ISPT NOMINEES PTY LTD v CHIEF COMMISSIONER OF STATE REVENUE (NSW)

Judges:
Barrett J

Court:
New South Wales Supreme Court

MEDIA NEUTRAL CITATION: [2003] NSWSC 697

Judgment date: 12 August 2003

Barrett J

PART 1 - INTRODUCTION

The transactions

1. At issue in these proceedings is the question whether ad valorem stamp duty became payable on two instruments of transfer of land executed on 27 January 1995. The instruments relate to land at Forster and Bondi Junction. The transferor in each case was Coles Myer Property Investments Pty Ltd (``CMPI'') and the transferee was the plaintiff, ISPT Nominees Pty Ltd (``Nominees''). Argument before me was confined to the instrument concerning the land at Forster, it being accepted by the parties that the outcome on that would also be the outcome in relation to the instrument concerning the Bondi Junction land.

2. The wider transactions in which the instruments played a part were examined by the Court of Appeal in proceedings in which the question of stamp duty liability on a basis quite distinct from that now in issue was before the court:
Chief Commr of Stamp Duties (NSW) v ISPT Pty Ltd 99 ATC 4066; (1998) 45 NSWLR 639.

3. The transaction in relation to the Forster land consisted of the following steps taken in the following order on the same day, 27 January 1995:

4. Because it will be convenient to refer from time to time to the various steps by the numbers given to them by Fitzgerald AJA in the Court of Appeal, I set out in full his Honour's description of the transaction (
99 ATC 4066 at 4078-4079; (1998) 45 NSWLR 639 at 656):

``1. ISPT Coles Myer (Forster) Property Trust (No 1) (the `Forster No 1 Trust') was established by a deed executed by CMPI and ISPT Pty Ltd (`ISPT'). ISPT was appointed trustee of the Forster No 1 Trust.

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2. Coles Myer Property Investments applied for the issue of 17,973,996 units in the Forster No 1 Trust and provided ISPT as trustee of that trust with a cheque in the sum of $17,973,996. The units applied for were issued to Coles Myer Property Investments. No other units in the Forster No 1 Trust had been issued at that time.

3. ISPT as trustee of the Forster No 1 Trust made a written offer to Coles Myer Property Investments to purchase the Forster Shopping Village for $17,973,995. The offer made provision for Coles Myer Property Investments `... to hold the property as a nominee under the deed establishing the Trust for so long as Coles Myer Property Investments remains the registered proprietor...'.

4. Coles Myer Property Investments orally accepted the offer.

5. The cheque for $17,973,996 in favour of ISPT as trustee of the Forster No 1 Trust which Coles Myer Property Investments had paid for its 17,973,996 units in that trust was then endorsed by ISPT in favour of Coles Myer Property Investments and returned to it. An overpayment of $1.00 was returned to ISPT as trustee of the Forster No 1 Trust.

6. ISPT as trustee of the Industries Superannuation Property Trust (the `ISPT Trust') and ISPT Custodians Pty Ltd (`ISPT Custodians') as trustee of the ISPT Coles Myer (Forster) Property Trust No 2 (the `Forster No 2 Trust') each applied for 8,986,998 units in the Forster No 1 Trust, and each paid for those units by a cheque for $8,986,998 in favour of ISPT as trustee of the Forster No 1 Trust. The units applied for were issued to each of ISPT as trustee of the ISPT Trust and ISPT Custodians as trustee of the Forster No 2 Trust.

7. ISPT as trustee of the Forster No 1 Trust redeemed the 17,973,996 units in that trust which had previously been issued to Coles Myer Property Investments, and endorsed the two cheques, each for $8,986,998, which it had received from ISPT as trustee of the ISPT Trust and ISPT Custodians as trustee of the Forster No 2 Trust in favour of Coles Myer Property Investments.

8. Coles Myer Property Investments resigned as the `nominee' of ISPT under the Forster No 1 Trust, and was replaced as `nominee' by ISPT Nominees.

9. The Forster Shopping Village was transferred by Coles Myer Property Investments to ISPT Nominees as the `nominee' of ISPT under the Forster No 1 Trust. The stated consideration for the transfer was `nil'.

In summary, the effect of the transaction was to transfer the legal title to the Forster Shopping Village to ISPT Nominees, and beneficial ownership of the property to a party other than Coles Myer Property Investments, which no longer has any estate or interest, legal or equitable (beneficial) in the property.''

References below to ``Step 5'', ``Step 8'', ``Step 9'' and so forth are references to the elements thus numbered by Fitzgerald AJA.

The original assessments and the challenge to them

5. On 20 April 1995, each of the transfers dated 27 January 1995 was assessed as liable to a fixed duty of $2. That duty was paid and each instrument was marked as being duly stamped. This decision was made on the footing that the transfers fell within s. 73(2A) of the Stamp Duties Act 1920. On 21 September 1995, however, the Chief Commissioner purported to issue to ISPT assessments under Division 3A of the Stamp Duties Act on the footing that ad valorem duty was payable upon or by reference to transactions involving a change in the beneficial ownership of property not- withstanding that the transaction was not by way of written instrument. ISPT objected to the assessments. The Chief Commissioner disallowed the objections, whereupon ISPT appealed to this court. Studdert J allowed the appeal:
ISPT Pty Limited v Chief Commr of Stamp Duties (NSW) 98 ATC 4084; (1997) 38 ATR 128. An appeal against Studdert J's decision was later dismissed on 23 December 1998 in the Court of Appeal proceedings to which I have already referred (Meagher JA and Fitzgerald AJA, Mason P dissenting).

The claim for further duty

6. On 22 December 1999, two notices were issued to Nominees, purportedly under s. 37(1) of the Stamp Duties Act 1920, calling for a further payment in respect of each of the instruments of transfer which had already been marked as duly stamped upon payment of duty

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of $2. In the case of Forster, the notice began as follows:

``A Real Property Act Transfer from Coles Myer Property Investments Pty Ltd (A.C.N. 050-141-654) to ISPT Nominees Pty Ltd (A.C.N. 066-648-077) (`Nominees') in respect of property known as the Forster Shopping Centre was, on 20 April 1995, assessed and stamped to duty of $2.00 under section 73(2A) of the Stamp Duties Act (the `Act').

It appearing that there has been assessed on the Transfer an insufficient amount of duty or fine, pursuant to section 37(1) of the Act, I call upon ISPT Nominees, the person on whose behalf the Transfer was properly chargeable in respect of both duty and fine at the time of stamping of same, namely $1,168,869.60 calculated as follows:...''

There was an identical notice of the same date in relation to Bondi Junction, although referring to a different amount of duty.

7. Each notice issued on 22 December 1999 (and bearing that date) was signed ``J.W. Purcell, Commissioner of State Revenue''. On 7 January 2000, two further notices were issued in order to supplement the original notices by specifying a due date for payment, being 28 January 2000. These were signed, ``S.P. Johnson, Commissioner of State Revenue''. It is not disputed that the signatories held, on the respective dates, the position of Commissioner of State Revenue or that the notices were issued by the Commissioner of State Revenue.

8. Nominees, being dissatisfied with the decision to issue the notices, lodged a written objection under s. 86 of the Taxation Administration Act 1996. Acting under s. 91, the Chief Commissioner subsequently disallowed the objection. Nominees paid the sums demanded, together with fines, but without prejudice to its rights to challenge the disallowance of the objection.

The present proceedings

9. By its summons filed on 29 March 2001, Nominees claimed the following orders:

``1. An order that the decision of the Defendant of 2 February 2001 disallowing the Plaintiff's Notice of objection dated 18 February 2000 to a notice under section 37(1) of the Stamp Duties Act 1920 purportedly issued by the Defendant dated 22 December 1999 in respect of property known as the Eastgate Shopping Centre be set aside.

2. An order that the decision of the Defendant of 2 February 2001 disallowing the Plaintiff's Notice of Objection dated 18 February 2000 to a notice under section 37(1) of the Stamp Duties Act 1920 purportedly issued by the Defendant dated 22 December 1999 in respect of property known as the Forster Shopping Centre be set aside.

3. An order that the Plaintiff's Notices of Objection dated 18 February 2000 be allowed.

4. An order that the Defendant refund the amount paid by the Plaintiff by way of stamp duty and fine pursuant to section 104 of the Taxation Administration Act 1996 together with interest.

5. Such further or other orders as the Court thinks fit.

6. Costs.''

10. The matter the subject of the fourth order, insofar as it is concerned with fines (as distinct from duty), has already been determined and disposed of by consent. As far as substantive relief is concerned, there remain the claims for the first to third orders and for the fourth as it affects duty as such. The orders are sought in exercise of the right of appeal arising under s. 96 of the Taxation Administration Act 1996. By virtue of s. 101, the party appealing (here, Nominees) has the onus of proving its case.

Core statutory provisions

11. It is necessary to refer at once to several of the relevant statutory provisions. From its enactment in 1920, the Stamp Duties Act 1920 contained, in s. 37, provisions enabling the revenue to demand further payment in cases where it appeared that insufficient duty had been assessed. As in force at the time relevant to the present proceeding, s. 37 was in the following terms:

``37 Deficient duty may be recovered

(1) If it appears that the Chief Commissioner has stamped an instrument having assessed an insufficient amount of duty or fine thereon, or erroneously or improperly put on the same a stamp denoting that it is not liable to duty or is duly stamped, the Chief Commissioner may at any time call upon the

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person on whose behalf the instrument was presented for assessment to pay the amount with which in his opinion such instrument was properly chargeable in respect of duty or fine, or both duty and fine, at the time of stamping the same.

...

(2) An amount payable under this section shall be a debt due to the Crown, and may be recovered from such person accordingly: Provided

  • (a) that such person, if dissatisfied, may object or appeal against the decision of the Chief Commissioner under section 124, the provisions of which shall, mutatis mutandis, apply, and
  • (b) that the instrument stamped under subsection (1) shall be as good and available for all purposes as though full duty and fine had been paid thereon.''

12. In 1992, the following ss. 35A to 35C were added to the Stamp Duties Act 1920:

``Stamp taken to constitute an assessment

35A For the purposes of this Act, the stamping of an instrument (excluding a return) by the Chief Commissioner is taken to be an assessment of the duty (and, where relevant, of any fine) payable under this Act in respect of the instrument.

Amendment of assessment by Chief Commissioner

35B(1) The Chief Commissioner may, in the chief Commissioner's absolute discretion, amend an assessment, except as provided by this section.

35B(2) The amendment of an assessment may be made for any reason. In particular, an amendment may be made in connection with a reduction or refund of duty under section 35C.

35B(3) The Chief Commissioner must not amend an assessment in respect of an instrument (including a return) if the Chief Commissioner is satisfied that the assessment was made in accordance with the interpretation of this Act in respect of instruments of that kind commonly applied by the Chief Commissioner at the time the assessment was made

35B(4) An application by a person for the amendment of an assessment may be made only within 2 years after the date of the assessment.

35B(5) The Chief Commissioner may amend an assessment, otherwise than on an application by a person, only within 2 years after the date of the assessment.

35B(6) More than one amendment of an assessment may be made in accordance with this section.

35B(7) It is not competent for a person to bring proceedings against the Chief Commissioner to require the Chief Commissioner to exercise the discretion under subsection (1).

35C(1) The Chief Commissioner may, in the Chief Commissioner's absolute discretion:

  • (a) reduce the amount of duty to be paid in respect of an instrument; or
  • (b) refund any amount which has been paid in respect of an instrument which is in excess of a requirement for payment under this Act,

except as provided by this section.

35C(2) The Chief Commissioner must not reduce or refund an amount in respect of an instrument if the Chief Commissioner is satisfied that the payment of the amount was made in accordance with the interpretation of this Act in respect of instruments of that kind commonly applied by the Chief Commissioner at the time the payment was made.

35C(3) An application for a reduction or refund of an amount may be made at any time within 2 years after the date of payment of the amount.

35C(4) A reduction or refund is subject to the production to the Chief Commissioner of the instrument concerned, except in the case of an instrument which has been destroyed by the Registrar-General following the registration of the instrument by the Registrar-General.

35C(5) The Chief Commissioner may refuse to make a refund is of the opinion that the person applying for the refund has passed the duty or other amount on to another

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person and the refund will not be paid to that other person.

35C(6) Instead of making a refund to a person, the Chief Commissioner may apply the amount that would otherwise be refunded to meet duty or any other amount payable (or which is likely to become payable) by the person in relation to any other instrument.

35C(7) It is not competent for a person to bring proceedings against the Chief Commissioner to require the Chief Commissioner to exercise the discretion under subsection (1).

35C(8) In this section, `instrument' includes a return.''

13. On 1 January 1997, the Taxation Administration Act 1996 came into operation. Its ss.8 and 9, so far as relevant for present purposes, were as follows:

``8. General power to make assessment

(1) The Chief Commissioner may make an assessment of the tax liability of a taxpayer.

(2) An assessment of a tax liability may consist of a determination that there is not a particular tax liability.

9. Reassessment

(1) The Chief Commissioner may make one or more reassessments of a tax liability of a taxpayer.

(2) A reassessment of a tax liability is to be made in accordance with the legal interpretations and assessment practices generally applied by the Chief Commissioner in relation to matters of that kind at the time the tax liability arose except to the extent that any departure from those interpretations and practices is required by a change in the law (whether legislative or non-legislative) made after that time.

(3) The Chief Commissioner cannot make a reassessment of a tax liability more than 5 years after the initial assessment of the liability, unless...''

14. On 1 July 1998, the Duties Act 1997 came into operation. Several aspects of that Act are relevant for present purposes. First, s. 315 and Schedule 2 caused ss. 35B and 35C of the Stamp Duties Act 1920 to be omitted. The precise way in which that was done should be noted. Section 315 provided:

``315 Amendment of Act

An Act specified in Schedule 2 is amended as set out in that Schedule.''

Schedule 2 contained, in paragraph 2.2, a sub-heading ``Stamp Duties Act 1920 No 47'' under which appeared as item [5]:

``[5] Sections 5, 6A, 8B, 8C, 9, 10, 13, 14, 19, 32, 35B, 35C, 36, 38A, 44E and 98V

Omit the sections.''

15. The second relevant change, for present purposes, effected by the Duties Act 1997 was the addition of references to both the Stamp Duties Act 1920 and the Duties Act 1997 in the definition of ``taxation laws'' in s. 4 of the Taxation Administration Act 1996. This was effected by appropriate specification through s. 315 and Schedule 2.

16. Third, s. 315 and Schedule 2 to the Duties Act 1997 added to the Stamp Duties Act 1920 the following s. 3AA:

``Section 3AA Taxation Administration Act 1996

This Act is to be read together with Taxation Administration Act 1996 which makes provision for the administration and enforcement of this Act and other taxation laws.''

17. Fourth, s. 315 of and Schedule 2 to the Duties Act 1997 caused to be omitted from the Stamp Duties Act 1920 s. 124 thereof which, so far as relevant, had provided:

``Any person liable to the payment of duty... who is dissatisfied with the assessment of the Chief Commissioner may... deliver to the Chief Commissioner a notice in writing requiring him to state a case for the opinion of the Supreme Court.''

Despite the omission of s. 124 in the Stamp Duties Act 1920, the reference to s. 124 in s. 37 remained.

18. Section 315 of and Schedule 2 to the Duties Act 1997 were afterwards repealed. Section 4 of the Statute Law (Miscellaneous Provisions) Act (No 2) 1999 enacted:

``4. Repeals

Each Act specified in Schedule 4 is, to the extent indicated in that Schedule, repealed.''

Schedule 4 contained an item as follows: 

        


    ``Name of Act               Extent of Repeal
          ...                          ...
    Duties Act 1997 No 123      Section 315 and
                                    Schedule 2''

These changes took effect on 3 December 1999.

19. Schedule 5 to the Statute Law (Miscellaneous Provisions) Act (No 2) 1999 contained certain provisions (given force by s. 5) as to the effect of amendments made by that Act. It also contained provisions as to the effect of repeals and re-enactments made by that Act. There was no provision as to the effect of repeals without re-enactment.

20. The last provision to be mentioned is s. 73(2A) of the Stamp Duties Act 1920, being the provision by reference to which Nominees contends that each instrument of transfer executed on 27 January 1995 was liable to a fixed duty of $2 only, as distinct from ad valorem duty. That section, as in force at the relevant time, was as follows:

``Where a conveyance made for nominal consideration is consequential upon the making of a decision which is recorded in writing and which has the same effect as an instrument referred to in subsection (1)(a)(i), (ii) or (iii) or the execution of such an instrument (whether the trust affected by the instrument is expressed or implied) the duty with which the conveyance is to be charged is $2 if:

  • (a) where, by the decision or the instrument upon the execution of which the conveyance is consequential, a new or additional trustee is appointed - the conveyance, upon taking effect, would operate to vest the trust property for which the new or additional trustee is appointed in the persons who become and are the trustees for performing the trust, or
  • (b) where, by the decision or the instrument upon the execution of which the conveyance is consequential, a trustee retires - the conveyance, upon taking effect, would operate to vest in the continuing trustee alone the trust property that was vested jointly in the trustee who retired and the continuing trustees, and the Chief Commissioner is satisfied:
  • (c) that, subject to subsection (2AA) of this section, none of the persons who, after the appointment of a new or additional trustee by the decision or the instrument upon the execution of which the conveyance is consequential, are the trustees for performing the trust is, or can become, a beneficiary under the trust, or
  • (d) that, subject to subsection (2AA) of this section, none of the continuing trustees remaining after the retirement of a trustee pursuant to the decision or the instrument upon the execution of which the conveyance is consequential is, or can become, a beneficiary under the trust.''

21. Section 73(1), in so far as relevant, was as follows:

``The following instruments are not to be charged with ad valorem duty as conveyances, namely:

  • (a)...
    • (i) An instrument appointing a new trustee, or
    • (ii) an instrument appointing an additional trustee, or
    • (iii) an instrument by which a trustee retires from a trust without any new trustee being appointed in his place, or
    • (iv) a declaration by an executor under section 11 of the Trustee Act 1925.''

22. It will be necessary to refer to other statutory provisions in due course. Those set out above are, however, the provisions of central relevance to the case.

PART 2 - THE CASE ADVANCED BY NOMINEES

Nominees' first basic contention

23. Nominees' case before me was based on three basic contentions, each of which involves a number of issues and sub-issues that will have to be examined in some depth.

24. Nominees' first basic contention is that the notices purportedly issued under s. 37(1) of the Stamp Duties Act 1920 on 22 December 1999 were not validly issued. The first argument advanced in support of that contention is that the Chief Commissioner was estopped from asserting the dutiability of the transfers having failed to do so in the previous

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proceedings determined by Studdert J and the Court of Appeal. This result is compelled, it is said, by the principles outlined in
Port of Melbourne Authority v Anshun Pty Ltd (1980) 147 CLR 35 or, alternatively, because the assertion of dutiability the subject of these proceedings entails an abuse of process.

25. Nominees' second argument in support of the proposition that the purported s. 37(1) notices were not validly issued is that, in issuing the notices, the Commissioner purported to act under s. 37 of the Stamp Duties Act at a time when that section was no longer in force, with the result that the notices had no legal effect. Briefly stated, that second argument runs as follows:

A similar argument, based on the enactment of ss. 35B and 35C of the Stamp Duties Act in 1992 is also advanced.

26. Nominees' third avenue of attack on the s. 37(1) notices is a variant on the second. It submits that s. 37 must be construed subject to the requirements of ss. 9(2) and 9(3) of the Taxation Administration Act, with the Stamp Duties Act and the Taxation Administration Act being read together as directed by s. 3AA of the latter. Section 9(2) of the Taxation Administration Act requires that the reassessment be in accordance with legal interpretations and assessment practices generally applied by the Chief Commissioner at the time he made the original assessment. It is said by Nominees that, because the notices of 22 December 1999 did not show that that requirement had been satisfied, they were invalid.

27. Nominees makes a fourth and final alternative submission in relation to the s. 37 notices. It submits that the notices would only be valid if issued pursuant to a delegation of authority by the Chief Commissioner, and, the statute pursuant to which the purported delegation was made having been repealed, there is no evidence of any such delegation.

Nominees' second basic contention

28. Nominees' second basic contention is that, even if the s. 37 notices were valid, each of the instruments of transfer was, by virtue of s. 73(2A) of the Stamp Duties Act, liable to only the fixed duty of $2 paid in 1995 and there was accordingly no statutory basis for demanding further payment under s. 37(1). Nominees' argument on this front is briefly as follows:

29. After I had reserved judgment and had begun to consider the submissions, I formed the view that a point briefly mentioned in argument and relevant to the second basic contention regarding s. 73(2A) required closer attention. The point is whether each instrument of transfer in which the consideration was expressed to be ``nil'' was properly regarded as a conveyance ``for nominal consideration'' as referred to in that section. I raised this matter with the parties and asked whether it was something to which the court was entitled to have regard. The defendant later filed a notice of motion seeking a declaration that the proceedings should be determined without regard to that matter. I did not accede to that application and made directions for the taking of further evidence and the making of further submissions: see
ISPT Nominees Pty Ltd v Chief Commr of State Revenue [2003] NSWSC 34. Evidence was given and submissions made on 7 February and 8 July 2003. This ``nominal consideration'' aspect is taken into account in my consideration of Nominees' second basic contention.

Nominees' third basic contention

30. Nominees' third basic contention is that the property transferred at Step 9 was of minimal value only, with the result that, if ad valorem duty is payable, it is of a negligible amount. Nominees' argument on that footing (that is, assuming that s. 73(2A) did not apply) proceeds generally as follows:

31. Each of the three basic contentions upon which Nominees relies involves a number of distinct issues. I shall examine those contentions in the order in which they are set out above, dealing with the separate issues each raises in the order that seems to flow naturally.

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PART 3 - ESTOPPEL AND RELATED MATTERS

The estoppel by omission argument

32. Nominees contends that the Chief Commissioner should have raised the question of ad valorem duty on the transfers during the proceedings heard by Studdert J and, having failed to do so, is precluded from raising it in these proceedings. This submission is based in the rule in Henderson v Henderson (1843) 3 Hare 100. In that case, Sir James Wigram VC said (at 114-115):

``In trying this question, I believe I state the rule of the court correctly, when I say, that where a given matter becomes the subject of litigation in, and of adjudication by, a court of competent jurisdiction, the court requires that parties to that litigation to bring forward their whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matter which might have been brought forward as part of the subject in contest, but which was not brought forward, only because they have, from negligence, inadvertence, or even accident, omitted part of their case. The plea of res judicata applies, except in special cases, not only to points upon which the court was actually required by the parties to form an opinion and pronounce a judgement, but to every point which properly belonged to the subject of litigation, and which the parties, exercising reasonable diligence, might have brought forward at the time.''

33. Nominees put this argument in the form of two alternative submissions: first, that the decision in
Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 prevents the dutiability of the transfers being raised in these proceedings; or, alternatively, that raising the dutiability of the transfers at this point would be an abuse of process:
Bradford & Bingley Building Society v Seddon [1999] 1 WLR 1482. As will become clear, it seems to me that Nominees' two submissions are merely different ways of putting the same argument based on the rule in Henderson v Henderson.

Abuse of process and estoppel distinguished

34. English courts have increasingly taken the view that the principle in Henderson v Henderson is an aspect of the court's inherent jurisdiction to prevent an abuse of process, rather than some species of estoppel or res judicata. In
Greenhalgh v Mallard [1947] 2 All ER 255 Somervell LJ said (at 357) that

``... res judicata for this purpose is not confined to the issues which the Court is actually asked to decide, but... covers issues... which are so clearly part of the subject matter of the litigation, so clearly could have been raised that it would be an abuse of the process of the court to allow a new proceeding to be started in respect of them.''

35. Lord Wilberforce, delivering the advice of the Judicial Committee in
Brisbane City Council v Attorney-General for Queensland [1979] AC 411, said (at 425) that the ``true basis'' of the rule was abuse of process,

``and it ought only to be applied when the facts are such as to amount to an abuse: otherwise there is a danger of a party being shut out from bringing forward a genuine subject of litigation''

36. In
Barrow v Bankside Agency Ltd [1996] 1 WLR 257 Bingham MR said (at 260):

``The rule is not based on the doctrine of res judicata in a narrow sense, nor even on any strict doctrine of issue or cause of action estoppel. It is a rule of public policy based on the desirability, in the general interest as well as that of the parties themselves, that litigation should not drag on forever and that a defendant should not be oppressed by successive suits when one would do. That is the abuse at which the rule is directed.''

37. In Bradford & Bingley Building Society v Seddon (above) Auld LJ (with whom Ward and Nourse LJJ agreed) said (at 1491):

``Although the courts have continued to speak of the rule variously as res judicata in `its wider sense' (per Lord Kilbrandon in Yat Tung Investment Co. Ltd v Dao Heng Bank Ltd. [1975] AC 581, 590A), or not in a `strict' of `true' sense (per Stuart-Smith LJ in Talbot v Berkshire County Council [1994] QB 290, 296D-E), it is quite distinct from res judicata which, save in special circumstances in the case of issue estoppel, is an absolute bar to relitigation.''

