PARTIES: CRAMBROOK NOMINEES P/L (ACN 009 620 311)
v
COMMISSIONER OF TAXES
AND:
BLAKE CORPORATION P/L (ACN 009 624 364)
v
COMMISSIONER OF TAXES
TITLE OF COURT: SUPREME COURT OF THE NORTHERN TERRITORY
JURISDICTION: SUPREME COURT OF THE NORTHERN TERRITORY exercising Territory
jurisdiction
FILE NO: LA8/2000 (20006987)
LA15/2000 (20009576)
#DATE 13:10:2000
DELIVERED: 13 October 2000
HEARING DATES: 30 August 2000
JUDGMENT OF: THOMAS J
APPEAL - DECISION OF COMMISSIONER OF TAXES - OBJECTIONS AGAINST ASSESSMENTS -
STAMP DUTY
Appeal - appeal against decision of Commissioner of Taxes - objections against
assessments of stamp duty - assessment be varied to nil or remitted for
reassessment - transfer exempt from duty - instrument upon which duty can be
assessed - trust property - subject to mortgage - amendment to trust deed -
whether transfer for valuable consideration - appellants not cross-examined -
established that transfer not made for valuable consideration - doctrine of
fiscal nullity does not apply - transaction not equivalent of a sale - appeal
allowed
Taxation (Administration) Act 1978 (NT) s 4 (1) and s 101; Stamp Duty
Act 1978 (NT) s 4 and s 9A (b)
Mortimore v Commissioner of Inland Revenue [1864] 2 H & C 347;
The Great Western Railway Company v Inland Revenue Commission [1894] 1
QB 507, Merritt v Merritt [1970] 1 WLR 1211; Browne v Dunn (1893)
6 R (HL) 67; In Re The Land Tax Act 1887; Ex Parte Finlay (1884) 10 VLR
(E) 68; Comptroller of Stamp (Vic) v Rylaw Pty Ltd 81 ATC 4,411,
cited
BL & M Grollo Homes Pty Ltd v Comptroller of Stamps (Vic) [1983] 1
VR 445; Commissioner of Stamp Duties (NSW) v Buckle (1998) 192 CLR 226;
Comptroller of Stamps (Vict) v Ashwick (Vic) No. 4 Pty Ltd (1987) 163
CLR 640, referred to
Gutwenger v Federal Commissioner of Taxation (Cth) 95 ATC 4,008,
considered
Counsel:
Appellant: D Russell QC
Respondent: R Webb
Solicitors:
Appellant: Noonans Lawyers
Respondent: Morgan Buckley
Judgment category classification: C
Judgment ID Number: tho200025
Number of pages: 32
IN THE SUPREME COURT
OF THE NORTHERN TERRITORY
OF AUSTRALIA
AT DARWIN
BETWEEN:
CRAMBROOK NOMINEES P/L (ACN 009 620 311)
Appellant
AND:
COMMISSIONER OF TAXES
Respondent
AND:
BLAKE CORPORATION P/L
(ACN 009 624 364)
Appellant
AND:
COMMISSIONER OF TAXES
Respondent
(Delivered 13 October 2000)
(2) On appeal -
(a) the appeal shall be limited to the grounds stated in the objection; and
(b) the burden of proving that any assessment objected to is excessive lies
on the objector.
(3) If a person's liability or assessment has been reduced on an objection,
the reduced liability or assessment shall be the liability or assessment
appealed against."
[2] There are no material differences between the two appeals
which with the consent of all parties were heard together.
[3] The grounds of appeal in respect of matter LA8 of 2000 (20006987) are as
follows: 2. The only material document submitted to the Respondent for assessment of
duty was a transfer of certain lands dated 24 November 1998 ("the transfer").
The assessment relates to this instrument.
3. The transfer was not made subject to, and did not comprise an agreement
within the meaning of that term as defined in the Taxation (Administration) Act
1978 as applicable to the Stamp Duty Act 1978 (collectively "the Acts").
4. The transfer was:
a) A conveyance
b) Made by a trustee, namely Better Homes Pty Ltd ("the trustee"), to the
Appellant
c) Not made for valuable consideration
d) In conformity with a validly constituted trust, namely the Rockton Unit
Trust
d)(sic)Of property which was acquired by the trustee by virtue of an
instrument of which was duly stamped, namely the subject property details of
the prior stamping in relation to which had previously been supplied to the
Respondent.
5. In the premises the transfer was exempt from duty by reason of paragraph
(b) of item 9A of Schedule 2 of the Stamp Duty Act 1978.
6. There is no principle of law, and no provision of any Act, which entitled
the Respondent to assess the transfer otherwise in accordance with the
provision referred to in paragraph 5.
7. Specifically, the fact that the subject property was at the time of
transfer subject to an encumbrance did not entitle the Commissioner to assess
duty thereon in the manner in which he did in the assessment or at all.
8. There is no instrument upon which duty of the type described in the
notice can be assessed other than the transfer.
9. Alternatively, the foregoing grounds apply in relation to each such
instrument."
[4] The orders sought by the appellants in this matter are as
follows: (b) alternatively an order that the assessment be remitted to the Respondent
for reassessment according to law; and
(c) costs."
[5] The grounds of appeal in respect of matter LA15 of 2000
(20009576) are as follows: 2. The only material document submitted to the Respondent for assessment of
duty was a transfer of certain lands dated 24 November 1998 ("the transfer").
The assessment relates to this instrument.
3. The transfer was not made subject to, and did not comprise an agreement
within the meaning of that term as defined in the Taxation (Administration)
Act 1978 as applicable to the Stamp Duty Act 1978 (collectively "the
Acts").
4. The transfer was:
(a) a conveyance;
(b) made by a trustee, namely Better Homes Pty Ltd ("the trustee"), to the
Appellant;
(c) not made for valuable consideration;
(d) in conformity with a validly constituted trust, namely the Rockton Unit
Trust;
(e) of property which was acquired by the trustee by virtue of an instrument
which was duly stamped, namely the subject property details of the prior
stamping in relation to which had previously been supplied to the Respondent."
