CHIEF COMMISSIONER OF LAND TAX v MACARY MANUFACTURING PTY LTD

Judges: Spigelman CJ

Mason P
Sheller JA

Court:
New South Wales Court of Appeal

MEDIA NEUTRAL CITATION: [1999] NSWCA 471

Judgment date: 17 December 1999

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Mason P

19. At issue in this appeal is the liability of the respondent, Macary Manufacturing Pty Limited (hereafter referred to as ``the Trustee'') to land tax as the ``owner'' of land subject to a ``special trust'' for the years 1988-1996.

20. The Trustee has been the trustee of the McCann No 2 Family Trust since it was constituted on 2 July 1977 by Deed of Settlement. Using moneys settled upon it, the

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Trustee acquired three adjacent lots fronting Harriette Street and Penshurst Avenue, Neutral Bay. The Trustee has remained the registered proprietor of the land. The home erected upon it has been the place of residence of Mr and Mrs McCann and their children since 22 December 1987.

21. On 19 February 1996 the appellant issued land tax assessments for the 1988-1996 land tax years, citing for the applicable year ss 3AC(2)(b), 3AD(2)(b) or 3AE(2)(b) of the Land Tax Act 1956. These assess land tax on the Trustee on the basis that it was the owner of the land subject to a ``special trust'' at the relevant dates.

22. The Trustee objected to the assessments. Its primary contention was that it was not the ``owner'' of the land because, since 22 December 1987, it had held as bare trustee for Mr and Mrs McCann. Alternatively, if the Trustee was the owner, the land was not subject to a ``special trust'', and accordingly it was liable to tax at lesser rates.

23. The objections were disallowed on 26 June 1996. The Trustee appealed to the Supreme Court [ reported at 98 ATC 4580]. Black AJ set aside the appellant's decisions of 26 June 1996, allowed the Trustee's objections, reduced the land tax assessments to nil, and ordered the appellant to pay the Trustee's costs. His Honour found that the Trustee was not the ``owner'' of the land.

Statutory framework

24. Land tax is imposed by the Land Tax Act 1956 (``the Taxing Act''), which is to be read and construed with the Land Tax Management Act 1956 (``the Management Act'').

25. Section 9(1) of the Management Act provides that land tax is payable by the owner of land on the taxable value of all the land owned by that owner which is not exempt from taxation under the Act. (Its form was different before 1992, but only because it lacked gender- neutrality.) The tax is charged on land owned at midnight on 31 December immediately preceding the year for which the land tax is levied (s 8 of the Management Act).

26. ``Owner'' is defined in s 3(1) of the Management Act to include:

``(a) in relation to land, every person who jointly or severally, whether at law or in equity:

• (i) is entitled to the land for any estate of freehold in possession; or
• (ii) is entitled to receive, or is in receipt of, or if the land were let to a tenant would be entitled to receive, the rents and profits thereof, whether as beneficial owner, trustee, mortgagee in possession, or otherwise;

...

(d) a person who, by virtue of this Act, is deemed to be the owner.''

27. Sections 3AC(2)(b), 3AD(2)(b) and 3AE(2)(b) of the Taxing Act prescribe a rate of two cents for each dollar of taxable value in respect of the taxable value of all the land owned by a person at midnight on 31 December of various years where inter alia the land is subject to a ``special trust''. The years in question span the years of the challenged assessments. (For an inexplicable reason the assessments for the 1991-1996 tax years refer to s 3AB(2)(b) and not s 3AE(2)(b), but nothing appears to turn on this.)

28. Between 1985 and 1997 ``special trust'' was defined in s 3(1) of the Management Act in terms which included the following:

``(b) a trust -

• (i) under which the trustee has active management duties;
• (ii) the whole or any part of the trust property of which comprises land; and
• (iii) the interests of the beneficiaries under which in relation to that trust property which comprises land are not such as to constitute those beneficiaries owners of that land for the purposes of this Act....''

29. Sections 3AB, 3AC, 3AD and 3AE of the Taxing Act are broadly similar in their structure and form. They deal with different tax years. For present purposes it is sufficient to observe that subsection (1) of each section stipulates that:

``(1) Except as provided by subsection (2), in respect of the taxable value of all the land owned by any person at midnight on 31 December [ year stated] there shall be charged, levied, collected and paid under the provisions of the Principal Act [ ie the

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Management Act] and in the manner therein prescribed, land tax for the period of 12 months commencing on 1 January in the next succeeding year and at the rates set out in [ schedule stated].

[ Section 3AE, which dealt with the years 1989-1996, used the words `there is to be charged' in lieu of `there shall be charged'. Nothing turns on this difference.]''