38. In Manson v Vooght [1999] BPIR 376 May LJ, delivering the leading judgment, said (at 387-388):

``In my view, the use in this context of the phrase `res judicata' is perhaps unhelpful, and this not only because it is in Latin. We

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are not concerned with cases where a court has decided the matter; but rather cases where the court has not decided the matter, but where in a (usually late) succeeding action someone wants to bring a claim which should have been brought, if at all, in earlier concluded proceedings. If in all the circumstances the bringing of the claim in the succeeding action is an abuse, the court will strike it out unless there are special circumstances. To find that there are special circumstances may, for practical purposes, be the same thing as deciding that there is no abuse, as Sir Thomas Bingham MR came close to holding on the facts in Barrow v Bankside Agency Ltd [1996] 1 WLR 257. The bringing of a claim which could have been brought in earlier proceedings may not be an abuse. It may in particular cases be sensible to advance cases separately. It depends on all the circumstances of each case. Once the court's consideration is directed clearly towards the question of abuse, it will be sent that the passage from Sir James Wigram V-C's judgment in Henderson v Henderson 3 Hare 100 is a full modern statement of the law so long as it is not picked over semantically as if it were a tax statute.''

39. The House of Lords has confirmed the rule's basis in abuse of process as opposed to res judicata or issue estoppel:
Johnson v Gore Wood & Co [2001] 2 WLR 72 at 89-90 per Lord Bingham of Cornhill (with whom Lord Goff of Chievely, Lord Cooke of Thorndon and Lord Hutton agreed on the abuse of process of point).

Abuse of process - the United Kingdom approach

40. The application of the Henderson rule in English courts reached its high point in Yat Tung Investment Co Ltd v Dao Heng Bank Ltd [ 1975] AC 581, where Lord Kilbrandon said that a claim that ``could and therefore should'' have been made in proceedings could not be later brought. English courts have since retreated from this high-water mark.

41. Before Yat Tung was decided Somervell LJ, in
Greenhalgh v Mallard [1947] 2 All ER 255, described (at 257) the abuse as covering

``issues or facts which are so clearly part of the subject-matter of the litigation and so clearly could have been raised that it would be an abuse of the process of the court to allow a new proceeding to be started in respect of them.''

Then, in Yat Tung, Lord Kilbrandon said, at 589-590:

``The second question depends on the application of a doctrine of estoppel, namely res judicata. Their Lordships agree with the view expressed by McMullin J that the true doctrine in its narrower sense cannot be discerned in the present series of actions, since there has not been, in the decision in no 969, any formal repudiation of the pleas raised by the appellant in no 534. Nor was Choi Kee, a party to no 534, a party to no 969. But there is a wider sense in which the doctrine may be appealed to, so that it becomes an abuse of process to raise in subsequent proceedings matters which could and therefore should have been litigated in earlier proceedings.''

42. A similar approach was taken in
Talbot v Berkshire County Council [1994] QB 290. That case arose out of a motor vehicle accident. The passenger sued the driver and the county council. Damages were apportioned between the two defendants. The driver then brought a claim in respect of his own injuries against the council. The question to be determined was whether the driver's claim against the council was abusive of process. Stuart-Smith LJ said (at 298):

``There can be no doubt that the [driver's] personal injury claim could have been brought at the time of [the passenger's] action. It could have been included in the original third party notice issued against the council (RSC Ord 16, r 1(b)(c)); it could have been started by a separate writ and consolidated with or ordered to be tried with [ the passenger's] action: Ord 4, r 9. The third party proceedings could have been amended at any time before trial and perhaps even during the trial to include such a claim notwithstanding that ti was statute- barred, since it arose out of the same or substantially the same facts as the cause of action in respect of which relief was already claimed, namely, contribution or indemnity in respect of [the passenger's] claim: Ord 20, r 5. In my opinion, if it was to be pursued, it should have been so brought.''

43. It should be noted that Lord Kilbrandon's formulation that a claim that ``could and therefore should'' have been made in earlier

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proceedings cannot subsequently be made is contrary to
Kok Hoong v Leong Cheong Kweng Mines Ltd [1964] AC 993 where the defendant was allowed to raise defences that might previously been raised in proceedings in which the plaintiff obtained default judgment.

44. Since these cases there has been an apparent retreat, in the United Kingdom, from the position that a claim will necessarily be barred if it ``could and therefore should'' have been brought in earlier proceedings. In Bradford & Bingley Building Society v Seddon (above) Auld LJ (with whom Ward and Nourse LJJ agreed) said (at 1492-1493):

``In my judgement mere `re'-litigation, in circumstances not giving rise to cause of action or issue estoppel, does not necessarily give rise to abuse of process. Equally, the maintenance of a second claim which could have been part of an earlier one, or which conflicts with an earlier one, should not, per se, be regarded as an abuse of process. Rules of such rigidity would be to deny its very concept and purpose. As Kerr LJ and Sir David Cairns emphasised in Bragg v Oceanus Mutual Underwriting Association (Bermuda) Ltd [1982] 2 Lloyd's Rep. 123, 137, 138-139 respectively, the courts should not attempt to define or categorise fully what may amount to an abuse of process: see also per Stuart-Smith LJ in Ashmore v British Coal Corporation [1990] 2 QB 338, 352. Sir Thomas Bingham MR underlined this in Barrow v Bankside Agency Ltd [ 1996] 1 WLR 257, stating, at p. 263B, that the doctrine should not be `circumscribed by unnecessarily restrictive rules' since its purpose was the prevention of abuse and it should not endanger the maintenance of genuine claims: see also per Saville LJ, at p. 266D-E.

Some additional element is required, such as a collateral attack on a previous decision (see, e.g. Hunter v Chief Constable of the West Midlands Police [1982] AC 529; Bragg's case [1982] 2 Lloyd's Rep. 132, per Kerr LJ and Sir David Cairns, at pp. 137 and 139 respectively, and Ashmore's case [1990] 2 QB 338), some dishonesty (see e.g. per Stephenson LJ in Bragg's case, at p. 139 and Potter LJ in Morris v Wentworth-Stanley [ 1999] 2 WLR 470, 480 and 481; or successive actions amounting to unjust harassment (see eg Manson v Vooght, The Times, 20 November 1998; Court of Appeal (Civil Division) Transcript No. 1610 of 1998, per May LJ).''

45. One final important point made in Bradford & Bingley Building Society v Seddon should be noted. The Court of Appeal, having characterised the rule in Henderson v Henderson as a form of avoiding abuse of process, considered that the party raising the issue bore the onus of establishing it, and that the court should exercise caution before striking out claims on this basis (see at 1496).

46. The House of Lords revisited the issue in Johnson v Gore Wood & Co, holding that an ``additional element'' was not necessary for the rule in Henderson v. Henderson to apply. In Johnson v Gore Wood & Co the plaintiff had previously brought proceedings against the defendants in the name of a company that he operated and in which he held all but two of the issued shares. The defendants applied to have the new claim by the plaintiff personally struck out as an abuse of process. Lord Bingham of Cornhill (with whom Lord Goff of Chievely, Lord Cooke of Thorndon and Lord Hutton agreed on the abuse of process point) outlined the approach to be taken when applying the rule in Henderson v Henderson. His Lordship said (at 90):

``But Henderson v Henderson abuse of process, as now understood, although separate and distinct from cause of action estoppel and issue estoppel, has much in common with them. The underlying public interest is the same: that there should be finality in litigation and that a party should not be twice vexed in the same matter. This public interest is reinforced by the current emphasis on efficiency and economy in the conduct of litigation, in the interests of the parties and the public as a whole. The bringing of a claim or the raising of a defence in later proceedings may, without more amount to abuse if the court is satisfied (the onus being on the party alleging abuse) that the claim or defence should have been raised in the earlier proceedings if it was to be raised at all. I would not accept that it is necessary, before abuse may be found, to identify any additional element such as collateral attack on a previous decision or some dishonesty, but where those elements are present the later proceedings will be must more obviously abusive, and there will

ATC 4710

rarely be a finding of abuse unless the later proceeding involves what the court regards as unjust harassment of a party. It is, however, wrong to hold that because a matter could have been raised in earlier proceedings it should have been, so as to render the raising of it in later proceeding necessarily abusive. That is to adopt too dogmatic an approach to what should in my opinion be a broad, merits-based judgement which takes account of the public and private interests involved and also takes account of all the facts of the case, focusing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before. As one cannot comprehensively list all possible forms of abuse, so one cannot formulate any hard and fast rule to determine whether, on given facts, abuse is to be found or not.... While the result may often be the same, it is in my view preferable to ask whether in all the circumstances a party's conduct is an abuse than to ask whether the conduct is an abuse and then, if it is, to ask whether the abuse is excused or justified by special circumstances. Properly applied, and whatever the legitimacy of its descent, the rule has in my view a valuable part to play in protecting the interests of justice.''

47. The following propositions thus arise out of his Lordship's judgment:

48. Other cases that reflect the apparent retreat from Lord Kilbrandon's statement that Henderson v Henderson excluded matters which ``could and therefore should'' have been litigated in earlier proceedings include The Penelope II [1980] 2 Lloyd's Rep 17 at 19, The Mekhanik Evgrafov [1988] 1 Lloyd's Rep 330 and Arnold v National Westminster Bank plc [ 1990] Ch 573 at 593, 596, 600.

49. Because of High Court authority to which I am about to come, it is not appropriate for me simply to adopt the United Kingdom approach. However, I consider that approach to be instructive insofar as it reveals a rejection of the notion (obviously relevant to the present case) that a matter cannot be raised if it ``could and therefore should'' have been raised in earlier proceedings. Moreover, when applying the test emerging from High Court authority, the comments of the House of Lords in Johnson v Gore Wood & Co regarding the desirability of a ``broad, merits-based approach'' taking account of ``all the circumstances'' should be borne in mind.

Abuse of process - the Australian approach

50. I turn immediately to the decision of the High Court in
Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589. That case concerned injury arising out of the use of a crane owned by the Port of Melbourne Authority and hired by Anshun Pty Ltd. The agreement for hire provided that Anshun indemnify the Authority against any claims made against it arising out of the use of the crane. The injured worker claimed against both Anshun and the Authority. The latter failed to raise the indemnity as a defence. Damages were awarded against both defendants. The Authority then brought a claim against Anshun based on the indemnity. Anshun, relying on Henderson v Henderson, sought to have the proceeding struck out. The notion that Henderson v Henderson operated to bar a claim that ``could and therefore should'' have been brought in

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earlier proceedings was rejected by a majority of the High Court, and an unreasonableness test was adopted. Gibbs CJ, Mason and Aickin JJ said (at 601):

``However in Yat Tung [[1975] AC 581] the adoption of the principle in Henderson v Henderson [(1843) 3 Hare 100] was taken too far. Lord Kilbrandon spoke of it becoming `an abuse of process to raise in subsequent proceedings matters which could and therefore should have been litigated in earlier proceedings' [[1975] AC, at p. 590]. As we have seen, this statement is not supported by authority. And if we are to discard the traditional statement of principle [ in Henderson v Henderson] because it was linked to the rules of common law pleading, there is no reason for rejecting the powerful arguments based on considerations of convenience and justice which were associated with it.

Lord Kilbrandon's remarks go further than the statement of Somervell LJ in Greenhalgh v Mallard [[1947] 2 All ER 255, at p. 257] which was recently approved by Lord Wilberforce in Brisbane City Council [[1979] AC, at p. 425]. Somervell LJ had said: `res judicata for this purpose is not confined to the issues which the court is actually asked to decide, but... it covers issues or facts which are so clearly part of the subject-matter of the litigation and so clearly could have been raised that it would be an abuse of the process of the court to allow a new proceeding to be started in respect of them'. Yet Greenhalgh v Mallard and Brisbane City Council, unlike Yat Tung, were not cases in which the alleged estoppel arose from a defendant's failure to plead a defence. They were cases in which it was argued that a plaintiff was estopped from bringing a new proceeding by reason of the dismissal of an earlier action.

In these cases in applying the Henderson v Henderson principle to a plaintiff said to be estopped from bringing a new action by reason of the dismissal of an earlier action, Somervell LJ and Lord Wilberforce insisted that the issue in question was so clearly part of the subject matter of the initial litigation and so clearly could have been raised that it would be an abuse of process to allow a new proceeding. Even then the abuse of process test is not one of great utility. And its utility is no more evident when it is applied to a plaintiff's new proceeding which is said to be estopped because the plaintiff omitted to plead a defence in an earlier action.

In this situation we would prefer to say that there will be no estoppel unless it appears that the matter relied upon as a defence in the second action was so relevant to the subject matter of the first action that it would have been unreasonable not to rely on it. Generally speaking, it would be unreasonable not to plead a defence if, having regard to the nature of the plaintiff's claim, and its subject matter it would be expected that the defendant would raise the defence and thereby enable the relevant issues to be determined in the one proceeding. In this respect, we need to recall that there are a variety of circumstances, some referred to in the earlier cases, why a party may justifiably refrain from litigating an issue in one proceeding yet wish to litigate the issue in other proceedings e.g. expense, importance of the particular issue, motives extraneous to the actual litigation, to mention but a few. See the illustrations given in Cromwell v County of Sac. [(1876) 94 US [24 Law Ed, at p. 199]].''

Their Honours continued (at 603-604):

``The likelihood that the omission to plead a defence will contribute to the existence of conflicting judgments is obviously an important factor to be taken into account in deciding whether the omission to plead can found an estoppel against the assertion of the same matter as a foundation for a cause of action in a second proceeding. By `conflicting judgments' we include judgments which are contradictory, though they may not be pronounced on the same cause of action. It is enough that they appear to declare rights which are inconsistent in respect of the same transaction.

It is for this reason that we regard the judgment that the Authority seeks to obtain as one which would conflict with the existing judgment, though the new judgment would be based on a different cause of action, a contractual indemnity.''

51. The statement by Gibbs CJ, Mason and Aickin JJ that ``the abuse of process test is not one of great validity'' merits further attention. At first blush it appears that Gibbs CJ, Mason

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and Aickin JJ rejected the notion that Henderson v Henderson had come to have its basis in abuse of process. Their Honours' statement must, however, be viewed in the context of their wholesale rejection of the formulation preferred by Lord Kilbrandon in Yat Tung. In referring to ``the abuse of process test'', their Honours were, it seems, specifically referring to the test adopted by Lord Kilbrandon in Yat Tung (ie whether the matter ``could and therefore should'' have been raised in earlier proceedings), and were not disputing that the rule in Henderson v Henderson has its basis in abuse of process. They then proceeded to state their own test (ie whether the matter is ``so relevant to the subject matter of the first action that it would have been unreasonable not to rely on it''). Viewed in this way, the majority judgment in Anshun is consistent with United Kingdom jurisprudence. Ormiston JA, writing extra-judicially has adopted this approach saying (``Abuse of Process, Anshun and the Criminal Law - A Commentary'' (1997) 71 ALJ 942 at 944):

``The difficulty about any such historical explanation of the majority's apparent distaste for applying abuse of process in Anshun is that the judges who formed the majority were well aware of the extent to which courts, particularly English courts, had relied upon abuse of process in this area of the law. As explained by Handley JA in his third edition of Spencer Bower, Turner & Handley on Res Judicata the extended doctrine is `based on abuse of process' [ paragraph 443]. (See generally his discussion at pars 443-454.) Despite the comments in the passage quoted above from their judgment I would doubt that the majority in Anshun intended to say that the principle they extrapolated from Henderson and subsequent cases was not founded on the inherent jurisdiction of the court to prevent abuse of its processes, but they intended to say, rather, that merely incanting the words `abuse of process' was not a useful test for determining in what circumstances a party would be shut out from raising a particular case. It is unlikely that they intended to disapprove the passage cited from Somervell LJ's judgment in Greenhalgh v Mallard [[1947] 2 All ER 255]. He had said that the principle covered

`issues or facts which are so clearly part of the subject matter of the litigation and so clearly could have been raised that it would be abuse of the process of the Court to allow a new proceeding to be taken in respect of them'

[ibid at 257].

It was only the extension by Lord Kilbrandon in Yat Tung Investment Co Ltd v Dao Heng Bank Ltd [[1975] AC 581 at 590] which the majority disapproved.''

52. Handley JA, writing extra-judicially, has also adopted this approach to Anshun estoppel (KR Handley, ``Anshun Today'' (1997) 71 ALJ 934). His Honour said (at 934), ``In the language of the stud book, one might say that Anshun was by abuse of process out of Henderson v Henderson''. He later said (at 940):

``The extended doctrine applied in Anshun is based on the court's inherent jurisdiction to prevent abuse of its process by proceedings which are vexatious, that is, unreasonable. This, one would suppose, was the basis for the reasonableness test in Anshun.''

53. The reasonableness test set out in Anshun has been explained and refined in several decisions. In Rahme v Commonwealth Bank of Australia (unreported, NSWCA, 20 December 1991), the Court of Appeal was called upon to decide the question that arises in the instant case, viz, whether failure to plead a cause of action in previous proceedings precludes its being raised subsequently. In that case, the plaintiffs had brought an action for damages arising out of a foreign currency loan transaction. They relied on several causes of action. After the action failed they commenced a second set of proceedings, relying on the Contracts Review Act 1980, which had not been raised in the first proceedings. The defendant pleaded the Anshun principle and was successful at trial and on appeal. Priestley JA (with whom Meagher JA and Hope AJA agreed) analysed the application of Anshun to cases in which a new cause of action was sought to be raised subsequently to proceedings concerning the same set of facts. His Honour formulated the following propositions:

``1, that Wigram VC's extended principle as stated in Henderson is accepted as good law by the High Court; 2, that that principle applies, inter alia, to category (3) cases, that is to a proceeding in which a party is

ATC 4713

asserting a cause of action which could have been raised, but was not, in a previous proceeding in which the same party was asserting a different cause of action based on substantially the same facts against the same party as the second principle is being brought; and 3, that the extended principle of Henderson will be applied to the second proceeding when it was unreasonable for the party asserting the cause of action in that second proceeding to refrain from raising it in the earlier proceeding against the same opponent party.''

54. His Honour then applied those propositions to the case before the Court of Appeal, saying that the relevant question was:

``whether the claim sought to be raised in the Supreme Court under the Contracts Review Act (a) could have been raised in the Federal Court proceedings and (b) raised matters so clearly part of the subject matter of the Federal Court proceedings that it was unreasonable on the part of the appellants not to have raised that claim in those proceedings.''

The Court of Appeal held that the plaintiffs could have raised the Contracts Review Act in the previous proceedings, and that their failure to do so was unreasonable. Accordingly, Anshun applied to prevent the Contracts Review Act being raised in the second proceedings.

55. In
Bryant v Commonwealth Bank of Australia (1995) ATPR ¶41-421; (1995) 57 FCR 287, the Full Federal Court applied Rahme to a case in which the defendants in certain proceedings subsequently raised a claim against the plaintiffs that could have been raised by way of cross-claim in the previous proceedings. The Court said (at ATPR 40,752; FCR 298) that:

``... where, as here, a defendant's claim is intimately connected with that of the plaintiff, in the sense that each arises, substantially, out of the same matters of fact, there is every reason to require that both be litigated at the one time; thereby minimising costs and avoiding the possibility of inconsistent judgments (cf Federal Court of Australia Act 1976, s. 22).''

56. The application of the Anshun unreasonableness test was further discussed by the Full Court of the Federal Court in
Ling v Commonwealth (1996) 68 FCR 180. Wilcox J (with whom Whitlam J agreed) said (at 184):

``In considering reasonableness, as it seems to me, consideration must be given to all aspects of the case. They include the extent of the overlap between the facts underlying each claim; the greater the overlap, the easier it is to argue that it was unreasonable not to raise the matter in the first case. They also include any difficulties that existed, or might reasonably have been perceived, in raising the matter earlier.''

57. The decision in Ling concerned the plaintiff's failure to bring his claim as a cross- claim in earlier proceedings in the Federal Court. The Court held that the failure was not unreasonable, because the claim could not have been instituted in the Federal Court, and would have had to have been brought in the Supreme Court in reliance on the exercise of a discretionary power of remittal to the Federal Court.

58. In Ling, Sundberg J (with whom Wilcox and Whitlam JJ agreed) took the view that the ``special circumstances'' exception in Wigram VC's formulation should not be treated as an exception at all, but should, instead, form part of the analysis of the relevant unreasonableness. In other words, rather than determining whether the rule in Henderson applies prima facie and then determining whether there are special circumstances that exclude the rule, the Court took the view that the existence of special circumstances was a factor to take into account in determining whether the rule applied in the first place. His Honour noted (at 194) that the Privy Council in Yat Tung ``appears to have considered `special circumstances' as an issue separate from `unreasonableness'''. His Honour then said (at 195, referring to Yat Tung):

``The Board's example seems to be one to which the rule would not apply at all, rather than a special circumstance requiring the non-application of the rule. On Lord Kilbrandon's own formulation, the rule does not apply unless reasonable diligence would have caused a matter to be raised. A party who is unaware of the facts which answer a claim, and could not reasonably be expected to be aware of them, would not be held to have failed to exercise reasonable diligence, or to have acted unreasonably, in not raising the answer.

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I prefer to approach the matter as the High Court appears to have done and that is simply to ask whether the appellant's failure to raise his grievance in the Commonwealth proceeding was unreasonable. For the reasons I have given, I do not think it was, and accordingly I do not consider he is estopped from now litigating his negligence claim.''

This is consistent with the approach taken by the House of Lords in Johnson v Gore Wood & Co.

Unadjudicated causes of action remain available

59. It is a general principle that an unadjudicated cause of action may be brought despite a party's failure to raise it in earlier proceedings. This being so, Anshun, insofar as it relates to causes of action (as opposed to defences), must be regarded as operating to limit the scope of that general principle. In
Tanning Research Laboratories Inc v O'Brien (1990) 8 ACLC 248; (1990) 169 CLR 332 Brennan and Dawson JJ said (at ACLC 257; CLR 346):

``A plaintiff who has an unadjudicated cause of action which can be enforced only in fresh proceedings (Duedu v Yiboe (1961) 1 WLR 1040 at p. 1046) cannot be precluded from taking fresh proceedings merely because he could have and, if you will, should have counter-claimed on that cause of action in a forum chosen by the opposite party in proceedings in which the opposite party sued him. We do not read the majority judgment in Port of Melbourne Authority v Anshun Pty Ltd as holding to the contrary, except in a case where the relief claimed in the second proceeding is inconsistent with the judgment in the first: see especially at pp. 599-601.''

60. As author of the third edition of Spencer Bower's Res Judicata, 1996, Handley JA said (at 265)

``Despite statements in Talbot v Berkshire CC [[1994] QB 290, CA, para 288, different causes of action arising out of the same factual context which have not been adjudicated upon may not be barred in later proceedings as an abuse of process. There is a substantial body of authority to the contrary. Thus a judgment in trespass is no bar to an action in conversion [Lacon v Barnard (1626) Cro Car 35]; judgment for assault and false imprisonment did not bar an action for malicious prosecution [Guest v Warren (1854) 9 Exch 378 at 383]; judgment for the plaintiff in replevin was no bar to an action for trespass to the land on which the goods were seized [Gibbs v Cruikshank (1873) LR 8 CP 454], and judgment for damages to the plaintiff's cab did not bar an action for his personal injuries [ Brunsden v Humphrey (1884) 14 QBD 141].''

61. His Honour has elsewhere said (``Anshun Today'', above, at 940):

``There is substantial authority for the view that a cause of action which has not been adjudicated upon will still be available, although it could have been joined in earlier proceedings, provided it is not substantially the same as any then adjudicated. This point was made by Brennan and Dawson JJ in Tanning Research Laboratories [(1990) 169 CLR 332]. Familiar examples include Brunsden v Humphrey [(1884) 14 QBD 141], where the [English] Court of Appeal held that an action could be brought for personal injuries after proceedings for the recovery of property damage, and The Oropesa [[1943] P 32], where the [English] Court of Appeal held that parents of a deceased seaman could bring an action under the Fatal Accidents Act 1846 after an action to recover for loss to his estate. Presumably the second action in these cases did not arise out of substantially the same facts as the first.

Other recent authority includes Trawl Industries v Effem Foods [(1992) 36 FCR 406 at 422], where Gummow J held that an action for breach of s. 52 of the Trade Practices Act 1974 barred an action for negligent misrepresentation at common law which arose out of substantially the same facts.''

62. The effect of Anshun in Australia is that a party may bring an unadjudicated cause of action provided that it is not ``so relevant to the subject matter of the first action that it would have been unreasonable not to rely on it'' in the first action.

The position in this case

63. The question whether preclusionary principles apply here makes necessary an

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examination of the source and course of the previous litigation. The following summary is taken from the judgment of Studdert J (
98 ATC 4084; (1997) 38 ATR 128), with some explanatory material added in brackets [at 4088-4089]:

``The affidavit of Miss Chang reveals that on 6 March 1995 the transfers [i.e, the transfers at Step 9 in Fitzgerald AJA's description]... were submitted to the Commissioner for Stamp Duties for stamping and in that and subsequent letters and meetings the plaintiff's [i.e, ISPT's] liability for stamp duty was debated. On 16 March 1995 the Commissioner made it plain by letter that it considered duty was payable under Division 3A of the statute and on 27 March 1995 the plaintiff [ISPT], through its solicitors, lodged with the defendant a cheque for $3,151,839, being the calculated duty if the Commissioner's contention was correct. This payment was made with the express purpose of avoiding any possible penalties for late payment should it ultimately be determined that duty was attracted in respect of the acquisitions of these two properties.

