REEF & RAINFOREST TRAVEL PTY LTD & ANOR v COMMISSIONER OF STAMP DUTIES (QLD)
Judges:McPherson JA
Thomas JA
Muir J
Court:
Queensland Court of Appeal
MEDIA NEUTRAL CITATION:
[2001] QCA 249
McPherson JA
This is an appeal by way of case stated under s 24 of the Stamp Act 1894 against a determination by the Commissioner for Stamp Duties assessing to stamp duty under the Act an instrument (which is annexure ``G'' to the case stated) purporting to be a transfer dated 1 October 1996 of 88 out of a total of 180 units in the Blue Wings Unit Trust. The transfer of those units is expressed to be by Mandalee Grazing Coy Pty Ltd as seller in favour of Reef & Rainforest Travel Pty Ltd as buyer ``AFT'' (which presumably means ``as trustee for'') the Woodward Family Trust. The consideration for the transfer is stated to be $88.00.
2. It is useful to refer to details of the entities and individuals involved. The Blue Wings Unit Trust was constituted by a trust deed dated 9 February 1981 as varied on 12 November 1997. On 1 October 1996 the trustee of that Unit Trust was Reef & Rainforest Travel Pty Ltd, which was named as buyer in the instrument of transfer annexure ``G''. John Douglas Woodward was one of two shareholders in Reef & Rainforest Pty Ltd. He was also one of two directors and two shareholders of Mandalee Grazing Coy Pty Ltd, which was itself trustee of the JD Woodward Family Trust, of which John Douglas Woodward and RD Woodward and their family were the principal beneficiaries. Mandalee was, as has already been noted, the seller of the 88 units in the instrument of transfer assessed to duty.
3. The instrument of transfer ``G'' dated 1 October 1996 used for the transfer of those units is a standard printed transfer form in common use for transferring shares in companies. The signature of John Douglas Woodward appears in the space provided in the form for the signature of the seller, followed by the date 1.10.96, and the space provided for the signature of Reef as buyer has been completed by the insertion of the signatures of BD Woodward and MJ Woodward. A signature in that form is regarded not as constituting signature by an agent of a company, but as execution by the company itself, such execution being effected by the subscription of the corporate name followed by the authenticating signature of a director or officer of the company in question. See
Richardson
v
Landecker
(1950) 50 SR (NSW) 250
at 259
, approved in
Black
v
Smallwood
(1966) 117 CLR 52
at 60-61
.
4. The relevance of this detail is that, although para 1(c) of the Case Stated refers to the instrument ``G'' as having been signed by Mandalee as transferor and by Reef as transferee, the appellants on the hearing of the appeal disputed the validity of the execution of the transfer by John Douglas Woodward on behalf of Mandalee. In October 1995 he was only one of the two director-shareholders of that company. In a statutory declaration dated 2 June 2000, which is annexure ``AA'' to the stated case, Mr John Douglas Woodward says that, although he signed the instrument of transfer in favour of Reef for Mandalee, he did not speak to any other director or shareholder of Mandalee about transferring the 88 units in the Blue Wings Unit Trust. In para 6(b) of the Declaration he says that no meeting or resolution of directors, or of shareholders, and no agreement, formal or informal, of directors or shareholders of Mandalee expressly or impliedly authorised or ratified the execution of the transfer instrument ``G'' by or on behalf of Mandalee as seller by him or at all.
