, when Mr and Mrs Tesoriero acquired at least the beneficial title to all of the units in the CUT save those of Mr Socini, they acquired a “majority interest”, as defined, or an interest which resulted in them having a majority interest, in a designated landholder, within the operation of s.99E(1) of the Act. Failure by Mr and Mrs Tesoriero to lodge with the Commissioner a statement in respect of the acquisition required by s.99E within two months entitled the Commissioner to issue a default assessment in accordance with s.127B of the Act. 44 Mr and Mrs Tesoriero submit that as at 16 December 1988 Zelino held no land at all as Trustee of the CUT and as an asset of that Trust. They say that although Zelino held the legal title to Lots 2, 3, 4, 11 and 12 it did so as a bare trustee for Mr Socini and Mr and Mrs Tesoriero respectively, pursuant to contracts for sale which had been entered into prior to 16 December 1988 and in respect of which the purchase price had been paid. They rely upon the well established principle that where a vendor under a contract for the sale of land has received the purchase price from the purchaser so that the purchaser is entitled to call for a conveyance, the vendor is the trustee of the land for the purchaser. If the vendor declines to convey, the purchaser is entitled to a vesting order: Chang v Registrar of Titles (1976) 137 CLR 177, at 185; K.L.D.E. Pty Ltd v Commissioner of Stamp Duties (Qld) (1984) 155 CLR 288, at 301. 45 Accordingly, say Mr and Mrs Tesoriero, as Zelino did not own any of the apartments in its capacity as Trustee of the CUT and as assets of that Trust, it was not a “designated landholder” to which s.99E(1) could apply. 46 The Commissioner responds that the submission of Mr and Mrs Tesoriero would succeed were it not for one point, namely, that there were no contracts between Zelino, Mr Socini and Mr and Mrs Tesoriero respectively for the sale of the apartments. The Commissioner says that what the parties were endeavouring to do in their dealings with the apartments prior to 16 December 1988 was to engage the mechanism provided by the Trust Deed for the issue or acquisition of “special rights units”, i.e. units in the classes “D” to “O” as provided by Clause 2(d) and the Sixth Schedule to the Trust Deed. This they failed to do because, by late 1986 and 1987, it was impossible for Zelino to comply with the requirement of Clause 2(d) of the Trust Deed that Zelino make a determination to issue “D” to “O” class units not later than twenty-four hours after it accepted cash from the unitholders pursuant to Clause 2(a). Zelino had accepted cash from unitholders under that clause in early 1985. The effect of the venturers’ applications 47    What, precisely, was the legal result of the venturers’ applications for lots in the Strata Plan and the various resolutions of Zelino’s directors during 1986 and 1987? One thing is fairly apparent: none of the venturers, and perhaps even Mr Budai, had any clear idea of how the “special rights units” provisions of the Trust Deed worked. No one seems to have realised that by 1986 it was too late for Zelino to issue “special rights units” pursuant to Clause 2(d), at least without an amendment to the Trust Deed. 48    I am satisfied that when the Zelino Board resolved on 27 October 1986 that “where possible” the transfer of strata lots be achieved in accordance with Mr Budai’s memorandum in respect of “special rights units”, it was regarded by all parties – Zelino and the venturers alike, they being the controlling mind of Zelino – as highly desirable but not essential that strata lots be transferred to venturers by use of the “special rights units” mechanism provided by the Trust Deed, in order to avoid stamp duty if possible. However, the issue of “special rights units” was only subordinate to the main object of the parties, namely, that the venturers acquire the legal title of the apartments which they had chosen at the prices which had been determined by the Board on 14 October 1986. 49    This is evident from the terms of the application of Mr and Mrs Tesoriero on 29 October 1986 for lots 3 and 12; it is evident from the application of Feangil on 5 November 1986 for “the exclusive beneficial ownership of Lot 8” ; it is evident from the applications of Mr and Mrs Tesoriero and Mrs Zanin on 17 December 1986 to acquire lots 4 and 11 and 9 respectively. 50    It is evident from the terms of the resolutions of the Board on 12 November 1986 that documents be prepared for the transfer of lots 12 and 8, rather than that documents be prepared for the issue of “special rights units”. Similarly, it is evident from the terms of the resolution of the Board on 17 November 1986 that documents be prepared to transfer lot 3 to Mr and Mrs Tesoriero; the same intention appears from the terms of the resolution of 19 September 1987 that documents be prepared to transfer lot 2 to Mr Socini “on terms that will ensure that Zelino is in no way disadvantaged had Zelino exchanged the sale to an outside purchaser on 22/9/87” . The intention is evident also from the resolution of the Board on 9 July 1987 that “applicants for special rights units meet all their commitments [i.e. in respect of the acquisition of the lots which they had selected] on 14/8/87 irrespective of the ability of the Company to deliver good title ” (emphasis added). I think it is a clear inference that the inability to give good title which was referred to was understood as the consequence of the fact that the Strata Plan for the development would not be registered by 14 August 1987; it was not understood by the parties to refer to the fact, unknown to them, that Clause 2(d) of the Trust Deed could never have been satisfied. 