The Commissioner was invited to issue his assessment under s 127B of the Stamp Duties Act so that in due course the plaintiff [ ISPT] could be afforded the opportunity of objection and appeal in accordance with the machinery provided in Part 5 of the statute.

In his letter dated 7 April 1995, in which it acknowledged receipt of the cheque abovementioned, the Commissioner wrote:

`Based on the information furnished each of the transactions conducted on 27 January 1995 concerning the Eastgate Trust and the Forster Trust triggered the provisions of Division 3A of the Stamp Duties Act (``Act'') and as a result a statement is required to be lodged with the Commissioner in respect of each transaction in accordance with the provisions of Section 44A(1) of the Act. However, to accommodate your concerns that the lodgement of a statement may be interpreted as an acknowledgement of the need to comply with the provisions of Division 3A of the Act, I am prepared to defer the requirement to lodge a statement for each of the said transactions, without the imposition of any penalties that would otherwise accrue under the provisions of Section 44E of the Act.

Subject to the Eastgate property having a value which did not exceed the consideration of $37,859,745 the duty payable on the transaction that took place on 27 January 1995 between the above- mentioned parties is estimated at $2,177,779. It is acknowledged that the said duty was paid within two months of 27 January 1995.

Similarly, subject to the Forster property having a value which did not exceed the consideration of $17,973,995, the duty payable on the transaction that took place on 27 January 1995 is estimated at $974,060. It is acknowledged that such duty was paid within two months of 27 January 1995.'

On 2 June 1995 the Commissioner again wrote to the plaintiff's [ISPT's] solicitors and on this occasion his letter, inter alia, stated:

`From the information furnished I am of the opinion that the transaction that took place on 27 January 1995 between Coles Myer Property Investments Pty Limited and ISPT Pty Limited as trustee of the ISPT Coles Myer (Eastgate) Property Trust (No. 1), triggered the provisions of Division 3A of the Stamp Duties Act (``Act''). As a result a statement is required to be lodged with the Commissioner in accordance with the provisions of Section 44A(1) of the Act.'

Section 35B authorises the Chief Commissioner in his absolute discretion to amend an assessment at any time within two years after the date of the original assessment. On 21 September 1995 the Commissioner wrote to the plaintiff's [ ISPT's] solicitors:

`The assessments purportedly made by my letters of 7 April 1995 and 2 June 1995 are hereby amended under section 35B of the Act.

It is considered that contracts for sale and purchase of land, created by acceptance of the written offers dated 27 January 1995, caused or resulted in a change in

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the beneficial ownership of land situated in New South Wales. ISPT, being a party to those transactions who would have been liable to pay duty if such transactions had been effected or evidenced by an instrument liable to ad valorem duty under the heading ``Conveyances of any property'', is required to lodge 2 statements under section 44A. As ISPT has failed to lodge such statements, duty has been assessed in accordance with section 127B.'

The plaintiff [ISPT] promptly lodged notice of objection to the assessment dated 20 October 1995, in compliance with s 124 of the Stamp Duties Act in each case. By letter dated 22 February 1996 the Commissioner advised that the objection taken in each case had been disallowed. Hence the matter has come before this court pursuant to s 124A of the Stamp Duties Act:

`124A(1) An appeal to the Supreme Court under this Part is by way of rehearing the original objection to the Chief Commissioner and is limited to the grounds of the original objection.'''

64. Having heard and determined ISPT's appeal under s. 124A, Studdert J made two orders as sought in the summons before him [at 4085]:

``1. An order that the decision of the Defendant of 22 February 1996 disallowing the Plaintiff's Notice of Objection dated 20 October 1995 to a notice of assessment by the Defendant dated 21 September 1995 be set aside.

2. An order that the Plaintiff's Notice of Objection be allowed.''

65. In the result, therefore, the decision of Studdert J, left intact by the Court of Appeal (which simply dismissed the appeal), was that ISPT was not required to lodge with the Chief Commissioner a statement with respect to a transaction which caused or resulted in a change in the beneficial ownership of land. That is the position that prevailed on and after 23 December 1998 when the Court of Appeal decision was given.

66. In the present proceedings, of course, the Chief Commissioner is not the plaintiff; nor was the Chief Commissioner the plaintiff in the earlier proceedings. In each case, a person subjected to levying of tax by the Chief Commissioner resorted to the statutory jurisdiction of the court in an attempt to reverse a decision of the Chief Commissioner as to the person's liability. In the earlier case, that party was ISPT. In this case, it is Nominees.

67. These circumstances are sufficient, in my view, to make inapplicable to this case the kinds of barriers that arise from the High Court's decision in Anshun. The separate identities of ISPT and Nominees might not, of themselves, be sufficient to forestall the operation of Anshun principles: see, in particular, the observations of Lord Bingham of Cornhill in Johnson v Gore Wood & Co at 91 concerning an individual and a company that was his ``corporate embodiment''. More powerful is the point that the Chief Commissioner did not at any point seek to invoke the jurisdiction of the court. He did not need to do so. The statute put at his disposal machinery enabling him to cause a debt to arise and to subsist unless and until the effect of his administrative act was negated by another statutory provision activated by an order of the court obtained at the suit of the debtor. The Chief Commissioner might have approached the court for relief had the debt not been paid. In the events that happened, however, there was no occasion for him to do so and his role in each proceeding was as a defendant seeking to resist the making of an order challenging particular administrative action taken by him in relation to a particular person.

68. I regard the present circumstances as distinguishable from
DFC of T v Chamberlain 90 ATC 4153; (1990) 26 FCR 221. That was a case in which the revenue sued to recover tax and, after judgment had been entered by consent, sought to have that judgment set aside so that the proceedings could continue as a basis for claiming a greater sum (being the sum originally assessed) than the sum claimed when the proceedings were commenced and to which the consent judgment extended (being a sum apparently resulting from a clerical error).

69. Similar considerations do not attend a situation such as the present where the revenue first invokes one head of taxation liability by way of administrative action against one person and later invokes another head of taxation liability by way of separate administrative action against another person. This is particularly so where, although both actions are taken by reference to the same set of facts or

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sequence of events, one fixes upon one element of the total matrix (the supposed change in beneficial ownership of land effected otherwise than by instrument of transfer) and the other fixes upon a different element (an instrument of transfer as such).

70. This conclusion is strengthened by reference to a principle referred to by Hamilton J in
Oamington Pty Ltd & Anor v Commr of Land Tax & Anor 98 ATC 5051, namely, that no conduct of a revenue authority can estop the operation of the taxing statute. In stating that principle, Hamilton J referred to
Maritime Electric Company Ltd v General Davies Ltd [1937] AC 610, which he described as:

``a case in which a private company was treated as a public utility by a statute which stipulated the rates at which electricity was to be charged for. The respondent was charged and paid at wrong rates and acted to its detriment in assuming those rates to be correct.''

71. In Maritime Electric the House of Lords held that an estoppel should not be enforced for reasons of public policy, on the basis that it was of general benefit to society that the revenue statute be complied with. In
Thrasyvoulou v Secretary of State for the Environment [1990] 2 AC 273, Lord Bridge said (at 289)

``It is well established that a statutory body cannot by contract fetter its own freedom to perform its statutory duties or exercise its statutory powers and by parity of reasoning it has been held that no such fetter can arise from an estoppel by representation: see Maritime Electric Co Ltd v General Dairies Ltd [1937] AC 610 and Southend-on-Sea Corporation v Hodgson (Wickford) Ltd [ 1962] 1 QB 416.''

72. It is pertinent, in this connection, to refer to statements in the High Court on this matter. In
Chamberlain v DFC of T 88 ATC 4323; (1988) 164 CLR 502, Deane, Toohey and Gaudron JJ said (at ATC 4327; CLR 510):

``... it may well be that no conduct on the part of the Commissioner can operate as an estoppel against the operation of the Act: FC of T v Wade (1951) 84 CLR 105 at p 117. It is equally true that the Commissioner is not bound by a determination made in respect of an assessment for one year, so far as other years are concerned: Caffoor v IR Commr (1961) AC 585 at pp. 598-601. Likewise there can be no issue estoppel against the operation of a statute which creates public rights and duties or which enacts imperative provisions: Bradshaw v M'Mullan (1920) 2 I.R. 412 at pp. 425-426; Griffiths v Davies (1943) KB 618; Kok Hoong v Leong Cheong Kweng Mines Ltd (1964) AC 993 at pp. 1015-1017.

All this may be accepted for the purposes of the present appeal but it has little to do with the question at issue.''

73. This passage was referred to in
FC of T v Ryan 2000 ATC 4079; (2000) 201 CLR 109 as the basis for the following statement by Gleeson CJ, Gummow and Hayne JJ (at ATC 4084; CLR 124):

``... Further, insofar as the argument seeks to suggest that the Commissioner should be precluded from assessing what is due, it is a proposition that encounters the serious difficulties that lie in the way of applying doctrines of estoppel in circumstances of this kind, Chamberlain v DFC of T
88 ATC 4323 at 4327; (1988) 164 CLR 502 at 510 per Deane, Toohey and Gaudron JJ; FC of T v Wade
(1951) 9 ATD 337 at 344; (1951) 84 CLR 105 at 117 per Kitto J; Maritime Electric Co v General Dairies Ltd [1937] AC 610.''

74. In the light of these observations, White J (with whom de Jersey CJ and Jerrard JA agreed) said in
Commr of Stamp Duties (Qld) v Agenti Architects Pty Ltd & Ors 2003 ATC 4625 at 4631 [28]; [2003] QCA 265 (at [28]):

``... More importantly, no representation or estoppel can operate against the imperative provisions of the Stamp Act.''

75. It follows that, even if the actions of the Chief Commissioner in 1995 led the parties to believe that adoption of the basis of assessment founded on Division 3A of the Stamp Duties Act was the only way in which exaction of duty would be pursued, that would not prevent assertion of some other statutory basis subsequently. Significantly, however, the documents in evidence show that no such representation was made. The revenue made it clear in its letter of 16 March 1995 (referred to in the first paragraph of the extract from Studdert J's judgment at paragraph [63] above) that, if the claim for duty under Division 3A was ``successfully defended'', there would be

ATC 4718

an alternative claim on the basis that the s. 73(2A) exemption did not apply.

76. My conclusion on this aspect of the case is that no form of estoppel precluded the Chief Commissioner from making, by means of the notices purportedly issued under s. 37(1) of the Stamp Duties Act, the claims for payment challenged by Nominees in these proceedings.

PART 4 - IMPLIED REPEAL AND RELATED MATTERS

Submissions - implied repeal

77. The medium through which the Chief Commissioner sought to invoke s. 37 of the Stamp Duties Act 1920 was the notices issued to Nominees on 22 December 1999. At that time, s. 37 remained part of the text of the Act of 1920 but, in Nominees' submission, had been either repealed or given a modified operation when ss. 35A to 35C of that Act were inserted with effect from 18 May 1992 or when the Duties Act 1997 enacted (as of 1 July 1998) that the Stamp Duties Act 1920 was ``to be read together with'' the Taxation Administration Act 1996. Central to the submission is the fact that each of these events caused to come into operation, in relation to the Stamp Duties Act 1920, provisions dealing with review or alteration by the Chief Commissioner of an assessment previously made by him. Such a provision, it is said, must be regarded as having either negated (and therefore impliedly repealed) s. 37 or caused the process available under s. 37 to be subject to conditions and limitations to which it was not previously subject. The provisions that came into operation in 1992 are ss. 35A to 35C of the Stamp Duties Act 1920 itself; while those that came into operation in 1998 are contained in s. 9 of the Taxation Administration Act 1996.

78. In summary, the contention of Nominees is that s. 37 has been impliedly repealed or, alternatively, that s. 37 must be read subject to the limitations imposed by s. 9 of the Taxation Administration Act 1996, so that the s. 9 conditions must be complied with (and such compliance recited on the face of the notice) in order to issue a s. 37 notice. The implied repeal is said by Nominees to have occurred on 18 May 1992, when ss. 35A to 35C were inserted into the Stamp Duties Act 1920 by the Stamp Duties (Amendment) Act 1992, or, alternatively (and this was the position for which Nominees principally contended), on 1 July 1998 when the Taxation Administration Act 1996 was applied to the Stamp Duties Act 1920 by the Duties Act 1997, s. 315 and Schedule 2.

79. When ss. 35A to s. 35C became part of the Stamp Duties Act 1920, there arose what counsel for Nominees termed ``considerable tension'' between s. 35B and s. 37 which had not been expressly repealed. Section 35B allowed the Chief Commissioner to ``amend an assessment'' but such an amendment was required to be made within two years (s. 35B(5)). Also, s. 35B(3) provided that:

``the Chief Commissioner must not amend an assessment... if the Chief Commissioner is satisfied that the assessment was made in accordance with the interpretation of this Act in respect of instruments of that kind commonly applied by the Chief Commissioner at the time the assessment was made.''

The tension to which counsel for Nominees referred would be evident where an assessment could not be amended under s. 35B because, say, the Chief Commissioner was out of time. In such a situation, the Commissioner could, if unconstrained by s. 35B, simply issue a s. 37 notice (having considered the original assessment to be insufficient) calling for the payment of the amount said to be properly chargeable. Similarly, if s. 35B(1) was unavailable because of the operation of s. 35B(3), a s. 37 notice might be issued instead, rendering the limitation in s. 35B(3) of no practical effect.

80. Counsel for Nominees suggested three possibilities as to the effect on s. 37 of the insertion of sections 35A to 35C on 18 May 1992: that s. 37 was impliedly repealed; that s. 37 became subject to the requirements in s. 35B; or that s. 37 remained unfettered. Reference was made to the commentary by D.G. Hill in Duties Legislation, 1998, at p. 818. The learned author considered that s. 37 may have become subject to the requirements in s. 35B (ie the second possibility raised by counsel for Nominees):

``There is, however, a tension between the provisions of s. 35B and the provisions of s. 37... Although the Chief Commissioner may be barred from amending the assessment under s. 35B, it would appear that he may seek recovery of the duty on the basis that the original instrument was insufficiently stamped at any time. Seemingly therefore, although two years had

ATC 4719

gone by since the original instrument was duly stamped, the Chief Commissioner could form the view that the instrument was insufficiently stamped and require payment of additional duty. Once the additional duty was paid and a new stamp put on the instrument, it is hard to see how that new stamp could not be itself an assessment and presumably, therefore, a reassessment, having regard to s. 35A of the Act. In other words, the Chief Commissioner would be precluded from restamping the instrument. It may therefore be arguable that the power to recover insufficient duty under s. 37(1) arises only in the period of two years from the original stamping of the instrument.''

81. On 1 July 1998, the Duties Act 1997 came into effect. Section 315 and Schedule 2 had the combined effect of omitting ss. 35B and 35C of the Stamp Duties Act 1920; amending s. 4 of the Taxation Administration Act 1996 so as to include the Stamp Duties Act 1920 in the list of ``taxation laws'' to which the Taxation Administration Act 1996 applies; and adding s. 3AA to the Stamp Duties Act 1920. Section 3AA provides that the Stamp Duties Act 1920 is to ``be read together with the Taxation Administration Act 1996''.

82. The Taxation Administration Act 1996 had come into effect on 1 January 1997. The limitations in s. 9 of that Act differ from those in s. 35B of the Stamp Duties Act 1920 in that s. 9(3) provides for a five year time limit (as opposed to the two year limit in s. 35B(5)) and s. 9(2) imposes a positive requirement that a reassessment be made in accordance with assessment practices at the time the tax liability arose as opposed to the negative requirement in s. 35B(3).

83. It was Nominees' submission that s. 37 was impliedly repealed on 1 July 1998 (to the extent that it remained operative after 18 May 1992). There is the same tension between s. 37 and s. 9 as existed between s. 35B and s. 37 described above. If s. 37 has not been impliedly repealed, s. 37 could be used to call for additional payment where an insufficient amount was originally assessed, despite the fact that the Chief Commissioner was, say, out of time to make a ``reassessment'' under s. 9.

84. Counsel for Nominees also relied on the fact that s. 37 retained its reference to s. 124 of the Stamp Duties Act 1920, notwithstanding that s. 124 was omitted on 1 July 1998. This, it was said, provides a further basis for thinking that s. 37 had been impliedly repealed. Section 37(2) provides that:

``An amount payable under this section shall be a debt due to the Crown, and may be recovered from such person accordingly: Provided

  • (a) that such person, if dissatisfied, may object or appeal against the decision of the Chief Commissioner under s. 124, the provisions of which shall, mutatis mutandis, apply...''

85. Counsel for Nominees submitted that the omission of s. 124 further suggested that s. 37 had been impliedly repealed because the legislature would not have intended that s. 37 confer an unreviewable power on the Chief Commissioner.

86. It was Nominees' alternative submission that on 1 July 1998, s. 37 of the Stamp Duties Act 1920 became subject to the limitations in s. 9 of the Taxation Administration Act 1996.

87. It was submitted for the Chief Commissioner that s. 37 was not inconsistent with ss. 35A to 35C and is not inconsistent with s. 9. The substance of the Chief Commissioner's argument in both respects is that s. 37 is concerned with ``recovery of duty'' whereas s. 35B and s. 9 are respectively concerned with the power to ``amend an assessment'' and the power to make a ``reassessment''. It was submitted for the Chief Commissioner that recovery and reassessment are different activities and that it is not inappropriate that the powers to engage in them should be construed as being subject to different limitations. Furthermore, the fact that it would have been easy for the legislature to effect an express repeal of s. 37 suggests that the it intended that the separate regimes stand together.

88. It is useful to summarise the way in which counsel for the Chief Commissioner characterised each of the relevant provisions.

89. Section 35A provides that the stamping of an instrument is taken to be an assessment of the duty. Section 35B provides that the Chief Commissioner may amend an assessment (subject to the limitations described above). It was submitted for the Chief Commissioner that the amendment of an assessment (under s. 35B) was sufficiently different from the recovery of

ATC 4720

deficient duty under s. 37 that the two sections were not inconsistent.

90. In support of this submission, counsel referred to the Second Reading Speech of the Stamp Duties (Amendment) Act 1992 which introduced s. 35B. Counsel said that the Second Reading Speech shows that the insertion of ss. 35A to 35C ``had nothing to do'' with s. 37. In fact, the Second Reading Speech simply fails to make any mention of the s. 37 power and any distinction between it and the power to amend an assessment under s. 35B. All it relevantly says is:

``[i]n order that all refunds from stamp duty can be properly made, the Stamp Duties Act is being amended to provide:-

...

the Chief Commissioner with authority to reassess the duty payable within 2 years of the date of the original assessment.''

91. Counsel for the Chief Commissioner did not make any extensive submission on the characterisation of s. 9. This is because it can be viewed as a replacement of s. 35B. Section 9 can be distinguished from s. 37 in the same way as s. 35B of the Stamp Duties Act 1920 is distinguished. Section 9(1) refers to ``reassessments of a tax liability''. Counsel submitted that reassessment was a different process to a recovery under s. 37 in the same way that an amendment of an assessment was under s. 35B.

92. Counsel for the Chief Commissioner submitted that s. 37 was concerned with the ``recovery'' of duty as opposed to ``amending an assessment'' or ``reassessment''. Section 37 appears under the heading ``Deficient duty may be recovered'' and proceeds on the basis that the instrument has previously been assessed or stamped, but to an insufficient amount. It permits a person to be called upon to pay the amount with which the instrument was properly chargeable at the time of stamping. According to the submission on behalf of the Chief Commissioner, this does not involve an assessment at all, but ``is merely declaratory of the common law under which the Crown is not precluded by the blunders of its own officers from recovering the full liability charged by the taxing statute'' (citing Green's Death Duties, 7 ed, 1971).

93. Counsel argued that s. 37 is therefore not concerned with ``reassessing'' or ``amending'' an assessment, as s. 35B of the Stamp Duties Act 1920 was and as s. 9 is, and is therefore not inconsistent with those sections. This submission proceeds on the basis that a recovery of duty under s. 37 does not require a new assessment to be made, nor does it require the original assessment to be amended. The recovery of duty after an insufficient assessment is viewed as a different process from reassessment under s. 9 or an amendment of an assessment under s. 35B. Counsel for the Chief Commissioner also submitted that recovery under s. 37 does not require that the instrument be stamped or re-stamped. This is relevant because s. 35A of the Stamp Duties Act 1920 provides that the stamping of an instrument is taken to be an assessment.

94. Finally, counsel submitted that the reference to s. 124 of the Stamp Duties Act 1920 in s. 37 was simply a mistake. In support of this submission he noted that references to s. 124 remained in other parts of the Stamp Duties Act 1920 (ss. 3(a), 68(3), 125(3) and 127B(10)).

Submissions - whether s. 37 became subject to s. 9

95. Counsel for Nominees made an alternative submission that, if s. 37 had not been impliedly repealed by 1 July 1998, it became subject to the limitations in s. 9 on that date. It was also submitted for Nominees that the s. 37 power may have been subject to the limitations in s. 35B before 1 July 1998. It is convenient to deal with the second of those submissions first.

96. Counsel for Nominees relied on the tentative suggestion by D.G. Hill in Duties Legislation (p. 818), that, even before 1 July 1998, s. 37 may have been subject to the limitations in s. 35B. It is suggested that this may have been the case because the recovery of duty under s. 37 amounted to a new stamping of the document which, by virtue of s. 35A, is an assessment attracting the operation of s. 35B. The commentary says:

``Once the additional duty was paid and a new stamp put on the instrument, it is hard to see how that new stamp could not be itself an assessment and presumably, therefore, a reassessment, having regard to s. 35A of the Act. In other words, the Chief Commissioner would be precluded from restamping the instrument. It may therefore be arguable that the power to recover insufficient duty under s. 37(1) arises only in

ATC 4721

the period of two years from the original stamping of the instrument.''

This is, of course, contrary to the Chief Commissioner's submission in relation to the implied repeal argument that recovery under s. 37 does not amount to a ``stamping'' or a new ``assessment''.

97. The analysis by D. G. Hill, regardless of its correctness, might not be relevant when considering any tension between s. 9 and s. 37. This is because, according to that analysis, s. 35A renders the recovery of duty under s. 37 an ``assessment'', but s. 9 only expressly applies to a ``reassessment''.

98. On 1 July 1998 the Stamp Duties Act 1920 became one of the ``taxation laws'' to which the Taxation Administration Act 1996 applies (s. 4 of the Taxation Administration Act 1996). In addition, s. 3AA was inserted into the Stamp Duties Act 1920 having the effect that the Stamp Duties Act 1920 and the Taxation Administration Act 1996 are to be ``read together''. It was Nominees' submission that, by virtue of these provisions, the power to issue a s. 37 notice became subject to the limitations in s. 9. This submission was largely based on the notion that courts have sometimes taken the view that subjecting of one Act to another apparently inconsistent Act is an alternative to the implied repeal of either.

99. It was further said for Nominees that it was a mandatory jurisdictional precondition of the exercise of the power under s. 37 that a s. 37 notice recite that the s. 9 requirements have been met. It was said that satisfaction of the five year requirement would always be recited (because a s. 37 notice would state the date of the original assessment). It was submitted for Nominees, however, that a valid notice must also expressly state that the reassessment has been ``made in accordance with the legal interpretations and assessment practices generally applied by the Chief Commissioner in relation to matters of that kind at the time the tax liability arose''. In support of this submission, counsel emphasised that s. 35B(3) had been couched in negative language whereas s. 9(2) was a positive requirement. Alternatively, it was submitted for Nominees, if it was not necessary that the Chief Commissioner recite that the s. 9 requirements have been satisfied on the face of the notice, it was nonetheless for the Chief Commissioner to demonstrate that the requirements had in fact been satisfied. No evidence had been led as to whether the decision to issue the notice was made in accordance with the assessment practices applied in 1995.

100. The Chief Commissioner's answer to all of this was the same as his answer on the implied repeal argument: if s. 37 on the one hand and s. 35B and s. 9 on the other hand are concerned with separate subject matters, and if they give rise to separate and distinct powers, there is nothing to suggest that s. 37 should be subject to the limitations of either s. 35B or s. 9.

Implied repeal - the law

101. In
Butler v Attorney-General (1961) 106 CLR 268, a majority of the High Court (Kitto, Taylor and Menzies JJ, Fullagar and Windeyer JJ dissenting) held that s. 32(5) of the Public Service Act 1946 (Vic) had impliedly repealed s. 10 of the Discharged Servicemen's Preference Act 1943 (Vic). Section 32(5) of the Public Service Act provided that public service appointments should be made on the basis of relative efficiency and then on relative seniority. Section 10 of the Discharged Servicemen's Preference Act had provided for preference in promotion to discharged servicemen. It is useful to canvass briefly the test of implied repeal used by each member of the High Court.

102. Fullagar J (dissenting) adopted the so- called contrariety test. His Honour said (at 275) that implied repeal:

``is a comparatively rare phenomenon and it has been said again and again that such a repeal will not be held to have been effected unless actual contrariety is clearly apparent.''

His Honour also made relevant comments regarding the ``rule of commonsense'' and the maxim generalia specialibus non derogant. These are discussed below.

