Thakral Fidelity P/L v the Commissioner of Stamp Duties

[1997] QSC 169

IN THE SUPREME COURT

OF QUEENSLAND  No. 549 of 1996
  No. 2515 of 1996

Before the Hon. Justice Muir

[Thakral Fidelity P/L v. The Commissioner of Stamp Duties]

BETWEEN:
  THAKRAL FIDELITY PTY LIMITED
  Applicant

AND:
  THE COMMISSIONER OF STAMP DUTIES
  Respondent

CATCHWORDS:     Stamp Act 1894 as amended, sections 56B and 56C - Time at which the Commissioner may achieve a relevant state of satisfaction for the purposes of s.56B(1A) - Meaning of “trustee of a trust” in s.56C(2).

Counsel:Mr D.  Russell QC, with him Mr D.  Savage for the plaintiff

Mr R.  Gotterson QC, with him Mr J.  Logan for the defendant

Solicitors:  Phillips Fox for the plaintiff

Crown Solicitors for the defendant

Hearing Dates:  4-5 August 1997

REASONS FOR JUDGMENT - MUIR J.

Judgment delivered 12 September 1997

The applicant seeks judicial review of two stamp duty assessments in respect of a transaction by which two property funds were merged into one and units in the unit trust constituting the merged fund were issued to the public.

Relevant facts

The Broadbeach International Property Trust ("BIPT") was constituted by a trust deed dated 9 September 1987. The original trustee was Goldsea Pty Ltd ("Goldsea"). The trust fell within the definition of "Unit Trust Scheme" in s.2 of the Stamp Act.

On 4 May 1994–

·Trust Company of Australia Limited ("TCAL") succeeded Goldsea as the trustee of BIPT.

·TCAL was the trustee of a unit trust described as the Thakral Property Trust ("TPT").

·TCAL as trustee of the BIPT–

(a)Obtained the Australian Securities Commission's approval of a deed dated 3 May 1994 which amended the deed constituting the BIPT, for the purposes of Part 7 and 12 of Division 5 of the Corporations Law.

(b)After obtaining such approval–

(i)issued 100,000 voting units in BIPT to the applicant ("the share issue");

(ii)redeemed all of the units (212,455,672) until then held in BIPT by Hesse Pty Ltd ("the Hesse redemption");

(iii)entered into an agreement for the sale and purchase of the shares in Goldsea;

(iv)acquired by transfer from Ormiston Pty Limited ("Ormiston") one of the three issued shares in the capital of Goldsea for a consideration of 1 dollar;

(v)acquired by transfer from Pranbrooke Pty Limited ("Pranbrooke") two of the three issued shares in the capital of Goldsea for a consideration of two dollars.

None of the units so issued or redeemed were ever listed on the stock exchange.  The property the subject of the BIPT included realty and improvements thereon located in Queensland, namely, the Pan Pacific Hotel and Oasis Shopping Centre on the Gold Coast ("the Queensland property").  That real property was registered in the name of Goldsea.  After Goldsea ceased to be trustee of the BIPT it held the property for TCAL, the new trustee of the BIPT.  The 100,000 voting units in BIPT acquired by the applicant were held by it for TCAL.

For the purposes of the share issue, the unencumbered value of the undivided share in the Queensland property equivalent to the proportion of the total issued units in BIPT represented by the units issued without regard to the debts or liabilities of BIPT was $36,319.  For the purposes of the Hesse redemption, the unencumbered value of the undivided share in the Queensland property equivalent to the proportion of the total issued units of BIPT represented by the units redeemed without regard to the debts or liabilities of BIPT was $77,224,659.

The share issue and the Hesse redemption were each effected pursuant to cl.12.17 of the BIPT deed.

On 11 June 1994 units in BIPT with their stapled shares were issued to over 4,000 unit holders. On 17 June 1996, those units (with those stapled shares) were listed on the Australian Stock Exchange. On that date BIPT satisfied the spread tests in paras.(a) and (b) of the definition of the "Public Unit Trust Scheme" in s.56D(1) of the Stamp Act 1894 (“the Act”).

At the time of the public unit issue and thereafter the applicant held and continues to hold the 100,000 voting units in BIPT.

At all times since 11 June 1994 all of the units in TPT were held by Thakral Holdings Limited. 

On 31 March 1994 the solicitors for Thakral (Phillips Fox) wrote to the respondent stating, inter alia–

·Thakral controls and manages the Sovereign Property Fund ("SPF").