5. This statement might have raised in a fairly acute way the power of this Court to draw
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inferences and conclusions, as we were invited to do under UCPR 781(3)(b), that went beyond or conflicted with primary facts contained in the Case Stated. However, the question in this instance is, in my opinion, concluded against the appellants by a later statutory declaration annexure ``BB'' forming part of the stated case. The declarant is a solicitor from the firm acting for the appellants and he has the carriage of the appeal on their behalf. In that capacity he produced a document ``B'', described as a copy of an undated deed of rescission between Mandalee and Reef, and stated his belief that it was executed on or before 28 October 1997. The three page document is in the form of a deed prepared by the appellants' solicitors and was executed as a deed under the seals of both parties. Recital A states that Mandalee and Reef (whose name is in this instance abbreviated to ``Travel'') executed the transfer, which is identified in cl 1.1 of the deed as the transfer of 88 units in the Blue Wings Unit Trust between Mandalee as transferor and [ Reef] as transferee dated 1st October 1996 annexure ``G''. Recitals B and D(a) of the deed record that the consideration has not been paid and that the parties do not intend to pay it. Clause 3.1 contains a covenant by which the parties ``agree to rescind their agreement to transfer the Units ab initio''. From this it is plain that, despite the assertion of John Douglas Woodward in his statutory declaration ``AA'' dated 2 June 2000, the deed embodies a formal acknowledgment and agreement covenanting, under the corporate seals of both Mandalee and Reef as transferor and transferee respectively, that those two companies executed the transfer instrument ``G'' dated 1 October 1996, which the Commissioner has assessed to duty. It would, indeed, not have been either necessary or possible to effect a rescission of that transfer instrument if it had already been void in law by virtue of the alleged deficiency in Mr JD Woodward's authority to act on behalf of Mandalee in executing or authenticating its execution. If it was void, it would not have been capable of being rescinded. If, therefore, there is or was any conflict with the statements in Mr Woodward's statutory declaration ``AA'', the parties have by their deed ``B'' now covenanted and agreed that, at the time of its execution, the instrument of transfer annexure ``G'' was not a void or defective instrument because of any lack of authority on the part of Mr Woodward to execute it for Mandalee.6. It is nevertheless said that the intended effect of cl 3.1 of the deed was, as it says, to rescind the deed ``ab initio'', and that this intention must be given effect according to its terms. It may, on the authority of
Baird
v
BCE Holdings Pty Ltd
(1996) 40 NSWLR 374
at 388
, and the decisions to which it refers, be accepted that, if the transfer had been rescinded by order of the court because of some vitiating factor in its formation, like mistake or misrepresentation, the rescission might have been effective from the inception of the transfer even as against the Commissioner; but, as Young J observed in that case (40 NSWLR 374 at 388):
``All these comments about rectification of the register meaning that the transaction has never taken place must be read in the light of the fact that almost all the cases were cases where there had been some ground at law or in equity of rescinding the contract ab initio. None of them deal with the situation where rescission was by consent or where there is a completed transaction and the requirement for a reconveyance. They do not seem to me to lead to the conclusion that in the situation of rescission by consent, the transaction is to be treated by the company as a transaction which had never taken place nor need the court so consider it in its order.''
In my opinion, and irrespective of the legal position (whatever it might be) if the rescission had taken place before the Commissioner's assessment on 22 October 1997, the deed of rescission ``B'' executed by the parties on or about 28 October 1997 did not have the consequence of rescinding or obliterating the assessment made on the earlier date. The deed no doubt bound the parties to it to treat the instrument of transfer ``G'' as if it were rescinded or cancelled from the date of its execution; but it did not affect the Commissioner's act in assessing it to duty in the exercise of his statutory powers at the time he did, when, on any view of it, nothing had intervened to deprive transfer ``G'' of the efficacy in law that it then possessed.
7. It is to the latter question that I now turn. On behalf of the appellants, Mr Harrison QC submitted that, in any event, the transfer instrument dated October 1996 was void or ineffective to achieve its purpose of transferring the 88 units in the Blue Wings Unit Trust from
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Mandalee to Reef. The reason is said to be that, although apparently complete and valid on its face, the transfer in question was executed in breach or defiance of the provisions of the trust deed constituting the Blue Wings Unit Trust. The foundation of the submission is that cl 23 of the Blue Wings Trust Deed contains restrictions on the transfer of units that confer on other unit holders in the Trust rights of pre- emption that were never complied with by the transferor in this instance. Clause 22 begins by conferring an unrestricted right of transfer to a spouse or to certain specified blood relatives of the unit holder or of that spouse. It obviously has no application to the case of a corporate transferor like Mandalee. Clause 23 then provides that ``no unit shall be sold or transferred until the following rights of pre- emption shall have been exhausted''. The ensuing paragraphs of cl 23 incorporate a series of pre-emption provisions in the standard form commonly encountered in the articles of association of private companies, beginning in cl 23(a) with the requirement that every unit holder ``who may desire to sell or transfer any units'' must give notice in writing to the trustee of such desire, whereupon the trustee is constituted agent for the sale of those units. There is provision for fixing the price and for apportioning the units among existing unit holders who are willing to buy them. By cl 23(d), it is only in the event of the whole of the units not being sold in this way that they or any remaining units may be sold to any person.8. Pre-emption rights in that general form have been the subject of decisions in Britain, Australia and New Zealand. Similar provisions in the articles of association of a company take effect as part of the corporate constitution binding on members as contractual terms between them and the company as well as the members inter se. See Corporations Law, s 140(1), and
Rayfield
v
Hands
[
1960] Ch 1
. In the present case, it is submitted that cl 23 of the Blue Wings Trust Deed was binding on Mandalee as holder of the 88 units, and that it was therefore required, before transferring those units to Reef, to offer them to the other unit holders in accordance with the provisions of cl 23. Since Mandalee had (so it was said) failed to do so, the transfer is void and hence incapable of being assessed to any duty.