103. Kitto and Menzies JJ (in separate judgments) adopted ``covering the field'' language of the sort that has been applied in cases considering s. 109 of the Constitution and inconsistencies between Commonwealth and State Acts. Kitto J said (at 281) that:

``In passing the Public Service Act 1946 the Victorian Parliament was making a fresh start in the statutory regulation of its own Public Service; and the Act has every appearance of intending to cover the ground comprehensively so far as valid

ATC 4722

Commonwealth legislation left room for that to be done. It defined with precision and apparent exhaustiveness the policy to be pursued in regard to appointments.''

Similarly, Menzies J said (at 286) that the later Act was an ``exhaustive statement of the law'' in the area.

104. Kitto J also approved the contrariety test, saying (at 280) ``in considering the two State enactments... the question must be whether they could stand together, `live together' as Viscount Dunedin expressed it in
In re Silver Brothers Ltd [1932] AC 514 at 523''.

105. Taylor J held (at 284) that the statutes were ``directly in conflict and it is impossible for both to have full operation in relation to promotions within the service''. Accordingly, the later Act prevailed. His Honour came to this conclusion with reference only to the words enacted. He considered it inappropriate to go further and attempt to impute an intention to the legislature (see at 285).

106. Windeyer J (dissenting) adopted (at 290) a version of the contrariety test, asking whether the two statutes were clearly and indisputably contradictory, displaying such repugnancy that they could not be reconciled.

107. In summary, Fullagar, Taylor, Kitto and Windeyer JJ all adopted, to differing extents, the test of contrariety. Menzies J adopted a covering the field approach, and Kitto J also used the covering the field principle in his reasoning.

108. The contrariety test has received significant judicial support. Counsel for Nominees referred to the decision of Gummow J in
Suatu Holdings Pty Ltd v Australian Postal Corporation (1989) ATPR ¶40-937; (1989) 86 ALR 532. His Honour expressed (at ATPR 50,191; ALR 546-547) a strong preference for the direct contrariety (or repugnancy) test over a covering the field approach. His Honour said (at ATPR 50,191; ALR 546-547):

``... In Australia, the term `inconsistency', used in relation to the operation of laws, invariably directs attention to sec 109 of the Constitution. However, that does not necessarily provide safe guidance in a case which concerns statutes of the same legislature.''

His Honour then quoted a passage of Fullagar J's judgment in Butler (at 276) regarding the presumption that the State legislature did not intend to contradict itself (as opposed to the Commonwealth legislature, for which no presumption can be made). The passage is set out and discussed below. Gummow J continued [ATPR at 50,191]:

``It is true that in Butler v Attorney-General (Victoria) at p 281, Kitto J spoke of the later State statute as having `every appearance of intending to cover the ground comprehensively' and Menzies J (at p 286) described it as making `an exhaustive statement'. However, in general, where legislation of the same legislature is under consideration, the courts have tended to eschew the application of any `covering the field' doctrine derived from federal constitutional law. In Goodwin v Phillips [ (1908) 7 CLR 1] at p 10, Barton J spoke in terms of `repugnancy'. In Butler v Attorney- General (Victoria) Kitto J, earlier in his judgment, at p 280, had approached the question by asking whether the two statutes `could stand together', and Fullagar J (at p 276) spoke of `contrariety', Taylor J (at p 285) spoke of `direct conflict', and Windeyer J (at p 290) asked whether the two statutes were clearly and indisputedly contradictory, displaying such repugnancy that they would not be reconciled. Again in Travinto Nominees Pty Ltd v Vlattas & Anor [ [1972] 1 NSWLR 24] at p 34 Gibbs J, in discussing the decision in Breskvar v Wall [ (1971) 126 CLR 376] described the case as one in which it was held that the two statutes in question `could stand together'.

The courts thus have approached the matter by use of criteria apparently derived from the law as to `textual collision' for the purposes of sec 109 of the Constitution, and `repugnancy' as understood in decisions dealing with sec 2 of the Colonial Laws Validity Act 1865, 28 and 29 Vic c 63 (Imp): see Union Steamship Co of New Zealand Ltd & Anor v The Commonwealth & Anor (1925) 36 CLR 130 at pp 158-159;
Grace Bros Pty Ltd v Magistrates of the Local Courts of New South Wales (1989) ATPR ¶ 40-921; (1988) 84 ALR 492.''

109. Other decisions in which support has been expressed for the direct contrariety or repugnancy test include
Rose v Hvric (1963) 108 CLR 353 (``that the contrariety between the earlier and later enactments must be such that

ATC 4723

`effect cannot be given to both at the same time''' per Kitto, Taylor and Owen JJ at 360), Re Applications of Shephard [1983] 1 NSWLR 96 (at 107-108 per Yeldham J following Rose v Hvric),
Australian Oil Refining Pty Ltd v Cooper (1987) 11 NSWLR 277 (``are inconsistent to the extent that they cannot stand together (in the sense that effect cannot be given to both at the same time)'' per Hunt J (Finlay and Allen JJ agreeing) at 280), Kutner v Phillips [1891] 2 QB 267 at 271-272,
Sarris v Penfolds Wines Pty Ltd [1962] 63 SR (NSW) 10 at 11,
Parramatta City Council v Stauffer Chemical Co (Aust) Pty Ltd [1971] 2 NSWLR 500 at 508-509 (affirmed [1973] 1 NSWLR 229).

110. Two decisions which support the covering the field approach should be mentioned. The first is
Mitchell v Scales (1907) 5 CLR 405, where it was held that the English laws regarding vagrancy were impliedly repealed in New South Wales upon the enactment of laws by the New South Wales legislature that covered the field. Isaacs J said (at 417) (quoting the US decision of Norris v Crocker 13 Howard 429 at 438 per Catron J):

``As a general rule it is not open to controversy that where a new Statute covers the whole subject matter of an old one, adds offences, and prescribes different penalties for those enumerated in the old law, that then the former Statute is repealed by implication; as the provisions of both cannot stand together.''

The second decision is that of Street CJ in
R v Chalak (1983) 47 ALR 600, where his Honour (at 602) endorsed the reasoning in Mitchell v Scales.

111. Notwithstanding these two decisions, it can, I think, be regarded as settled law that the test of implied repeal is the test of contrariety or repugnancy. The covering the field approach taken in cases regarding inconsistency between State and Commonwealth statutes is not relevant in cases regarding inconsistencies between two State statutes. This is because there is a presumption that exists when comparing State statutes - and does not when comparing State statutes to Commonwealth statutes - that the legislature did not intend to contradict itself (see Butler per Fullagar J at 276, set out below).

112. In applying the contrariety test, courts have been guided by several principles. Three of these principles are relevant here. They are the presumption of consistency, the ``rule of commonsense'', and the maxim generalia specialibus non derogant.

113. As to the first of these principles, the presumption of consistency, Fullagar J said, in Butler (at 275) that:

``The two Acts must be considered together, I would think, without any a priori assumption, but, if any assumption is to be made, it should be that the legislature believed its own Act to be valid: Wenn's Case (1948) 77 CLR 84.''

Then (at 276) his Honour put the proposition in stronger terms, saying:

``It should be pointed out in this connection that the position where contrariety is suggested between an earlier and a later State statute is not quite the same as the position where inconsistency, within the meaning of s. 109, is suggested between a Commonwealth Act and a State Act. The Commonwealth Parliament is, within its sphere of power, paramount legislature, and there can be no presumption, either that it did, or that it did not, intend by its own Act to supersede or preclude from operation a State Act. But, where the comparison to be made is between two State Acts, there is a very strong presumption that the State legislature did not intend to contradict itself, but intended that both Acts should operate. It will often be found that the two may reasonably and properly be reconciled by reading the one as subject to the other.''

114. The effect of the presumption is that the party that argues that a statute has been impliedly repealed bears a heavy burden. Moreover, courts should, if reasonably possible, construe a statute in such a way as to avoid the conclusion that a pre-existing statute was impliedly repealed upon the subsequent statute's enactment. In Butler (at 290) Windeyer J quoted Maxwell on The Interpretation of Statutes, 8ed, 1937, where it was said (at p. 147) that:

``A sufficient Act ought not to be held to be repealed by implication without some strong reason. It is a reasonable presumption that the legislature did not intend to keep really contradictory enactments on the Statute- book, or, on the other hand, to effect so important a measure as the repeal of a law

ATC 4724

without expressing an intention to do so. Such an interpretation, therefore, is not to be adopted unless it be inevitable. Any reasonable construction which offers an escape from it is more likely to be in consonance with the real intention.''

115. The next relevant principle is the ``rule of commonsense'', which provides that it is rare for one statute in affirmative terms to be found impliedly repealed by another which is also in affirmative words. In Butler (at 276) Fullagar J quoted Lord Blackburn in Garnett v Bradley (1878) 3 App Cas 944 (at 966) who said:

``there is one rule, a rule of common sense, which is found consistently laid down in these authorities to which I have referred, namely, that when the new enactment is couched in general affirmative language and the previous law, whether a law of custom or not, can well stand with it, for the language used is all in the affirmative, there is nothing to say that the previous law shall be repealed, and therefore the old and new laws may stand together. There the general affirmative words used in the new law would not of themselves repeal the old. But when the new affirmative words are, as was said in Stradling v Morgan (1560) 1 Plow 199 at 206, such as by their necessity to import a contradiction, that is to say, where one can see that it must have been intended that the two should be in conflict, the two could not stand together; the second repeals the first.''

116. The third relevant principle is the maxim generalia specialibus non derogant, which, in the particular context, is not so much a principle distinct from the other two as a means by which they have been given effect. In order that two statutes might stand together courts often construe subsequent statutes as only providing for special cases and accordingly hold that the pre-existing statute has been derogated from only to the extent of those special cases. In the instant case, Nominees has taken this position as an alternative to their submission that s. 37 has been impliedly repealed.

117. Fullagar J summarised the principle, saying (at 276):

``It will often be found that the two [ statutes] may reasonably and properly be reconciled by reading the one as subject to the other. In other words it will commonly be found that the appropriate maxim is not `leges posteriores priores contrarias abrogant' [later laws repeal earlier laws inconsistent therewith] but `generalia specialibus non derogant'.''

118. In Butler Kitto J did not think that the two statutes could be made to ``live together'' by way of the maxim generalia specialibus non derogant (at 280). His Honour's comments are relevant to the present case. He said (at 280):

``It is not, I think, a case in which two enactments might be made to live together by implying into the later an exception sufficient to allow for the continued operation of the earlier, on the principle generalia specialibus non derogant for while discharged servicemen are a special class of persons, the Public Service is a special class of employment, and each enactment may be called general or special according to the point of view from which it is regarded.''

Analysis and decision on implied repeal - 1992 provisions

119. One of the circumstances in which s. 37 applies is described in its opening words which remain in their original 1920 form, save for the reference to ``Chief Commissioner'' rather than ``Commissioner'':

``If it appears that the Chief Commissioner has stamped an instrument having assessed an insufficient amount of duty or fine thereon...''

120. Under the Act as it stood before the 1992 amendments, this referred back to a process mentioned in both s. 35 and s. 36. Section 35 applied:

``Where an instrument is presented to the Commissioner for assessment...''

It obliged the Commissioner to state whether, in his opinion, the instrument so presented was ``liable to duty'' and, if he was of the opinion that it was liable to duty or fine, to ``assess the duty or fine with which it is in his opinion chargeable''. Stamping in accordance with the assessment permitted ``stamping with a particular stamp denoting the amount of duty or fine so paid, and denoting that it is duly stamped''. Section 36 permitted the impounding of any instrument ``presented at the stamp office for assessment or otherwise''.

121. Sections 35A to 35C were added by the Stamp Duties (Amendment) Act 1992. They are

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set out in paragraph [12] above. Sections 35, 36 and 37 remained, in material respects, in the form already noticed.

122. Immediately after the commencement of 1992 amendments on 18 May 1992, the Act retained the concept of presentation of an instrument for ``assessment'' embodied in the opening words of both s. 35 and s. 36, as well as the concept of ``assessment'' by the Chief Commissioner of the duty payable in respect of the instrument or for which it is chargeable and the concept that stamping in accordance with such an assessment permitted the application of a particular stamp denoting both the amount of duty or fine paid and that the instrument was duly stamped. The new s. 35A had the effect of deeming every instrument actually stamped to have been the subject of such an ``assessment'', thus avoiding the need for someone seeking to challenge an ``assessment'' under s. 124 and related provisions to prove the assessment.

123. The Act's references to ``assessment'' were references to the formation by the Chief Commissioner of an opinion as to the amount of duty payable in respect of an instrument as part of the process of stamping the instrument. The step following ``assessment'' entailed the instrument's being ``stamped in accordance with the assessment'', it being also provided (by s. 35A) that stamping as such gave rise to a presumption that there had been an assessment corresponding with the amount of the stamping. The act of ``assessment'' was thus intimately related to stamping. It did not, however, play a part in creating indebtedness for duty. Under s. 24 and s. 38, a debt arose upon first execution of the instrument. The debt was not for the amount ``assessed'' by the Chief Commissioner. Rather, it was for the duty ``chargeable on'' the instrument, being the amount of duty dictated by the Act and determined according to its provisions, regardless of any opinion of or calculation by the Chief Commissioner.

124. In conferring a power to ``amend an assessment'', s. 35B, as added in 1992, enabled the Commissioner to act upon some change in his opinion as to the amount of duty with which an instrument was chargeable but did not spell out the consequences of such a changed opinion. It must be presumed, however, that an amended assessment was intended to have effect in the same way as an original assessment so that, under s. 35(1), the relevant instrument could, after amendment of the initial assessment, again be stamped following payment of further duty, the subsequent stamping being by means of a stamp denoting the revised amount of duty paid and that the instrument was duly stamped.

125. The last point is important. Under s. 29 of the Act as it stood after the 1992 amendments, an instrument was not ``good, useful or available'' in the ways the section mentioned unless it was ``duly stamped''. Having regard to the definition of ``duly stamped'' in s. 3, an instrument was not ``duly stamped'' unless ``stamped in accordance with this Act''. Section 35B, in providing a means by which an assessment might be amended, also created, by its interaction with s. 35, an avenue by which the instrument the subject of the amended assessment, having been shown no longer to be ``duly stamped'', might, through payment of the additional duty, again become ``duly stamped''.

126. Section 37 worked in a different way. It depended upon the Chief Commissioner's forming an opinion that duty has been assessed in an insufficient sum or that a ``not liable'' or ``duly stamped'' stamp has been applied erroneously or improperly. To an extent, therefore, the pre-condition to its operation corresponded with that upon which s. 35B was founded. But there the similarity ended. Section 37 did not entail the payment of further duty and a further stamping in the way envisaged by s. 35. On the contrary, s. 37 enabled the Chief Commissioner simply to demand a sum of money which, by force of that section alone, thereby became payable and had the character of a debt due to the Crown quite independently of s. 38. Furthermore, the debt arising under s. 37 was a debt due by the person to whom the notice under that section was directed, being ``the person on whose behalf the instrument was presented for assessment''. The debt created by s. 38 in respect of ``duty chargeable'' on an instrument was, by contrast, a liability of every person ``primarily liable with respect to [the] instrument'', being, by force of the s. 3 definition, a person designated under the heading ``persons primarily liable'' in the Second Schedule.

127. The other difference to be noted is that failure to pay an amount the subject of a notice given under s. 37 did not entail the consequence that the relevant instrument could not any

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longer be regarded as effective and available in the ways dealt with by s. 29. This was the effect of s. 37(2)(b) (``... shall be as good and available for all purposes as though full duty and fine had been paid thereon''). When that section referred to an instrument ``stamped under subsection (1)'' it must be taken to have referred to an instrument that had been stamped as referred to in s. 37(1), that is, stamped after assessment of an insufficient amount of duty or fine or stamped erroneously or improperly as either not liable or duly stamped. This is because s. 37(1) did not itself provide for or require any stamping. It merely created a mechanism for demanding money and, in contrast to s. 35(1), did not contemplate any form of stamping in consequence of satisfaction of the demand. Section 37 thus created an exception to s. 29 by providing that an instrument which, in the Chief Commissioner's opinion, was insufficiently or erroneously or improperly stamped (being also an instrument in respect of which the Chief Commissioner had manifested that opinion by making a demand under s. 37(1)) was nevertheless as good and available ``as though'' it satisfied the s. 29 criterion of being ``duly stamped''.

128. The distinction between the two regimes, so far as process is concerned, is that one was calculated to cause an instrument to be stamped with duty in an amount different from that originally applied to it, whereas the other was designed to facilitate the collection of further money without further stamping. The physical location of the instrument was relevant to this. Leaving to one side the limited circumstances in which an adhesive stamp could be used, production of an instrument to the Chief Commissioner was indispensable to its being stamped or further stamped. A s. 37 demand for money could be made and effectuated regardless of the location of the relevant instrument and even if it had been destroyed.

129. This analysis is, in my judgment, sufficient to establish that there was no implied repeal of s. 37 by the addition of ss. 35A to 35C by the amending Act of 1992. There is no doubt that each of ss. 35A and 37 was concerned with the same general subject matter, including the situation where the Chief Commissioner formed an opinion that a wrongly calculated amount had been paid as duty in respect of an instrument. But each approached the matter in a different way, by reference to a different procedure, in respect of a potentially different person and with a view to a different result. The two provisions were capable of co-existing and being given effect to without offending the principle of repugnancy and contrariety. No compelling reason is shown for concluding that there was any legislative intention to set at nought the provisions of s. 37 which formed part of the immediate statutory context into which ss. 35A to 35C were injected.

Analysis and decision on implied repeal - 1998 provisions

130. The Taxation Administration Act 1996 has as its short title:

``An Act to make general provision with respect to the administration and enforcement of the other taxation laws.''

131. Section 4 designates certain other enactments ``taxation laws''. The purpose of the Act and its relationship with other ``taxation Laws'' are stated in s. 7:

``7. Purpose of Act and relationship with other taxation laws

(1) The purpose of this Act is to make general provision with respect to the administration and enforcement of the other taxation laws.

(2) The other taxation laws include provisions with respect to:

  • (a) the imposition of tax and its payment, and
  • (b) exceptions to and exemptions from liability to the tax, and
  • (c) entitlements to refunds.

(3) This Act includes general provisions with respect to:

  • (a) assessment and reassessment of tax liability, and
  • (b) obtaining refunds of tax, and
  • (c) imposition of interest and penalty tax, and
  • (d) approval of special tax return arrangements, and
  • (e) collection of tax, and
  • (f) record keeping obligations of taxpayers and general offences, and
  • (g) tax officers and their investigative powers and secrecy obligations, and
  • (h) objections and reviews, and

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  • (i) miscellaneous matters such as service of documents, corporate criminal liability and evidence.''

132. The provisions of s. 8 of the Act are set out at paragraph [13] above. The provisions of s. 9 concerning reassessment are also set out at paragraph [13] above.