5. In the premises the transfer was exempt from duty by reason of paragraph
(b) of item 9A of Schedule 2 of the Stamp Duty Act 1978.
6. There is no principle of law, and no provision of any Act, which entitled
the Respondent to assess the transfer otherwise in accordance with the
provision referred to in paragraph 5.
7. Specifically, the fact that the subject property was at the time of
transfer subject to an encumbrance did not entitle the Commissioner to assess
duty thereon in the manner in which he did in the assessment or at all.
8. There is no instrument upon which duty of the type described in the
notice can be assessed other than the transfer.
9. Alternatively, the foregoing grounds apply in relation to each such
instrument.
[6] The orders sought by the appellants in this matter are as
follows: (b) alternatively, an order that the assessment be remitted to the
Respondent for re-assessment according to law; and
(c) costs."
[7] At the outset of the hearing the Court was presented with a
Statement of Agreed Facts and Documents which are set out hereunder (Exhibit
1): 2. The trustee of the Rockton Unit Trust was at all times Better Homes Pty
Ltd ACN 054 999 567, formerly known as Rockton Pty Ltd ACN 054 999 567.
3. On and from 17 November 1998 the Appellant was a discretionary
beneficiary of the Rockton Unit Trust.
4. The Trust Deed of the Rockton Unit Trust was amended by means of a Deed
of Amendment ("the first Rockton Amending Deed) dated 6 December 1994. (A copy
of the first Rockton Amending Deed is annexed and marked "2").
5. The Rockton Trust Deed was further amended by a Deed of Amendment dated
17 November 1998 ("the second Rockton Amending Deed"). (A copy of the second
Rockton Amending Deed is annexed and marked "3").
6. Better Homes Pty Ltd ACN 054 999 567 as trustee of the Rockton Unit Trust
was the registered proprietor of the following real property:
(a) Lot 5868 of Darwin;
(b) Portion 1797 of Bagot;
(c) Portion 1798 of Bagot;
(d) Portion 1796 of Bagot; and
(e) Lot 9219 of Nightcliff,
and had become the registered proprietor of all those real properties prior
to 1 January 1998.
7. On 2 July 1998 a transfer of a share in Jaguar Kitchens & Cabinets
Pty Ltd and of units in Territory Cabinets Unit Trust were executed. (Copies
of those documents are annexed and marked "4" and "5" respectively).
8. On 24 November 1998 the meetings and resolutions evidenced by the
documents annexed were held and made (as the case may be) and the other
documents annexed were executed.
(a) Transfer of share in Bayview Homes (NT) Pty Ltd.
(b) Transfer of share in Better Homes Pty Ltd.
(c) Minutes of a meeting of unitholders of the Rockton Unit Trust.
(d) resolution of the trustee of the Rockton Unit Trust.
(e) Transfer of Lot 9219 of Nightcliff and Portion 1796 of Bagot to Blake
Corporation Pty Ltd.
(f) Transfer of Portions 1797 and 1798 of Bagot and Lot 5868 of Darwin to
Crambrook Nominees Pty Ltd. (Copies of these documents are annexed and marked
"6-11"
8.(sic) The documents which are the subject of this appeal were lodged for
assessment under cover of a letter from James Noonan to the Commissioner of
Taxes dated 23 December 1998. (A copy of that letter is annexed and marked
"12").
9. Duty was assessed in respect of the transfers of units in the Territory
Cabinets Unit Trust and in the Budget Homes 1993 Unit Trust and shares in
Jaguar Kitchens & Cabinets Pty Ltd and Bayview Group Pty Ltd and the
transfer forms stamped on 5 January 1999. Those stamped transfer forms are
annexed and respectively marked "4, 5, 6 and 7").
10. On 11 June [1]999 the respondent issued a Notice of Assessment. (A copy
of that Notice is annexed and marked "13").
11. On 9 July 1999 the appellant and Blake Corporation Pty Ltd delivered to
the respondent a Notice of Objection. (A copy of that Notice is annexed and
marked "14").
12. By letter dated 14 January 2000 the respondent disallowed the objection.
(A copy of that letter is annexed and marked "15")."
[8] In addition to the agreed facts the appellants tendered an
affidavit of Jeffrey William Dennis Blake sworn 29 August 2000 (Exhibit 2). Mr
Blake is a director of Blake Corporation Pty Ltd and was a director of Better
Homes Pty Ltd (formerly known as Rockton Pty Ltd), Jaguar Kitchen and Cabinets
Pty Ltd, Bayview Homes (NT) Pty Ltd and Bayview Group Pty Ltd. Mr Blake
deposes that there has been no consideration agreed or provided in respect of
the transfer of the subject property as described in his affidavit.
[9] Mr Richard Pius Crambrook in affidavit sworn 29 August 2000 (Exhibit 3) and
affidavit sworn 30 August 2000 (Exhibit 4), deposes that he is a director of
Crambrook Nominees Pty Ltd and was a director of Better Homes Pty Ltd (formerly
known as Rockton Pty Ltd, Jaguar Kitchen and Cabinets Pty Ltd, Bayview Homes
(NT) Pty Ltd and Bayview Group Pty Ltd. Mr Crambrook deposes that there was no
consideration agreed or provided in respect of the subject property as
described in his affidavits.
[10] The properties described in these affidavits are the properties referred
to in the Transfer of Land (Annexure 10 and 11) in the Agreed Facts and
Documents and the resolution which is Annexure 9 in the Agreed Facts and
Documents.
[11] The issue between the appellants and the respondent arises because the
trustee of a trust which owned property which was subject to a mortgage made a
decision to distribute trust property to the beneficiaries of the trust while
it was subject to the mortgage. The Commissioner of Taxes has ruled that
because the mortgage was subsequently paid out by the beneficiaries that the
exemption which is normally available under the Stamp Duty Act 1978 for such a
transaction ceased to be available.
[12] The Stamp Duty Act imposes a tax on instruments by s 4 which
provides: Subject to this Act, stamp duty is imposed on the instruments included in
the classes of instruments specified in Schedule 1."
[13] The issue is whether the instrument which the Commissioner
has stamped falls within item 5 of Schedule 1 which is a conveyance of dutiable
property and if they do whether or not they also fall within the exemption
provided by item 9A(b) of Schedule 2.