30. Subsection (2) of these sections was in mirror form, providing in each case (so far as presently relevant):

``(2) In respect of the taxable value of all the land owned by a person at midnight on 31 December [ year stated] where -

• (a)..., or
• (b) the land is subject to a special trust;

land tax for the period of 12 months commencing on 1 January in the next succeeding year shall, except as provided by section 27(2A) of the Principal Act, be charged, levied, collected and paid as referred to in subsection (1) at the rate of 2 cents for each $1 of the taxable value.''

31. Pausing there, it can be seen that the legislative scheme envisaged that ownership would be the criterion of taxability, that higher rates applied if the land was subject to a special trust, and that the provisions of the Management Act are to be referred to in relation to the charging, levying, collection and payment of the tax.

32. Sections 24 and 25 of the Management Act provide:

``24 TRUSTEES

24 Any person in whom land is vested as a trustee shall be assessed and liable in respect of land tax as if he were beneficially entitled to the land:

Provided that where he is the owner of different lands in severalty, in trust for different persons who are not for any reason liable to be jointly assessed, the land tax so payable by him shall be separately assessed in respect of each of those lands:

Provided also that when a trustee is also the beneficial owner of other land, he shall be separately assessed for that land, and for the land of which he is a trustee, unless for any reason he is liable to be jointly assessed independently of this section.

25 EQUITABLE OWNER

25 Subject to this Act, the owner of any equitable estate or interest in any land shall be assessed and liable in respect of land tax as if he were the legal owner of the estate or interest; and the owner of the legal estate shall be deemed to be the primary taxpayer, and the owner of the equitable estate shall be deemed to be the secondary taxpayer; and there shall be deducted from the land tax payable by the latter in respect of the land such amount (if any) as is necessary to prevent double taxation.''

33. In the form in which it stood effective between 21 December 1986 and 1 July 1997, s 10(1)(r) of the Management Act exempted from taxation under the Act:

``(r) with respect to taxation leviable or payable in respect of the year commencing on 1 January 1987 or any succeeding year:

• ...
• (ii) a parcel of residential land not exceeding 2,100 square metres in area that is used and occupied as the principal place of residence of the owner of the land (or, if there are joint owners, as the principal place of residence of one or more of them) and for no other purpose;
• ...

unless the owner or all of the joint owners who so used and occupied the lot or land (as appropriate) is such an owner by reason only of being a trustee.''

The expression ``residential land'' is defined in s 10(1D) in terms which excludes land owned by a company.

The trust deed and the resolutions

34. The arguments supporting and challenging the assessment can only be understood against the background of certain information relating to the particular trust.

35. The trust as to income is declared in cl 3. Relevantly, it stipulates that the Trustee ``may prior to the Vesting Day at any time and from time to time during any Accounting Period'' pay all or any part of the income to one or more of the ``General Beneficiaries''.

36. The expression ``General Beneficiaries'' is defined in cl 1(d) of the Deed to include the ``Specified Beneficiaries'', itself defined as Mr and Mrs McCann, the children of Mr McCann and the children of Mrs McCann.

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37. The trusts as to corpus are stipulated in cl 4. Relevantly, that clause provides:

``4. As from the Vesting Day the Trustees shall stand possessed of the Trust Fund -

• (1) in trust for such of the beneficiaries and in such proportions or for one to the exclusion of the other or others and if more than one in such shares absolutely as the Trustees may subject to Clause 36 hereof by instrument in writing revocable or irrevocable before the Vesting Day appoint provided that any revocable appointment shall be revocable only until the end of the day preceding the Vesting Day when it shall become irrevocable and any purported revocation thereof thereafter shall be invalid and ineffective.
• (2) in so far as any part of the Trust fund shall not have been disposed of in accordance with sub-clause (1) of this Clause if one Specified Beneficiary shall be living on the Vesting Day in trust for such Specified Beneficiary absolutely and if more than one Specified Beneficiary is so named or described in trust for such of the Specified Beneficiaries as shall be living on the Vesting Day as tenants-in-common in equal shares absolutely...''

38. In cl 1(13), the Deed defines ``the Vesting Day'' to mean:

``the first to occur of the following dates namely -

• (i) the day specified as `the Distribution Date' in the Schedule;
• (ii) such date being earlier than the day so specified as the Trustees may subject to Clause 36 hereof appoint as the Vesting Day; or
• (iii) the date of expiration of the perpetuity period.''

``The Distribution Date'' is specified as 30 June 2060.

``The perpetuity period'' is defined in conventional terms by reference to the death of the last survivor of the descendants of King George V.

39. The Trustee is a company whose directors and equal shareholders have been Mr James Martin McCann and Mrs Wilna McCann since 1973. There are three children of the marriage, born in 1972, 1976 and 1978.

40. On 25 July 1986 the directors resolved:

``that the whole of the Trust Fund of the Trust (including but without limiting the generality of the foregoing, the properties known as 27A Harriette Street, Neutral Bay and 10 Penshurst Avenue, Neutral Bay) be set aside for, and appointed absolutely in favour of, James Martin McCann and Wilna McCann in equal shares as joint tenants, upon the Vesting Day but upon the basis that the said James Martin McCann and Wilna McCann will discharge all liabilities whatsoever of the Trust as at the Vesting Day .''