133. Sections 8 and 9 appear in Part 3. The references in ss. 8 and 9 to ``tax liability'' must be construed in the light of the s. 3(1) definition of ``tax'':

```tax' means a tax, duty or levy under a taxation law, and includes:

  • (a) interest and penalty tax under Part 5, and
  • (b) any other amount paid or payable by a taxpayer to the Chief Commissioner under a taxation law.''

134. ``Tax liability'' thus refers to a liability to not only ``a tax, duty or levy'' under a taxation law but also ``any other amount... payable by a taxpayer to the Chief Commissioner under a taxation law''. A ``taxpayer'' includes a person ``who is liable or may be liable to pay tax''.

135. By operation of s. 315 of and Schedule 2 to the Duties Act 1997, the Stamp Duties Act 1920 became, on 1 July 1998, one of the ``taxation laws'' referred to in the Taxation Administration Act and was amended to require that it be ``read together with'' that Act. On the same date, the following provision came into effect as clause 19 of Part 3 of Schedule 1 to the Taxation Administration Act (inserted by s. 8 and Schedule 6 to the State Revenue Legislation Amendment Act 1998):

``An assessment made under the Stamp Duties Act before 1 July 1998 is taken to have been made under Part 3, except as provided by clause 28.''

(Clause 28, concerned with objections and appeals, is irrelevant for present purposes.)

136. The Taxation Administration Act contains a definition of ``assessment'' in s. 3(1). It refers explicitly to an assessment made ``under'' Part 3 of that Act and is therefore not directly applicable to the interpretation of the expression ``assessment made under the Stamp Duties Act 1920'' used in clause 19 of Part 3 of Schedule 1 to the Taxation Administration Act. By analogy, however, it seems to me that clause 19 must be taken to have the effect that a determination, by formation of opinion, of an amount of ``tax'' (in the Taxation Administration Act sense) payable by a person, being a determination made pursuant to and for the purposes of the Stamp Duties Act before 1 July 1998 (and including such a determination inherent in an assessment of the kind referred to in s. 35A), was, on that date, given, for the purposes of the Taxation Administration Act, the character of an ``assessment'' made under Part 3 of that Act. As a result, it must be presumed, for the purposes of the Taxation Administration Act, that where an instrument was, before 1 July 1998, stamped at a particular amount under the Stamp Duties Act 1920, there had been an ``assessment'' under Part 3 of the Taxation Administration Act, being an assessment of tax liability of that amount in relation to the person made liable by the Stamp Duties Act to pay duty on the instrument.

137. The Taxation Administration Act makes no attempt to define ``reassessment''. Literally, ``reassess'' means ``assess again'': see
Commr of Stamp Duties (Qld) v Edmunds & Anor 88 ATC 4343; [1989] 1 QdR 271. An effect of clause 19 of Part 3 of Schedule 1 to the Taxation Administration Act must therefore have been to make available to the Chief Commissioner, in relation to an assessment under the Stamp Duties Act of the kind I have just mentioned, the power to make the relevant determination over again by way of ``reassessment of tax liability'' under s. 9 of the Taxation Administration Act.

138. Section 37 of the Stamp Duties Act, as already noted, purports to operate where it appears that the Chief Commissioner has stamped an instrument having assessed an insufficient amount of duty or fine on it or has erroneously or improperly put on it a stamp indicating that it is not liable to duty or is duly stamped. The trigger, in cases to which s. 37 applies, is the formation of an opinion by the Chief Commissioner that the duty actually paid is deficient or that no duty has been paid where it should have been, even though a stamp has been placed on the instrument. Such an opinion involves the view that some amount remains to be paid to discharge the tax liability of the person concerned and that the original opinion as to the amount of duty payable (or that none was payable) was incorrect. Having regard to the meaning of ``tax'' in the Taxation Administration Act and that Act's references to ``a tax liability of a taxpayer'', it must follow,

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in such a case, that formation of the threshold opinion according to which s. 37 of the Stamp Duties Act operates is, where the stamping was made before 1 July 1998 and perceived after that date to be insufficient, ``a reassessment of a tax liability of a taxpayer'' as referred to in s. 9(1) of the Taxation Administration Act. Formation of the opinion is a ``reassessment'' rather than an ``assessment'' because it entails re-making of the decision inherent in the original stamping which, via s. 35A of the Stamp Duties Act and clause 19 of Part 3 of Schedule 1 to the Taxation Administration Act, has the status of an ``assessment'' for the purposes of the latter Act. As they apply to such a case, ss. 37 and 9 must therefore be regarded as provisions dealing with the same subject matter, namely the formation of such a revised opinion in relation to such an instrument and the consequences of the formation of the opinion.

139 That leads to the question whether the two provisions are capable of independent operation. Section 9 involves conditions and limitations that find no place in s. 37. A reassessment under s. 9 may not be made more than five years after the initial assessment except in certain circumstances and may only be made in accordance with interpretations and practices referred to in s. 9(2). The power to form an opinion under s. 9 is therefore a qualified and limited power. Under s. 37, by contrast, the Chief Commissioner may act in any way and without regard to particular interpretations and practices. In addition, there are distinctions corresponding with those discussed in relation to the interaction of s. 37 with the 1992 provisions. A reassessment under s. 9 does not, of itself, give rise to any payment liability, although it may have a bearing on the question whether an instrument may still be regarded as duly stamped. Section 37 contemplates the imposition of a new and direct payment obligation upon a particular person (``the person on whose behalf the instrument was presented for assessment''), while s. 9 is, at best, concerned with the expression of a revised official opinion as to the quantum of the pre- existing tax liability of the person whose liability has already been established. And importantly, s. 37 creates a new and independent debt due to the Crown, whereas a s. 9 reassessment has no such effect.

140. The telling point, however, is that s. 9 regulates the Chief Commissioner's power to do the very thing without which s. 37 cannot be put into operation. Section 37 cannot be invoked or called in aid by the Chief Commissioner in the absence of an opinion, actually formed and held, that duty previously assessed was deficient or that an earlier decision as to absence of liability to duty was in error. Section 9 is directly concerned with the act or process of forming such an opinion. This is because that act or process is a ``reassessment'' of ``a tax liability of a taxpayer''. The provision directing that, from 1 July 1998, the Stamp Duties Act 1920 be read ``together with'' the Taxation Administration Act means that the former, insofar as it deals with the process of forming an opinion grounding resort to s. 37, is to be taken to import, for that purpose, the procedural rules imposed by the latter in relation to that process which is, in terms of the latter, the ``reassessment'' process governed by s. 9.

141. I therefore conclude that, while the legislative changes that became effective on 1 July 1998 did not repeal s. 37 and did not remove the power to make demands in accordance with that section, they did have the effect that no such demand could lawfully be made except in consequence of the formation of a threshold opinion reached consistently with the restrictions and limitations imposed by s. 9.

Were the notices defective for non-compliance with s. 9?

142. Section 9 imposes a time limit: s. 9(3). There is no question here as to non-observance of that. Section 9 also defines, in an exclusive way, the matters that may be taken into account and the basis on which a reassessment may be made. It is necessary, under s. 9(2), that the Chief Commissioner act in accordance with legal interpretations and assessment practices generally applied by the Chief Commissioner in relation to matters of the same kind when the tax liability arose. There is an exception for cases where the law has changed in the meantime.

143. The Chief Commissioner submits that it is for the taxpayer to prove an assessment excessive, that there is no defect on the face of the s. 37 notices and that he is entitled to the benefit of the presumption of regularity. Nominees says, however, that the validity of the notices was affected by failure to recite in them

ATC 4729

that the opinion on which they were based had been formed by reference to the particular interpretations and practices referred to in s. 9 of the Taxation Administration Act.

144. The presumption of regularity generally places the onus of proving the non-fulfilment of the requirements on the party alleging irregularity. As was said by Gowans J in
Bolton v Dance [1968] VR 631 (at 641-642), the presumption of regularity will not apply to a notice where there is an apparent defect on the face of it. However, Gowans J went on to say (at 641):

``The absence of a statement that a preliminary step in the making of the instrument has in fact preceded its making may present the appearance of such a defect if by reason of the surrounding circumstances the absence of the statement appears significant. But there is no rule that there must always appear a statement specifying the preliminary steps that have been taken or that all preliminary steps have been taken.''

145. It is therefore necessary to determine whether the failure to recite that the reassessment was made in accordance with the interpretation of the law used at the time of the original assessment was significant by reason of the surrounding circumstances.

146. Gowans J's test was applied by Young J (as he then was) in
LS v Director of FACS (1989) 18 NSWLR 481. That case concerned an order made by the Minister for Family and Community Services under s. 46(1) of the Child Welfare Act 1939 that a state ward be treated as an intellectually handicapped person under that Act. The order in question failed to recite fulfilment of the preconditions (requiring the Minister to be satisfied of certain things). Young J (at 486) held that the order was ``significant'' because the order restricted the freedom of the subject.

147. The absence of the statement that the Chief Commissioner applied consistent interpretation practices in the original assessment and the reassessment is not ``significant'' under Gowans J's test. The situation is far removed from the situation in LS v Director of FACS, where the Minister failed to recite that he was satisfied that the ward was intellectually handicapped and that the ward's interests would be promoted by having the ward treated as an intellectually handicapped person. Young J considered that it was the impact on the ward's freedom that rendered the absence of the recital significant.

148. Given the nature of the obligation created by the notice (a stamp duty liability) and the relatively undemanding nature of the s. 9(2) requirement, I do not consider the s. 37 notices to have been invalid by reason of their not containing a recital that the s. 9 requirements had been complied with.

The s. 124 reference

149. Section 37 of the Stamp Duties Act 1920 continues to refer to s. 124 of that Act despite the omission of s. 124 by s. 315 of and Schedule 2 to the Duties Act 1997. There can be no doubt that this introduces an anomaly but it is one that does not need to be resolved at this point. Whether, as the Chief Commissioner contended, the retention of the reference to the omitted s. 124 in s. 37 (and in other provisions) was just a mistake or whether it was intentional, the anomaly is not in my judgment sufficient of itself to undermine the conclusion I have stated as to the ability of s. 37 and s. 9 to co-exist.

PART 5 - WHETHER DELEGATIONS DEFECTIVE

The delegation power

150. Section 8B(2) of the Stamp Duties Act provided:

``The Chief Commissioner may, by instrument in writing, delegate all or any of this functions (other than this power of delegation) conferred or imposed by or under this or any other Act, as specified in the instrument, to the Commissioner or any other person engaged in the administration of this Act and may, by such an instrument, revoke wholly or in part any such delegation.''

151. On 2 January 1997 the Chief Commissioner delegated certain powers to certain persons. The power conferred by s. 37 of the Stamp Duties Act was delegated to persons for the time being occupying positions at or above CO 1-2. It was common ground that the s. 37 power was thus delegated to the Commissioner of State Revenue, being the officer by whom the s. 37 notices were signed. It was also common ground that the Commissioner of State Revenue possessed the power to issue a s. 37 notice during the period between 2 January 1997 and 1 July 1998. On the latter date, s. 8B was omitted from the

ATC 4730

Stamp Duties Act by the mechanism referred to at paragraph 14 above.

152. On 1 July 1998, the Duties Act 1997 and the Stamp Duties Act became ``taxation laws'' to which the Taxation Administration Act 1997 applies: see paragraph 15 above. Section 67 of the Taxation Administration Act provides that the Chief Commissioner may delegate to any person any function of the Chief Commissioner under a taxation law, other than the power of delegation itself. After 1 July 1998, s. 67 of the Taxation Administration Act could thus be used to delegate the power to issue a s. 37 notice. A delegation was, in fact, made under s. 67 of the Taxation Administration Act on 2 January 1997, but this delegation did not include a delegation of the power to issue a s. 37 notice (Exhibit D). This is not surprising considering that the Stamp Duties Act was not, at the time of the delegation, a taxation law to which the Taxation Administration Act applied.

Submissions

153. Nominees contends that the omission of s. 8B of the Stamp Duties Act on 1 July 1998 had the effect of rendering all delegations made under that section inoperative. It relies on the principle referred to by Williams J in
Bird v John Sharp & Sons Pty Ltd (1942) 66 CLR 233 (at 250):

``The general principle is plain that when a statute or part of a statute is repealed it must be considered, except as to transactions past and closed, as if it had never existed (Surtees v Ellison [(1829) 9 B & C 750)]; In re Mexican and South American Co [(1859) 4 De G & J 544 at p. 557]). In Watson v Winch [(1916) 1 KB 688] it was held that, where by-laws have been made under powers conferred by a section of an act, the repeal of the section abrogates the by-laws unless they are preserved by the repealing Act by means of a saving clause or otherwise. But this may not be taken to be a rule of law applicable in every case. Parliament may not intend that the repeal of the section should also operate as an implied repeal of the by-laws made under it. As a general rule the repeal would no doubt have this effect. But a different result would follow where from other sections which were not repealed, it was manifest that all that Parliament intended to do was to revoke the power to make further by-laws, leaving the existing by-laws in force, subject to their liability to be amended, varied or revoked under powers conferred by other sections contained in the Act at the time of the repeal or introduced into it by amendment at that time.''

154. In the same case Latham CJ said (at 239):

``The general principle as to the effect of a repealing statute is that a repealed Act must, in the absence of savings clauses and except as to closed transactions, be regarded as if it had never existed (Surtees v Ellison; Hewson v Heard [(1829) 9 B & C 750]). Thus, when a by-law has been made under a statute, the repeal of the statute repeals the by-law unless there is a saving clause (Watson v Winch [(1916) 1 KB 688]).''

155. It was said for Nominees that the ``general principle'' applies equally to delegations of powers such that delegations cease to be effective upon the repeal of the statute pursuant to which they were made. Accordingly, Nominees says, the Commissioner had no power to issue the s. 37 notice.

156. Against this, the Chief Commissioner relies on s. 30 of the Interpretation Act 1987, the operation of which was expressly preserved by clause 2 of Schedule 1 of the Duties Act 1997. Section 30(1) of the Interpretation Act 1987 provides that:

``The amendment or repeal of an Act or statutory rule does not:

  • ...
  • (b) affect the previous operation of the Act or statutory rule or anything duly suffered, done or commenced under the Act or statutory rule, or
  • (c) affect any right, privilege, obligation or liability acquired, accrued or incurred under the Act of statutory rule, or...''

157. The act said to be ``suffered, done or commenced'' for the purposes of paragraph (b) is the delegation of power to the Commissioner on 2 January 1997. The rights said to be acquired for the purposes of paragraph (c) are the right of the Chief Commissioner to exercise his or her power to delegate powers (provided that it be exercised before 1 July 1998) and the right of the Commissioner, as delegate, to exercise the delegated power.

158. The Chief Commissioner's alternative submission is that the use of the word ``omit'' in clause 5 of Schedule 2 of the Duties Act

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1997, as opposed to ``repeal'', reveals a legislative intention that the expurgation of s. 8B was not to affect the continued operation of delegations previously made thereunder.

159. In support of these submissions, the Chief Commissioner referred to s. 49(2) of the Interpretation Act 1987 which provides that:

``A delegation:

  • ...
  • (c) may be revoked, wholly or partly, by the delegator.''

This provision was said to be significant for two reasons. First, it was said to evince an intention on the part of the legislature that a delegation might survive the repeal of the section under which it was made. Second, it avoids the problem that would arise if a delegation survived the repeal of the power by which it could it be revoked.

Analysis and decision

160. The consequences of the repeal of a power to delegate were considered in
Wright v McQualter (1970) 17 FLR 305. In that case a police officer had been appointed by a delegate of the Minister for the Interior. After the appointment, the provision of Australian Capital Territory Law conferring the Minister's power to delegate was repealed. It was contended that the appointment of the police officer was no longer valid. Kerr J said (at 324-325):

``... it is clear that the repeal of s. 3 of the Police Ordinance, which would on this basis remove all power of the minister to delegate his powers and functions under the Police Ordinance would have prevented his delegation to McLaren from having any continuing effect after s. 3 was repealed (see Halsbury's Laws of England, 3rd ed., vol. 36, p. 469, par. 714, and Watson v Winch [ [1916] 1 KB 688]).

It was argued that the delegation to McLaren was something duly done under s. 3 of the Ordinance before it as the repealed and that s. 6 of the Interpretation Ordinance 1937-1959 (ACT) brought into operation s. 8 of the Acts Interpretation Act 1901-1950 of the Commonwealth, applying it to the Police Ordinance as if the Ordinance were a Commonwealth Act. Section 8 provides that where an Act repeals in the whole or in part a former Act then, unless the contrary intention appears, the repeal shall not-

`(b) affect the previous operation of any Act so repealed, or anything duly done or suffered under any Act so repealed; or

(c) affect any right privilege obligation or liability acquired accrued or incurred under any Act so repealed.'

Applying this provision to the Police Ordinance, the argument was that the delegation was something done under the Ordinance as it originally stood before repeal and the repeal of s. 3 did not affect what was already done and did not affect the privilege of appointment which had been given to McLaren. It was contended, in effect, that there was no contrary intention shown in the repealing provision. However, the section repealed gave the Minister not only a power to delegate but also a power to revoke a delegation once made and this power of revocation was also repealed. If the delegation were not to be affected by the repeal of s. 3 the extraordinary result would be reached that, so far as the Police Ordinance is concerned, the delegation would stand and could not be revoked. This could not have been the intention of the repealing Ordinance, which evinced an intention to destroy the Minister's power of delegation under the Police Ordinance. Doubtless an appointment made by a delegate prior to the repeal of s. 3 would be valid despite the repeal but a delegation could not continue to operate after the repeal to permit the delegate to continue making appointments as the Minister's delegate when the Ordinance after the repeal did not permit the Minister to have a delegate.

McLaren's appointment of McQualter was invalid if supported only by s. 3 of the Police Ordinance, as he had no delegated power of appointment at the time he purported to appoint McQualter. It would be otherwise if his delegation was saved by the existence of the Minister's power of delegation under s. 12C.''

161. Kerr J concluded that the delegation was, in fact, saved by the operation of s. 12C of the Seat of Government (Administration) Act 1910 (Cth) but that is irrelevant to the present case.

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162. The Australian Capital Territory's interpretation legislation does not, and did not at the time of Kerr J's decision, include an equivalent to s. 49(2) of the Interpretation Act 1987 to the effect that a delegation may be revoked by the delegator. In the Chief Commissioner's submission, s. 49(2) applies to delegations that survive the repeal of the sections that provide for their revocation. Accordingly, it is necessary to consider whether the operation of s. 49(2) eliminates the problem identified by Kerr J that is, the problem that an irrevocable delegation is created if s. 30 of the Interpretation Act 1987 operates to save a delegation in the event of the repeal of the statute which provided for its being made and revoked.

163. It seems to me that s. 49(2) does not so operate. The section makes no reference to the repeal of an Act pursuant to which a delegation is made. In enacting the provision, parliament did not intend to provide for the revocation of a delegation after the repeal of the statutory power to revoke. The Second Reading Speech of the Interpretation Bill 1986 made by Mr Sheahan, then Attorney General and Minister Assisting the Premier, and the Explanatory Note produced by the Parliamentary Counsel which it incorporates are instructive in this regard. These sources make it clear that the purpose of section 49 is to apply automatically standard procedural provisions regarding the delegation of powers to Acts that make provision for such delegations.

164. Mr Sheahan said (at Hansard, vol. 194, p. 7924):

``The last comment I wish to make about the provisions of the bill is that it contains a number of provisions designed to shorten Acts and statutory rules. These are standard provisions which would otherwise have to be repeated in individual Acts. An example is clause 49 of the bill which contains a standard delegation provision. The inclusion of these provisions in the bill does not, of course, prevent Acts and statutory rules from adopting different provisions where this is considered necessary. It simply means that in the cases where these provisions are appropriate they will apply automatically without having to be repeated.''

165. The Explanatory Note states that (at p. 7929):

``Clause 49 provides that a power conferred by an Act or instrument to delegate a function includes a power to delegate the function to a person by name or by reference to a particular officer or the title of the particular office. That clause sets out provisions of the kind that are currently included in Acts and instruments in relation to the delegation of functions.''

166. Accordingly, s. 49 does not permit a delegator to revoke a delegation after the repeal of a statute that provides for the making and revocation of the delegation. Consequently, the argument put for the Chief Commissioner - that s. 30 saves a delegation in the event of the repeal of the statute pursuant to which it was made and pursuant to which it could be revoked - encounters the problem of an irrevocable delegation identified by Kerr J in Wright v McQualter. Section 30 should not, therefore, be regarded as allowing the delegation to the Commissioner under s. 8B of the Stamp Duties Act to remain effective after the repeal of s. 8B.

167. Moreover, even if s. 49 did operate in the manner for which the Chief Commissioner contends, s. 30 would not, in my opinion, apply to a delegation of power. Where an Act enables the making of delegated legislation there can be no doubt that repeal of that Act also effects the repeal of any delegated legislation unless there is some provision to the contrary: Bird v John Sharp & Sons Pty Ltd (above); Surtees v Ellison (1829) 9 B & C 750;
Watson v Winch [1916] 1 KB 688. This is so notwithstanding the existence of s. 30 of the Interpretation Act 1987 and its equivalents. For example, in Bird v John Sharp & Sons Pty Ltd none of the members of the High Court saw any need to consider the operation of s. 8 of the Acts Interpretation Act 1901 (Cth) which is, and was then, couched in terms identical to those of s. 30 of the Interpretation Act 1987. Similarly, in Watson v Winch, the English Court of Appeal concluded that the repeal of a statute providing for the making of delegated legislation effected the repeal of any delegated legislation so made notwithstanding the existence of s. 38(2) of the Interpretation Act 1889 (Eng). In other words, the making of delegated legislation is not something ``done or commenced under the Act'' for the purposes of s. 30(1)(b) of the Interpretation Act 1987 and the right to make delegated legislation, conferred by the enabling statute is not a ``right... acquired'' for the

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purposes of s. 30(1)(c) of the Interpretation Act 1987.

168. Bird v John Sharp & Sons Pty Ltd and Watson v Winch can be contrasted with the decision in
Aitken v South Hams District Council [1995] 1 AC 263. In that case a notice was served under s. 58(1) of the Control of Pollution Act 1974 (UK) requiring the abatement of a statutory noise nuisance. Contravention of the notice constituted an offence: s. 58(4). Section 58 was subsequently repealed, and a new procedure was substituted. After the repeal, the local authority prosecuted the recipient pursuant to s. 58(4) for breach of the notice. The period during which the breach occurred was after the repeal of s. 58. The House of Lords unanimously held that, because of the operation of s. 16(1) of the Interpretation Act 1978 (UK) (the equivalent of s. 30(1) of the Interpretation Act 1987), the notice remained effective and the breach of the notice was still punishable. Lord Woolf, delivering the judgement of the House of Lords, said (at 271):

``I start with section 16(1)(b). Its language is clearly appropriate to continue the effectiveness of a notice which was `duly' served prior to the date of repeal. If the notice remains effective, then the `obligation' to comply with the notice would also be preserved by section 16(1)(c).''

169. His Lordship concluded (at 272):

``I therefore have no difficulty in coming to the conclusion, so far as the first stage is concerned, that section 16(1) preserves, not only the effectiveness of the notice which was served under the earlier legislation, but also the ability to enforce the obligation created by that notice.''

170. It appears, therefore, that service of a notice requiring the abatement of a statutory nuisance is something duly done for the purposes of s. 30(1) (Aitken v South Hams District Council) but making delegated legislation is not (Bird v John Sharp & Sons, Watson v Winch). Section 30(1) is clearly directed towards preventing the interruption of a state of affairs produced by a legislative regime when that legislative regime, or part of it, is repealed. Obviously, s. 30(1) does not preserve the regime itself. Delegated legislation, as part of a legislative regime, will not itself be saved by s. 30(1), but acts done pursuant to delegated legislation will be. The different results in Bird v John Sharp & Sons and Watson v Winch on the one hand, and Aitken v South Hams District Council on the other can thus be explained.

171. A power to delegate is akin to the power to make delegated legislation insofar as they are both structural components of a legislative regime. The delegation is not part of the state of affairs the regime has created: it is part of the regime itself. Accordingly, s. 30(1) does not allow a delegation to survive the repeal of the provisions by which it was made.

172. It remains to consider the Chief Commissioner's submission that parliament, by using the word ``omit'' instead of ``repeal'' in Part 2.2 of Schedule 2 of the Duties Act 1997, evinced an intention that delegations made under s. 8B of the Stamp Duties Act should continue to be effective. That submission must be rejected for the same reason that the defendant's submission regarding s. 30 of the Interpretation Act 1987 is rejected: Parliament cannot have intended to create an irrevocable delegation, especially when it had removed the power to make similar delegations.

173. Even if this were not the case, the submission could still not be accepted. In cases where it has been necessary to decide whether a statute is an amending statute or a repealing statute, courts have looked to the substance, and not the form of the provision:
Beaumont v Yeomans (1934) 34 SR (NSW) 562 at 569 per Jordan CJ; Bird v John Sharp & Sons Pty Ltd (above);
Ku-ring-gai Municipal Council v Attorney-General (NSW) (1957) 99 CLR 251 at 265. There can be no doubt that the substance of s. 315 and clause 5 of Part 2.2 of Schedule 2 of the Duties Act 1997 is the removal of s. 8B of the Stamp Duties Act. The following comments, made by Mr Bennion in his book (Bennion FAR, Statutory Interpretation, 3ed, 1997 (at p. 222) are relevant:

``The law has made use of many synonyms for the operation known as repeal, often in the same sentence.

  • Example 85.1 The statute 19 Hen 7 c 29 s 1 (1503) spoke of the `reversall repelle adnullacion and advoydance' of a specified Act.
  • Example 85.2 The desire to emphasise that an Act is consigned to limbo perhaps reached its extreme when a statute of Richard III was ordered to be `annulled and utterly destroyed, [to be] taken out of

    ATC 4734

    the Roll of Parliament, and be cancelled and burnt, and be put in perpetual oblivion'.

There is no special wording required however, and the one word 'repeal' will delete the provision as effectively as any verbal jumping on its bones or scattering of its ashes.''

174. Furthermore, if parliament had intended that delegations made under s. 8B remain effective after the repeal of s. 8B it could have easily made express provision to that effect. That being the case, it is inappropriate to infer such an intention from the use of the word ``omit''.

175. Accordingly, the power possessed by the Commissioner of State Revenue, by delegation from the Chief Commissioner, to issue a s. 37 notice did not survive the repeal of s. 8B of the Stamp Duties Act. The notices issued on 22 December 1999 by the Commissioner of State Revenue, as supplemented by the notices issued on 7 January 2000 by the same officer, were therefore not duly issued and were of no effect.

PART 6 - THE TRUST ASPECTS

The elements of s. 73(2A)