9. The effect of a breach of pre-emption provisions in articles of association has been considered in a number of decisions. It is settled that a shareholder may obtain an injunction to restrain registration of a transfer made in breach of the articles, and probably also an order for specific performance of the pre-emption agreement which they contain:
Rayfield v Hands
[
1960] Ch 1, as well as rectification of the share register if registration of the transfer has already taken place:
Grant
v
John Grant
&
Sons Pty Ltd
(1950) 82 CLR 1
at 29
;
Carew- Reid
v
Public Trustee
(1996) 20 ACSR 443
at 455-456
. There are some dicta in
Hunter
v
Hunter
[
1936] AC 222
at 262
, which may perhaps be taken as suggesting the possible invalidity of an agreement that was entered into in breach of pre-emption provisions, but there is no decision anywhere to that effect. Indeed in rejecting those suggestions, the New Zealand Court of Appeal in
Gold
v
Penny
[
1960] NZLR 1032
, held that an agreement to transfer shares was capable of being specifically enforced even before the relevant articles were complied with. See also
Coachcraft Ltd
v
SVP Fruit Co
&
Anor
(1977-1978) CLC
¶
40-400
at 29,934;
[
1978] VR 706
at 719-720
, and
Safeguard Industrial Investments Ltd
v
National Westminster Bank Ltd
[
1981] 1 WLR 286
.
10. It is not altogether easy to see why, on ordinary principles, an agreement to transfer shares in defiance of pre-emption provisions would be void. It would not become illegal simply because it contravened the agreement constituted by the articles of association; by comparison, it is well settled that an agreement to assign a lease in breach of a covenant not to do so without the landlord's consent is effective to transfer a proprietary interest, subject always to rights of forfeiture and re-entry by the lessor. What is more, in
Hawks
v
McArthur
[
1951] 1 All ER 22
at 27
, an agreement that ignored a pre-emption article was treated as capable of transferring an equitable interest in the shares that was held to prevail over a later equitable interest of an execution creditor under a charging order. The share purchasers there had paid the price in full; but, as I read the reasons, that circumstance was regarded as strengthening their equity or priority and not as a condition precedent to recognising their equitable title. Equity will not assist a volunteer; but, if there is consideration for a transfer as there is here, the fact that it has not yet been paid or executed does not convert it into a voluntary transfer. Nor, for an effective
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assignment or agreement to assign a beneficial interest in trust property is it necessary that specific performance be available. It is enough if there is a clear intention or agreement to assign. As Lord Macnaghten said inTailby v Official Receiver (1888) 13 App Cas 523 at 543 :
``to effectuate the intention an assignment for value, in terms present and immediate, has always been regarded in equity as a contract binding on the conscience of the assigner and so binding the subject-matter of the contract...''
His Lordship was there speaking of an agreement for value to assign future property, possibilities, expectations and the like; but the case of an existing chose in action, like the units in the present case, is obviously so much stronger. See also the discussion by Windeyer J in
Norman
v
FC of T
(1963) 13 ATD 13
at 25-26;
(1962-1963) 109 CLR 9
at 32-33
.
11. It is, I think, necessary to analyse what is involved in the transfer in this case. A unit in a unit trust, at least in the simple form of the Blue Wings Unit Trust with which were are concerned here, is an aliquot share or interest in the undivided assets of a trust that are held for investment or profit by the trustee for the benefit of the unit holders or beneficiaries of that unit trust. For convenience those shares are identified, and their ownership and transfer facilitated, by a system of private registration or recording in the books of the trustee. The transfer of a unit in the unit trust is therefore simply an assignment of the beneficiary's equitable interest in part of the trust assets as a whole. To be effective, the transfer or ``disposition'' of an equitable interest must be manifested and proved by some writing signed by the person disposing of it:
Property Law Act
1974, s 11(1)(c);
Oughtred
v
Inland Revenue Commissioner
[
1960] AC 206
. That requirement is satisfied in this case by transfer ``G'', which was signed by Mandalee in the way I have explained. The result probably was, at the very least, to constitute Mandalee a constructive trustee for the 88 units for the transferee, or proposed transferee, Reef. See
Neville
v
Wilson
[
1997] Ch 144
. Because the units are equitable interests or choses in action, no question of transferring any legal title to the units or to the assets of the unit trust arises here.