[ The bolded portion is conceded by the Trustee to be invalid. The parties disagree as to whether it is severable]

The 1986 resolution purports to be an appointment of Mr and Mrs McCann for the purposes of cl 4(1) of the Trust Deed (par 19, above). It is silent as to whether it is revocable or irrevocable. But (as the Trustee accepts) it does not purport to accelerate the ``Vesting Day''.

41. In brief, the Trustee submits that the 1986 appointment was valid as a nomination of beneficiaries of the corpus. The appellant challenges the appointment on the basis that the portion commencing ``but upon'' is not authorised by cl 4(1) or any other provision of the Trust Deed. The Trustee accepts the invalidity of the proviso, but submits that such invalidity does not affect the validity of the appointment effected by the earlier portion of the resolution. The Trustee relies upon
Hooke v Robson [ 1962] NSWR 606 at 609-610 .

42. On 22 December 1987 the directors passed a second resolution in the following terms:

``It was resolved that today, Tuesday 22nd December 1987 be nominated as the Vesting Day and that to the extent that the Trust Fund remains unappointed, pursuant to the abovementioned resolution, that the whole of the capital and income of the Trust fund be set aside for, and appointed absolutely in favour of James Martin McCann and Wilna McCann, in equal shares as joint tenants.''

43. In brief, the Trustee submits that the 1987 resolution was authorised by par (ii) of the definition of ``the Vesting Day'' in cl 1(13)(ii) of the Trust Deed (see par 20 above). According to the Trustee, this brought forward the ``Vesting Day'' from 30 June 2060 to 22

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December 1987. The Trustee does not rely upon any other portion of the 1987 resolution, conceding that the purported appointment contained in it is ineffective.

44. If the Vesting Day has been duly brought forward to 22 December 1987, the Trustee contends that:

• (a) the appointment/nomination of Mr and Mrs McCann by the 1986 resolution thereupon became irrevocable (if it was not already irrevocable) in accordance with cl 4(1);
• (b) alternatively, if the 1986 resolution was wholly invalid, the ``default provisions'' of cl 4(2) operated upon the 1987 resolution to vest the Trust Fund in the ``Specified Beneficiaries'' living on the Vesting Day. These were Mr and Mrs McCann and their three children.

45. The appellant challenges the validity of the 1987 resolution on the ground that it purports to appoint as the Vesting Day the very date of the resolution itself. It is contended that cl 1(13)(ii) does not permit this.

The competing submissions

46. At the risk of some repetition I set out the competing submissions of the parties.

47. In the light of
Chief Commr of Stamp Duties (NSW) v Buckle & Ors 98 ATC 4097 at 4103-4104; (1998) 192 CLR 226 at 242 , the Trustee accepts that it would have been validly assessed as ``the owner'' of land subject to a ``special trust'' during the period 1988-1996 if the 1987 resolution purporting to bring forward the Vesting Day is invalid.

48. The Trustee submits that it ceased to be the owner from 22 December 1987 onwards because it became a bare trustee of a vested trust on that date, holding the land in trust for:

• (a) Mr and Mrs McCann, according to the combined operation of the 1986 and 1987 resolutions and cl 4(1);
• (b) alternatively, the ``Specified Beneficiaries'' being Mr and Mrs McCann and their three children, according to the combined operation of the 1987 resolution and the default provisions of cl 4(2).

49. The appellant's principal submission is that, in determining whether the Trustee was an ``owner'', it is unnecessary to decide whether the Trustee became a bare trustee on 22 December 1987. The Chief Commissioner submits that this is irrelevant, because the Trustee was and remained:

• (a) ``at law... entitled to the land for any estate of freehold in possession''; or alternatively,
• (b) ``at law... entitled to receive... the rents and profits thereof... as... trustee''.

This submission invokes the two arms of par (a) of the definition of ``owner'' (par 8 above).

50. Alternatively, the appellant challenges the validity of the two resolutions. The 1986 resolution is said to be invalid because the unauthorised condition commencing with the words ``but upon'' is said to be inseverable.
Re Hay's Settlement Trusts [ 1982] 1 WLR 202 at 212, 213 is cited. The 1987 resolution is said to be invalid because it was passed on the very date of the accelerated Vesting Day which it purported to fix.

51. The Trustee submits that the 1987 resolution brought forward the Vesting Day to 22 December 1987, with the result that (a) the Trustee thereupon ceased to be owner, (b) (alternatively) the land was not the subject of a ``special trust''. On alternative (a) the Trustee is entitled to have the assessments quashed. On alternative (b) the Trustee is entitled to have the assessments remitted for redetermination ( Taxation Administration Act 1996, s 102).