·SPF is listed on the Australian Stock Exchange having approximately 4,000 unit holders.  It is intended that SPF will become associated with BIPT. 

·Both trusts will have common ultimate owners namely unit holders in BIPT and shareholders in Thakral Holdings Limited ("THL").

·BIPT is controlled by Westpac Banking Corporation.

·The deed constituting the BIPT is to be amended to render it suitable for approval by the Australian Securities Commission.

·Units in the BIPT, prior to listing, will be issued to–

"(a)the 4,000 (approx) SPF unit holders, in the same proportions as their existing SPF unit holdings; and

(b)50 (+) institutional and private units holders referred to above;

As a result, by May of 1994 BIPT–

·will be constituted by a deed approved pursuant to the Corporations Law;

·will be listed on the Australian Stock Exchange;

·will have approximately 4,000 unit holders who are for the most part unrelated to any other unit holder except they'll owe their participation in the two groupings referred to above; and

·whose unit holdings will comply with the definition of `"public unit trust' in s.56B of the Act."

Enclosed with the letter were statutory declarations by two directors of the proposed manager of BIPT and of THL confirming their respective beliefs that units in BIPT will be issued to the public to the extent required by para.(b) of the definition of "public unit trust scheme" in s.56B(1) of the Act within twelve months of the trust deed for BIPT receiving approval from the Australian Securities Commission. The declarations stated grounds in support of the belief.

The letter continued–

"The situation is therefore one in which it would be appropriate for you to be satisfied of the matters specified in sub-section 56B(1A) of the Act. We would appreciate it if you could confirm that the above trusts can now be treated as a `public unit trust scheme' under that sub-section, and any dealings with units in BIPT now do not attract the operation of section 56B.

Please confirm that our understanding of the position is correct, and let us know if there is anything further that you require."

On 7 April 1994 Miss Pitkin, a partner of Clayton Utz, solicitors for Westpac Banking Corporation, spoke to Mr McClafferty of the Office of State Revenue over the telephone. She told him that she had received the letter of 31 March 1994 which asked whether the Commissioner was satisfied that there existed a unit trust scheme for the purposes of s.56D(1A) of the Act. She asked Mr McClafferty if he would like her to bring the letter to him and to discuss the matter with him. Mr McClafferty suggested that the letter should be sent to him first so that he could have a look at it. Miss Pitkin reminded Mr McClafferty that he had had previous involvement with what was described as "the Broadbeach International Hotel portfolio" in 1991 and 1992 relating to s.56B and s.56C exemptions for the replacement of a joint venture partner. On 7 April 1994 the letter and the statutory declarations were delivered to Mr McClafferty under cover of a with compliments slip.

On 13 April 1994 Miss Pitkin enquired of Mr McClafferty over the telephone as to the progress of the request contained in the letter.  On 18 April 1994 Miss Pitkin telephoned Mr McClafferty and found that he was absent from the office that day.  She spoke to another employee of the respondent and left a message for Mr McClafferty to telephone her.  Miss Pitkin spoke to Mr McClafferty on 19 April and was told that Mr McClafferty had read the letter from Phillips Fox of 31 March, that he did not see any problems with granting the requested exemption and that he would try and forward a letter to that effect that day.

Later that day Mr McClafferty telephoned Miss Pitkin advising that his letter was ready for collection. 

The letter from the Office of State Revenue was signed by Mr McClafferty above the words–

"M. MC CLAFFERTY - SENIOR REVENUE OFFICER

for Commissioner of Stamp Duties"

The letter stated inter alia–

"RE:  THE BROADBEACH INTERNATIONAL PROPERTY TRUST

Thank you for your letter of 31 March 1994 which was onforwarded by Clayton Utz. The abovementioned trust will be considered to be a `public unit trust scheme' for the purpose of section 56B of the above act provided:-

1.The amended Trust Deed receives approval from the Australian Securities Commission; and

2.Units are issued to the public in satisfaction of section 56B(1A) within twelve months of the date of approval of the deed."