176. I turn now to Nominees' contention that, by virtue of s. 73(2A) of the Stamp Duties Act, each of the instruments of transfer dated 27 January 1995 between CMPI as transferor and Nominees as transferee, being the instruments of transfer executed at Step 9, was liable to a fixed duty of $2 only. Sections 73(1) and 73(2A) are set out above. Several elements must be found to exist to warrant a conclusion that s. 73(2A) operated in this case. These are, first, that the conveyance was ``made for nominal consideration'', second, that it was ``consequential upon the making of a decision'', third, that the decision was ``recorded in writing'' and, fourth, that the decision ``has the same effect as'' an ``instrument appointing a new trustee''.

177. This part of the case was initially argued on the basis emerging from the Chief Commissioner's reply to Nominees' request for particulars, namely, that s. 73(2A) did not apply because ``the land was not trust property in relation to any decision or event referred to in s. 73(1)(a)(i), (ii) or (iii)''. The Chief Commissioner's contentions were thus limited to the proposition that the section was not attracted because the land was not trust property in relation to the events which occurred at Step 8. (The issue concerning the ``nominal consideration'' aspect of s. 73(2A) was raised subsequently.)

178. The central inquiry, at this point, is whether a trust subsisted after Step 5 so that there was, at Step 8, the ``appointment of a new trustee'' with the result that the instrument of transfer at Step 9 was an instrument of the kind referred to in s. 73(1)(a)(i).

Was the land trust property after Step 5?

179. The plaintiff's primary submission is that the decision of the Court of Appeal in the previous proceedings included a finding that a trust arose at Step 5 and that that finding is binding, either by virtue of the doctrine of stare decisis or as a result of an estoppel. It was submitted by the plaintiff in the alternative that the land became trust property after Steps 6 and 7 were completed. On either basis, the land was trust property at the time the transfers were executed.

180. The Chief Commissioner submitted that the Court of Appeal was not required to decide whether the land became trust property at Step 5 and, in fact, made no such finding. In the Chief Commissioner's submission, the principles of merger and futility operated so that the land was not held on trust as a consequence of Step 5. This is because the legal and ultimate beneficial interest was held by CMPI both before and after Step 5. If this is correct, the Chief Commissioner says, the issue and redemption of units in the Forster No. 1 Trust (Steps 6 and 7) could not make the land trust property because the land was held absolutely by CMPI and never became subject to the Foster No. 1 Trust. The only trust assets at any point of the transaction, on this argument, were the interests in the various cheques.

181. The Chief Commissioner submitted, in the alternative, that the absence of prior written approval required by clause 8.10 of the trust deed rendered invalid the purported appointment of CMPI as nominee in the way stated in the written offer at Step 3. If this is correct, the land was not trust property after Step 5 as it was beneficially held by CMPI.

The Court of Appeal decision

182. A close analysis of the Court of Appeal decision is necessary in order to isolate any

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ratio decidendi that is binding on me and to appreciate reasoning that I must regard as highly persuasive.

183. The Court of Appeal was called upon to consider whether the arrangement as a whole entailed, in terms of s. 44(1)(a) of the Stamp Duties Act

``a transaction which... causes or results in a change in the beneficial ownership of an estate or interest in... land situated in New South Wales:''

If there was no such transaction, Division 3A of the Stamp Duties Act did not apply and stamp duty was not chargeable. The Court of Appeal was only concerned with Step 5. If a ``change in the beneficial ownership'' occurred through Step 5, it was the result of the issue or redemption of new units in the trust and s. 44(2)(d) would exclude the operation of s. 44(1)(a).

184. The question whether a trust arose at Step 5 was directly in issue in the Court of Appeal decision. It appears from the judgments that ISPT's primary submissions were, first, that s. 23C(1) of the Conveyancing Act 1919 operated to prevent the disposition of an interest in land at Step 5 (because there was no writing) and, second, that no equitable estate could pass to ISPT at Step 5 as CMPI purported to be trustee for CMPI alone (as the beneficiary of the Foster No. 1 Trust), so that trustee and ultimate beneficiary were identical. If this was so, so the submission ran, no sub-trust arose and CMPI held the land absolutely both before and after Step 5. Both submissions are relevant to the question in the present case, namely, whether the land was trust property at the time the transfers were executed. ISPT's further alternative submission was that even if such a sub-trust did arise, the fact that CMPI was the ultimate beneficial owner of the property both before and after the transaction precluded a change in beneficial ownership sufficient to activate s. 44(1)(a).

185. The ultimate question for the Court of Appeal as to whether s. 44(1) applied is irrelevant to the present case. All the court is currently concerned with is whether the Court of Appeal, in determining the s. 44(1) issue, made a finding as to the existence of a trust at Step 5. It is convenient to examine each of the judgments of the members of the Court of Appeal.

Section 23C(1) of the Conveyancing Act - Mason P

186. Mason P noted the requirements of s. 23C(1)(a) of the Conveyancing Act (ie, that an interest in land can only be created or disposed of by writing signed by the person creating or disposing of the land). Against this, the Chief Commissioner argued that a resulting trust arose upon payment of the purchase price of the land by the negotiation of the cheques by ISPT to CMPI at Step 5 (see, eg,
McWilliam v McWilliam Wines Pty Ltd (1964) 114 CLR 656 at 660;
Stern v McArthur (1988) 165 CLR 489 at 523). If such a resulting trust arose CMPI held the land on trust for ISPT (as trustee for the Forster No. 1 Trust). Because of s. 23C(2) (which says that s. 23C does not affect the creation or operation of resulting, implied or constructive trusts), s. 23C(1) would not prevent such a trust from arising. Alternatively, the Chief Commissioner relied on a trust arising out of the agreement recorded in the offer document (which stated that ``CMPI is appointed to hold the property as a nominee under the deed establishing the Trust for so long as CMPI remains the registered proprietor'').

187. Mason P held that the ``concatenation'' of the payment of the purchase price by ISPT on the one hand, and the unwritten agreement that the land be held on trust on the other meant that s. 23C(1) did not prevent the trust from being enforced. The terms of such a trust would be those set out in the trust deed as contemplated by the offer document. This is a significant aspect of his Honour's decision and is discussed below.

The merger issue - Mason P

188. ISPT submitted that CMPI held the land absolutely at Step 5 (despite both the orally accepted offer that the land be held on trust and the payment of the purchase price by ISPT) because of the operation of the principles of ``merger, circuity and futility''. According to ISPT, no resulting trust could arise because of the coincidence in identity of the legal owner and ultimate beneficiary. If CMPI held the land on trust for ISPT (as trustee of the Forster No. 1 Trust) and CMPI was the sole unitholder of the Forster No. 1 Trust, then, according to ISPT's submission, the registered proprietor of the land (CMPI) also held the ultimate beneficial interest in the land. Accordingly, ISPT invoked the principle ``that no equitable estate passes if A purports to be trustee for A alone'' citing
DKLR

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Holding Co (No 2) Pty Ltd v Commr of Stamp Duties (NSW) 82 ATC 4125 at 4151; (1982) 149 CLR 431 at 474 and the cases there cited;
Suncorp Insurance & Finance v Commr of Stamp Duties (Qld) [1998] 2 Qd R 285 at 304-305. In such a case, according to ISPT, the equitable estate would merge in the prior legal estate. ISPT also relied on the following passage from Deane J's judgment in
Corin v Patton (1990) 169 CLR 540 at 579:

``... equity, with its regard for substance rather than form, would not go through the charade of intervening to create trusts of property under which the legal owner held as bare trustee for another who in turn held as bare trustee for the legal owner. To the contrary, equity firmly denies the possibility of any such intervention in that it would disregard the interposed beneficiary whom it would see as having no interest in the property at all (see, e.g., Grainge v Wilberforce; In re Lashmar; Moody v Penfold; Baker and Langan, Snell's Principle's of Equity, 28th ed. (1982), p. 104; Meagher and Gummow, Jacob's Law of Trusts in Australia, 5th ed. (1986), par. 2312; Pettit, Equity and the Law of Trusts, 6th ed. (1989), Hanbury and Maudsley, Modern Equity, 13th ed. (Martin) (1989), p. 113). That means that such a trust is not possible since, once the interposed beneficiary is disregarded, the trustee and the beneficiary would be the same person with the result that the legal and beneficial interests were merged.''

189. In other words, it was ISPT's submission that equity will regard a sub-trustee of an equitable interest as having no interest in the property, and therefore, in circumstances where legal owner and ultimate beneficiary are the one person, the legal and equitable estates in the property will merge in that person

190. Mason P rejected this submission on two grounds. First, his Honour appears to have agreed with the Chief Commissioner's submission that it was necessary to consider the parties' intentions as to the transaction as a whole (ie, moving beneficial ownership of the property from CMPI to the ISPT group) when considering whether equity operated to cause the legal and beneficial estates to be united in CMPI. His Honour noted that the transaction would not have had its desired effect if a trust did not arise at Step 5. Instead, the property would have continued to be held absolutely by CMPI and would not have become an asset of the Forster No. 1 Trust until Step 9, when the land was transferred by CMPI to the plaintiff (as the nominee of ISPT under the Forster No 1 Trust). If that were so, the eventual change of unitholder in the Forster No. 1 Trust would not have had any effect on any interest in the property, because the only asset of the Forster No. 1 Trust would have been an interest in the cheques. Similarly, the transfer of the property from CMPI to ISPT would not have been a change of trustee, but rather a transfer of fee simple in the property. Mason P said:

``It was vital to the transaction taken as a whole that the entire beneficial interest in the land move into the Forster No 1 Property Trust at step (6) [the end of Fitzgerald AJA's step 5]. Were it not so, the later issue (step 7) and redemption (step (8)) of units would have left the land unaffected. And the ultimate transfer (step (11)) would have involved much more than a change in the trustee of the land, because the land would not have been held on any trust.''

191. Mason P was well disposed towards the Chief Commissioner's submission that the broad context of the transaction was relevant to determining whether the principle of merger should operate to defeat the sub-trust arrangement. His Honour said that equity should not operate to defeat such intentions:

``If the principle of merger eclipsed step (6) from the view of equity, it would defeat the whole transaction intended by the parties. Equity may do nothing in vain. But neither does it work to defeat the lawful intentions of parties. Here, those intentions require that equity perceive, recognise, declare and (in the event of breach, enforce) the sub-trust whereby Coles Myer Property Investments held its legal interest in the land as nominee for the trustee (ISPT), with that trustee treating such interest in the land as a trust asset held on behalf of the unit holders from time to time. The terms of that sub-trust are spelled out in detail in the trust deed for the Forster No 1 Trust. If principles of merger and futility precluded the passing of a beneficial interest into the Forster No 1 Trust at this stage, then that interest never became a trust asset. And the later issue and redemption of units were dealings in a trust that owned nothing but interests in various

ATC 4737

cheques. And the transfer of the land (step (11)) was anything but a mere change of trustees in the Forster No 1 Trust.''

192. The second reason for Mason P's rejection of ISPT's submission was the fact that he did not consider CMPI to be a bare (sub- )trustee and therefore considered that the passage from Deane J's judgment in Corin v Patton inapplicable. His Honour considered that a bare trustee should be distinguished from a trustee with active duties, and that ``Where there are active duties, equity will recognise a sub-trust whose beneficiary is the same as the legal owner''. Mason P considered that the reference to a ``bare trustee'' was critical, and that when a trustee has

``active duties, equity will recognise a sub- trust whose beneficiary is the same as the legal owner. This is because the failure to do so would defeat the parties' intent that the sub-trust operate according to its terms, including the term that the nominated sub- trustee act as such. Thus where A holds on trust for B who holds on trust for C, then B will not `disappear from the picture': Grey v Inland Revenue Commissioners [1958] Ch 375 at 382 if B's trust is active and not bare; see also at 715 [sic], per Lord Evershed MR.''

193. His Honour, in discussing the nature of a bare trust, considered various formulations of the test for bare trusteeship before following Gummow J in
Herdegen & Anor v FC of T 88 ATC 4995; (1988) 84 ALR 271. Gummow J preferred a definition of bare trust that equated active duties with duties expressly imposed by the settlor. Mason P then held that the duties contained in the trust deed ``despite... being exiguous'' met that definition. Accordingly, CMPI (as registered proprietor) held the land in ``active trust'' for ISPT which held the beneficial interest in trust for CMPI (as sole unitholder of the Forster No. 1 Trust). His Honour did not define the duties that he considered to be imposed on CMPI as nominee under the trust deed. If Mason P was wrong, and the terms of the trust deed do not apply to any resulting trust that might have arisen at Step 5, the trust would be a bare trust (see Herdegen at ATC 5003; ALR 281) and Deane J's comments in Corin v Patton would apply.

194. In summary, Mason P considered that the legal and equitable estate did not merge in CMPI because:

Conclusion as to existence of trust - Mason P

195. Having regard to the parties' overall intentions, Mason P made the following comments about the ``purported effect'' of the transaction:

``What emerged from this analysis is that it is inaccurate to say that step (6) merely brought about the result that, upon payment of the purchase price, Coles Myer Property Investments purported to hold the land on trust for ISPT which purported to hold it in trust for Coles Myer Property Investments. The arrangements stemming from Coles Myer Property Investments' receipt of purchase moneys and nomination were more complex. In truth, Coles Myer Property Investments purported to hold its pre- existent legal interest in the land as nominee for ISPT, the trustee under the trust deed. It necessarily followed that ISPT was purporting to hold the interest in the land that it thereby acquired as an asset of the Forster No 1 Property Trust (in which Coles Myer Property Investments held all of the issued units at the time).''

196. His Honour thus considered that the transaction purported to pass the beneficial interest in the land from CMPI as registered proprietor to ISPT at Step 5, with ISPT holding on trust for CMPI as sole unitholder. If the beneficial interest did not move from CMPI to ISPT at this point, no sub-trust could have existed. As Mason P said, ``it must follow that the beneficial interest passes to the sub-trustee in order that it can be held by the sub-trustee for the benefit of the ultimate beneficiary''. In other words, Mason P held that the beneficial interest passed to ISPT as subtrustee on its way, as it were, to being held by the ultimate

ATC 4738

beneficiary. His Honour further held that the beneficial interest that passed to ISPT (as trustee for the Forster No. 1 Trust) at Step 5 was ``a change in beneficial ownership sufficient to engage section 44(1)''. Mason P said:

``Fecund equity conceived the shifting use and the springing use. But equity would be relinquishing its role as mother for that of magician if (without the use of mirrors) it enabled the beneficial interest in the land to move into the Forster No 1 Property Trust without touching the tripwire of s 44(1).''

197. Mason P clearly decided that a trust arose at Step 5. Moreover, his Honour's conclusion as to s. 44(1) expressly contemplated that at Step 5 the property was held by CMPI on trust for ISPT which held its interest on trust for CMPI as sole unitholder. The very shift in beneficial interest which his Honour considered to ``touch the tripwire'' of s. 44(1) was the passing of the beneficial interest in the land to ISPT. It could not be disputed that the beneficial interest then held by ISPT was held by it on trust for CMPI as the sole unitholder of the Forster No. 1 Trust.

The approach of Fitzgerald AJA

198. It should be noted at the outset that, in contrast to Mason P Fitzgerald AJA did not examine whether the correspondence of identity of the legal owner and the ultimate beneficial owner of the property was an obstacle to the interposition of ISPT as sub-trustee and therefore never called into question whether the land was trust property after Step 5. That being the case, his Honour proceeded to decide whether having CMPI hold the land on trust for ISPT as trustee for the Forster No. 1 Trust amounted to a change in beneficial ownership sufficient to activate s. 44(1).

Change in beneficial ownership by sub-trust? - Fitzgerald AJA

199. In examining whether the sub-trust arrangement created at Step 5 involved a change in beneficial ownership of the land, Fitzgerald AJA declined to consider potential problems arising from the fact that CMPI was both the registered proprietor of the land and the sole unitholder of the Forster No. 1 Trust. His Honour said [at 4080]:

``... it is convenient to put this point to one side for the moment, and to consider a hypothetical transaction in which a stranger was the holder of all the issued units in the Forster No 1 Trust at the time of the material contract of sale and purchase of the Forster Shopping Village and the payment of the purchase price.''

200. His Honour held that in these circumstances there would be no doubt that a trust would exist at Step 5 [4080]:

``There is no reason to doubt that, in the circumstances postulated, Coles Myer Property Investments' estate or interest in the property would have been reduced to the legal estate: see, eg,
Stern v McArthur (1988) 165 CLR 489 at 523;
Chan v Cresdon Pty Ltd (1989) 168 CLR 242 at 252-253.''

This statement makes it clear that Fitzgerald AJA did not consider whether a bare sub-trustee ``drops out of the picture'' in the way contemplated in
Re Latimer [1891] 1 Ch 258,
Grainge v Wilberforce (1889) 5 TLR 436 and other cases that will be discussed in due course.

201. Fitzgerald AJA proceeded to determine, in the context of this ``hypothetical transaction'', whether Step 5 would amount to ``a change in the beneficial ownership of an estate or interest in land'' under s. 44(1). Fitzgerald AJA held that it did not. His Honour considered that [at 4080]

``The issue of beneficial ownership between trustee and sole unit holder of the Forster No 1 Trust must depend primarily, at least, on the terms of the deed for that trust: Suncorp 97 ATC at p 4835;
Costa & Duppe Properties Pty Ltd v Duppe (1986) VR 90.''

202. Fitzgerald AJA noted the rights conferred by the trust deed on ISPT as trustee (such as an indemnity in respect of certain liabilities) before concluding [at 4081]:

``... In any event, any rights ISPT as trustee of the Forster Shopping Village No 1 Trust has in respect of the Forster Shopping Village under the trust deed or the general law plainly do not constitute full beneficial ownership of that property, which is the sole basis upon which the Commissioner's assessment is founded.''

203. His Honour also commented that the trust deed entitled a sole unit holder to full beneficial ownership of the trust assets, subject only to the rights of the trustee and that, accordingly, the trustee could not be full beneficial owner of trust property. Accordingly,

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the interest acquired by ISPT in its capacity of trustee of the Forster No. 1 Trust was not full beneficial ownership of the sort that would activate s. 44(1).

Moving of an interest at Step 5 - Fitzgerald AJA

204. Fitzgerald AJA then dealt with the Chief Commissioner's submission that beneficial ownership must pass to ISPT at Step 5 in order that ISPT might hold such beneficial ownership on trust for the unitholders of the Forster No. 1 Trust. In other words, Fitzgerald AJA considered whether full beneficial ownership passed through ISPT ``on its way'' to the beneficiary of the Forster No. 1 Trust.

205. It will be recalled that Mason P accepted this submission, saying, ``it must follow that the beneficial interest passes to the sub-trustee in order that it can be held by the sub-trustee for the benefit of the ultimate beneficiary''. Fitzgerald AJA disagreed. His Honour did not accept the proposition that ``a sole beneficiary of a trust... derives beneficial ownership of the property through the trustee in the sense that, for an instant, beneficial ownership of the property is vested in the trustee as it passes from vendor to beneficiary''. Instead, Fitzgerald AJA took the view that the only beneficial estate or interest that passed to ISPT was [at 4081]

``... the concatenation of rights, enforceable in equity against Coles Myer Property Investments both as vendor and sole unitholder, which ISPT obtained in respect of the property under the contract of sale and purchase and the trust deed with respect to the Forster No 1 Trust. Nothing else passed to ISPT, or to or from Coles Myer Property Investments.''

This, according to Fitzgerald AJA did not constitute ``a change in the beneficial ownership of an estate or interest in... land'' under s. 44(1).

Conclusion as to existence of trust - Fitzgerald AJA

206. Fitzgerald AJA's approach to the question whether a trust arose at Step 5 relies on an analogy with the hypothetical situation of A holding on trust for B who holds on trust for C. He decided that in such a situation s. 44(1) would not be activated. Fitzgerald AJA appeared to consider that there was no difficulty in applying the same reasoning to the situation where A holds on trust for B who holds on trust for A. Fitzgerald AJA did not expressly decide whether the identity of legal proprietor and ultimate beneficiary was an impediment to the creation of a sub-trust at Step 5.

207. There are two possible interpretations of Fitzgerald AJA's analogy approach to the question whether a trust existed at Step 5. First, it is possible that his Honour was using an a fortiori approach, so that even if the transaction was effective in creating the sub-trust arrangement, the beneficial ownership of the land did not change at Step 5. Accordingly, it would be unnecessary to decide whether the identity of legal proprietor and ultimate beneficiary prevented a trust from then coming into existence because, even if it did, s. 44(1) would not be activated. This would explain why Fitzgerald AJA declined to decide the s. 23C issue. According to this interpretation of Fitzgerald AJA's judgment, he did not decide whether the land became trust property at Step 5. He merely decided that, even if it did, the beneficial ownership of the land did not change and s. 44(1) did not apply.

208. Alternatively, it is possible that, by not adverting to the merger argument or to the s. 23C argument, Fitzgerald AJA was simply rejecting them. On this interpretation, his Honour must be regarded as having decided that s. 23C did not prevent the disposition of an interest in land at Step 5 and that a trust did, in fact, arise at Step 5, but that the creation of such a trust did not amount to a change in the beneficial ownership of the land under s. 44(1).

209. The first of these two interpretations is immediately attractive on the basis that it explains Fitzgerald AJA's silence regarding the s. 23C issue and the merger issue. However, certain comments made by his Honour favour the second interpretation. The second sentence of Fitzgerald AJA's judgment is ``Each shopping centre is now owned by Nominees Pty Ltd as trustee of a unit trust''. This could only be the case if a trust arose in respect of the property at Step 5. Otherwise, the land would never have become an asset of the Forster No. 1 Trust and the fee simple would have remained with CMPI at Step 5. Accordingly, the final transfer to Nominees would have been a transfer of the fee simple. It was submitted on behalf of the Chief Commissioner that this statement by Fitzgerald AJA is simply wrong.

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210. It will be recalled that Fitzgerald AJA said, in relation to the Chief Commissioner's submission that ``for an instant, beneficial ownership is vested in the trustee as it passes from vendor to beneficiary'' [at 4081]:

``... It is convenient to return from the hypothetical situation of a unit trust in which the sole unitholder is a different person from the vendor of the property to the present case in which Coles Myer Property Investments occupied both roles, since it then becomes unnecessary to decide whether or not the Commissioner's submission might be correct in other circumstances.

The beneficial estate or interest in the Forster Shopping village which passed to ISPT was the concatenation of rights, enforceable in equity against Coles Myer Property Investments both as vendor and sole unitholder, which ISPT obtained in respect of the property under the contract of sale and purchase and the trust deed with respect to the Forster No 1 Trust. Nothing else passed to ISPT, or to or from Coles Myer Property Investments....

Such a conclusion does not deny that the Forster Shopping Village became an asset of the Forster No 1 Trust.''

211. This passage is significant. In order to address the Chief Commissioner's submission that the beneficial ownership in the land passed through ISPT (as trustee) ``on its way'' to CMPI (as sole unitholder), Fitzgerald AJA ceased using his analogy whereby a stranger was the sole unitholder of the Forster No. 1 Trust. Instead, his Honour examined the Chief Commissioner's submission as it related to a situation in which A purported to hold property on trust for B who held its interest on trust for A. Fitzgerald AJA then held that ISPT would acquire an interest in the land at step 5 as a trustee for CMPI (as the sole unitholder), that interest being ``the concatenation of rights, enforceable in equity against Coles Myer Property Investments both as vendor and sole unit holder''. If Fitzgerald AJA had accepted the argument relating to the identity of the legal owner and ultimate beneficiary (or, indeed, the s. 23C argument), he would not have held that any rights passed to ISPT at all at Step 5. The land would simply have continued to be held absolutely by CMPI.

212. These two statements by Fitzgerald AJA seem to mean that it is the second interpretation of Fitzgerald AJA's judgment that is correct. If that is so, Fitzgerald AJA's judgment must be regarded as involving a decision that the land became trust property at Step 5 notwithstanding s. 23C and the merger argument.

The approach of Meagher JA

213. Meagher JA agreed with the judgment of Fitzgerald AJA, but stated his own reasons why there was no change of beneficial ownership at Step 5 [at 4077]:

``... The legal estate resided in Coles Myer Property Investments both before and after steps (5) and (6). Either ss 23C and 54A of the Conveyancing Act 1919 applied to nullify the ordinary effect of those two steps, or they did not. If they did, the beneficial interest remained with Coles Myer Property Investments. If they did not, the beneficial interest also remained in Coles Myer Property Investments, in its capacity as sole unit holder in ISPT. In neither event is there any change of beneficial interest.''

214. This statement makes it clear that, despite his professed agreement with Fitzgerald AJA, Meagher JA did not decide whether a trust arose at Step 5. Indeed, Meagher JA thought it possible that s. 23C might prevent a trust from arising. It was not necessary for Meagher JA to decide whether a trust arose at Step 5 because any such trust would not involve a change in beneficial ownership.

215. However, Meagher JA, like Fitzgerald AJA, did not address the argument that the identity of legal proprietor and ultimate beneficiary was no obstacle to a trust arising at Step 5. Meagher JA, like Fitzgerald AJA, did not need to, because he held that, even if a sub- trust did arise at Step 5, the beneficial ownership of the property did not change because CMPI still held it in its capacity of sole unitholder of the Forster No. 1 Trust. However his Honour also thought that the merger argument was no obstacle to a trust arising at step 5. He said in the penultimate sentence in the passage set out above, ``If they did not, the beneficial interest also remained in Coles Myer Property Investments, in its capacity as sole unit holder in ISPT''. In other words, his Honour considered (assuming s. 23C did not apply) that CMPI possessed the beneficial interest after Step 5 by virtue of being the sole unitholder of the Forster No. 1 Trust, not by virtue of the fact

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that no sub-trust arose due to the identity of legal owner and ultimate beneficiary (ie the merger argument).

216. Accordingly, Meagher JA's judgment, except to the extent of the general concurrence with Fitzgerald AJA, involved no decision as to whether a trust arose at Step 5 (or whether a trust was excluded by s. 23C) and appears to include a decision that the identity of legal owner and ultimate beneficiary did not prevent such a trust from arising.

Does the ratio decidendi include a decision that a trust arose?

217. The Court of Appeal decision can be broken down in the following way: two judges (Mason P and Fitzgerald AJA) held that a trust arose at Step 5 and that s. 23C of the Conveyancing Act did not apply. Meagher JA did not come to any conclusion on those matters. However, all the judges agreed that the identity of legal proprietor and ultimate beneficiary did not prevent a trust from arising at Step 5.

218. The findings of the Court of Appeal are binding on me only if they form part of the ratio decidendi of the Court of Appeal's decision. The better view appears to me to be that they do not. There are two reasons for this. First, Meagher JA made no finding as to the existence of a trust. Only Mason P and Fitzgerald AJA held that a trust arose at Step 5and as will be discussed below, a determination cannot become part of the ratio decidendi of a decision by ``cobbling together'' rulings in minority and majority judgments. Second, the conclusion of Fitzgerald JA that a trust arose at Step 5 did not form part of the ratio decidendi of his Honour's decision. Of the three judgments, it is only that of Mason P in dissent that involves an essential finding that a trust arose at Step 5.

219. Mason P and Fitzgerald AJA decided that a trust arose at Step 5. Meagher JA made no separate decision on the issue. There can be no doubt that Mason P's decision that a trust arose formed part of the ratio decidendi of his Honour's judgment: Mason P held that beneficial ownership changed precisely because a trust arose at Step 5. Notwithstanding this, the fact that Meagher JA declined to hold that a trust arose at Step 5 makes it impossible to conclude that the ratio decidendi of the Court of Appeal decision as a whole included a finding that a trust arose at Step 5. A ratio decidendi cannot be created by aggregating views of minority judges and views of majority judges to secure a numerical majority on a particular issue. In
Great Western Railway Company v Owners of SS Mostyn [1928] AC 57 at 73-74, Viscount Dunedin said:

``Now, when any tribunal is bound by the judgment of another Court, either superior or co-ordinate, it is, of course, bound by the judgment itself. And if from the opinions delivered it is clear - as is the case in most instances - what the ratio decidendi was which led to the judgment, then that ratio decidendi is also binding. But if it is not clear, then I do not think it is part of this tribunal's duty to spell out with great difficulty a ratio decidendi in order to be bound by it. That is what the Court of Appeal has done here. With great hesitation they have added the opinion of Lord Hatherley to that of Lord Cairns and then, with still greater difficulty, that of Lord Blackburn, and so have secured what they think was a majority in favour of Lord Cairns's very clear view. I do not think that the respect which they hold and have expressed for the judgments of your Lordships' House compelled them to go through this difficult and most unsatisfactory performance.... [Y]ou cannot extract from the judgments in Wear v Adamson such a ratio decidendi as is binding. That, however, is far from wiping Wear v Adamson off the slate. It remains for two purposes. First, for the judgment itself and, second, for the opinions of the noble Lords, which are entitled to the greatest respect. Now, the judgement is binding. What, therefore, I think is our duty on this occasion is to consider the statute for ourselves in the light of the opinions, diverging as they are, and to give an interpretation; but that interpretation must necessarily be one which would not, if it was applied to the facts of Wear v Adamson lead to a different result.''

220. In
Dickensons Arcade Pty Ltd v Tasmania (1974) 130 CLR 177 at 188, Barwick CJ said:

``In submitting that the method of calculating the licence fee did not involve the imposition of a duty of excise, considerable reliance was placed by the defendant on the Court's decision in Dennis

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Hotels Pty Ltd v Victoria. It was there decided by majority that the licensing provisions of the Licensing Act 1958 (Vict), other than that provision which fixed the fee for a temporary victualler's licence or a temporary packet licence, did not impose duties of excise and were within the competence of the Victorian legislature. There was, however, no reason for that decision common to the members of the Court who formed the majority in favour of the conclusion. An attempt was made by counsel for the plaintiff in the argument of this demurrer to construct a reason for decision in the sense of the minority by aggregating views expressed by those Justices with a view argumentatively attributed to one of the Justices included in the majority. Such a course, however, is inadmissible, just as a common reason for decision could not be constructed by adding views of single justices to form a conglomerate. See, e.g., Great Western Railway Co v Owners of SS `Mostyn', per Viscount Dunedin. A composite reason so constructed does not furnish a reason for decision in the sense of that expression in relation to judicial precedent. There being no reason for decision common to the majority of the Justices, the Court's decision in Dennis Hotels Pty Ltd v Victoria, in my opinion, is authority only in relation to the statutory and factual situation it resolved and in relation to a case which has, if not precisely, at least substantially and indistinguishably the same statutory and factual situation. Cf. Lord Haldane in Great Western Railway Co v. Owners of SS `Mostyn', esp. at pp. 71-72. I do not regard myself as bound to use any of those reasons as a base on which to construct some further or other conclusion.''

221. It should be noted that the statement of Barwick CJ that
Dennis Hotels Pty Ltd v Victoria (1961) 101 CLR 621

``is authority only in relation to the statutory and factual situation it resolved and in relation to a case which has, if not precisely, at least substantially and indistinguishably the same statutory and factual situation''

does not mean that the Court of Appeal decision is binding simply because it was concerned with the same transaction as concerns the court in the present case. The Court of Appeal decision would bind the parties only in respect of the s. 44(1) question.

222. Next, it should be noted that Fitzgerald AJA's decision that a trust arose does not form part of the ratio decidendi of his Honour's judgment. Fitzgerald AJA held that Step 5 did not engage s. 44(1) notwithstanding that a trust was created, thereby rejecting ISPT's submission that no trust was created at Step 5, but accepting its submission that the creation of such a trust did not amount to a change of beneficial ownership under s. 44(1). In such a situation, it is only the acceptance of the alternative submission, and not the rejection of the primary submission, that forms part of the ratio decidendi. In his dissenting judgment in
Bristol-Myers Squibb Co v F H Faulding & Co Ltd (2000) 170 ALR 439, Finkelstein J outlined this principle. His Honour said:

``What is the position if the judge rules in favour of one party on one issue, thus entitling him to obtain judgment, but rules in favour of the other party on the second issue? The generally accepted view is that the decision on the second point is not part of the ratio decidendi. The reason is to be found in the acceptance of the broad proposition that a statement of principle that is not necessary to found the judgment or order of the Court, that is a statement which if not made or if decided differently, would not alter the outcome, is obiter. This seems to stem from a statement by Vaughan CJ in Bole v Horton (1673) Vaugh 360 at 382: `An opinion given in Court, if not necessary to the judgment given of record, but that it might have been as well given if no such, or a contrary, opinion had been broached, is no judicial opinion, nor more than a gratis dictum'.''

223. Finkelstein J noted the decision in
Penn- Texas Corp v Murat Anstalt (No 2) [1964] 2 QB 647. The Court of Appeal had previously decided that under the Foreign Tribunals Evidence Act 1856 (UK) there was no power to order a company to give evidence, but there was power to order it to produce documents, but only if they were specifically identified. The Court of Appeal held, however, that no order should be made because the documents sought to be produced had not been sufficiently identified. The applicant then made a further application for specifically identified documents. The Court of Appeal decided that

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there was no power to order the production of evidence at all, notwithstanding the earlier decision of the Court of Appeal. In coming to this conclusion the Court relied on the principle derived from Bole v Horton (1673) Vaugh 360.

224. However the principle in Bole v Horton is not without controversy. Finkelstein J's judgment in Bristol-Myers Squibb Co v FH Faulding & Co Ltd was itself a dissenting judgment. While in Burt v Barry & Roberts Ltd, Ex parte Barry & Roberts [1956] St R Qd 207 a majority of the Full Court of Queensland (Stanley J and Jeffries AJ agreeing, Mack J dissenting) held that ``if on the issues broadly stated the superior Court intends to and does give a deliberate exposition of the relevant law that opinion should be followed by other Courts'', this view is yet to gain widespread acceptance.

225. Accordingly, Fitzgerald AJA's rejection of the merger argument did not form part of the ratio decidendi of his Honour's decision. The ratio decidendi is limited to the finding that any trust that may or may not have arisen did not involve a change in beneficial ownership contemplated by s. 44(1).

226. One of the questions before this court is whether s. 23C prevented a trust from coming into existence at Step 5. It is therefore necessary to determine whether the Court of Appeal decision binds the Court to a decision that s. 23C did not so operate.

227. In the Court of Appeal, Mason P and Fitzgerald AJA held that a trust arose at Step 5. A fortiori, they also held that s. 23C did not prevent a trust from arising at Step 5. Meagher JA, on the other hand, while expressly adverting to the possibility that s. 23C might apply, did not consider it necessary to decide whether it did. This was because, according to Meagher JA, even if s. 23C did not apply (and a trust arose at Step 5), s. 44(1) would not be engaged.

228. Accordingly, of the majority, only Fitzgerald AJA decided that s. 23C precluded the operation of a trust at Step 5. As discussed above, it is not possible to ``cobble together'' majority and minority judgments so as to create a ratio decidendi. Therefore, I am not precluded in this case from deciding that s. 23C prevented a trust from coming into existence.

229. Similarly, it must be decided whether the identity of the legal owner of the land and by sole beneficiary of the Forster No. 1 Trust prevented the creation of a trust at Step 5. It is necessary to determine whether the ratio decidendi of the Court of Appeal's decision included a determination against this argument and that the principles derived from the quoted passage of Deane J in Corin v Patton did not operate to prevent a trust from coming into existence.

230. The only judgment in which the merger argument was squarely addressed is that of Mason P. His Honour rejected the argument. For the reasons set out above, however, the relevant judgments are those of the majority. Fitzgerald AJA, in deciding that a trust existed after Step 5, necessarily decided that the merger argument did not prevent such a trust from arising. Meagher JA, however, held that either s. 23C applied or a trust arose but beneficial ownership did not change. Therefore, although Meagher JA did not decide whether s. 23C applied, his Honour seems to have decided, if only by implication, that, if s. 23C did not apply, a trust would arise notwithstanding the merger argument.

231. By implication, Fitzgerald AJA and Meagher JA rejected (or, in Meagher JA's case, did not think it necessary to consider) ISPT's submission that no trust was created at Step 5, but accepted ISPT's submission that the creation of such a trust would not amount to a change of beneficial ownership under s.44(1). As noted above, only the acceptance of the alternative submission is binding on me.

232. The principle that the rejection of an argument does not form part of the ratio decidendi of a decision where an alternative argument succeeds, when applied to the present case, means that the Court of Appeal decision is not binding one way or the other in relation to the question whether a trust arose at Step 5. In any case, it is noteworthy that in the Court of Appeal, the majority did not squarely address the issue whether the identity of trustee and ultimate beneficiary prevented a trust from arising at Step 5. It seems, therefore, that there could be no ``deliberate exposition of the relevant law'' so as to render the rejection of the merger argument part of the ratio decidendi. It should be noted, for the sake of completeness, however, that the court in this case cannot conclude that a trust arose at Step 5 if such a conclusion would necessarily lead to the conclusion that there had been a change of

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beneficial ownership as contemplated by s. 44(1). This is made clear by the comments of Viscount Dunedin in Great Western Railway Company v Owners of SS Mostyn regarding the binding nature of a judgment itself, notwithstanding uncertainty as to, or divergence in, the reasons for it.

The Court of Appeal decision in summary

233. Mason P decided that a s. 23C did not apply to prevent a trust from coming into existence at Step 5, the terms of such a trust being those contained in the trust deed. His Honour further held that the identity of the trustee and the ultimate beneficiary did not preclude a trust from arising because, first, that result would defeat the parties' intentions, and, second the trusts were not bare trusts. His Honour held that the creation of the trust amounted to a change in the beneficial ownership of the property sufficient to activate s. 44(1).

234. Fitzgerald AJA held that a trust arose at Step 5, the creation of which did not amount to a change in beneficial ownership as contemplated by s. 44(1). In so holding, his Honour impliedly rejected the s. 23C and merger arguments.

235. Meagher JA, while purporting to agree with Fitzgerald AJA, held that either the s. 23C applied to prevent a trust from arising or any trust that arose would not amount to a change in beneficial ownership as contemplated by s. 44(1). Consequently, his Honour made no decision as to whether s. 23C applied, but (like Fitzgerald AJA) his Honour impliedly rejected the merger argument.

236. In any event, the court in this case is only bound by the Court of Appeal's decision insofar as it includes a decision that the transaction did not engage s. 44(1). Of the majority judges, only Fitzgerald AJA actually ruled that a trust arose at Step 5. Moreover, his Honour's ruling that a trust arose did not form part of the ratio decidendi of his Honour's judgement, because the decision merely amounted to the rejection of a primary submission in circumstances where the alternative submission was accepted. Similarly, only Fitzgerald JA in the majority ruled that s. 23C precluded a trust from arising. Accordingly, subject to what is said below about issue estoppel, it is open to me to decide whether s. 23C precluded a trust from arising at step 5. Finally, and subject to the same proviso, it is open for me to decide whether the identity of legal owner and ultimate beneficial owner of the property precludes the coming into existence of a trust. This is because the rejection of the merger argument by the Court of Appeal merely amounted to the rejection of a primary submission in circumstances where the majority accepted an alternative submission.

Issue estoppel?

237. In addition to arguing that this court is bound by the decision of the Court of Appeal, the plaintiff asserted that the Court of Appeal decided the issue of whether a trust arose at step 5 and that the parties are bound in that respect by an issue estoppel.

238. In Thoday v Thoday [1964] P 181 Diplock LJ defined issue estoppel in the following way (at 198):

``There are many causes of action which can only be established by proving that two or more different conditions are fulfilled. Such causes of action involve as many separate issues between the parties as there are conditions to be fulfilled by the plaintiff in order to establish his cause of action; and there may be cases where the fulfilment of an identical condition is a requirement common to two or more different causes of action. If in litigation upon one such cause of action any of such separate issues as to whether a particular condition has been fulfilled is determined by a court of competent jurisdiction, either on evidence or on admission by a party to the litigation, neither party can, in subsequent litigation between one another upon any cause of action which depends upon the fulfilment of the identical condition, assert that the condition was fulfilled if the court has in the first litigation determined that it was not, or deny that it was fulfilled if the court in the first litigation determined that it was.''

239. In R v Hartington, Middle Quarter Inhabitants (1855) 4 E&B 780 Coleridge J said (at 794)

``... the judgement concludes, not merely as to the point actually decided, but as to a matter which it was necessary to decide, and which was actually decided as the groundwork of the decision itself, though not then directly the point at issue.''

240. Applying these principles to the instant case it is clear that no issue estoppel can arise.

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The Court of Appeal held that the Chief Commissioner was not entitled to assess duty pursuant to s. 44. The Chief Commissioner will be estopped from re-agitating the issue if the finding that a trust arose was a necessary part of the Court of Appeal's decision that s. 44 did not apply. This will be the case if a finding that a trust arose was necessary to the claim pursuant to s. 44, and it can be demonstrated that the Court of Appeal failed to make such a finding. (See the passage from Diplock LJ's judgment in Thoday v Thoday set out above.)

241. A lengthy analysis of the Court of the Appeal's reasoning is unnecessary. I have already held that, of the members of the majority in the Court of Appeal, only Fitzgerald AJA held that a trust arose at Step 5. The matter was not decided by the majority and no issue estoppel can arise. Moreover, the fact that Meagher JA clearly did not decide whether a trust arose, yet reached the same conclusion as Fitzgerald AJA, suggests that the finding that a trust arose could not be a ``condition'' of the Court of Appeal's decision sense meant by Diplock LJ in Thoday v Thoday. The following passage from the judgment of Knight Bruce VS in Barrs v Jackson (1842) 1 Y & C Ch Cas 585 (at 597-598) is relevant in this respect:

``But it is, I think, to be collected that the rule against re-agitating matter adjudicated is subject generally to this restriction, that, however essential the establishment of particular facts may be to the soundness of a judicial decision, however it may proceed on them as established, and however and binding and conclusive the decision may as to its immediate and direct object be, those facts are not all necessarily established conclusively between the parties, and that either may again litigate them for any other purpose as to which they may come in question, provided the immediate subject of the decision be not attempted to be withdrawn from its operation so as to defeat its direct object.''

Was the land trust property when transferred to CMPI?

242. Because, on the view I have taken, there was no binding finding by the Court of Appeal on this question, I must proceed to consider it. There are three possible impediments to a finding that a trust arose: first, the operation of s. 23C(1) of the Conveyancing Act; second, the coincidence in identity of the legal owner of the land and the sole unit holder of the Forster No. 1 Trust (ie, the merger argument); and, third, the absence of prior written approval of the unitholders to the nomination of CMPI as nominee under the trust as required by clause 8.10 of the trust deed.

The merger argument

243. It is necessary to determine whether Step 5 had the effect of ``merging'' the legal and equitable estate in CMPI. I use the expression ``merge'' for convenience, notwithstanding that CMPI was absolutely entitled prior to Step 5. This question requires two stages of analysis. First, it is necessary to decide whether the principle to which Deane J referred in Corin v Patton actually exists. Second and if the principle referred to above does exist, it is necessary to decide whether it applied to this transaction in such a way that the legal and equitable estates in the property came together in CMPI as legal owner purporting to hold the property on trust for itself.

244. The authors of Jacobs' Law of Trusts 6 ed (1997) summarise equity's approach to sub- trusts as follows (at 699):

``A sub-trust will arise if A, a beneficiary under a trust, declares himself trustee of it for B under a trust imposing active duties on A; the head trustee will owe his duties to A who will continue to hold a beneficial interest and A will owe distinct duties to B who will also acquire a beneficial interest. Even if B's interest be vested absolutely and B be sui juris, there will not be between B and the head trustee the precise co-incidence of right and duty necessary to B to invoke the rule in Saunders v Vautier against the head trustee. The contrary view, which has the support of Professor Scott, is that A continues to hold his equitable interest so that both A and the head trustee would be necessary parties should B seek a conveyance of the legal title to him or in accordance with his direction.''

245. In Corin v Patton a woman executed in favour of her brother a transfer of her interest as a joint tenant in land. They also executed an instrument of trust providing that the brother held his interest in the house on trust for the sister. The sister died before the transfer was registered. During the course of argument,

``it was submitted on behalf of the appellants that the correct analysis of the

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situation which would have existed if the transfer to Mr Corin had been registered was that Mr Corin would have acquired the whole legal and equitable estate but would have held the property conveyed subject to a trust. That was said to be the effect of the approach taken in this Court in the DKLR Holding Co Case. That being so, equity should give pro tanto effect to the intention of the parties by constituting Mrs. Patton a trustee of her interest in the subject land for Mr Corin as bare trustee for herself.''

(per Deane J at 578)

246. Deane J then said (at 579) that:

``The third answer [to that submission] is that equity, with its regard for substance rather than form, would not go through the charade of intervening to create trusts of property under which the legal owner held as bare trustee for another who in turn held as bare trustee for the legal owner. To the contrary, equity firmly denies the possibility of any such intervention in that it would disregard the interposed beneficiary whom it would see as having no interest in the property at all (see, e.g., Grainge v Wilberforce; In re Lashmar; Moody v Penfold; Baker and Langan, Snell's Principle's of Equity, 28th ed. (1982), p. 104; Meagher and Gummow, Jacob's Law of Trusts in Australia, 5th ed. (1986), par. 2312; Pettit, Equity and the Law of Trusts, 6th ed. (1989), Hanbury and Maudsley, Modern Equity, 13th ed. (Martin) (1989), p. 113). That means that such a trust is not possible since, once the interposed beneficiary is disregarded, the trustee and the beneficiary would be the same person with the result that the legal and beneficial interests were merged.''

247. Deane J relied on two precedents, Grainge v Wilberforce (1889) TLR 436 and
Re Lashmar [1891] 1 Ch 258 in coming to this conclusion. Grainge v Wilberforce involved a situation where a mortgagee held property on trust for a sub-trustee, who had fulfilled his only active duty (to raise money against the property) and held his interest in the property on trust for the defendant in an action for specific performance of a contract for sale of the property. The trustee was not a party to either the contract or the action. Chitty J held that this was no obstacle to an order for specific performance (at 437):

``But Lloyd [the trustee] had no interest whatever, or, if he had any, it was only an equitable right to redeem as trustee for the persons interested under the deed of 1867. The case, therefore, fell within the principle that where A was trustee for B, who was trustee for C, A held in trust for C, and must convey as C directed. B - in this case Lloyd - might therefore be left out even under the old strict rules as to parties: Head v Lord Teynham (1 Cox, 57).''

248. In Re Lashmar, A devised the reversionary interest in land to B, the legal estate being held by his executor Penfold. B devised his interest to his executor Moody on trust for his wife for life and thereafter for his son. B empowered Moody to sell any part of his land during his wife's life and, thereafter, during the minority of B's son. The son, having attained his majority, died intestate and without issue. He predeceased B's wife. The legal estate remained throughout in Penfold, A's executor. Upon the death of B's wife, Moody (the trustee under B's will), claimed to have become absolutely entitled to the property. According to that claim, Penfold held the land on a bare trust for Moody who in turn held upon trusts that failed. The Court of Appeal held that Moody had no claim to the property. Linley LJ (with whom Bowen LJ agreed) said (at 267):

``Now the question is, upon that will, what interest (if any) the surviving trustee, William Moody, takes in this property; and I cannot find, after spelling over the will with all the care I can, that he is, or rather was, anything more than a bare trustee for George Hartnup [B's son]. It is quite obvious that, as soon as Mrs. Jane Lashmar [B's widow], the surviving tenant for life, dies, and George Hartnup attained twenty-one, that Moody had no duty whatever to perform. He had a power of sale during the life of the tenant for life, and also during the minority of George Hartnup; but after the tenant for life was dead, and Hartnup had attained twenty-one, he was simply a bare trustee, having no duty whatever to perform. Now, supposing that which is not the fact, that the testator had been entitled to the legal estate in this property, it appears to me that the legal estate to that property would, after the death of the widow, have vested in George Hartnup, and not in this trustee.''

249. Fry LJ said (at 269):

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``Now the will goes on in these terms - `from and after her decease or second marriage, upon trust for my son George Hartnup, his executors administrators, or assigns, according to the respective natures thereof'. Now, it is observed, that it is not a trust to convey, which would be the appropriate and proper trust if the legal estate had been vested in the trustees; but it is a trust `for.' There is nothing to be done by trustees in that respect - no active duty to be performed at all. In my judgment the trusts of the will came to an end with the sentence that I have read. All the rest is power. It is in express terms power: `I `empower' my trustees to do this'; `I `empower' my trustees to do that'. Those powers continued during the lifetime of the wife and during the minority of the son, and after that they have no effect; and, it appears to me, therefore, that there is no active trust, no active duty whatever to be performed by the trustees - at any rate, after the death of the wife - as trustees. Whatever they are to do during the minority they are to do in their character as donees of the power.''

250. All members of the Court of Appeal were thus of the view that where the legal estate is vested in X who purports to holds on a bare trust for Y who is in turn a bare trustee for Z, the intermediary Y has no interest in the property which is accordingly held by X directly on trust for Z.

251. In both Grainge v Wilberforce and Re Lashmar, the only authority cited for the proposition for which the cases are said to stand is Head v Lord Teynham (1783) 1 Cox 57 (in Grainge v Wilberforce at 437). In that case, a father had devised land to trustees to raise 4000 pounds for the benefit of his six younger children. Two of the children assigned their shares to a trustee for the benefit of two of the father's other children. The question before the court was whether it was necessary that the latter trustee be a party to the action. The report states (at 57):

``For plaintiff it was insisted that as the original trustees of the term who had the legal estate, and all the children who had the beneficial interest were before the court, there was no occasion to make the other trustee a party, and the court would direct a sale of the term without his joining in the sale: and of that opinion was the court - and decreed accordingly.''

252. Head v Lord Teynham seems to be the earliest case involving an example of the principle that developed into that propounded by Deane J in the passage in Corin v Patton quoted above. Another old case meriting attention is Onslow v Wallis (1849) Mac & G 506, which was distinguished in Re Lashmar. In that case, A devised property by will to B, that property being held on trust by the trustee under A's will (T1). B then died leaving his estate to trustees (T2). T2 were to realise the property and pay certain debts. T2 were never instructed who was to receive the remainder of the trust property. T1 claimed that they were entitled to the land absolutely. Lord Cottenham LC held that T1 were not so entitled, because T2 had duties to perform, and could not be excluded.

253. The principle was more recently referred to in Grey v Inland Revenue Commissioners [1958] Ch 375. In that case, the registered holder of shares transferred them to nominees on trust for himself. He then directed the nominees to hold the shares on trust for his grandchildren. This direction was later recorded or acknowledged in written declarations by the nominees that they held the shares on trust for the grandchildren. The question before the court was whether the oral direction vested the beneficial interest in the grandchildren (as a declaration of trust evidenced by a subsequent writing for the purposes of the Statute of Frauds), or whether it was invalid for want of writing (as a ``disposition'' for the purposes of the Statute of Frauds). If the oral direction was ineffective, then duty would be payable on the written declarations. In coming to the conclusion that there had been a declaration of trust, Upjohn J said (at 382):

``For myself, I can see no distinction between the two cases that may be put: (1) the donor says: `I declare myself a trustee of my equitable interest for the donee'; the legal effect of that is that the trustees become trustees of the equitable interest and the donor disappears from the picture; and (2) the donor says: `I direct you the trustees to hold upon trust for the donee'. Both seem to me to be really indistinguishable methods of operating to transfer the equitable title by way of declaration of trust in contrast to doing so by way of assignment.''

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254. On appeal, a majority of the Court of Appeal (Morris and Ormerod LJJ, Lord Evershed MR dissenting) held that the oral direction was not a declaration of trust, but a ``disposition'' for the purposes of the Statute of Frauds and therefore void for want of writing. Lord Evershed MR said (at 715) in his dissenting judgment (at 715):

``But in the case at any rate of such a declaration by one who is the owner beneficially of property, the legal estate in which is vested in another as trustee for him - what is referred to in the American Restatement (1935) `Trusts' edited by Professor Austin Scott of Harvard University, as `sub-trusts' - the practical effect would seem, in common sense to amount, or to be capable of amounting, to the `getting rid of' a trust or equitable interest then subsisting.''

255. To complete the picture, I should refer to what appear to be the only other references to this doctrine in the authorities. First, Mason J said in
DKLR Holding Co (No 2) Pty Ltd v Commr of Stamp Duties (NSW) 82 ATC 4125 at 4136; (1982) 149 CLR 431:

``The second example is closer to the present case. A conveys an absolute estate in fee simple to B who executes a declaration of trust acknowledging that he holds as trustee for A absolutely. The appellant says, contrary to the fact, that the property conveyed is a bare legal estate. At common law A might have conveyed a bare legal estate, but in the example given he has not done so and therefore duty is to be assessed on the footing that an absolute estate in fee was conveyed.''

256. Second, there was reference in
McKinnon Wallace Holdings Pty Ltd v Commr of State Revenue (Vic) 98 ATC 5181; [1999] 1 VR 397 to the question whether a bare sub-trust of an equitable interest was possible but the Victorian Court of Appeal did not need to decide the point.

Arguments against the Corin v Patton principle

257. The only firm judicial statement against the existence of the principle stated by Deane J in Corin v Patton is to be found in the obiter dicta of Dixon J in
Comptroller of Stamps (Vic) v Howard-Smith (1936) 54 CLR 614 (at 621-622):

``A voluntary disposition of an equitable interest may take one of at least three forms. It may consist of an expression or indication of intention on the part of the donor that he shall hold the equitable interest vested in him upon trust for the persons intended to benefit. In that case he retains the title to the equitable interest, but constitutes himself a trustee thereof, and, by his declaration, imposes upon himself an obligation to hold it for the benefit of others, namely, the donees.''

258. The most cogent arguments against the existence of the principle are those advanced by Brian Green (Green, ``Grey, Oughtred and Vandervell'' (1984) 47 MLR 385). First, he pointed out (at p 397) that the principle is

``inconsistent with the view adopted by the House of Lords in Oughtred v IRC [1960] AC 206 in relation to a constructive bare trustee of an equitable interest who most definitely remained `in the picture' until the execution of a `completion document deliberately removed him from it'.''