Assuming the Trust vested, was the Trustee the ``owner''?

52. It is convenient to proceed first on the assumption that the 1987 resolution validly appointed the Vesting Day as 22 December 1987.

53. Black AJ accepted the Trustee's submission that the Trustee ceased on 22 December 1987 to be the ``owner'' of the land within s 3(1) of the Management Act, notwithstanding that it remained the registered proprietor of the land. The Trustee had contended that the vesting of corpus meant that thereafter the Trustee held on a bare trust and that the only ``owners'' were the beneficiaries according to the trust deed. These were Mr and Mrs McCann according to the 1986 resolution, or (in default) the McCanns and their children as the class of ``Specified Beneficiaries'' entitled under the default provisions of cl 4(2).

54. The Trustee's argument which found favour with the learned judge was that the effect of the 1987 resolution left it as a bare trustee with the sole remaining duty to execute a

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transfer when called upon to do so by the appropriate beneficiaries. This was said to preclude the Trustee from holding an estate of freehold in possession or from being entitled to the rents and profits.

55. In accepting this submission, Black AJ cited Sully J in
Opalfield Pty Ltd v Commr of Land Tax (NSW) 93 ATC 4863 . It was noted that the orders made by Sully J had been overturned on appeal (
Commr of Land Tax (NSW) v Opalfield Pty Ltd 94 ATC 4171 ). Since however the Court of Appeal did not address Sully J's interpretation of the meaning of ``owner'', Black AJ followed this interpretation and applied it in the present case, holding that (upon vesting) the Trustee held under the trust deed as a bare trustee with the consequence that it was not the ``owner''.

56. The appellant challenges this interpretation of ``owner'' as well as its application to the Trustee (assuming vesting). It is pointed out that the Trustee was at all times the registered proprietor, whereas Opalfield Pty Ltd was not registered proprietor on the relevant taxing date.

57. In my view, the Trustee was the ``owner'' as defined, under both arms of par (a) of the extended definition.

58. As the registered proprietor of an estate in fee simple the Trustee was, by definition, ``at law... entitled to the land for [ an] estate of freehold in possession''. The estate was in possession because the registered proprietor had a present right of enjoyment, as distinct from a reversion, remainder or expectancy (
Glenn v Federal Commissioner of Land Tax (1915) 20 CLR 490 at 498, 501, 507 ).

59. The registered proprietor of an estate in fee simple holds (at law) an estate in possession notwithstanding the imposition of a trust requiring the proprietor to hold that estate on behalf of beneficiaries. Nothing turns on whether the trust is active or bare. There will be an equitable estate or interest according to the terms of the trust. However, ``An equitable interest is not carved out of a legal estate but impressed upon it.'' (
DKLR Holding Co (No 2) Pty Ltd v Commr of Stamp Duties (NSW) 82 ATC 4125 at 4151; (1982) 149 CLR 431 at 474 per Brennan J). In other words, the recognition of a trust does not detract from the estate in possession enjoyed by the trustee at common law. Indeed, the full enjoyment of that trust interest depends upon the trustee's capacity to defend against third parties the plenitude of the legal estate vested in the trustee.

60. Hope JA illustrated the distinction in
DKLR Holding Co (No 2) Pty Ltd v Commr of Stamp Duties (NSW) 80 ATC 4279 at 4285-4286; [ 1980] 1 NSWLR 510 at 519-520 :

``... [ A]lthough 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. In illustrating his famous aphorism that equity had come not to destroy the law, but to fulfil it, Maitland , [ Lectures on Equity, 2nd ed] at p 17, said of the relationship between legal and equitable estates in land:

`Equity did not say that the cestui que trust was the owner of the land, it said that the trustee was the owner of the land, but added that he was bound to hold the land for the benefit of the cestui que trust . There was no conflict here.'

This relationship can perhaps be usefully illustrated by reference to the possession, and the right to possession, of land which is held by a trustee subject to a private trust. As a legal owner, and subject to any disposition of the right, such as would occur upon the granting of a lease, the trustee has at law the right to possession of the land, and unless somebody else is in possession, under him or adversely to him, he also has the legal possession of the land. He may maintain trespass against anyone who infringes that possession, and ejectment against any person who, without his consent, takes possession. At law a cestui que trust has no right to possession; he cannot sue the trustee at common law in ejectment... If the trustee holds as a bare trustee for a beneficiary absolutely entitled, that beneficiary is, in equity, entitled to put into

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possession if he so wishes, but he cannot sue the trustee in ejectment. His right can be enforced only by an order made in the exercise of the equitable jurisdiction of the court. If necessary, the Court will, upon an appropriate indemnity being given, compel the trustee to allow the beneficiary to use his name to bring ejectment. When placed in possession by the trustee, at law the beneficiary is merely tenant at will of the trustee, the tenancy being determinable at law at any time on demand of possession by the trustee... As a corollary, the trustee might at law determine the beneficiary's tenancy and recover the land from him in an action for ejectment, and the beneficiary would have no legal defence; he would of course have an equitable defence which he has long been able, by statute, to plead in the action at law.''