Assessment on 21 December 1995

The letter of 19 April 1994 notwithstanding, on 21 December 1995 the respondent issued an assessment in respect of the share allotment and the Hesse redemption in the sum of $3,152,264.25.  The assessment notice provided–

"Doc       Date of        Consideration/Value  Duty Category     Duty                  

No          Document

1             03 MAY 94   $77,261,008.00     CONV /TRANSFER - OTHER $2,893,820.25

PENALTY, LATE LODGMENT $   260,444.00

$ 3,154,264.25

Document Description    TRUST DEED

Parties  HOWLONG PTY LTD

REDAN PTY LTD

Assessment  Allotment of 100,000 units to Thakral Fidelity Pty Ltd -

Comments: Section 56B Value $36,349.00 - Duty $669.00 - Penalty $61.00

Redemption 212,455,672 units by Hesse Pty Ltd -

Section 56B Value $77,224,659.00 - Duty $2,893,151.25 - Penalty $260,383.00"

In a letter of 21 December 1995 to Messrs Phillips Fox the respondent provided the following further details of the assessment–

"The consideration figure of $77,261,008 represents the `Total Assets' under the `Preliminary Completion Statement' in respect of BIPT, which is at schedule S4 of the Restructure Agreement."

The letter further stated–

"The Commissioner accepts that issue of units made on 11 June 1994 are issues to the public under and in accordance with the approved BIPT deed. As and from that date, the Commissioner is satisfied that the requirements of section 56B(1A) will be met, subject to satisfaction of section 56B(1B).

BIPT is therefore a `public unit trust scheme' under section 56B only in respect of all issues of stapled securities to the public under and in accordance with the approved deed, excluding the issue of non-stapled units on 4 May 1994. On the basis of such determination the dispositions made on and after 11 June 1994 are not dutiable under section 56B."

Assessment of 23 February 1996

On 23 February 1996 the Office of State Revenue issued an assessment in respect of the transfer of shares by Ormiston Pty Limited to TCAL and the transfer of shares from Pranbrooke Pty Ltd to TCAL.  The notice of assessment stated inter alia–

"Assessment Comments: SECTION 51E  VALUE $800.00

2             04 MAY 94   $25,787,003.00     CONV / TRANSFER - OTHER $ 966,088.75

PENALTY, LATE LODGMENT $   86,949.00

$ 1,053,037.75

Document Description    TRANSFER OF SHARES (UNLISTED)

Parties  ORMISTON PTY LIMITED

TRUST COMPANY OF AUSTRALIA LIMITED

Assessment Comments: SECTION 56C VALUE $25,787,003.00

SECTION 53 APPLIED - TOTAL VALUE $77,361.008.00

"Doc       Date of        Consideration/Value  Duty CategoryDuty

No          Document

3             04 MAY 94   $51,573,005.00     CONV / TRANSFER - OTHER $ 1,932,177.50

PENALTY, LATE LODGMENT $   173,896.00

$ 2,106,073.50

Document Description    TRANSFER OF SHARES (UNLISTED)

Parties  PRANBROOKE PTY LIMITED

TRUST COMPANY OF AUSTRALIA LIMITED

Assessment Comments: SECTION 56C VALUE $51,574,005.00

SECTION 53 APPLIED - TOTAL VALUE $77,361,008.00"

In a letter of 23 February 1996 to Messrs Phillips Fox, the respondent stated inter alia–

That the Commissioner refused to determine that s.56C(16) applied to exclude from the operation of s.56C the transfers of shares in Goldsea Pty Ltd to TCAL by Ormiston Pty Ltd and Pranbrooke Pty Ltd on 4 May 1994. The Commissioner rejected the argument that s.56C did not apply to Goldsea because at relevant times it had been replaced as trustee of BIPT by TCAL and was thus only a "bare trustee" for TCAL, having "none of the powers that a `trustee' normally has" and was not "the trustee of a properly constituted trust".

The letter stated "those arguments are not accepted because s.56C, by operation of s.56C(2), applies to a company which owns property located in Queensland in its capacity as trustee."

An argument on behalf of the applicant that the exemption contained in s.56C(16) applied with the result that s.56C was not applicable, was rejected. The reasons advanced in the letter were–

"There is in fact the necessary connection between the share transfer and the benefit transfer.  The disponors of the relevant shares in Goldsea (i.e. Ormiston and Pranbrooke) each held at the relevant time 50% of the issued units in the Broadbeach International Holding Trust (`BIHT').  Hesse Pty Ltd (`Hesse') in turn held at the relevant time, as trustee of BIHT, the 212,455,672 units in BIPT for the benefit of Ormiston and Pranbrooke.  Those entities were therefore the beneficial owners of the units in BIPT, at the same time holding between them the issued shares in Goldsea;

The words `made in the contemplation of' express more than temporal connection.  They suggest that the prospect of a disposition of a beneficial interest in relation to property held in trust must at least be the occasion for the disposition of the shares being made.  In this case, the share transfers in question were made pursuant to the Share Sale Agreement which was in turn made pursuant to the Procuration Agreement dated 30 March 1994."