[14] It is not in dispute that under Schedule 1 the property which is the
subject of this appeal, was dutiable property. It is not disputed that two of
the three instruments are conveyances which means that for all practical
purposes it is of little consequence whether the first instrument was a
conveyance.
[15] The question then becomes whether or not the exemption in paragraph 9A(b)
of Schedule 2 applies to these conveyances. Paragraph 9A(b) of Schedule 2
provides: (b) made by a trustee to a beneficiary, where the conveyance is not made for
valuable consideration and the conveyance is in conformity with a trust
contained in a validly constituted trust and the property the subject of the
conveyance was acquired by the trustee by virtue of an instrument which was
duly stamped or has been exempted from duty under this Schedule or was not
otherwise subject to duty; or"
[16] The Rockton Unit Trust Deed is a deed of settlement dated
13 March 1992. Clause 19.25 of that Trust Deed provides as follows: Every Trustee who is a corporation or company may exercise or concur in
exercising any discretion or power hereby conferred on the Trustee by a
resolution of such corporation or company or by a resolution of its Board of
Directors or governing body or may delegate the right and power to exercise or
concur in exercising any such discretion or power to one or more members of its
Board of Directors or governing body appointed from time to time by the said
Board of Directors or governing body for that purpose."
[17] Section 27 of the Trust Deed provided wide powers of
amendment. There have been two amendments to the Trust Deed, the first made on
6 December 1994. The second Deed of Amendment made on 17 November 1998
effected two substantial changes to the Trust Deed.
[18] The first substantial change was to change the rules which applied in
relation to distribution of income by entirely deleting and replacing Clause
22. The second substantial change was that Clause 17 of the original Trust
Deed was deleted and replaced with new clauses relating to distributions of
capital. Clause 17.4 provides as follows: [19] Counsel for the appellants Mr Russell QC, submits that
under the provisions of Clause 17.4 the trustee may actually hand over the
property. The effect of the trustee's decision to do so comes not from the
decision of the trustee itself but from the actual appointment.
[20] Document No. 9, in the book of Agreed Facts and Documents, is titled
Rockton Unit Trust; Resolution of the trustee, Better Homes Pty Ltd ACN 954 999
567. The resolution is dated 24 November 1998. It is this document which
purports to transfer the subject property and is the document on which stamp
duty has been assessed. It is the submission on behalf of the appellants that
this resolution did nothing. It was a decision by the directors of the trustee
company that they would transfer the property to the beneficiaries. This
decision was effected by the subsequent execution of the transfers.
[21] The questions for this Court on appeal are whether:
1. the resolution was an agreement or otherwise falls within the definition of
a conveyance;
2. the resolution, or alternatively the transfers, were made for valuable
consideration;
3. the doctrine of fiscal nullity applies in the Northern Territory;
4. if so, whether it applies in the present circumstances.
[22] The appellants contend that all questions should be answered in the
negative. The appellants contend the respondent no longer relies on the
resolution as an agreement but now contends that it "effects an appropriation
of the relevant trust assets".
[23] It is the appellants' argument that this is not a correct construction of
the Trust Deed as amended. Until the property actually passed from the trustee
it remained part of the property of the fund, with the trustee free to make
some other decision in relation to it. The appellants further maintain that a
mere resolution of the trustee company cannot operate as a conveyance because
it is a transaction not an instrument. If it were deliberate at all on the
appellants' submission, liability would arise under the Taxation Administration
Act Division 15. No such assessment has been made.
[24] The definition of "conveyance" in s 4(1) of the Taxation
(Administration) Act is as follows: [25] The resolution effects an appropriation of trust property
and is an "appointment" within the definition of "conveyance". The
consequential transfer documents are a conveyance. The resolution dated 24
November 1998 states that the subject properties are transferred by way of
gift.
[26] The transfers of land were executed in Form 5 of Schedule 1 to the Real
Property Regulations. The form of transfer states: [27] The appellants' argument is that it was inaccurate to
state that the transfer was made "in consideration of an agreement" and still
more inaccurate to describe the parties as "buyer and seller" rather than as
"transferor and transferee". Note 1 to the Form of Transfer explains when this
form of transfer is to be used and is set out hereunder. 1. This form must be used for all simple transfers by the owner other than -
(a) transfers by a mortgagee exercising power of sale (Form 6)
(b) transfers creating or reserving easements (Form 9 or 10)
(c) transfer by a receiver (Form 7)
(d) transfer pursuant to a court order (Form 15)
(e) transfer of mortgage, encumbrance or lease (Form 28)
For those transfers the appropriate form must be used.
If the words "Buyer" and "Seller" are considered inappropriate other words
may be used."
[28] The appellants refer to the sworn affidavits of Mr Blake
and Mr Crambrook (Exhibit 2, 3 and 4) to the effect that there was no
consideration for the transfer meaning in this context there was no
consideration passing to the trustee as part of the transaction. The
appellants argue this evidence cannot be rejected by the Court particularly as
they were not required for cross examination.
[29] The appellants argue that the fact the parties subsequently paid out the
liability of the former trustee to the bank and refinanced their own respective
liabilities does not amount to consideration. On the appellants' argument it
merely reflects the nature of the trust asset which passed to the beneficiary.
It is the submission of counsel for the appellants that it does not mean there
was an agreement between the beneficiary and the trustee that this would occur
at a time following the transfer and there is no suggestion that it occurred at
the time of the transfer accordingly there was neither actual nor executory
consideration. The appellants maintain that there is nothing extraordinary in
trust property being mortgaged property. A trust can be declared in respect of
mortgaged property. Any beneficiary receiving trust property necessarily is
required to provide the trustee with a release. The appellants argue that a
trust can be declared in respect of mortgaged property, consequently there can
be no reason why a trustee cannot also account to the beneficiaries by
delivering of such property.
[30] Ms Webb, counsel for the respondent, referred to the letter dated 14
January 2000, annexure marked 15 in the statement of Agreed Facts and Documents
in this matter which essentially contains the reasons the respondent would put
forward as to why this appeal should be rejected.