12. There is nothing except possibly the pre- emption provisions in cl 23 of the trust deed to obstruct the assignment envisaged by the instrument ``G'' from taking effect as an assignment of the beneficial interest represented by the 88 units in the Blue Wing trust assets. It may be that the very execution of transfer ``G'' activated those provisions, in the sense that it showed there was, within the meaning of cl 23(a), a desire on the part of Mandalee as unit holder to transfer those units. See
Lyle
&
Scott Ltd
v
Scott's Trustees
[
1959] AC 763
. If so, no other unit holder has apparently expressed a willingness to purchase the units. Nothing is shown to have happened that would prevent an order being made for specific performance of that transfer. Such an order, if it were needed and sought, would at the first stage not direct a complete transfer of the units from Mandalee to Reef but go no further than to direct compliance with the requirements of the pre-emption provisions of the Trust Deed: cf
Brown
v
Heffer
(1967) 116 CLR 344
at 350
.
13. To that Mr Harrison responds by saying that such an order would not, until those pre- emption provisions were complied with, create in Reef an equitable title co-extensive with the equitable title of the seller Mandalee, but only such an interest as is commensurate with what would at that stage be decreed in favour of Reef as the buyer of the units. However, the argument is, for several reasons, quite artificial. One is that it does not follow that, before such an order is made, there is no assignment or ``disposition'' of the interest of Mandalee in the Blue Wings unit trust assets. Specific performance is not a requisite for the assignment of a beneficial interest in the assets of a trust. The requirements of such an assignment are prescribed by s 11(1)(c) of the
Property Law Act
1974. Another reason is that it seems still to be doubtful whether a transfer, or the expression of a desire to transfer, not the legal title but no more than a beneficial interest in shares or unit trusts is sufficient to set in motion the operation of pre-emption provisions in the general form of those in cl 23 of the Blue Wings Trust Deed. See
Safeguard Industrial Investments Ltd
v
National Westminster Bank
[
1981] 1 WLR 286
at 298
.
14. Finally, it is necessary to recall that, as trustee of the Blue Wings Unit Trust, Reef was and is already the holder of the legal title to the whole trust property or assets, of which the beneficial interest is in the unit holders including Mandalee. What, therefore, is being
ATC 4428
transferred or assigned by transfer ``G'' was and is no more than 88/180ths of the beneficial interest in property or assets of which Reef is already the legal owner. Ordinarily a trustee can justify the purchase of the beneficial interest of a cestui que trust in trust assets only by making full disclosure to the beneficiary. There is, however, no reason at all to suppose that Mandalee was not aware of what was taking place when it executed the transfer. Assigning to the trustee a beneficiary's interest in trust assets has the effect of uniting or combining in the trustee the equitable and legal interests in those assets, and so of discharging the trustee quoad that beneficiary's interest from the office of trustee. SeeSanderson v Walker (1807) 13 Ves Jun 601 ; 33 ER 419 at 420 ; and A.J. Oakley (ed) Trends in Contemporary Trust Law , at 145-146, 149-150 (OUP 1996)
15. It is difficult to accept that, before taking the step of assessing to stamp duty under the Act an instrument like annexure ``G'', it is necessary for the Commissioner first to make inquiries of the kind suggested by the appellants in this case. On its face, the transfer submitted for assessment suggests the existence of none of these questions if, indeed, they exist at all. The question to be determined by the Commissioner was simply whether or not the instrument was liable to stamp duty under s 56B(4) of the Act, which provides, so far as material, that:
``... an instrument transferring a unit or effecting or evidencing a disposition in relation to a unit shall be chargeable with duty as if it were a conveyance free of encumbrances of an undivided share, equivalent to the proportion of the total issued units under the unit trust scheme represented by the unit, in the property held by the unit trustee as trustee without regard to the debts or liabilities of the unit trust scheme.''