Relevant provisions of the act

"56B.(1)  For the purposes of this section–

. . . .

‘public unit trust scheme' means a unit trust scheme the units of which are listed on a stock exchange or a unit trust scheme as defined in section 2 in respect of which there is an approved deed for the purposes of the Companies (Queensland) Code, part 4, division 6 of the corresponding provisions of the Companies Code or Companies Act of any other State or a Territory or a deed of a class approved by order in council, but does not include a unit trust scheme in respect of which there is such an approved deed but under which–

(a)no units have been issued to the public; or

(b)fewer than 50 persons are beneficially entitled to units under the scheme or 20 or fewer persons are beneficially entitled to 75% or more of the total issued units under the scheme before or after a disposition of a unit or a series of dispositions of units which are pursuant to one transaction or arrangement (or what is substantially one transaction or arrangement) or a series of transactions or arrangements having a mutuality of purpose, whether or not in the case of a series of dispositions they involve the same or different persons.

. . . .

(1A)  For the purposes of subsection (1), definition `public unit trust scheme', paragraph (a), where the commissioner is satisfied that, within 12 months of the date of the approval of a deed, units will be issued to the public to an extent and with such entitlements as are within the scope of that definition, the unit trust scheme shall be deemed to be a public unit trust scheme for the purposes of that definition.

. . . .

56C.(2)  This section applies to–

(a)A company which is the trustee of a trust and in that capacity carries on business in Queensland or owns property located in Queensland; and

(b)a company which has an interest in shares in a company of the kind specified in paragraph (a).

. . . .

(16)  Where the commissioner is satisfied that a disposition in respect of a share in a company to which this section applies was not made in the contemplation of the disponor disposing or the disponee acquiring, directly or indirectly, for himself, herself or any person any benefit in relation to property held in trust, the commissioner may determine duty not to apply under this section in respect of the disposition.

(17)  Where the commissioner is satisfied of the matters under subsection (16) and the commissioner determines that duty under this section does not apply in respect of a disposition, the commissioner shall notify the company and the disponor and the disponee of the matters and circumstances of which the commissioner was satisfied in making that determination."

Summary of questions for determination

The central issues for determination in application 549 of 1996 are–

"(a)Whether s.56(1A) of the Stamp Act 1894 (`the Act') has application unless there is a unit trust scheme the units of which are listed on the stock exchange or a unit trust scheme as defined in s.2 of the Act in respect of which there is an approved deed for the purposes of the Corporations Law.

(b)If the answer to (a) is in the affirmative whether, in order to cause s.56B(1A) to operate, the Commissioner was satisfied `that within twelve months of the date of approval of a deed, units will be issued to the public to an extent and with such entitlements as are within the scope of' the definition of `public unit trust scheme'.

(c)If the answer to (a) is in the affirmative and the answer to (b) is in the negative whether the assessments were vitiated by mistake through failure by the Commissioner to make a determination that the requirements of s.56B(1A) had been satisfied.

(d)Whether sub-section (1A) operates only to relieve from duty issues of units to the public pursuant to an approved deed and, in consequence, does not protect the share issue and the Thakral redemption."

The central issues for determination in application 2515 of 1996 are –   

“(a)whether Goldsea at relevant times was `the trustee of a trust' within the meaning of section 56C(2)(a) of the Act.

(b)whether the Commissioner was satisfied or ought reasonably to have been satisfied in terms of section 56C(16) in relation to the transfers of the shares in Goldsea."

Construction of section 56B(1A) - whether the section can operate in the absence of an approved deed

The matters which support the view that subsection (1A) can operate only where an approved deed is already in existence are–

(a)the introductory words of the subsection which are–

"For the purposes of subsection (1), definition `public unit trust scheme',

. . .

(b)the definition of "public unit trust scheme" refers to three types of schemes: ones in which the units are listed on the stock exchange; ones in respect of which there is an approved deed, and ones in respect of which there is a deed of a class approved by a Governor in Council.  In the case of approved deeds there is an express exclusion of schemes under which–

“(a)no units have been issued to the public; or

(b)fewer than 50 persons are beneficially entitled to units under the scheme or 20 or fewer persons are beneficially entitled to the 75% or more of the total issued units under the scheme before or after a disposition of the unit or a series of dispositions of units . .”.

The definition thus appears to contemplate, relevantly, a state of affairs in which there is in existence a unit trust scheme under an approved deed.