[31] Summarising the preliminary matters, counsel for the respondent stated
that the initial trustee in the First Deed of Settlement (Annexure 1)
established a common form unit trust under which unit holders have a
proprietary interest in each asset of the trust (Clause 8.1 to 8.3
inclusive).
[32] The Second Deed of Amendment dated 17 November 1998 (Annexure 3) converted
the Trust Deed to a discretionary trust whereby the beneficiaries do not have
legal or beneficial interest in trust assets. The trustee was a person other
than the settlor. The Trust Deed as amended provided for the trustee either to
distribute income each financial year among such beneficiaries as he chose.
The relevant amendment is Clause 22 "Distributions of Income". The amending
Clause 17 provides for distributions of capital and provides at 17.1 that upon
the termination of the trust the trust fund belongs to such beneficiaries and
in such proportions as the trustee determines under that clause - see 17.1.1.1.
Clause 17.6 provides that the trustee shall not exercise such discretion
without the consent of the ordinary unit holders.
[33] In that sense the ordinary unit holders retain some element of control
over what happens with trust property. A reading of the Trust Deed indicates
that the trustee has very wide powers of administration and a power to vary the
Trust Deed.
[34] The question for the respondent was whether the resolution of the trustee
or in the alternative the transfer of land documents effect a conveyance of
dutiable property. It is relevant to note the definition of "instrument" in
s 4(1) of the Taxation Administration Act which is: "'instrument' includes
any document;"
[35] Under this definition both the resolution and the transfers are
instruments for the purpose of the Taxation (Administration) Act and the Stamp
Duty Act. The issue is whether the resolution or the transfers effect a
conveyance of dutiable property. In this case the Commissioner of Taxes
stamped the resolution dated 24 November 1998 Annexure 9. The reason he gave
for stamping the resolution is because he formed the view it was an instrument
of appointment of objects of a trust. It appointed beneficiaries to take the
property specified in the resolution. Annexure 9 resolves that certain
property be transferred to Crambrook Nominees as trustee of the Crambrook
family trust and certain other identified property transferred to Blake
Corporation Pty Ltd as trustee for the Blake family trust. In each case the
transfers were expressly subject to existing encumbrances. The Commissioner
ruled that this document was an instrument of appointment. It appoints
beneficiaries. It is the argument on behalf of the respondent that the
Commissioner could have or could still amend and instead stamp the relevant
transfers (Annexures 10 and 11).
[36] The issue then is whether or not the conveyance, whether it be the
resolution or the transfer, is exempt from stamp duty under s 9A(b) of
Schedule 2 of the Stamp Duty Act. In determining what the effect of the
instrument is for the purposes of stamp duty it is permissible to have regard
to other material in order to determine its true effect (Commissioner of
Stamp Duties (NSW) v Buckle (1998) 192 CLR 226).
[37] In deciding whether or not the conveyance, be it the resolution or the
transfer is exempt from stamp duty under s 9A(b) of Schedule 2 the only
issue is whether or not the transfer or conveyance was for valuable
consideration.
[38] The respondent says that there was valuable consideration that being the
assumption of a debt by Crambrook Nominees Pty Ltd and Blake Corporation Pty
Ltd. The debt being the mortgage or "existing encumbrance" attached to the
property when it was transferred (see Mortimore v Commissioner of Inland
Revenue [1864] 2 H & C 347 and The Great Western Railway Company v
Inland Revenue Commission [1894] 1 QB 507).
[39] In the more recent Australian case Gutwenger v Federal Commissioner of
Taxation (Cth) 95 ATC 4008, it was held that an assumption of
liability for a mortgage was not valuable consideration. However, that
decision turned on the particular facts found by the trial judge and does not
preclude the assumption of a liability from being a consideration. Black CJ,
Shepherd and Jenkinson JJ said at 4019 - 4020: In all the circumstances we are satisfied that there was a gift by Mrs
Gutwenger of the land to her husband. His Honour's conclusion that the
transaction was for consideration is, in our respectful opinion, incorrect."
[40] One of the basis for the Federal Court finding the
assumption of a mortgage did not amount to consideration was the finding of
fact by the primary judge that there was no evidence Mrs Gutwenger and her
husband, the appellants, had discussed the question of what was to happen in
relation to the mortgage and the discharge of the obligation under the mortgage
to the bank.
[41] In the matter before this Court, the Commissioner had quite a deal of
written material before him from which counsel for the respondent submits the
Commissioner could infer there had been discussions and agreement reached as to
the assumption of the respective encumbrances on the properties.
[42] Annexure 18 in the book of Agreed Facts and Documents, is a letter dated 8
July 1998 from chartered accountant Mal Sciacca to Mr Richard Tucker, finance
manager of the ANZ Bank Darwin. This letter omitting formal parts reads as
follows: Further to my discussions with Richard Crambrook and Jeffrey Blake we wish
to advise that the group has decided to restructure and split its assets in the
following ways:-
- Richard intends to take over the operations of the Bayview Business, the
current Bayview office and warehouse and adjoining vacant block of land and the
Cullen Bay display Home.
- Jeffrey intends to take over the Jaguar Kitchens business, the proposed
new Jaguar office & factory, the old Jaguar office and factory and the Two
and A Half Mile property. Jeffrey intends to continue in the joinery business
and specialise as a property developer.
We have prepared summaries of values attributed to those assets and current
borrowing's secured on those assets.
We would appreciate if you could review the security arrangements on the
loans and effectively split those loans so that neither partner guarantees the
other partners loan.
We have prepared a schedule of the proposed transfers and funding
requirements that should be of assistance.
If you require any further information please do not hesitate to contact our
office."