Section 56B(4) predicates that what falls to be charged with duty is an instrument transferring ``or effecting or evidencing a disposition... of an undivided share'' representing a part of ``the property held by the unit trustee as trustee''; or, in other words, an assignment of a share in the beneficial interest in the trust assets. Mr Harrison submits that the use of the expression ``disposition'' implies that nothing less than a change of ownership must take place before a transfer or an instrument of transfer becomes dutiable under s 56B(4). Assuming for present purposes that is so, it does not follow that what is contemplated is necessarily a transfer of the legal title, or of anything more than a beneficial interest in the trust assets being transferred. Section 11(1)(c) of the Property Law Act , from which the word ``disposition'' in s 56B(4) of the Stamp Act was probably derived, speaks of the disposition ``of an equitable interest or trust subsisting at the time of the disposition...''. It is capable of including an ``interest'' of the character of that assigned by Mandalee even before compliance with the pre-emption provisions of cl 23 of the Trust Deed had taken place.
16. To discover the meaning of the word ``disposition'' used in s 56B(4), it is necessary to turn to s 56B(1), which defines the word in relation to a unit as including:
``(a) a transfer or other disposition (including declaration of trust, settlement or agreement to dispose) of the unit....''
Accepting, again for present purposes, that ``other disposition'' is confined to a change of ownership in the form of a transfer, it seems to me that the assignment effected by the transfer ``G'' had the effect of changing from Mandalee to Reef the beneficial ownership of Mandalee's interest in the trust assets that was represented by the 88 units, and that that is so even if the pre-emption procedure still remains to be complied with. But, in any event, the definition of ``disposition'' in s 56B(1) specifically includes ``an agreement to dispose of the unit...'', and, when read with s 56B(4) itself, it means that an instrument is dutiable if it either ``effects'' or ``evidences'' an agreement to dispose of such a unit.
17. It was nevertheless contended for the appellants that the instrument of transfer was not an agreement to dispose of Mandalee's 88 units in the Blue Wings Unit Trust. That contention is, in my opinion, not sustainable. It is true that it is, in form, a present transfer; but it is also readily capable of being regarded as an agreement to transfer. It refers to and identifies a ``seller'' and a ``buyer''; it specifies a ``Date of Purchase''; and it prescribes a consideration for it. As well, it contains a provision by which:
``I... the registered holder and undersigned seller for the above consideration do hereby transfer to the abvovenamed hereinafter called the Buyer the securities as specified above standing in my... name in the books of the abovenamed Company subject to the
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several conditions on which I... hold the same at the time of signing hereof and I... the Buyer do hereby agree to accept the said securities subject to the same conditions.''
The transfer embodies the terms on which the seller and buyer agree to be bound to transfer and accept a transfer of the 88 units, and in that way it constitutes an agreement between them to transfer or dispose of those units. In addition, it ``evidences'' a disposition or ``agreement to dispose'' as defined in s 56B(1), within the meaning of s 56B(4) of the Act. In this respect it resembles the signed acknowledgment considered in
Fleetwood-Hesketh
v
Inland Revenue Commissioners
[
1936] 1 KB 351
at 366-367
, in that the instrument of transfer contains all the material terms between the partners and as such is, or is evidence of, a contract or agreement for the sale or disposition of the equitable interest that is the subject of that transfer. Equity, which in the matter of assignment looks not to the form but to the substance and intent of the parties, has always been prepared to construe a present assignment which cannot take effect immediately as an agreement to assign: see
Tailby
v
Official Receiver
(1888) 13 App Cas 523
at 543
; and
Norman
v
FC of T
(1963) 13 ATD 13
at 20;
(1963) 109 CLR 9
at 24
. There is no reason why the same should not apply to annexure ``G''. If it is in form a present assignment, which cannot be given full effect until cl 23 is complied with, it is nevertheless capable of taking effect as a contract to assign. An agreement to assign is, under s 56B((4) of the
Stamp Act
, evidence of a disposition of an equitable interest in trust property, and so is directly within the charging provision in s 56B(4) itself.
18. Under s 56B(4) an instrument like the transfer annexure ``G'' is chargeable to duty as if it were a conveyance ``free of encumbrances'' of the unit or share in trust property held by the trustee as such, ``without regard to the debts or liabilities'' of the unit trust scheme. That is the basis on which the Commissioner's assessment proceeded in this case. I consider it to have been correct. This makes it unnecessary for me to consider the appellants' further argument that they are entitled to an ``allowance'' under s 75(2) of the Stamp Act in respect of a ``stamp'' that has been purchased or paid for but attached to an instrument which has never been of any legal effect. In my opinion, transfer ``G'' was legally effective.
19. The appeal should be dismissed, with the costs to be paid by the appellants.
20. The questions submitted for determination in para 24 of the Case Stated should be answered as follows:
- (a) Yes
- (b) Yes
- (c) By the appellants.
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