(c)The definition uses tenses other than the future when referring to schemes or listings eg.  “the units of which are listed”; “there is an approved deed”; “a deed of a class approved by order in council”; “there is an approved deed”; “no units have been issued”; “there is such an approved deed”.

It is contended on behalf of the applicant that the qualifying words in the subsection,  “within 12 months of the date of the approval of a deed” are in neutral language and that there is no reason to conclude that the words should be read as if they provided "within 12 months of the date the deed was approved".  The respondent argues that in the absence of a known date of approval it is difficult, if not impossible, for the respondent to be satisfied that units will be issued in the prescribed manner within 12 months of the date of approval.  Until an approved deed comes into existence there is no doubt an additional element of uncertainty in the matters to be considered by the respondent in forming a state of mind for the purposes of the sub-section, but that does not require the conclusion that the subsection cannot operate unless the consideration to be given by the respondent takes place at a date after the date of approval of the deed.  It is obvious that, in respect of the question of the issue of units to the public, the respondent is required to achieve a state of satisfaction in respect of a future matter on the evidence put before her.  It would be possible for the respondent to similarly achieve a state of satisfaction on evidence adduced in relation to the likely date of approval of a deed. 

However, in my view, the respondent’s argument is strengthened by two considerations.  The first is the fact that, if the applicant's argument is correct, the temporal operation of the exemption afforded by the subsection may be extended for an indeterminate period in excess of 12 months.  On the applicant's construction it would be open to the respondent to be relevantly satisfied at a time when the likely date of approval was some months in the future.  The applicant’s construction also increases the possibility that a unit trust scheme will achieve status as a “public unit trust scheme”, without it ever actually satisfying the pre-requisites for a “public unit trust scheme”.   The second consideration is the unlikelihood that the sub-section would impose on the respondent the burden of making a determination as to whether a deed was likely to be considered registrable by another authority and, if so, by what date.

I conclude that the occasion for the formation by the respondent of a state of satisfaction for the purposes of sub-section (1A) does not arise until there exists a relevant approved deed.

Does subsection (1A) operate only to relieve from duty issues of units to the public pursuant to an approved deed?

The respondent argues that the purpose of the subsection is to confer relief from stamp duty on the issue of units to the public in a unit trust scheme pursuant to an approved deed.  The argument continues–

“An apparent purpose in providing for the deeming provision is to cater for the interim circumstances where units are first issued to the public pursuant to an approved deed but before it becomes a PUTS. Those units first issued will attract s.56B duty, and it will not be until sufficient units have been issued for the `spread’ test to be satisfied that the unit trust scheme will in fact be a PUTS. Importantly the purpose of the deeming provision is not to place a unit trust scheme in a `stamp duty free zone’ for an indeterminate period of time between date of satisfaction and commencement of issue of units to the public, a period dependent upon however long it might take to apply for and obtain approval.”

The question arises because the subject dispositions did not involve issues of units to the public pursuant to an approved deed.

A difficulty with the respondent's submission is that the subsection does not address the question of exemptions from duty of specific transactions or instruments.  It is a provision which operates by causing a qualifying unit trust scheme to be deemed to be “a public unit trust scheme”.  It thus confers status on a unit trust scheme and transactions involving units in such a unit trust are assessed by reference to that status not by reference to their particular qualities. 

The respondent argued that the operation of the subsection ought be confined in the manner described above to avoid a manifest absurdity, cf. Cooper Bookes (Wollongong) Pty Ltd v. The Commissioner of Taxation (1980-81) 147 CLR 297. Reliance was also placed on s.14A(1) of the Acts Interpretation Act (Qld) which provides–

“In the interpretation of a provision of an Act, the interpretation that will best achieve the purpose of the act is to be preferred to any other interpretation.”

I accept that there is force in the respondent's submissions.  But it does not appear to me that the language of the subsection is ambiguous or that, if given a literal construction, it will result in an operation which was "capricious and irrational".  The subsection can operate only where the Commissioner becomes satisfied as to the prescribed matters.  One such matter is that units will be issued to the public in a manner so as to comply with the requirements of the definition within a specified period.  I do not see anything particularly irrational in a decision on the part of the legislature to extend the benefits of public unit trust scheme status to any transactions involving units in a unit trust scheme which so qualifies even though some of the transactions may not involve units issued to the public.  After all, once a unit trust scheme qualifies as a public unit trust scheme without benefit of the deeming provision, the benefits of the classification are not restricted to transactions involving units issued to the public.  If the subject units had been transferred after approval of the deed and after the “spread” requirements had been met, the respondent would not contend that the transfers would not be entitled to whatever benefits flowed from the public unit trust scheme classification.           