[43] Attached to this letter are summaries of the properties of
Mr Crambrook and his group of companies and Mr Blake and his group of
companies. The summaries include agreed values of property including real
estate and the amount of the loans and are set out hereunder: Agreed
Value Loans
Bayview Shed - Lot 1797 700,000 240,000
Vacant Land - Lot 1798 400,000
Cullen Bay Display Home - Lot 5868 700,000 450,000
Vacant Land - The Chase - Lot 6373 68,000
The Bayview Group Pty Ltd 1,487,000
Crambrook Residence - Berrimah 900,000 130,000
4,255,000 820,000
Additional Finance Required
Payout of Jeffrey Blake (approximately) 500,000
Guarantees to DHA 680,000
Overdraft 350,000
2,350,000
Jeffrey Blake & His Group of Companies
Agreed
Value Loans
Funds to be received from R Crambrook 500,000
Better Homes Pty Ltd - Cash 100,000
Jaguar Kitchens & Cabinets Pty Ltd 384,000
New Jaguar Shed - Lot 1796 1,100,000 670,000
Totem Road Jaguar Shed - Lot 9219 475,000 275,000
2 ½ Mile Stuart Highway, Parap 2,251,000 2,025,000
4,810,000 2,970,000
[44] The resolution dated 24 November 1998 refers to the same
real estate mentioned in the schedule to letter dated 8 July 1998 and set out
above.
[45] Annexures 10 and 11 are the transfers of the properties referred to in
Annexure 9 subject to encumbrances. These transfers are also dated 24 November
1998.
[46] Annexure 8 in the Agreed Facts and Documents is also dated 24 November
1998. It is a resolution from a meeting of unitholders held on that date.
Present were Richard Pius Crambrook and Jeffrey William Dennis Blake. It was
unanimously resolved that:
1. The notice and time requirements in Clause 25 of the trust deed are
waived.
2. The trust be terminated forthwith.
[47] Annexure 19 in the Agreed Facts and Documents is a letter dated 22
December 1998 from the ANZ Bank to Mr Crambrook, Director Crambrook Nominees
Pty Ltd which omitting formal parts reads as follows: Further to your most recent discussions with Richard Tucker, we hereby
advise having successfully attended settlement to payout Jeff Blake's interest
in Bayview Group Pty Ltd (as agreed by both parties) together with refinance of
2.5 Mile Depot site and properties previously held in the name of Better Homes
Pty Ltd.
Transaction details are provided as follows:
Payout of Jeffrey Blake
Drawdown of Commercial Bill with face Value $230,000.00
Net proceeds $228,895.53
Payout to Blake Corporation Pty Ltd $225,713.27
Residual Credit proceeds $ 3,182.26
These residual credit proceeds were credited to the operating account of
Crambrook Nominees Pty Ltd Number 1025-32892 under advice.
Refinance of properties held in the name of Better Homes Pty Ltd
Settlement to satisfy refinance of the first mortgage of Cullen Bay Estates
Pty Ltd in relation to the Cullen Bay display and properties situated at Lots
1797 and 1798 Stuart Highway was also effected as follows:
(i) Cullen Bay Display Home
Bank Cheque Number 787138 in favour of
Wyllie Group Pty Ltd $216,000.00
Clayton Utz fees $ 252.00
Total required to settle $216,252.00
(ii) Lots 1797 and 1798 Stuart Highway
Closure of Fully Drawn Advance Number
2595-78565 in the name of Better Homes
Pty Ltd $240,000.00
Reduction to Commercial Bill facility in
the name of Better Homes Pty Ltd $200,000.00
To effect (i) and (ii), Commercial Bill with face value of $650,000.00 was
drawn as follows:
[Total] proceeds $647,217.85
Less payouts as above $216,252.00
$240,000.00
$200,000.00
Total shortfall $ 9,034.15
This shortfall was debited the operating account of Crambrook Nominees Pty
Ltd Number 1025-32892.
In terms of Letter of Offer documentation, the once only rearrangement fee
of $500.00 was debited the operating account of Bayview Group Pty Ltd
2588-82039.
We trust the above is in accordance with your understanding of arrangements,
however please do not hesitate to contact me direct on 8982-3501 should you
have any queries."
[48] Annexure 29 to the Agreed Facts and Documents is a letter
dated 28 July 1999 from the ANZ Bank to "Mr Rick Cranbrook (sic) Director
Bayview Group Pty Ltd", which omitting formal parts, reads: From Better Homes to Crambrook Nominees
We confirm that the above transfers have now been registered, the Mortgages
in favour of Better Homes Pty Ltd discharged, new Mortgages in favour of
Crambrook Nominees Pty Ltd registered.
Government discharge and registration costs in relation to the above
totalled $535.00 and were charged to the account of Crambrook Nominees Pty Ltd
on 27 July 1999.
Should you require further details in this regard, please phone."
[49] Annexure 30 to the Agreed Facts and Documents are search
certificates from the Land Titles Office showing discharge of the respective
mortgages.
[50] All of these documents were before the Commissioner when he made a
decision to impose a stamp duty on the resolution.
[51] In summary, the information before the Commissioner was that the second
amending deed that created the discretionary trust was made on 17 November
1998. This amendment expanded the beneficiaries to include the corporate
entities, Blake Corporation and Crambrook Nominees.
[52] Shortly afterwards on 24 November 1998 there was a resolution to transfer
certain properties to the corporate beneficiaries. Also on 24 November 1998,
transfers of the subject land were executed and the trust terminated. Within
one month there is a letter dated 22 December 1998 (Annexure 19) regarding the
refinancing of the subject properties.
[53] These actions all took place following the letter of 8 July 1998 (Annexure
18) advising of the arrangements that were being planned.
[54] It is the submission of Ms Webb, counsel for the respondent, from the
letters provided by the ANZ Bank it is clear there were discussions as to what
would occur when there was a separation of the business interest.
[55] It is reasonable to assume that in going through the exercise of
separating business interests the parties intend to have matters cut and dried
legally before a separation took effect (Merritt v Merritt [1970] 1 WLR
1211).
[56] The fact that in the resolution it states the properties are to be
transferred by way of gift is not in itself conclusive. In the matter of BL
& M Grollo Homes Pty Ltd v Comptroller of Stamps (Vic) [1983] 1 VR 445
the Court held that the statement in the transfer that the consideration was
"the transferee being entitled in equity" did not fully and truly set forth the
consideration (Tadgell J at 448): [57] In this case the Commissioner has taken into account the
documents referred to above and numerous other documents including the deed of
settlement of the Rockton Trust, the second deed of amendment, the articles of
association, contracts and evidence of acquisition of the five lots of Better
Homes Pty Limited.