51    It is true that on 11 March 1987 the Zelino Board resolved that “documents be prepared for the issue of special rights units” for lots 11, 4 and 9. However, it is highly significant that nothing was ever done to prepare documents attempting to issue or transfer “special rights units” before the venturers actually paid their respective purchase prices for the lots which they had selected and went into possession, clearly with the consent of Zelino. In my view, the words of these resolutions were understood by all parties to be no more than a further attempt to bolster whatever argument they may later have been able to come up with that no stamp duty on any transfer of a lot to a venturer was payable because, by some means or other which they could not understand at the time, the “special rights units” mechanism of the Trust Deed had been successfully evoked in the process of transfer. 52    In my opinion, the applications by the venturers to acquire their chosen apartments were understood by all concerned as offers to Zelino to acquire those apartments at the prices fixed by the Board on 14 October 1986. It was understood that if the acquisitions could be effected through the issue of “special rights units”, then that should be done. The offers were accepted in those terms by Zelino by the resolutions for the preparation of documents for the transfer of lots to the respective venturers. Acceptance of the offers was communicated to the offerors by the very fact that the offerors, or their representatives, as directors of Zelino had voted to pass those resolutions. Binding contracts were intended to come into existence at that point and did come into existence. 53    The contracts with the venturers could be performed by Zelino by transferring the relevant lots to them directly, upon payment of the requisite purchase price, or else by some procedure involving, as an intermediary step, the issue of “special rights units” if that could validly be done – either mode of performance of the contracts by Zelino was acceptable. In fact, however, although the parties did not appreciate it at the time of the contracts, implementation of the “special rights units” mechanism in the Trust Deed was no longer possible so that the only available mode of performance of the contracts by Zelino was the transfer to the venturers directly of the titles to their strata lots, once the Strata Plan had been registered and the venturers had paid their respective purchase prices. 54    This conclusion is, in my view, supported by the traditional common lawyer’s analysis of the formation of a contract by reference to “offer”, “acceptance”, certainty as to parties, property and price, and intention to create a binding legal relationship. However, the conclusion that such contracts came into existence is also supported by the inferences which can be drawn from the acts and conduct of the parties in all the circumstances to which I have referred: see Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 97326; Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523. 55 The Commissioner does not dispute that, if on proper analysis there were contracts between Zelino and the venturers for the sale of their respective apartments which existed outside the regime of the “special rights units” mechanism of the Trust Deed, those contracts were performed prior to 16 December 1988 on the part of the venturers by the payment of the requisite consideration. The Commissioner does not dispute that, in those circumstances Zelino held the apartments as at 16 December 1988 as bare trustee for the venturers. Conclusion 56 For the above reasons, I am satisfied that as at 16 December 1988 Zelino did not hold any land in New South Wales in its capacity as Trustee of the CUT and as an asset of that Trust. Accordingly, the provisions of s.99E(1) of the Stamp Duties Act 1920 , as amended and then in force, did not apply to the acquisition on that date by Mr and Mrs Tesoriero of shares in Zelino and units in the CUT. 57    It follows that the assessment of stamp duty made by the Commissioner on 6 July 1984 in respect of that acquisition of shares and units, purportedly pursuant to s.127B of the Act, was invalid. 58    The objection of Mr and Mrs Tesoriero to that assessment is allowed and the assessment is set aside. 59    If the parties so desire, I will stand the matter over for further submissions as to interest, costs and consequential relief.

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Last Modified: 06/18/2001