Whether the respondent was satisfied for the purposes of s.56B(1A)

The applicant contends that the respondent's letter of 19 April 1994 communicates the respondent's satisfaction in terms of subsection (1A).  Alternatively, the applicant submits that if that submission is not accepted, it was not open to the respondent on 19 April 1994, on the evidence before her, not to be satisfied in terms of the subsection. 

If the conclusion expressed above that there is no scope of the operation of subsection (1A) until such time as an approved deed came into existence is correct, the applicant's contentions must fail.  However, it is appropriate that relevant findings of fact be made should this matter go on appeal.  Mr McClafferty swore in an affidavit–

“7.As at 19 April 1994, I was not satisfied that Broadbeach International Property Trust (BIPT) was a `public unit trust scheme’ as defined in s.56B(1) of the Stamp Act nor was I satisfied I could `deem’ BIPT to be a public unit trust scheme for the purposes of s.56B(1A) of the Stamp Act because, as at such a date, the BIPT deed had not received approval by the Australian Securities Commission. Approval was not scheduled until May 1994. In addition, units would need to be issued to the public within 12 months of the date of approval of the BIPT deed by the Australian Securities Commission to an extent and with such entitlements as were within the definition of `public unit trust scheme’ in s.56B(1) of the Stamp Act.  What I intended to convey by the letter of 19 April 1994 was that the respondent wouldn't consider BIPT a public unit trust scheme until the two steps mentioned in the second paragraph of the letter had occurred, but that the respondent would then consider it to be a public unit trust scheme if they did occur.”

The letter of 19 April provides some support for Mr McClafferty's evidence.  It does not refer to the Commissioner being “satisfied”.  Read literally, it says no more than that the Commissioner will consider the BIPT to be a "public unit trust scheme" at such time as it fulfils the requirements of the definition.  However, I consider it unlikely that Mr McClafferty so understood the letter or intended that it should be so understood.  It was apparent to Mr McClafferty that the parties to the transaction were expecting a ruling or intimation from the Commissioner which would cause savings of stamp duty of approximately three million dollars.

It was provided in response to a letter which sought confirmation that the BIPT could–

“. . now be treated as a `public unit trust scheme’ under that sub-section (1A), and that dealings with units in BIPT now do not attract the operation of section 56B.”

As is recorded earlier, Mr McClafferty advised Miss Pitkin at 1.10 p.m. the letter was ready for collection.  Earlier that day he had informed Miss Pitkin that he did not see any problems with granting the requested exemption and that he would try to forward to the solicitor a letter to that effect that day.  If Mr McClafferty did not consider that the letter was notifying the grant of the requested exemption, I consider it probable that Mr McClafferty would have made that quite plain in the letter or would have informed Miss Pitkin separately of that fact.  Although the letter appears to indicate that Mr McClafferty misunderstood the operation of the subsection (eg. by seeking to impose conditions or qualifications on the “approval”), it provides evidence that Mr McClafferty was satisfied that units would be issued within twelve months of the date of approval of a deed so as to meet the requirements of the definition.  The letter of 31 March was accompanied by statutory declarations which addressed the “spread” requirements.  In cross-examination Mr McClafferty conceded that he had no reason to doubt the correctness of what he was told in the letter or the declarations.

In paragraph 8 of his affidavit. Mr McClafferty swore–

“I was not informed on 4 May 1994 of any approval by the ASC of the BIPT trust deed. I have never been asked by anyone on behalf of the applicant as to whether I on behalf of the respondent had any particular satisfaction in relation to whether the issue of units in BIPT within 12 months of that date would comply with the `spread' requirements in s.56B(1) of the Stamp Act.  Neither have I ever had any such satisfaction.”

I accept that evidence insofar as it concerns the forming of an opinion or state of mind with respect to a particular date.  But it does not address the question of whether Mr McClafferty was satisfied throughout that the spread requirements would have been met within 12 months of the date of approval of the deed, whenever that happened to be. 

I am satisfied that Mr McClafferty has no actual recall of the circumstances surrounding the sending of the letter of 19 April 1994 or of what his thought processes were in connection with the formulation and dispatch of that letter.  I do not intend any criticism of Mr McClafferty in these findings.  I have no reason to doubt that his evidence was honestly given.