[58] The resolution states the transfers of property are by way of gift. The
documents clearly indicate that what was transferred was encumbered property
which was shortly thereafter refinanced by the beneficiaries.
[59] The Trust was terminated by resolution on 24 November 1998. Clause 30.3
of the original Trust Deed reads as follows: ....
in any circumstances be entitled to indemnity, reimbursement or recompense
from the unit holders or any of them but if acting in good faith shall be
entitled to be indemnified out of the fund in respect of all liabilities
incurred relating to the execution or attempted execution of any powers, duties
authorities or discretions vested in the Trustee under the provisions of this
Deed and in respect of all actions proceedings costs, claims and demands
relating to any matter or thing properly done or properly omitted to be done
concerning the Fund."
[60] As from 24 November 1998, there was no trust fund.
[61] In Commissioner of Stamp Duties (NSW) v Buckle (supra) at 246: [62] I agree with the submission made by Ms Webb, counsel for
the respondent, that in order to have been able to distribute the trust
properties it would appear provision must have been made for the liabilities in
question to have been discharged. On the material before the Commissioner the
inference that he drew that the exemption under 9A(b) of Schedule 2 of the
Stamp Duty Act was not available, was a reasonable inference.
[63] Mr Russell QC submits that it is for this Court to make findings of fact
and to apply the law to those facts. The issue is whether a transfer of
encumbered property involves an assumption of liability which makes it
dutiable.
[64] Mr Russell QC submits that the matter being a factual issue for this Court
the respondents are bound by the rule in Browne v Dunn (1893) 6R(HL)67.
Counsel for the appellants referred specifically to Exhibits 2, 3 and 4. Mr
Russell QC asserts that if the respondent wanted to put to the witnesses that
their version of events was untrue or improbable then this should have been
done in cross examination. Mr Russell QC argued that it is not open to this
Court to disbelieve sworn evidence on affidavit that has not been cross
examined upon. The appellants do not dispute that the transfers of property
were made subject to an encumbrance. What occurred here is that land the
subject of an encumbrance was conveyed to beneficiaries of a trust. The issue
is whether that encumbrance is indeed valuable consideration.
[65] In his reasons for disallowing the objections it was stated on behalf of
the Commissioner at page 5 of the reasons set out in letter to Mr James Noonan
dated 14 January 2000: Based on my conclusion in relation to the first query, it is my view that
subitem 9A(b) of Schedule 2 to the SDA has no application to present
considerations."
[66] This conclusion drawn by the Commissioner was based on a
lack of information. This Court has been presented with the sworn affidavit of
Mr Crambrook and Mr Blake that no agreement or understanding was entered into
between the parties named in the agreed facts except as set out in the agreed
facts and further deposing to the fact that the appellants have not agreed to
pay or provide, and have not paid or provided, any amount or other
consideration to the Trustee.
[67] The appellants were not cross examined on their affidavit evidence.
[68] On all the material now before the Court, I consider the appellants have
established that the transfer of the respective property was not made for
valuable consideration. It is not appropriate to infer from the documentation
that the appellants are being untruthful in their affidavit evidence or that
this whole scheme was devised for the purpose of avoiding stamp duty on the
transfer. There is authority for the proposition that property which is
transferred as a gift is not necessarily transferred for consideration because
it is subject to an encumbrance and therefore there must be an assumption of
liability which amounts to a consideration (Gutwenger v Commissioner of
Taxation (Cth) (supra); In Re The Land Tax Act 1887; Ex parte
Finlay (1884) 10 VLR (E) 68; Comptroller of Stamps (Vic) v Rylaw
Pty Ltd 81 ATC 4411).
[69] The next issue for consideration is whether the doctrine of fiscal nullity
applies in the Northern Territory and if so whether it is applicable in the
circumstances of this case
[70] The principle of fiscal nullity is contained in the decision of
Comptroller of Stamps (Vict) v Ashwick (Vic) No. 4 Pty Ltd (1987) 163
CLR 640 at 652: [71] In his letter of disallowance Annexure 15, the
Commissioner had this to say on the question of fiscal nullity (pp 5 - 7): Furthermore, based on the information placed before me, it is my view that
the principle applies to the factual matrix of this case, and accordingly, the
Amending Deed (as a step in the composite transaction) should be disregarded
for the purposes of ascertaining Crambrook and Blakes' stamp duty liability,
and accordingly, subitem 9A(b) of Schedule 2 to the SDA has no application to
present considerations. In other words, applying the fiscal nullity principle
(there being no anti-avoidance provision of a requisite nature in the Act and
the SDA), the relevant transfers effected via the Resolution or Transfers are
to be treated as conveyances from the Trustee to Crambrook and Blake (absent
the effect of the Amending Deed) which are liable to ad valorem duty under the
Act and the SDA.
In arriving at this conclusion, I have borne in mind the submissions set out
in Messrs James Noonan's letter of 29 April 1999 as to the circumstances
surrounding the Amending Deed and the purpose of its adoption, however, for the
following reasons I do not accept that (i) the Amending Deed was not part of
one single composite transaction and (ii) that Amending Deed (as a step in the
transaction) had a commercial purpose other than to obtain the stamp duty
benefit under subitem 9A(b) of the SDA:
* the substance and nature of the Trust Deed and the Amending Deed (ie the
latter Deed converts the Trust from a common form unit trust into a
discretionary trust coupled with a power of appointment, increases the pool of
potential beneficiaries to include Crambrook and Blake, and circumscribes the
Trustee's power - as set out below - giving Mr Crambrook and Mr Blake, in
effect, a right to veto the distribution of income and capital) and the
proximity in time between the execution of the Amending Deed (being 17 November
1998) and the termination of the Trust and Resolution (being 24 November 1998)
which effects an appropriation of the entirety of the trust assets.
* subclauses 17.6 and 22.9 of the Trust Deed as amended expressly
circumscribe the Trustee's discretionary powers with respect to the
distribution of capital and income; ie the Trustee must exercise their power,
in effect, with the concurrence of the ordinary unitholders (Mr Crambrook and
Mr Blake), thereby giving the ordinary unitholders an ability to preserve their
own interests and to ensure that the Trustee would appropriate the trust
property to beneficiaries they approved).