See also
Re Transphere Pty Ltd (1986) 5 NSWLR 309 ;
Upper Hunter Timbers Pty Ltd v Commr of Stamp Duties (NSW) 93 ATC 4859 ;
Chief Commr of Stamp Duties (NSW) v Buckle & Ors 98 ATC 4097 at 4103-4104; (1998) 192 CLR 226 at 242 .

61. To the extent that Opalfield at first instance indicates otherwise, it was wrongly decided. Opalfield Pty Ltd was a shelf company that purchased land as nominee for members of the Allen family. It had no power to deal with the land except in accordance with the directions of the beneficiaries. The purchase was settled on 23 December 1991 but the plaintiff did not become registered until 1992. It was assessed for land tax based upon its ownership of the land on 31 December 1991. Sully J held that the plaintiff was a bare trustee within the principles expounded by Gummow J in
Herdegen & Anor v FC of T 88 ATC 4995 at 5003; (1988) 84 ALR 271 at 281 . Sully J also held that the company was not an ``owner'' within par (a) of the definition in s 3(1) because it lacked a present right of beneficial enjoyment of the land. Nor was it a deemed owner within par (d) of the definition when read with s 26(1)(a) (which refers to a purchaser in possession).

62. Opalfield came to this Court and the appeal was allowed. Sheller JA gave the leading judgment (with which Kirby P and Meagher JA agreed). He held that Opalfield Pty Ltd was ``the purchaser'' within s 26(1)(a) and therefore the ``owner'' as at 31 December 1991. It was not to the point that the company purchased as nominee and held the benefit of the agreement for sale in trust for the members of the Allen family. Sheller JA addressed the argument that the company was exempt pursuant to s 10(1)(r)(ii) (set out above, par 15) and held the exemption to have no application because ``the owner'' was a company (see s 10(1D)).

63. In my respectful view Sully J in Opalfield and Black AJ in the present case elided two distinct legal concepts and, in so doing, erred when they held that a bare trustee does not fit within par (a) of the definition of ``owner'' because it has no present right of beneficial enjoyment. A trustee of the entire fee simple (ie where no future interest is involved) holds an estate in possession whether the trust is bare or active. It is beneficial in that (common law) sense. The legal estate confers a legal right to enjoyment or possession of the land and its rents and profits, even though the trustee may be compelled to hold that right for the benefit of the beneficiary. See also
Kern Corporation Ltd v Walter Reid Trading Pty Ltd & Ors (1987) 4 ANZ Insurance Cases ¶ 60-790 at 74,834; (1987) 163 CLR 164 at 191-192 (Deane J).

64. Griffith CJ recognised this distinction in the following passage in Glenn (at 498):

``If, for instance, a testator gives land upon trusts for accumulation of the rents and profits during the life of A, and then upon trust for B in fee, the estate of freehold in possession both legal and equitable is in the trustees during the life of A, and B has no estate in possession. If the accumulation is to be for a term of ten years the result will be the same. So, in my opinion, if it is to continue until a certain sum has been accumulated. The fact that the term `in possession' is often used in contradistinction to `in remainder' or `in expectancy' does not, therefore, prove that there must always be in the case of trust property an equitable estate in possession held by some person other than the trustee. The essential element of an `estate in possession' is, in my opinion, that the owner of it has a present right of beneficial enjoyment, whether accompanied by physical possession of the land or not.''

65. In Opalfield , Sully J cited the last sentence of this passage as if it stood for the proposition that the presence of a beneficiary with a present right of beneficial enjoyment of

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an estate deprived the trustee of the fee simple of the legal estate in possession. Reading the passage as a whole, Griffith CJ is not saying this. Glenn involved the equitable estate of the putative taxpayer. The Commissioner failed to establish that a beneficiary held even an equitable estate in possession during the period in which trustees were directed to accumulate a specified sum to be paid to the beneficiaries at the end of that period.

66. In any event Opalfield was distinguishable, because at the relevant date Opalfield Pty Ltd held its equitable interest (as purchaser under a settled contract for sale of Torrens land where the transfer in its favour had not yet been registered) in trust for nominees (the Allens) under what was found to be a bare trust. In those circumstances, there is authority for the proposition that the trustee of the bare sub-trust will ``disappear from the picture'' (
Grey v Inland Revenue Commissioners [ 1958] Ch 375 at 382 ,
Chief Commr of Stamp Duties (NSW) v ISPT Pty Ltd 99 ATC 4066 at 4072-4075; (1998) 45 NSWLR 639 at 647-651 ) in the sense that the equitable estate is held only by the sub-beneficiary. This may partially explain the result in Opalfield , but not (I think) the reasoning.

