UPPER HUNTER TIMBERS PTY LIMITED v COMMISSIONER OF STAMP DUTIES (NSW)

Judges:
Sully J

Court:
Supreme Court of New South Wales

Judgment date: Judgment handed down 15 October 1993.

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Sully J

On 23 September 1992 Upper Hunter Timbers Pty Limited (ACN 000 068 100) [``the plaintiff''], commenced in the Equity Division of this Court proceedings seeking certain declaratory relief against the Chief Commissioner of Stamp Duties [``the defendant'']. One such declaration sought was:

``A declaration that the Deed of Trust executed on 28 August 1991 by the plaintiff in respect of the land comprised in Certificate of Title Vol 5741 Folio 145 in favour of Edward Robert Bromley is subject to stamp duty in the sum of $10 only.''

2. By a summons filed on 30 March 1993, the plaintiff commenced in the Administrative Law Division of the Court proceedings against the defendant in which the plaintiff claimed the following relief:

``1. An Order that the decision of the defendant disallowing an objection dated 14 December 1992 by the plaintiff to an assessment to Stamp Duty and additional duty issued on 22 October 1992 in respect of a Deed of Trust executed on 25 August 1991, be set aside.

2. An order that the assessment be set aside.

3. An order that the defendant refund to the plaintiff the amount paid by the plaintiff on the assessment together with interest thereon on the rate prescribed for the purposes of Section 124C(3) of the Stamp Duties Act 1920.

4. An order that the defendant pay the plaintiff's costs of the proceedings.

5. Such further or other order as the circumstances of the case may require.''

3. The proceedings which had been thus commenced in the Administrative Law Division came on for hearing before me on 22 September 1993. On that occasion I made, by consent, orders consolidating the proceedings in the Equity Division and the proceedings in the Administrative Law Division. Additionally, and by consent, I ordered that there be decided separately from and before any other question in the proceedings, the question whether the duty payable upon the relevant document exceeds $10.

4. On 25 August 1991 the plaintiff executed in favour of Mr. Edward Robert Bromley a document described as a Deed of Declaration of Trust [``the subject document''].

The subject document deals with the whole of the land in Certificate of Title Vol. 5741

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``3. The document is not a Declaration of Trust within the meaning of sub-clause (2)(a) under that heading in the Second Schedule to the Act.

4. The document is not liable to ad valorem duty under any other section, provision or head of duty under the Act.''

7. By notice in writing dated 23 March 1993, the defendant disallowed the objection. He notified his view, relevantly for present purposes, that the subject document: ``... is considered to be liable to duty under the paragraph 2(a) of the Declaration of Trust Head in the Second Schedule to the Act''.

8. The plaintiff now, in effect, appeals to this Court pursuant to the provisions in that behalf of section 124 of the Stamp Duties Act 1920 (NSW) [``the Act'']. Such an appeal is, by virtue of section 124A of the Act an appeal by way of rehearing of the original objection made to the defendant and is limited to the grounds of such original objection. By virtue of section 124B of the Act, the plaintiff, as objector, bears the onus of establishing on the balance of probabilities that the duty in question was incorrectly assessed.

9. The Second Schedule to the Act sets out in tabulated form descriptions of various categories of instruments and the amounts of duty to which they are variously liable under the Act. That portion of the Second Schedule upon which the defendant relied in making the assessment now challenged is in the following terms:

``DECLARATION OF TRUST...

• (2)(a) Any instrument declaring that any property vested or to be vested in the person executing the instrument is or shall be held in trust for the person or persons or purpose or purposes mentioned therein notwithstanding that the beneficial owner or person entitled to appoint that property may not have joined therein or assented thereto.''

The amount of duty notified by the Schedule in respect of an instrument falling within that category is:

``[$]200.00 or the same duty as would be chargeable if the instrument were a conveyance of the property comprised therein, whichever is the greater.''

10. The contention of the plaintiff is that the subject document is assessable to duty as a ``Deed''. The relevant provisions in that regard under the Second Schedule are as follows:

``DEED:

• (1) Deed of any kind whatever not otherwise charged in this Schedule.
• (2) Any instrument which under the provisions of any statute is given the operation or effect of a deed before registration...''

Any instrument falling within this particular category is assessable to duty in the sum of $10.

11. In order to resolve the issue thus joined, it is necessary to attend more particularly to the events leading up to the execution of the subject document. In that regard I am satisfied of the following matters:

[a] In or about June of 1986 the plaintiff and his late wife were the directors of the plaintiff. They agreed orally that the impending introduction of Fringe Benefits Tax made it expedient that the plaintiff should sell the subject property to Mr. Bromley. A figure of $300,000 was agreed between Mr. & Mrs. Bromley as being a reasonable purchase price, having regard to the fact that an adjoining property had sold recently for $270,000.

[b] At the time of this agreement, the plaintiff was indebted to Mr. Bromley in a sum greatly exceeding $300,000.

[c] Mr. Bromley arranged for the relevant loan account with the plaintiff to be credited with a sum of $300,000.

[d] The Balance Sheet and the Profit and Loss Account of the plaintiff for the years- ended 30 June 1985 and 30 June 1986 were drawn so as to reflect the sale to Mr. Bromley by the plaintiff of the subject property.

[e] Following his acquisition of the subject property, Mr. Bromley gave appropriate formal notification to the relevant public authorities and has thereafter paid the Municipal and Water Rates on the subject property.

12. Given the whole of the foregoing facts and circumstances, I would reason as follows:

[a] The relevant question arising under the relevant provision of the Second Schedule to the Act, irrelevant portions omitted, is this question: Does the subject document declare that some property vested in the plaintiff is

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held in trust for Mr. Bromley, notwithstanding that Mr. Bromley did not join in the execution of the subject document and notwithstanding that he is not shown on the evidence otherwise to have assented positively to it?