I observe that a trustee of a trust has, inter alia, a duty to act
exclusively for the benefit of all beneficiaries and a duty to act personally
(i.e. not to exercise a power under dictation nor fetter his/her/their
discretion with respect to future conduct). Accordingly, a power of
appropriation, being a fiduciary power, must not be exercised so as to
prejudice the interests of other beneficiaries, but it is not incumbent upon
the trustee to obtain the consent of other beneficiaries (see, for example Ford
H.A.J. & Lee W.A., op cit at Chapter 9 and paras 1620-1621; Ong D.S.K., op.
cit at page 197; Evans M., Outline of Equity and Trusts (1988) Butterworths at
paras 1824-1828).
* the Amending Deed and the Resolution facilitate and effect a conveyance of
dutiable property from the Trustee to corporate entities (Crambrook and Blake)
whereunder the initial unit-holders of the Trust (being Mr Crambrook and Mr
Blake) are directors and beneficiaries/shareholders of the relevant entities
(see subclause 8.4 and Schedule 1 of the Trust Deed; ASIC Company searches
relating to Crambrook and Blake; BDO Mal Sciacca's letter of 8 July 1998 and
attachments).
* in relation to the Trust created under the Trust Deed (being a `common
form' unit trust under which the unit-holders obtained a propriety interest in
the trust - see page 3 herein), the Trustee (with the consent of the ordinary
unit-holders Mr Crambrook and Mr Blake, being sui juris and absolutely
entitled) could have conveyed the trust property to Blake and Crambrook or any
other related corporate entity, thereby giving effect to the relevant matters
set out in Messrs James Noonan's letter of 29 April 1999 (see subclauses
8.1-8.3 and clauses 16 and 25 of the Trust Deed and the First Schedule and Item
3.1 of the Second Schedule thereto; the terms of Resolution; Aust-Wide
Management Ltd v Chief Commissioner of Stamp Duties (NSW) (supra) at
4,746-4,747 and the authorities therein cited; Ford H.A.J. & Lee W.A., op
cit at para 1610; Ong D.S.K., op. cit at pages 197-199)."
[72] In summary, the respondent asserts the fiscal nullity
principle applies so that the relevant transfers are to be treated as
conveyances from the trustee to Crambrook Nominees and Blake Corporation absent
the effect of the amending deed (Annexure 3) which should be disregarded. On
the respondent's argument the effect of that would be that property was being
transferred from the trustee to a corporate entity which was not a beneficiary
and would not then come within the exemption in item 9A(b) and that it is not a
conveyance made by a trustee to a beneficiary because the second amending deed
and the effect of it should be disregarded.
[73] In Australia the cases that have considered the principle of fiscal
nullity have not applied it in the circumstances of those cases (Comptroller
of Stamps (Vict) v Ashwick (Vic) No. 4 Pty Ltd (supra).
[74] The Commissioner of Taxes argues that in the Northern Territory there was
at the relevant time no anti avoidance provision in the legislation such as
existed in the legislation the subject of consideration in other cases in
Australia. That is there was no specific provision in the relevant legislation
to the effect that with certain exceptions every instrument executed in order
either directly or indirectly to evade the payment of stamp duty is void.
[75] In this case the respondent argues that what has happened is that in
effect property has been transferred from the trustee to a corporate entity,
the directors of whom are the same as the unit holders of the trust, that there
was a composite transaction which was entered into for the purposes of avoiding
stamp duty liability that would have been payable if the trustee had simply
transferred the property directly to the corporate entities. It is the
Commissioner's position that the amending deed and the resolution facilitated
and effected a conveyance of dutiable property from the trustee to corporate
entities the director and beneficiaries who were the initial unit holders of
the trust. Those unit holders also had control through Clause 17.6 over the
distribution of property. The argument for the respondent is that the second
amending deed had no commercial purpose other than to obtain a tax benefit
because in relation to the trust created under the trust deed the trustee
could, with the consent of Mr Crambrook and Mr Blake, have conveyed the
property to those corporate entities Crambrook Nominees and Blake Corporation
or any other corporate entity giving effect to any intention that the property
did not stay in the hands of Mr Crambrook and Mr Blake personally.
[76] I have already referred extensively to the documents that made up the
transaction. In particular, the letter from Mr Mal Sciacca dated 8 July 1998
to the ANZ Bank (Annexure 18 to the Agreed Facts and Documents) establishes a
business purpose.
[77] I accept the argument put forward by Mr Russell QC on behalf of the
appellants that here there is no pre-ordained series of transactions which
achieves a result which might be achieved by one document alone.
[78] The submissions made by Mr Russell QC on behalf of the appellants follow
upon submissions made by Mr Noonan, solicitor for the appellants, in a letter
dated 29 April 1999 to the Commissioner of Taxes (Annexure 28 to the Statement
of Agreed Facts and Documents) which submissions on the issue of the fiscal
nullity doctrine I accept.
[79] I am not able to find that steps were inserted into the transaction which
had no commercial purposes apart from the avoidance of liability to pay duty.
The second amending deed (Annexure 3) which counsel for the respondent urges
should be disregarded does "ensure maximum flexibility for the purpose of the
separation of the affairs of Mr Blake and Mr Crambrook, and in particular, with
asset protection consideration in mind." (Annexure 28).
[80] The transaction is not the equivalent of a sale. I am not persuaded that
the doctrine of fiscal nullity whether or not it applies in the Northern
Territory does apply in the circumstances of this case.
[81] Accordingly, I would allow the appeal.
[82] I will hear from the parties as to the consequential orders to be made
including any orders for costs.
"(1) An objector who is dissatisfied with a decision of the
Commissioner on his objection may, within 30 days after service on him of
notice of that decision or within such further time as the Commissioner may
allow, appeal to the Supreme Court.
"1. The Appellant appeals to the Court pursuant to section 101 of
the Taxation (Administration) Act 1978 against an assessment of Stamp
Duty made by the Respondent on 11 June 1999 ("the assessment") purportedly on
an agreement said to be made on 24 November 1998 in the sum of $82,722.15.