67. Similar reasoning leads to the conclusion that the Trustee was also an owner because, ``if the land were let to a tenant [ it] would be entitled to receive the rents and profits thereof... as trustee'' within sub-par (ii) of par (a) of the definition of ``owner''.

68. Nothing in the definition of ``owner'' in s 3(1) suggests that there can only be one taxable owner of land at any point of time. Indeed, there are overwhelming indications to the contrary, because of the words ``every person... whether at law or in equity'' and because of the group of persons deemed to be owners by virtue of par (d) of the definition.

69. A trustee is answerable as a taxpayer, obliged to submit returns and armed with various rights (s 64). Section 24 provides that any person in whom land is vested as a trustee shall be assessed and liable in respect of land tax as if beneficially entitled to the land. The owner of an equitable estate or interest is also liable as if he or she were the legal owner (s 25). Several provisions of the Management Act contemplate multiple taxable ``owners'' in respect of the same land at the same time (see ss 23, 24, 25, 26, 27, 30, 32). Double taxation is avoided through recognition of ``primary'' and ``secondary'' taxpayers, with the secondary taxpayer being entitled to a deduction for such amount (if any) as is necessary to prevent double taxation. As between the legal and equitable owner, the owner of the legal estate is deemed to be the primary taxpayer (s 25). However, that owner's rights of recoupment, retention and indemnity are recognised by s 64.

70. None of these provisions assists the Trustee's argument. And no question of double taxation arises in the present case.

71. The Trustee submitted that
Sendall v Federal Commissioner of Land Tax (1911) 12 CLR 653 established that s 24 of the Management Act could not be used as an independent ground of assessing a trustee who is not an ``owner''. I agree. But s 24 is not invoked in that way in this case.

72. The Trustee conceded that if it were an ``owner'' then it would be no objection to its assessment that the beneficiaries might have been exempt if they had been assessed as such. This concession was properly made. Sendall does not suggest otherwise. It was a special case, because it involved a provision (s 25 of the Land Tax Amendment Act 1910 (Cth) (``the 1910 Act'')) which imposed a concessional tax on legal and equitable life tenants whose interests arose before 1910. The High Court (Griffith CJ and O'Connor J) held that this exemption could not be circumvented by assessing the trustee and relying upon provisions corresponding to s 24 and s 25 of the Management Act. To have done that would have left the trustee without power of recoupment because of the clear indication in the section in the 1910 Act that legal and equitable life tenants whose interests arose before 1910 were to be exempt from the general tax. Griffith CJ pointed out (at 661) that s 25 of the 1910 Act ``contains the only provision applicable to the case. The only person to be regarded as owner is the tenant for life, and the trustees of the estate are only liable to be assessed for the amount payable by the widow as such life tenant.''

73. O'Connor J spoke to similar effect (at 662-663). Indeed, he made some preliminary remarks which support the conclusion that the Trustee in the present case is an ``owner'' liable to be taxed as such under the general taxing provisions. O'Connor J said (at 662):

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``There is no doubt that, for the purposes of the Act, the trustee is the owner of the land, as well as the cestui que trust . The tax is made payable on the amount of the unimproved value of the land owned by a taxpayer. As a trustee may be an owner and taxpayer it is contended by the Commissioner that, according to the scheme of the Act, the tax may be imposed either on a trustee or on a cestui que trust , that is to say, on the owner of the legal estate or on the owner of the equitable estate. Mr Piddington, for the Commissioner, contends that, in this case, the tax must be paid by the owner of the legal estate. Now, in many instances it would make no difference to the amount of the tax whether the legal owner or the equitable owner were made the taxpayer. But in this case the distinction is very material, because the case of a tenant for life with estates in remainder has been expressly dealt with by sec. 25.''

The first sentence of the passage quoted is the commencement of a lengthy passage (at 662-663) explaining why s 25 of the 1910 Act covered the relevant field.

74. Here there is no provision equivalent in form or intent to s 25 of the 1910 Act. The exemption to which the McCanns might have been qualified, had they been assessed as owners, is s 10(1)(r) of the Management Act in the form in which it stood between 1986 and 1997 (see par 15 above). That exemption dealt with ``residential land''. However, s 10(1D) defined ``residential land'' in terms excluding land owned by a company. In Opalfield , this provision was considered by the Court of Appeal in the context of its earlier holding that Opalfield Pty Ltd was the deemed ``owner'' (in equity) of the land at the relevant date. The company's deemed ``ownership'' (through s 26) was held sufficient to defeat the exemption even though the land was occupied by the members of the Allen family who were the beneficiaries of the sub-trust (94 ATC at 4174-4175). The company's invocation of Sendall was rebuffed, because (in Sheller JA's words at 4175):

``... Even if one were to treat the respondent as standing in the place of the parties to the Agreement, those parties were not entitled to the exemption because the subject property was `owned by a company'. I do not think the consequence is affected by s 25 of the Act which provides for the owner of an equitable estate or interest to be assessed and liable in respect of land tax as a secondary taxpayer.''