The confusion which seems to have existed in the mind of Mr McClafferty gives rise to the possibility that, whilst purporting to give an intimation in terms of the subsection, he did not address the need to be satisfied as to the prescribed matters.  I have concluded, on balance, that Mr McClafferty was satisfied that the requisite “spread” requirements would be met within 12 months of the date of approval of the deed.  In an investigation report compiled by Kevin Simpson, special auditor, compliance branch, dated 21 June 1995 reference was made to the letter of 19 April 1994 and the conclusion expressed that–

“Accordingly, BIPT was granted `public unit trust scheme’ status thereby allowing the subsequent dealings in its units to occur free of Queensland Stamp duty.”

Mr McClafferty agreed that he had spoken to Mr Simpson concerning the two letters.  I infer that Mr Simpson discussed with Mr McClafferty the circumstances surrounding the two letters and the purpose of the letter of 19 April before concluding his report. 

A question then arises as to whether the requirements of subsection (1A) were fulfilled once the deed was approved on 4 May 1994, prior to the relevant dispositions.  The respondent did not give any further consideration to matters relevant to the application of subsection (1A) between the obtaining of the Australian Securities Commission's approval on 4 May and the share issue and the Hesse redemption which also took place on that day.  On one view of the matter, if the respondent did not know on 4 May 1994 of the fact of approval, she cannot have been relevantly satisfied.  Arguably, in order for her to be satisfied for the purposes of the subsection, she needed to know of the fact of approval, of the date of approval and to have had appropriate evidence as to the proposed issue to the public within the 12 month of that date.  The contrary argument is that it is sufficient if the respondent is satisfied that the spread requirements will be met within 12 months of the date of approval of the deed, when approved, and if the deed is approved whilst the respondent remains of that state of mind.  On this view of the provision, once the deed is approved the respondent’s state of satisfaction becomes relevant and operates regardless of whether the respondent again turns her mind to the matters to be considered for the purposes of sub-section (1A). 

I have concluded that the former approach is to be preferred.  If, as I have held, the fact of approval is, a pre-requisite to the operation of sub-section (1A), it seems to me in order to satisfy the requirements of the sub-section, the respondent must turn her mind, inter alia, to the date and fact of the approval.  It is implicit, I think, in the wording of the sub-section, taken with sub-section (1), that any application for approval and consideration of any such application, take place after approval of the deed.

The application of section 56C(2)(a)

In general, the liability of an instrument effecting or evidencing a transfer of a share in a company is governed by ss.31A to 31Y of the Act.

Where the company is the trustee of the trust and owns property located in Queensland s.56C applies. The effect of subsections (8) and (8A) of s.56C are that share transfers which fall within s.56C “in addition to any other duty payable under this Act” are chargeable with duty on the basis that the transfer constitutes a "conveyance free of encumbrances of a prescribed undivided share in all of the trust property held by the trustee". "Prescribed undivided share" for present purposes is–

"The proportion of the value of the total issued capital of the company which the Commissioner determines is represented by the share".  (ss.8A)

The assessment under consideration concerns two transfers of shares which took place on 4 May 1994. The first was a transfer by Ormiston of one share in Goldsea to TCAL. The second was a transfer by Pranbrooke of two shares in Goldsea to TCAL. The three shares were the whole of Goldsea's issued share capital at the time of the transfers. By the time of the transfers Goldsea had ceased to be trustee of the BIPT and TCAL had become trustee in its place. Goldsea remained the registered proprietor of real property which formed the principle component of the trust fund. The applicant contends that s.56C had no application because Goldsea, once it ceased to be trustee of the BIPT, did not meet the description in s.56C(2)(a). That subsection relevantly provides–

"(2)This section applies to–

(a)A company which is the trustee of a trust and in that capacity carries on business in Queensland or earns property located in Queensland; . . . "

It was argued that "trustee of the trust" meant something other than a bare trustee or a trustee of a constructive or resulting trust. This conclusion was said to flow from the addition of the words "of a trust" to the words "the trustee". It was urged that the former words were otiose unless the provision had in mind something along the lines of a trust formally constituted by an instrument in writing which imposed obligations on the trustee and spelt out terms and conditions upon which the trust was constituted. I accept that the words "of a trust" may not add meaning to the words "the trustee". However, I cannot see that they are part of an attempt to limit or define the type of trust to which subsection (2) applies. Such limitations are provided by the requirements that the trustee must, in its capacity as such, carry on business in Queensland or own property located in Queensland. The construction for which the applicant contends, in my view, would involve a significant and unwarranted qualification of the plain language of sub-section (2). In support of its argument, the applicant points to the possibility that s.56C might apply in a range of quite unexpected circumstances unless qualified in the way it suggests. It is submitted, for example, that a corporate vendor of land may hold the land in trust for the purchaser between contract and settlement (Kern Corporation Ltd v Walter Reid Trading Pty Ltd (1987) 163 CLR 164). The point is not without merit but I do not consider that a literal construction of sub-section (2) produces a manifest absurdity. Moreover, the consequences of any such unexpected operation of s.56C can normally be expected to attract relief by operation of sub-section (16). There does not appear to be any suggestion that, at relevant times, Goldsea carried on business in Queensland. It is not disputed that it "owned" property located in Queensland by virtue of the fact that it held the legal title to such property.