[b] The reference in that question to ``property'' is, by reason of the relevant provisions of section 3(1) of the Act, a reference to: ``any estate or interest in any property real or personal...''.

[c] The reference in the question at [a] to property as ``vested'' entails notions which are conveniently summarised as follows in Halsbury: Laws of England: 4th Ed.: Vol 39 para 486 fn 1:

"An estate is vested when there is an immediate fixed right of present or future enjoyment. An estate is vested in possession when there exists a right of present enjoyment. An estate is vested in interest when there is a present fixed right of future enjoyment."

[d] As at 25 August 1991, the date of execution of the subject document, the plaintiff undoubtedly remained registered as proprietor of an estate in fee simple in the whole of the subject property. What this entailed, on the given facts of the present case, is best approached, in my opinion, by reference to principles which are stated by Hope JA in his Honour's judgment in
DKLR Holding Co. (No. 2) Pty Ltd v Commissioner of Stamp Duties [1980] 1 NSWLR 510. The passages that I have in mind are those numbered (13)-(19), both inclusive, at pp 518-520 of the Report. I have had regard to and I rely upon the whole of what is there explained by his Honour, but will quote for present purposes only some excerpts which seem to me to be of particular present assistance:

"An unconditional legal estate in fee simple is the largest estate which a person may hold in land. Subject to qualifications arising under the general law, and to the manifold restrictions now imposed by or under statutes, the person seized of land for an estate in fee simple has full and direct rights to possession and use of the land and its profits, as well as full rights of disposition. An equitable estate in land, even where its owner is absolutely entitled and the trustee is a bare trustee, is significantly different...

After some hesitation, a trust interest in respect of land came to be regarded, not merely as some kind of equitable chose in action, conferring rights enforceable against the trustee, but as an interest in property. The fact that equitable estates were not enforceable against everyone acquiring a legal title to the property did not prevent them from being so regarded; a legal owner of land could lose his estate in, or become unable to enforce his rights in respect of, land in a number of ways... Several consequences follow. Firstly, an absolute owner in fee simple does not hold two estates, a legal estate and an equitable estate. He holds only the legal estate, with all the rights and incidents that attach to that estate... Secondly, although the equitable estate is an interest in property, its essential character still bears the stamp which its origin placed upon it. Where the trustee is the owner of the legal fee simple, the right of the beneficiary, although annexed to the land, is a right to compel the legal owner to hold and use the rights which the law gives him in accordance with the obligations which equity has imposed upon him. The trustee, in such a case, has at law all the rights of the absolute owner in fee simple, but he is not free to use those rights for his own benefit in the way he could if no trust existed. Equitable obligations require him to use them in some particular way for the benefit of other persons... (The position analysed by his Honour in paragraph (17))... can be analysed in a similar way in respect of all the rights given to a trustee who holds property at law in trust absolutely for a beneficiary. In some cases the right vested in the trustee may be such that he cannot be compelled to allow the beneficiary to exercise it except... in his, the trustee's, name. If this analysis be correct, although the beneficiary has an interest in the trust property, the content of that interest is essentially a right to compel the trustee to hold and use his legal rights in accordance with the terms of the trust. Where the trustee holds absolutely for

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the beneficiary, the beneficiary has a right in equity to be put, so far as practicable and generally subject to appropriate indemnities being given, into a position where directly, or indirectly, or for all practical purposes, he enjoys or exercises the rights which the law has vested in the trustee.

(19) Although some provisions of the Real Property Act 1900, such as s. 42 appear to deny the existence of equitable estates in land under Torrens Title, and although a trust interest cannot be registered in this title, equitable estates can undoubtedly exist in Torrens land. When validly created, they are interests in the land; and, although liable to be defeated, if another person becomes the registered proprietor of the land, they can be protected in a number of ways against that fate... In theory, a beneficiary may be more liable to be defeated, if the property in which he has an interest is land under the Torrens system; but, in essence, the nature of his right is the same as where the title to the relevant land is under the common law system."

[e] If, as I believe, these passages analyse correctly the entitlements with which they deal, then the plaintiff's registered proprietorship of the relevant fee simple as at the date of execution of the subject document, was ``property'' in the relevant statutory sense, and was, as well, ``vested'' in the plaintiff, and that notwithstanding that in the events which had happened, Mr. Bromley had equitable entitlements enabling him to restrict the ways in which the plaintiff might exercise, in a practical way, its prima facie entitlements as such registered proprietor.

[f] If that be so, then I think it cannot be disputed that the subject document does in fact declare that such vested property is held in trust for Mr. Bromley. It is true that the subject document speaks, in its precise terms, of the plaintiff's declaration that it ``holds the land'' as trustee for Mr. Bromley's sole use and benefit; but this clearly means ``holds all such entitlements as he might have by virtue of his registered proprietorship of the relevant fee simple'' as such trustee.

[g] It would seem to me, therefore, that the subject document accords in terms with the description in the relevant portion of the Second Schedule to the Act. It follows, in my opinion, that the duty properly payable in terms of the Act upon the subject document does exceed $10.

13. For the whole of the foregoing reasons, I make the following orders:

[a] I answer as follows the question to be decided separately in terms of the order made on 22 September 1993:

Question: Does the duty payable under the Act upon the subject document exceed $10?

Answer: Yes.

[b] I order the plaintiff to pay the defendant's costs of the trial of that separate question.

[c] I order the exhibits to remain in Court for a period of 28 days from today. Thereafter they may be handed out to the parties respectively entitled to them, unless there shall have been instituted within that period of 28 days an appeal against any part of this judgment, in which latter event the exhibits shall remain in Court until further order.