75. Accordingly, the appeal should be upheld. The assessments should not have been set aside. The Trustee was the owner of the land whether or not the trust had vested on 22 December 1987.

If the Trustee was the ``owner'', was there a special trust?

76. Land subject to a ``special trust'' was taxable at a higher rate than land otherwise owned. The Trustee submits that, if it were the owner at the relevant dates, the land was not subject to a special trust because of the resolution of 22 December 1987. According to the Trustee, the 1987 resolution caused the corpus to vest with the consequence that the Trustee held as bare trustee for whichever was the appropriate class of beneficiaries. It is convenient to repeat the relevant part of the definition of ``special trust'' as it stood in the years in question;

``(b) a trust -

• (i) under which the trustee has active management duties;
• (ii) the whole or any part of the trust property of which comprises land; and
• (iii) the interests of the beneficiaries under which in relation to that trust property which comprises land are not such as to constitute those beneficiaries owners of that land for the purposes of this Act....''

77. The 1986 and 1987 resolutions (set out at pars 22 and 24 above) sought to achieve two distinct purposes:

• (a) (in each resolution) to appoint beneficiaries as to corpus, in accordance with cl 4(1).
• (b) (in the 1987 resolution) to appoint 22 December 1997 as the Vesting Day, in accordance with par (ii) of the definition of ``the Vesting Day'' in cl 1(13).

78. It was conceded that purpose (a) only succeeded for the 1986 resolution if the offending portion at the end was severable; and that this purpose failed in the 1987 resolution. In my view, it does not matter whether purpose (a) was achieved, or whether pursuant to cl 4(2) the corpus became divisible as from the Vesting

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Day amongst all of the ``Specified Beneficiaries'' that take in default of a valid nomination. The critical issue is whether the trust vested at all on 22 December 1997. If it did not, then there could be no possibility of the land not being subject to a special trust. That is because the Trustee accepts that prior to vesting it had active management duties under the trust deed and because no identified class of beneficiaries would have held an interest constituting them owners (see (b)(i) and (iii) of the definition of ``special trust'', as set out in par 10 above and
Chief Commr of Stamp Duties (NSW) v ISPT Pty Ltd 99 ATC 4066 at 4075; (1998) 45 NSWLR 639 at 651-652 as to active duties).

79. Black AJ did not need to address this issue.

80. The relevant power in cl 1(13) to bring the Vesting Day forward from the ``Distribution Date'' specified in the Schedule to the Deed (30 June 2060) is to appoint:

``such date being earlier than the day so specified as the Trustees may... appoint as the Vesting Day.''

81. The Trustee submits that this requirement was satisfied because 22 December 1987 is earlier than 30 June 2060.

82. The appellant accepts that 22 December 1987 could have been appointed, but only if the appointment was effected prior to that day. It is submitted that the purported appointment of 22 December 1987 failed because the appointment on that very day was in effect self-defeating. This is explained by the following submissions. The power in cl 1(13)(ii) is to appoint ``such date being earlier than the day so specified'' (ie the date 30 June 2060). Clause 4 vests the corpus of the Trust fund in nominated or ascertainable beneficiaries, including the ``default beneficiaries'' contemplated by cl 4(2), `` [ a]s from the Vesting Day''. It is submitted that this contemplates the Vesting Day being a whole day of 24 hours commencing from the last moment of the previous day (cf
Trow v Ind Coope (West Midlands) Ltd [ 1967] 2 QB 899 at 914-915, 920, 921, 927 ; Associated Beauty Aids Pty Ltd v FC of T (1965) 13 ATD 506 at 510; (1965) 113 CLR 662 at 669-670). The ``appointment'' authorised by cl 1(13)(ii) can only operate prospectively from the moment it is made (cf
Campbell v Strangeways (1877) 3 CPD 105 ;
Burridge v Manison (1987) 88 FLR 59 ). Accordingly, the power was exercisable only prior to the date proposed to be appointed as the new Vesting Day.

83. In my view, the appellant's submissions should be accepted.

84. On my understanding of the submissions, it is common ground that it would not be open to the Trustee to resolve to appoint a date earlier than the date on which the resolution is passed. If I am wrong about this, I would nevertheless conclude that this is the situation. If, for example, the Trustee had purported to resolve on 22 December 1987 that the Vesting Day was 1 June 1987, this (if valid) would retrospectively deprive possible beneficiaries as to income and/or corpus of the right to have their interests adverted to in at least a general way, before they are passed over in favour of others (cf
McPhail v Doulton [ 1971] AC 424 at 449 ).

