CHIEF COMMISSIONER OF STATE REVENUE (NSW) v PLATINUM INVESTMENT MANAGEMENT LTD

Judges:
Campbell JA
Macfarlan JA
Handley AJA

Court:
New South Wales Court of Appeal

MEDIA NEUTRAL CITATION: [2011] NSWCA 48

Judgment date: 10 March 2011

---

Campbell JA

I have had the advantage of reading in draft the judgment of Handley AJA. I would prefer to give my own reasons why the Share Sale Deed contained a declaration of trust that was liable for ad valorem duty. The relevant facts, and most of the relevant provisions of the legislation, are set out in the judgment of Handley AJA, and I will not repeat them. I will also use the same defined terms as Handley AJA has used.

2. In construing the definition of " declaration of trust " in s 8(3) of the Act I would prefer not to place particular reliance upon the way in which the somewhat analogous provisions in the 1920 Act were construed. The Second Schedule to the 1920 Act related to " any property vested or to be vested … " whereas the definition of declaration of trust in s 8(3) of the Act relates to " any identified property vested or to be vested … " . The additional word " identified " has been inserted into the Act and is therefore presumed to have work to do.

3. If the Commissioner ' s contention that the Deed contained a " declaration of trust " were correct, duty would be charged on it by the combined effect of s 9 of the Act and the extract from the Table that Handley AJA set out at [ 55 ] .

4. At the time the Deed was entered s 12 of the Act provided:

• " (1) A liability for duty charged by this Chapter arises when a transfer of dutiable property occurs.
• (2) However, if a transfer of dutiable property is effected by a written instrument, liability for duty charged by this Chapter arises when the instrument is first executed. "

5. The Act has since been amended when the State Revenue Legislation Amendment Act 2010 added to s 12:

• " (3) A liability for duty in respect of a dutiable transaction that is charged with duty as if it were a transfer of dutiable property arises even if the dutiable property is not in existence at the time that the transfer is taken to have occurred, or the instrument effecting the transfer is first executed, as the case requires. "

6. That amendment might bear upon the value of the present decision as a precedent. However, the present case must be decided by reference to the state of the Act when the Deed was first executed.

7. If the Commissioner were right in contending that the Deed was a " declaration of trust " , the combined effect of s 9(2)(c) of the Act, and the portion of the Table set out in Handley AJA ' s judgment at [ 55 ] would be that the transfer of dutiable property was taken to have occurred when the declaration was made. Thus, both s 12(1) and (2) would have the effect that liability for duty would arise when the Deed was first executed.

8. That in turn would require that one could tell, at the time the Deed was first executed, whether it satisfied the definition of " declaration of trust " in s 8(3).

9. Because of the words " vested or to be vested " in that definition, the definition could be satisfied if the property in relation to which the trust is declared is not then vested in the person making the declaration, provided that the property in question is to be vested, at some stage in the future, in the person making the declaration. Because of the words " is or is to be held in trust " in the definition, it is not necessary for a declaration to be to the effect that at the time the declaration is made the property the subject of it is held in trust. Rather, it suffices if the declaration is that the property is, at some stage in the future, to be held in trust. There is no occasion to construe these words in the definition in any different way to that in which the High Court construed identical words in the 1920 Act in
DKLR Holding Co (No 2) Pty Ltd v The Commissioner of Stamp Duties (New South Wales) 82 ATC 4125 ; (1982) 149 CLR 431 and
Commissioner of Stamp Duties (New South Wales) v Pendal Nominees Proprietary Limited 89 ATC 4207 ; (1989) 167 CLR 1 , as explained by Handley AJA at [ 77 ] - [ 83 ] .

10. However, there are no analogous words of futurity in the definition concerning identification of the property. The definition is not " any declaration … that any identified or to be identified property vested or to be vested in the person making the declaration is or is to be held on trust … " . The property must be " identified property " at the time of first execution of the putative declaration of trust, and it does not suffice that the property referred to in the declaration might become " identified property " at some later time.

11. The Consideration Shares did not exist at the time the declaration of trust was made.

12. I would accept that the specific contemplation in the definition in s 8(3) and in the Table that a " declaration of trust " might be of property " to be vested " in the declarant, where that property is " to be held in trust " by the declarant does not of itself necessitate a conclusion that the property the subject of the declaration could be property not in existence at the time of making the declaration. However, the presence of those forward-looking words in the definition and the Table are consistent with " identified property " possibly extending to property not in existence at the time of the declaration.

13. Identification involves establishing that two things are the same. The root of the word is the Latin " idem " (meaning, " the same " ). Clearly, one way in which it makes sense to talk of " identified property " is when the property in question is described in such a fashion that, by comparing a particular presently existing item of property with the description, one can tell that it is the property that meets the description. However, it can sometimes also be legitimate to talk about " identified property " even if the property does not exist at the time the words are used. One circumstance in which such a usage would be legitimate is when the property is described by reference to characteristics that are sufficient, at the time of speaking, to be able to single out the property in question, once it comes into existence, from other property in existence at that future time, and to single it out in such a way that it is possible at the time of speaking to make an itemised list of every individual piece of property that will fall within the description. It is unnecessary to decide whether this is the only way in which property not presently existing might be " identified property " within the definition in s 8(3) of the Act.