"(a) an order that the assessment be varied to nil or accordingly
some other amount less than $82,722.15;
"1. The Appellant appeals to the Court pursuant to Section 101 of
the Taxation (Administration) Act 1978 against an assessment of Stamp
Duty made by the Respondent on 11 June 1999 ("the assessment") purportedly on
an agreement said to be made on 24 November 1998 in the sum of $77,848.70.
"(a) an order that the assessment be varied to nil or accordingly
some other amount less than $77,853.50;
"1. The Rockton Unit Trust was constituted by Deed of Settlement
dated 13 March 1992 ("the Rockton Trust Deed"). (A copy of the Rockton Trust
Deed is annexed and marked "1").
"4. Imposition of duty
"9A. Conveyance -
"19.25 Exercise of discretion by trustee corporation
"The trustee shall have and may exercise in its absolute discretion
at any time or times and from time to time prior to the Perpetuity Date power
to pay or apply the whole or any part of the Trust Fund, or any of the assets
of the Trust Fund in specie, to or for the benefit of all or any one or more
exclusively of the others of the Discretionary Beneficiaries then living or in
existence and in such proportions or manner as the Trustee shall in its
absolute discretion from time to time think fit, whether for consideration or
not."
"`conveyance' includes a transfer or assignment (or an agreement to
transfer or assign), grant, exchange, appointment, settlement, foreclosure,
declaration of trust, a statement under section 83B and a decree, judgment or
order of a court, whereby dutiable property or a marketable security is
transferred or assigned to (or agreed to be transferred or assigned to), vested
in or accrues to a person, but does not include the grant of a lease, other
than a convertible Crown lease, or a patent;"
"... The seller in consideration of an agreement with the buyer
transfers to the buyer the estate and interest in the land described and valued
below subject to the encumbrances affecting the land including any created by
dealings lodged for registration prior to the lodging of this transfer and the
buyer accepts this transfer".
"Schedule of Notes
"The question to be decided is a question of fact. The evidence
which his Honour accepted in the present case establishes, in our opinion, that
Mrs Gutwenger intended to make a gift of the land to her husband. That was the
tenor of her evidence and also the tenor of her husband's evidence. It is
plain, as we have mentioned, that his Honour accepted this evidence. Of
course, there could be transactions in which the owner of mortgaged land
transferred the land to another person in consideration of that person
undertaking to indemnify the transferor in respect of the liability under a
mortgage. The facts show that that is not the case here. The land is under
Torrens title so that it is not correct to speak of there being an equity of
redemption. But effectively what was transferred to the appellant was the land
subject to the charge created in favour of the bank by the mortgage. There is
no indication in the evidence that Mrs Gutwenger and the appellant discussed
the question of what was to happen in relation to the discharge of the
obligation to the bank. The subsequent facts indicate that he must have
assumed that the liability was to be paid out of the sales of the allotments.
That is what occurred. But that does not mean that it was not Mrs Gutwenger's
intention to make a gift of the land, subject to the mortgage, to her husband.
That is precisely what she intended to do and, in substance and effect, it is
what his Honour found occurred. It was only because of his view about the
effect of the appellant assuming his wife's liability for the mortgage debt - a
view which, with respect, we disagree - that he reached the conclusion that he
did.
"Re: The Bayview Group
"Richard Crambrook & His Group of Companies
"Settlement - Bayview Group Pty Ltd
"Re: Property Transfer
"The true consideration for the transfer in this case being
unexplained by the instrument designed to effect it, the respondent was obliged
and entitled to have regard to the surrounding circumstances to the extent
necessary to explain the operation and effect of the instrument and to
ascertain the actual consideration, if any."
"Notwithstanding anything to the contrary herein contained and
notwithstanding that but for this provision an obligation at law or in equity
might arise the Trustee shall not:
"Until the right to reimbursement or exoneration has been
satisfied, `it is impossible to say what the trust fund is'. The entitlement
of the beneficiaries in respect of the assets held by the trustee which
constitutes the `property' to which the beneficiaries are entitled in equity is
to be distinguished from the assets themselves. The entitlement of the
beneficiaries is confined to so much of those assets as is available after the
liabilities in question have been discharged or provision has been made for
them. To the extent that the assets held by the trustee are subject to their
application to reimburse or exonerate the trustee, they are not `trust assets'
or `trust property' in the sense that they are held solely upon trusts imposing
fiduciary duties which bind the trustee in favour of the beneficiaries."
"Although the Trustee may have a beneficial interest in the trust
property to the extent of its right of reimbursement or exoneration for the
discharge of liabilities incurred in administering the Trust, there is no
information placed before me to ascertain whether the Trustee was entitled to
be exonerated and, if so, whether the Trustee was in fact exonerated by
Crambrook and Blake in respect of the above debts (particularly in light of the
conveyances occurring by "way of gift") see, for example, Chief Commissioner
of Stamp Duties v Buckle (supra) at 244 - 247; Ong D.S.K., op cit at
256 - 262; subclause 30.3 of the Trust Deed).
"First, there must be a pre-ordained series of transactions; or, if
one likes, one single composite transaction. This composite transaction may or
may not include the achievement of a legitimate commercial (i.e. business) end
..... Secondly, there must be steps inserted which have no commercial
(business) purpose apart from the avoidance of a liability to tax - not
`no business effect'. If those two ingredients exist, the inserted
steps are to be disregarded for fiscal purposes. The court must then look at
the end result. Precisely how the end result will be taxed will depend on the
terms of the taxing statute sought to be applied.'
"As regards the second query, based on the current state of the law
and the provisions of the Act and the SDA, it is my view that the fiscal
nullity principle does apply to the statutory regime governing stamp duty in
the Northern Territory, there being no anti-avoidance provision of a requisite
nature in the Act and the SDA (see, for example, Ingram v Inland Revenue
Commissioners (1986) Ch 585 at 600-604; Comptroller of Stamps (Vic) v
Ashwick No. 4 Pty Ltd (1987) 163 CLR 640 at 654 cf Re Australian
Institute of Management (Vic) v Commissioner of State Revenue (Vic) 95 ATC
2,179 at 2,193-2,195).