85. How does the Trustee seek to meet the logic of the appellant's propositions summarised in par 64? First, it is pointed out that various powers in the deed are expressed to be exercisable ``prior to the Vesting Day'' (cll 3(1), 4(1), 6(1), 6(2), 6(3) and 7); not so cl 1(13)(ii). I do not think that this meets the appellant's submission. Cl 1(13)(ii) is very clear in its intended effect: any date earlier than 30 June 2060 is available to be appointed as the Vesting Day. But this says nothing about an attempt to appoint a date being the date of or a date prior to the date of the appointing resolution.

86. Secondly, the Trustee addresses the substance of the appellant's contention that cl 4 would effectively be defeated by permitting a wholly or partially retrospective nomination of an accelerated Vesting Day. The Trustee starts by pointing to the opening words of cl 4 (``As from the Vesting Day the Trustee shall stand possessed'', emphasis added). The Trustee submits that these words should be construed as referring to the last moment of the Vesting Day, being the first moment of the following day. The Trustee cites Associated Beauty Aids Pty Ltd v FC of T (1965) 13 ATD 506 at 509, 510, 511; (1965) 113 CLR 662 at 668-669, 669-670, 671-672.

87. Associated Beauty Aids discusses the principles of interpretation applicable to the construction of a document requiring computation of time ``from'' a named day or date. According to Barwick CJ (at ATD 509,

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CLR 668), the general rule is that time is to be computed excluding the day or date nominated, although the context may indicate otherwise. See also
Re Serafino; Ex parte Classic Manufacturing Pty Ltd (1989) 86 ALR 283 at 286-287 ,
Hughes & Anor v NM Superannuation Pty Ltd & Anor (1993) 11 ACLC 923 at 932; (1993) 29 NSWLR 653 at 667 . Neither Windeyer J nor Owen J committed themselves to such a position. Indeed, Windeyer J (at ACLC 933-934; NSWLR 669) inclined to the view that, if nothing to the contrary appears, the result of the act is operative from the first moment of the day on which the act is done ``not because the act has a retroactive effect, but because it takes effect instanter, and when a day is spoken of the law does not take cognizance of parts of a day''. See also Owen J at ACLC 935; NSWLR 671. The actual decision in Associated Beauty Aids casts no light on the issues in the present case.

88. I find it unproductive to search for or dwell unnecessarily upon what is the ``general'' rule of interpretation of ``from''. Context will be significant in displacing any general rule. One is therefore driven back to the trust deed, cl 4 in particular.

89. The Trustee points to the default provision in cl 4(2) which, if there is no valid nomination of beneficiaries before that day (cf cl 4(1)), distributes corpus to such of the Specified Beneficiaries `` as shall be living on the Vesting Day'' (emphasis added). In one sense this raises a separate issue, namely whether a person who dies on the Vesting Day is living on that day. Unaware of any authority on this point, I would have thought that the principle that fractions of a day are generally disregarded would apply, with the result that a person who is living at the start of a day is living on the day. This result fits well with cl 4(1) which, as indicated, contemplates that the capacity to appoint particular beneficiaries or to revoke a revocable nomination comes to an end at midnight on the day before the Vesting Day.

90. The Trustee submits that the 1987 resolution should be construed as speaking from the end of 22 December 1997. In the final analysis, this construction is urged because it would save an ambiguous resolution from invalidity if the appellant's submissions are correct. The problem, as I see it, with this submission is that it ignores the emphatic resolution ``that today, Tuesday 22 December 1987 be nominated as the Vesting Day''. This resolution stands separate and apart from the appointment of beneficiaries, but in a context where the Trustee in both the 1986 and the 1987 resolutions purported to nominate beneficiaries as to corpus, thereby seeking to avoid the default provisions.

91. In that specific context as well as in the context of cl 4(1) generally, the Trustee's intent was to ensure that 22 December 1987 was itself the Vesting Day, so that the terms of cl 4(1) (or if necessary cl 4(2)) would identify the corpus beneficiaries entitled to take corpus ``as from the Vesting Day'' (cl 4, opening words). The very fact that cl 4(2) picks up temporally where cl 4(1) leaves off, thereby ensuring that there is no gap reinforces the conclusion that the nominated Vesting Day was the whole of 22 December 1987, not the day following. If that attempted nomination failed because it was self- defeating, then the resolution cannot be rescued by construing it otherwise than according to its clearly expressed intent.

92. Accordingly, the attempt to accelerate the Vesting Day to 22 December 1987 failed. It is therefore unnecessary to consider whether, in that event, the Trustee thereupon became a bare trustee. It follows that the land was correctly assessed as being subject to a special trust.

Disposition

93. For these reasons I conclude that the assessments were properly made. The appeal should be allowed with costs. The orders made by Black AJ on 23 March 1998 should be set aside. The Summons should be dismissed with costs. If qualified, the respondent is to have a certificate under the Suitors' Fund Act.