The application of s.56C(16)

The respondent contends that s.56C(16) has no application because the transfer of the shares in Goldsea was made “in contemplation” of TCAL’s acquiring a benefit in relation to property held in trust. The identified benefit is “an indirect interest in the real property and assets of BIPT via the 100,000 units in BIPT held on trust by the applicant for TCAL. It was submitted on behalf of the applicant that–

“. . . the disposition of the shares were not made in contemplation of the matters described in s.56C(16) because the transfer of the shares in Goldsea was not made in contemplation of Pranbrooke and Ormiston disposing indirectly through Hesse of a benefit in the property of BIPT. The redemption occurred regardless of the transfer of shares and had nothing to do with any disposition of any benefit in relation to that trust property. The beneficial interest in the property of BIPT (or for that matter) BIHT was wholly unaffected by the share transfers and has remained, in will remain, unaffected.”

The respondent argued that “contemplation” in s.56C(16) had the following meaning given in the Compact Oxford English Dictionary 2nd ed–

“as a contingency looked for, or as an end aimed at.”

The respondent, referring to ANM Trading Pty Ltd v Commissioner of Business Franchises [1996] 2 VR 312 at 326, 7 accepted that “in the contemplation of” connoted more than an expectation. In ANM Batt J, applying the views expressed in Scene Estate Ltd v Amos [1957] 2 KB 205 concluded that “contemplation” in s.2(6AB) of the Business Franchise (Tobacco) Act 1974 (Vic) meant more than expectation and “required the power and obligation to do the very thing contemplated”. In my view, as the matters which took place on 4 May 1994 were all interdependent parts of the one preconceived plan sanctioned by contract, the respondent did not err in failing to be satisfied that the subject share transfers were not made in contemplation of the disponor disposing of or the disponee acquiring any benefit in relation to the property held in trust. The shares were transferred after the issue of the 100,000 voting units in BIPT and after the Hesse redemption was effected. However, as the transfers were part of the one transaction, which included the acquisition by TCAL of a beneficial interest in the 100,000 voting units, it does not seem to me that the share disposition cannot be said to be in contemplation of the acquisition by TCAL of the interest in the 100,000 voting units. TCAL’s acquisition was an aim of the overall transaction and it is appropriate to consider the substance of the transaction as opposed to mere form. See e.g. Fitch-Lovell Ltd v I.R.C. [1962] 1 WLR 1325 and Commissioner of Stamp Duties v Hopkins (1945) 71 CLR 351 at 360.

The applicant argued that if contrary to its submissions the respondent was entitled to assess under s.56C, the quantum of the assessment was too high. The applicant submitted that the respondent failed to take into account–

“(i)the effects of Patchet’s Case 85 ATC 4587, and the possibility that s.2A(2) of the Act (requiring a trusts liabilities and debts to be ignored) will not apply if the applicant succeeds in showing (in Application No. 549 of 1996) that the respondent should have treated the BIPT as a “public unit trust scheme”; and

(ii)that at the relevant time, the trustee of the BIPT borrowed $75 million (to fund the Hesse unit redemption, the subject of Application No. 549 of 1996) and was contingently liable for many times that amount by way of third party mortgage over these assets.”

This argument cannot succeed.  I have found against the applicant in Application No.549 of 1996.  Re Patchet Pty Ltd and Ors 85 ATC 4587 was decided before the insertion of s.2A in the Act. Item 4(b) of the head of charge “CONVEYANCE FOR TRANSFER” is made applicable by operation of s.56C(8). It requires duty to be “calculated on the full unencumbered value of the property . . . specified in this paragraph (4)(a)”. Section 2A(2) provides that where property is held or to be held pursuant to a trust other than a public unit trust scheme reference to “full unencumbered value” means the value of trust property without regard to the debts or liabilities of the trustee of the trust.

I will hear submissions as to orders appropriate to give effect to these reasons.