14. In the law of assignment of future property, there can be an effective assignment of property by using words that describe the property in quite a general way. The assignment is effective if that one can tell, once a particular item of property comes into existence, whether it meets the description. Thus, there can be an effective equitable assignment of " any real estate my father might leave me in his will " , at a time when the assignor ' s father is still alive. That is because, once the father has died, and the terms of his will are known, one can tell whether any particular item of real estate meets the description. The property is identifiable , once the occasion has come for deciding whether it is caught by the assignment. However, it is not possible, at the time of the assignment, to list the items of property that will fall within the assignment. It would be out of keeping with ordinary use of language to say, at the time of the assignment, that any particular item of real estate is " identified property " that is the subject of the assignment.

15. In the present case, the property to which cl 2.2 related was the Consideration Shares. Clause 1.1 of the Share Sale Deed included:

" Consideration Shares means the number of ordinary shares in the capital of the Buyer set out adjacent to each Seller ' s name in schedule 1 to be issued by the Buyer to the Nominee for the benefit of each Seller on Completion. "

16. Schedule 1 was a table that included, for each of the Sellers, the name, the purchase price of the shares being sold, and the number of Consideration Shares received. Thus, at the time of entry of the Deed, the characteristics by which the property that would be held on trust was described were the characteristics set out in the definition of Consideration Shares, as supplemented by Schedule 1. That definition is quite precise about the property that was to be held on trust - a specific number of shares, of a specific class, in the capital of a particular company, issued by that company to a particular person, and at a particular time. When described with that degree of specificity, they were " identified property " within the meaning of s 8(3) of the Act.

A Difference Between the Act and the 1920 Act

17. Section 19 of the Act provides:

" Duty is charged on the dutiable value of the dutiable property subject to the dutiable transaction at the relevant rate set out in Part 3 . "

18. The relevant portion of Part 3 fixed the rate of duty concerning transfer of property taking the form of unlisted shares is set out in s 32(1), which relevantly provides:

Dutiable value of the dutiable property subject to the dutiable transaction

Rate of duty

…

More than $ 1,000,000

$ 40,490 plus $ 5.50 for every $ 100, or part, by which the dutiable value exceeds $ 1,000,000

19. In other words, the amount of duty that is charged has a precise mathematical relationship to the dutiable value. When the whole point of those provisions of the Act that charge ad valorem duty is to levy and collect duty on certain transactions, the dutiable value of the dutiable property that is the subject of the dutiable transaction must be ascertainable, at the time at which the liability for duty arises. The Act properly construed requires this by implication, as a practical necessity, arising from the manner in which the amount of duty is to be ascertained.

20. That practical necessity might, in some circumstances, provide a limit on the circumstances in which property not in existence at the time could, as a matter of construction of the Act as a whole, fit within the type of property that is within the definition of " declaration of trust " in s 8(3). It was through such an implication that Mason J in DKLR at 455 contemplated that the class of declarations brought to duty under the 1920 Act was limited to property " which is capable of identification at the time of execution of the instrument so that it is then possible to compute the duty which would be payable on the conveyance of that property " . For the reasons given by Handley AJA, the dutiable value is ascertainable in the present case, and hence the type of limitation by implication that Mason J contemplated in DKLR does not operate.

21. However, now that the Act specifically requires the subject of a " declaration of trust " as defined to be " identified property " , it is due to the specific words of the statute, not due to an implication from the practicalities of assessing the duty, that it is necessary for the property the subject of a " declaration of trust " to be identified property. This means that under the Act there will be less occasion than there was under the 1920 Act for operation of the type of implied limitation that Mason J contemplated. It is unnecessary to decide whether there is now no occasion for such an implied limitation to ever operate.

Nexus with NSW - " Dutiable Property "

22. The Commissioner contended that the " dutiable property " within the meaning of s 11 of the Act that gave rise to the liability to pay duty was the type of property described in s 11(1)(d), namely:

" Shares … in a NSW company … "

23. The Dictionary to the Act provides that:

" NSW company means:

• (a) a company incorporated or taken to be incorporated under the Corporations Act 2001 of the Commonwealth that is taken to be registered in New South Wales for the purposes of that Act, or
• (b) any other body corporate that is incorporated under an Act of New South Wales. "

24. The Consideration Shares were shares in the Buyer. The Buyer was incorporated in New South Wales under the Companies (New South Wales) Code . Pursuant to s 1378 Corporations Act 2001 in the form it had when the Deed was first executed, after the Corporations Act 2001 came into force the registration of the Buyer under the previous NSW legislation had effect " as if it were a registration of the company under Part 2A.2 of this Act … " . Pursuant to s 1378(4) Corporation Act 2001 the Buyer is taken at the commencement of the Corporations Act 2001 to be registered in New South Wales.

25. It is possible under s 119A(3) Corporations Act to change the state or territory in which a company is taken to be registered. Therefore, there was the theoretical possibility that the Buyer might change its state of registration between the date on which the Deed was executed and the date on which the Consideration Shares were issued. However, that does not affect the liability of the Deed to duty as a declaration of trust. That is because any such change would take place after the date as at which the liability of the Deed for stamp duty must be ascertained. At the date of execution of the Deed, the Buyer was a " NSW company " as defined in the Act. The shares that cl 2.2 of the Deed said would be held on trust were shares in the Buyer. Thus the shares to be held in trust were shares that were within the definition of " dutiable property " at the date of first execution of the Deed. It would still be shares in the same company that would be held in trust pursuant to cl 2.2, even if the Buyer thereafter changed its state of registration. Thus the possibility that the Buyer might change its state of registration does not prevent the shares referred to in cl 2.2 of the Deed from being " identified property " , which is also a species of dutiable property.

26. I agree with [ 94 ] and following in the judgment of Handley AJA, and with the orders that His Honour proposes.