259. In Oughtred a mother and son entered into an oral contract to exchange the mother's interest in certain shares for the son's reversionary interest in certain other shares held by a trustee. After the contract was entered into, the trustee held the shares on bare trust for the son who held his equitable reversionary interest on trust for his mother. It should be noted, however, that there is no express statement by the majority in Oughtred that the contract, being a contract capable of specific performance, created a constructive trust over the equitable reversionary interest in favour of the son. Rather, Green regarded this conclusion as being implicit in the judgment (see p 403). It should be noted that Meagher, Gummow and Lehane agree (at para 7-180 of the fourth edition of Equity: Doctrines and Remedies) that it is implicit in the decision of the majority that the son retained a bare estate without disappearing from the picture.

260. Second, Green commented on the nineteenth-century authority for the doctrine. He expressed a view that Re Lashmar and Grainge v Wilberforce are merely sui generis decisions made in the context of specific facts from which no broad principle can be derived. He saw Onslow v Wallis and Head v Lord Teynham as no more than examples of the

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operation of the rule in Saunders v Vautier: (1841) 4 Beav 115. He said (at 397-398):

``As to the nineteenth-century authorities: both Onslow and Lashmar involved a somewhat unusual dispute between two sets of trustees as to entitlement to property in the complete absence of any persons who could claim to be beneficially entitled behind their respective trusts, there being no room for the doctrine of resulting trusts to break the impasse, with the real argument being as to which of the trustees was to get a windfall. In both cases T1 held for B absolutely and B had died leaving his estate to T2 as trustee. In Onslow, T2 was to realise the property in question and pay certain debts which did not exhaust the trust estate, B having failed ever to communicate to T2 what was to be done with the remainder. In Lashmar, T2 was to hold upon trusts which failed. Unsurprisingly, Lord Cottenham LC found for T2 in Onslow on the basis that he had outstanding duties to fulfil over the disputed property whereas T1 had none; whilst in Lashmar, the Court of Appeal held in favour of T1 on the basis that, T2 having no outstanding responsibilities in respect of the property either, there was no reason to prefer him to T1 in disturbance of the status quo. Had it been decided in Onslow that T1 could resist T2's suit on consenting to meet the outstanding debts himself, T2 being ignored on the basis that (if properly described as a trustee at all) he was a bare trustee for B's creditors, it might be arguable that Onslow was at least instructive on the declaration of bare trust point. As it is, it is irrelevant; and Lashmar only more so.

As to Grainge v Wilberforce, that was simply a case where it was confirmed that a tenant for life under the Settled Land Act 1882 could successfully pass the legal estate to settled land without any need for the trustee of a sub-trust behind the settlement joining in the conveyance: an entirely justifiable result which owed nothing whatsoever to the fact that the sub-trustee was a bare trustee, and which would clearly have been the same even if the sub-trustee had had substantial outstanding active duties to perform. Indeed, more instructive than Grainge itself is the one authority referred to by Chitty J. in the course of his judgment: Head v Lord Teynham. In that case it had been held that where all the persons beneficially interested in property held at law by T1 consented to T1's dealing with the property in a certain way, it was irrelevant that no consent had been obtained from T2 who was a trustee of a sub-trust under which certain of the beneficiaries were interested. In Head, T2 happened to be a bare trustee, but the result would have been the same even if he had held on a more complex basis. The true position is not so much that T2 'drops out of the picture,' rather that T2 cannot stand in the way of T1's accession to the wishes of the beneficiaries behind T2's trust (within the strictures of the Saunders v Vautier principle).

In the light of Onslow v Wallis, it is difficult to resist the conclusion that if T1 holds property exclusively governed by a bare sub-trust under which T2 is trustee for X, T1 would not be able to resist a claim by T2 that T1 pass the property over to him. When all is said, it should be X, not some arbitrary doctrine of law, that determines when, if at all, T2 drops out of the picture. It is the lesson of Head v Lord Teynham that T2 can no more stand in the way of X's wishes than can any other bare trustee. If X directs T2 to step aside, or opposes T2's attempts to call in the property from T1, X's wishes must prevail. But until such an occurrence (or until T2 deliberately assigns his outstanding bare equitable title to X) T2 is still around to accept a conveyance of the legal estate at some future date and to hold to X's order from that time onwards.''

261. It is said at para 7-205 of the fourth edition of Meagher, Gummow and Lehane, Equity: Doctrines and Remedies:

``[The view that such a doctrine exists] cannot in any event be true of a case where the declarant has, under the terms of the trust, active duties to perform: in such a case clearly he retains an equitable interest as trustee, the effect of the declaration being to create a sub-trust: Onslow v Wallis (1849) 1 Mac & G 506; 41 ER 1361. In principle there is no reason to distinguish cases where the declarant has active duties from those where he has not: the intention of the declaration in each case is to create a trust, that is, that the declarant retain his beneficial

ATC 4750

interest but become trustee of it. It can be argued convincingly that the cases said to support the view that a declaration by one who retains no active duties operates as an outright assignment (Grainge v Wilberforce (1889) 5 TLR 436; Re Lashmar [1891] 1 Ch 258) are authority for no such proposition: see B. Green, `Grey, Oughtred and Vandervell - A Contectual Reappraisal' (1984) 47 MLR 385 at 397-8).''

262. The authors of Scott on Trusts, 4 ed also decline to acknowledge the existence of the doctrine, stating (at vol 1A, p 471):

``Similarly, the beneficiary of a trust, if his interest is transferable, can create a trust of his interest, either by transferring it to another trustee, or by declaring himself trustee of it. In such a case also there is a trust and a subtrust; the beneficiary of the original trust or his transferee holds an equitable interest under that trust, but holds it as trustee for the beneficiaries of the new trust.''

263. There is American authority that may stand against Professor Scott's view. In Petition of Bankers Trust Co, 108 N.Y.S.2d 213 (1951) a ``payment trust'' was created under which the trustee was to pay income to an intermediary who was to pay it to the beneficiaries. It was held that the income was directly payable to the beneficiaries because the intermediary had no active duties to perform.

264. P.V. Baker ((1958) 74 LQR 180 at p 181-182) has doubted the correctness of Upjohn J's comments in Grey v IRC regarding the disappearance of the intermediate trustee. He said (at 181):

``... the learned trial judge said (pp. 172, 173), `For myself I can see no real distinction between the two cases that may be put: (1) the donor says: `I declare myself a trustee of my equitable interest for the donee'; the legal effect of that is that the trustees become trustees of the equitable interest for the donee and the donor disappears from the picture; and (2) the donor says: `I direct you the trustees to hold upon trust for the donee'.' But with the greatest respect, in the former case has the donee disappeared from the picture? Does a declaration of trust operate to transfer the equitable interest from donor to donee? It is suggested that when the donor declares himself a trustee of his equitable interest, he retains his equitable interest but a subsidiary equitable interest becomes vested in the donee. He might well have active duties, if, for example he had declared a discretionary trust.''

265. G Weir ((1940) 13 ALJ 524) took the same view (at 526):

``If a person, in whom an equitable interest is vested, clearly expresses an intention to hold the equitable interest upon trust for certain persons whom he intends to benefit, then, although he retains the title to the interest, he imposes upon himself by his declaration an obligation to hold it for the benefit of those persons.''

Disappearance of intermediate bare trustee

266. Notwithstanding the views expressed in the various secondary sources, there must be taken to exist a principle that the beneficiary of a bare trust, upon declaring himself a bare trustee of his equitable interest for a third party, ``disappears from the picture'' (to adopt Upjohn J's language), whereupon the legal owner holds the property for the benefit of the ultimate beneficiary alone.

267. Green's argument that Re Lashmar and Grainge v Wilberforce are sui generis decisions limited to their facts and that Onslow v Wallis and Head v Lord Teynham are merely applications of the principle in Saunders v Vautier is attractive but seems to me to neglect the express reliance in some of the cases on the existence of a principle whereby a bare trustee of an equitable interest ``disappears from the picture''. In Grainge v Wilberforce, Chitty J said (at 437):

``The case, therefore, fell within the principle that where A was trustee for B, who was trustee for C, A held in trust for C, and must convey as C directed. B - in this case Lloyd - might therefore be left out even under the old strict rules as to parties: Head v Lord Teynham (1 Cox, 57).''

268. In Re Lashmar Linley LJ said (with whom Bowen LJ agreed) said (at 267):

``... but after the tenant for life was dead, and Hartnup had attained twenty-one, he was simply a bare trustee, having no duty whatever to perform. Now, supposing that which is not the fact, that the testator had been entitled to the legal estate in this property, it appears to me that the legal estate to that property would, after the death

ATC 4751

of the widow, have vested in George Hartnup, and not in this trustee.''

269. Fry LJ's judgment in Re Lashmar is more susceptible to Green's analysis, as he did not expressly state that it was the fact that the sub-trustee was a bare trustee of an equitable interest that extinguished his claim to an interest. It is quite possible that Fry LJ's decision was based merely on the view that, as a trustee who had no active duties to perform, ``there was no reason to prefer [the plaintiff] to T1 in disturbance of the status quo.'' The same could be said of the decision in Onslow v Wallis and the report of the decision in Head v Lord Teynham.

270. Despite this, however, the principle referred to by Deane J in Corin v Patton should be recognised for several reasons. The first is the unambiguous statements in Grainge v Wilberforce and by the majority in Re Lashmar. Second, there are the obiter dicta of Deane J (citing Grainge v Wilberforce and Re Lashmar) in Corin v Patton and Mason J in DKLR Holding Co. Third, recognition is consistent with the views of Upjohn J and Lord Evershed in Grey v IRC. Fourth, the principle that equity is concerned with substance rather than form (and thus will not intervene to create an interest in an irrelevant intermediary: see Corin v Patton at 579 per Deane J) points unambiguously in that direction.

Was CMPI an intermediate bare trustee?

271. In the Court of Appeal, Mason P considered that the Corin v Patton principle did exist but that it did not apply to the transaction because CMPI was subject to active duties and was accordingly not a bare trustee (see at 650E and 651C). The active duties which, in Mason P's opinion, took the trust outside the ambit of the principle referred to by Deane J in Corin v Patton were those arising from clause 8.10 of the trust deed (p 77 of the Tender Bundle). Clause 8.10(b) provides that

``A nominee or custodian may perform the following actions in the name of the Trustee or, at the direction of the Trustee, in its own name as nominee for the Trustee:

  • (1) purchase or sell at the direction of the Trustee any Authorised Investment and execute all transfers and assurances necessary for any such purpose;
  • (2) receive and hold on behalf of the Trustee any Authorised Investment and any document of title thereto in safe custody provided that the Trustee may request access to, and return of, any Authorised Investment in the custody of the nominee or custodian and any document of title thereto;
  • (3) receive on behalf of the Trustee all amounts arising from any Authorised Investments referred to in sub-paragraph (2) above;
  • (4) procure registration of such Authorised Investments;
  • (5) hold and disburse moneys in the name of the Trust at the direction of the Trustee;
  • (6) perform any action the Trustee directs; and
  • (7) perform all actions incidental to any of the foregoing powers (other than any action which involves the exercise of a discretion).''

272. Clause 8.10(c) reads:

``A nominee or custodian may allow dividends and other income derived from any Authorised Investment in its custody to be paid to the Trustee or as the Trustee may direct, and the nominee or custodian will not be liable for any loss of misapplication of that income.''

273. Mason P said (at 652C) that effect of these provisions was that:

``Coles Myer Property Investments assumed a trusteeship whose terms were to be found spelled out in the trust deed. That was an active trust, despite the duties being exiguous: see Inland Revenue Commissioner v Silverts Ltd [1951] Ch 521 at 526; see generally, Snell's Equity, 29th ed (1990) at 103; Herdegen.''

274. The authors of Ford and Lee, Principles of the Law of Trusts, looseleaf, LBC have explained (at para 4010) Mason P's reasoning on the basis that his Honour considered that clause 8.10 imposed a duty to hold the equitable interest until the unitholders demanded assignment of it, and that such a duty was sufficient to render the trust active.

275. Whether or not a trust is a bare trust seems to me to involve more than the question whether the trustee has active duties. As the authors of Jacobs Law of Trusts have said (at para 318):

ATC 4752

``However, in Corumo Holdings Pty Ltd v C Itoh Ltd (1991) 24 NSWLR 370 at 398, it was pointed out that as a matter of strict logic almost no situation could be postulated where a trustee in some circumstances does not have active duties to perform by, for example, being immediately bound to transfer the trust property to the beneficiary who is absolutely entitled thereto... Thus a more precise use of the term `bare trustee' is to identify a trustee who has no interest in the trust assets other than that existing by reason of the office of trustee and who never has had active duties to perform or who has ceased to have those duties with the result that in either case the property awaits transfer to the beneficiaries or at their direction.''

(citing Herdegen v FC of T (1988) 84 ALR 271 at 281-82 and Corin v Patton at 579).

276. Similarly, the authors of Snell's Equity, 29ed, 1990 said (at 103):

``A simple (or bare) trust is one in which property is vested in one person on trust for another, the nature of the trust not being prescribed by the settlor but being left to the construction of the law, as where property is transferred to T `on trust for B absolutely'.''

277. Accordingly, as well as determining whether a the trustee is subject to active duties, it is necessary to decide whether the trustee ``has no interest in the trust assets other than that existing by reason of the office of trustee''. This formulation was taken from the judgment of Gummow J in
Herdegen & Anor v FC of T 88 ATC 4995; (1988) 84 ALR 271 where his Honour said (at ATC 5003; ALR 281):

``Today the usually accepted meaning of `bare' trust is a trust under which the trustee or trustees hold property without any interest therein, other than that existing by reason of the office and the legal title as trustee, and without any duty or further duty to perform, except to convey it upon demand to the beneficiary or beneficiaries or as directed by them, for example, on sale to a third party. The beneficiary may of course hold the equitable interest upon a sub-trust for others or himself and others.''

278. Ultimately, the question in the present case is whether the provisions of clause 8.10 of the trust deed are sufficient to take CMPI's trusteeship outside this concept of a bare trust. Strictly speaking, clause 8.10 provides for powers, not duties. This distinction, however, will not necessarily prevent the trust from being an active trust. For example, in Re Lashmar the Court of Appeal appeared to regard the trustee's power of sale (which existed during the widow's lifetime and during the testator's son's minority) as sufficient to render the trust an active trust while the power subsisted. It will be recalled that Linley LJ (with whom Bowen LJ agreed) said (at 267):

``Now the question is, upon that will, what interest (if any) the surviving trustee, William Moody, takes in this property; and I cannot find, after spelling over the will with all the care I can, that he is, or rather was, anything more than a bare trustee for George Hartnup [B's son]. It is quite obvious that, as soon as Mrs. Jane Lashmar [B's widow], the surviving tenant for life, dies, and George Hartnup attained twenty-one, that Moody had no duty whatever to perform. He had a power of sale during the life of the tenant for life, and also during the minority of George Hartnup; but after the tenant for life was dead, and Hartnup had attained twenty-one, he was simply a bare trustee, having no duty whatever to perform. Now, supposing that which is not the fact, that the testator had been entitled to the legal estate in this property, it appears to me that the legal estate to that property would, after the death of the widow, have vested in George Hartnup, and not in this trustee.''

279. Fry LJ said (at 269):

``Now the will goes on in these terms - `from and after her decease or second marriage, upon trust for my son George Hartnup, his executors administrators, or assigns, according to the respective natures thereof'. Now, it is observed, that it is not a trust to convey, which would be the appropriate and proper trust if the legal estate had been vested in the trustees; but it is a trust `for'. There is nothing to be done by trustees in that respect - no active duty to be performed at all. In my judgment the trusts of the will came to an end with the sentence that I have read. All the rest is power. It is in express terms power: `I `empower' my trustees to do this'; `I `empower' my trustees to do that'. Those powers continued during the lifetime of the wife and during the minority of the son, and after that they have no effect; and, it appears

ATC 4753

to me, therefore, that there is no active trust, no active duty whatever to be performed by the trustees - at any rate, after the death of the wife - as trustees. Whatever they are to do during the minority they are to do in their character as donees of the power.''

280. It seems to me that an ``active power'' (as opposed to an ``active duty''), regardless of its significance, will be sufficient to render the trust something other than a bare trust. There does not have to be a duty expressed as such. A power expressly conferred upon a trustee will give that trustee an interest in the property other than the minimal interest that exists simply by virtue of the trusteeship itself. The fact that, in this case, the terms of the trust were spelled out in the trust deed means that the trust could not be a bare trust having no express incidents and including only such terms as are implied by law. This is, I think, what Mason P meant when he said (at 652C):

``Coles Myer Property Investments assumed a trusteeship whose terms were to be found spelled out in the trust deed. That was an active trust, despite the duties being exiguous: see Inland Revenue Commissioner v Silverts Ltd [1951] Ch 521 at 526; see generally, Snell's Equity, 29th ed (1990) at 103; Herdegen.''

281. I also mention the possibility that one might adopt the approach to clause 8.10 suggested by Ford and Lee, that is, that it put the sub-trustee under a duty to hold the property until directed to assign it. This would be a sufficient duty to preclude classification of the trust as a bare trust.

282. For the reasons I have stated, the principle stated by Deane J in Corin v Patton, although in my view it exists, does not apply in this case. ISPT retains some interest in the property as subtrustee of CMPI's equitable estate. Accordingly, the legal and equitable estate did not merge in CMPI at Step 5.

If CMPI had been an intermediate bare trustee, would it have disappeared?

283. If I am wrong in this and the principle stated by Deane J in Corin v Patton does operate in this case, it is necessary to determine whether the legal and equitable estates would have merged in CMPI.

284. On the face of things, it may seem inevitable that merger would have occurred since ISPT could have no interest as bare sub- trustee of an equitable interest. But Mason P thought otherwise. His Honour took the view at 649-650 that merger would not occur if it would entirely defeat the parties' intentions regarding the transaction as a whole. In this case, merger would have the effect that the land would not become property of the Forster No 1 Trust, and no interest in the land would pass to ISPT until Step 9, when the property was transferred to the plaintiff (as nominee of ISPT under the Forster No 1 Trust). Mason P based his view on the proposition (at 650A) ``Equity may do nothing in vain''.

285. The doctrine of the merger of estates will not be applied by a court of equity if its application would run counter to the parties' actual or presumed intentions: see, eg, Forbes v Moffatt (1811) 18 Ves 384 at 390; Re Bellville's Settlement Trust [1964] Ch 163. In Forbes v Moffatt - which, it should be noted related to the merger of mortgage and equity of redemption - Sir William Grant MR said (at 390):

``Under the circumstances of this case the question arises between the real and personal representatives of John Moffatt; whether the mortgage for the sum of money, due to him, is to be considered as still subsisting; in which case his personal representatives are entitled to it; or is extinguished by the union of the characters of owner and mortgagee in John Moffatt; or by any acts, done by him, after he became owner.

It is very clear, that a person, becoming entitled to an estate, subject to a charge for his own benefit, may, if he chooses, at once take the estate, and keep up the charge. Upon this subject a Court of Equity is not guided by the rules of law. It will sometimes hold a charge extinguished, where it would subsist at law; and sometimes preserve it, where at law it would be merged. The question is upon the intention, actual or presumed, of the person, in whom the interests are united. In most instances it is, with reference to the party himself, of no sort of use to have a charge on his own estate; and, where that is the case, it will be held to sink, unless something shall have been done by him to keep it on foot.''

286. In Ingle v Vaughan Jenkins [1900] 2 Ch 368 Farwell J held that the merger of estates, in addition to the merger of charges, also depends

ATC 4754

on the intention of the person in whom the interests vest. This was confirmed by the United Kingdom Court of Appeal in Capital and Counties Bank v Rhodes [1903] 1 Ch 631.

287. In the present case, the fact that CMPI entered into the trust deed, the terms of which included the creation of an express trust in favour of ISPT (which, in turn, held its interest on trust for CMPI) is probably sufficient evidence of an expressed intention on the part of CMPI that its legal interest did not merge with its equitable interest. If it is not, however, the context of the transaction as a whole, and the advantage to both CMPI and ISPT of maintaining ISPT's subtrusteeship, is relevant to ascertaining CMPI's presumed intention. In Forbes v Moffatt, Sir William Grant MR said (at 392):

``With regard to presumptive intention, it was evidently most advantageous to John Moffatt, that this mortgage should be kept on foot; for otherwise he would have given priority to the other mortgage and all the debts of his brother. The reasonable presumption therefore is, that he would choose to keep the mortgage on foot. Where no intention is expressed, or the party is incapable of expressing any, I apprehend the Court considers what is most advantageous to him.''

288. Similarly, in Capital and Counties Bank v Rhodes, Lord Collins MR said (at 647):

``The question, therefore, in this view resolves itself into one of merger or no merger. Now it seems to me quite clear that, if the intention of the parties is that which determines the question, they certainly did not intend that a merger should take place. It is clear upon the facts that Rhodes could not have carried out his intention of purchasing the reversion without the co-operation of the bank, and that it was an essential condition of his obtaining that advance that he should be able to offer them the security of the rest of 100l. a year, payable under the lease of January 31, 1871.''

289. His Lordship later said (at 648):

``In point of fact the transaction could not have been carried out at all unless the term was kept alive, and it was clearly for the benefit of both parties to the transaction that it should be kept alive.''

290. The ability of equity to keep separate interests or estates alive despite their having come into the hands of a single person was the subject of observations by Spigelman CJ in
Cinema Plus Ltd v Australia and New Zealand Banking Group Ltd (2000) 49 NSWLR 513. The Chief Justice was there concerned with the supposed ``conceptual impossibility'' of a person taking a charge over a debt owed by him: cf
Broad v Commr of Stamp Duties (NSW) 80 ATC 4578; [1980] 2 NSWLR 40; Re Charge Card Services Ltd [1987] Ch 150. He was disinclined to accept the ``impossibility'', noting that equity seeks always to give effect to intentions.

291. In the present case, the parties must have intended that the property become an asset of the Forster No. 1 Trust after Step 5 because Step 6 (the issue of units to ISPT and ISPT Custodians) would otherwise have had no effect on the property. The interposition of ISPT as a sub-trustee formed a vital part of the parties' transaction as a whole because that feature, in their contemplation, forestalled a liability for ad valorem duty stamp duty. The fact that this benefit was directly enjoyed by ISPT which, as purchaser, would otherwise be liable to pay stamp duty is immaterial: it was a necessary part of the bargain between the parties.

292. It has been assumed that the operation of the principle whereby a bare sub-trustee ``disappears from the picture'' is, in circumstances where there is an identity of legal owner and ultimate beneficial owner, a species of merger of estates. Mason P considered that it was. His Honour's view is understandable: the operation of the principle certainly appears to fall within the traditional definition of a merger of estates. Blackstone, in Commentaries on the Law of England vol 2 described the principle of merger of estates by saying (at p 177):

``It may be proper to observe that whenever a greater estate and a lesser coincide and meet in one and the same person without any intermediate estate, the less is immediately annihilated; or in the law phrase, is said to be merged, that is sunk or drowned in the greater...''

293. Also, it is significant that it has been held that the principle whereby property cannot be held by a trustee on trust for itself is an example of the operation of the doctrine of merger of estates: see Re Cook [1948] Ch 212

ATC 4755

at 214-215, Ford and Lee, Principles of the Law of Trusts, 2ed, 1990 at para 502.

294. Finally, it should be noted that Mason P's view is consistent with the statement in Meagher, Gummow and Lehane, Equity Doctrines and Remedies (fourth edition, at para 7-205), that

``In principle there is no reason to distinguish intention of the declaration cases where the declarant has active duties from those where he has not: the intention of the declaration in each case is to create a trust, that is, that the declarant retain his beneficial interest but become trustee of it.''

295. The parties' obvious intention that the land become a trust asset at Step 5, rather than CMPI remaining absolutely entitled to it, prevents the legal and equitable estate from merging (or, more correctly, remaining merged) in CMPI at Step 5. The merger of estates cases should be applied here, as this situation could probably be properly characterised as an example or merger of estates, and, if not, similar principles would apply, in any case, to prevent equity from defeating the parties' intentions.

The s. 23C argument

296. Because, in the view I have taken, the argument based on the passage from Deane J's judgment in Corin v Patton fails, it is next necessary to determine whether the operation of the Statute of Frauds (ie. s. 23C of the Conveyancing Act) prevented the land from being trust property at Step 5.

297. In the majority judgments in the Court of Appeal, the question whether s. 23C(1) had been complied with was not examined in detail. Mason P, dissenting, considered the matter and held (at 649B) that the ``concatenation'' of the payment of the purchase price by ISPT and the express agreement to hold the land on trust meant that the land may have been held upon a constructive trust at Step 5. Section 23C(1) does not prevent a constructive trust from being enforced: see s. 23C(2). Mason P then proceeded to consider whether such a trust could arise, given the coincidence in identity between the registered proprietor and the ultimate beneficial owner before holding that it could.

Express trust?

298. It is necessary to determine whether, if a trust arises at all, it is an express trust or a constructive (or resulting) trust. Counsel for ISPT argued both options as alternatives. It was said that an express trust arose by virtue of paragraph 3 of the conditions in the offer document and clause 8.10 of the trust deed. Paragraph 3 of the conditions in the offer document is in the following terms:

``Once the purchase price is paid in full, CMPI is appointed to hold the property as a nominee under the deed establishing the Trust for so long as CMPI remains the registered proprietor.''

299. The Offer Document was signed by a director of ISPT. The trust deed was executed under the common seal of ISPT (TB, p128). The only person who is able to declare a trust of property is the beneficial owner of it: Tierney v Wood (1854) 19 Beav 330 at 335-6; 52 ER 377 at 379 per Romilly MR. There can be no doubt that, prior to Step 5, CMPI held the land absolutely. The offer document was not executed by CMPI. But the trust deed was. The trust deed alone cannot be a declaration of trust: it says only that CMPI may hold the property as nominee: cl 8.10. CMPI orally accepted ISPT's offer and, subject to the satisfaction of the requirement in s. 23C, this acceptance amounted to a declaration of trust.

300. Section 23C(1)(b) requires that ``the declaration of trust respecting any land or any interest therein must be manifested and proved by some writing signed by some person who is able to declare such trust...''. Section 23C(1)(a) provides that ``no interest in land can be created or disposed of except by writing signed by the person creating or conveying the same.'' The distinction between s. 23C(1)(a) and s. 23C(1)(b) is significant. It is discussed at para 7-030 of the fourth edition of Equity: Doctrines and Remedies by Meagher, Gummow and Lehane:

``Why, one might ask, is s 23C(1)(b) needed at all? Is not a declaration of trust of land a disposition of that land or, at least, a transaction which creates an interest in it?... The point is not entirely without importance because whereas a transaction which is within para (a), or for that matter, para (c), of section 23C(1) is entirely ineffective unless in writing, a transaction which within para (b) need only be 'manifested and proved' by some writing: the transaction may be oral provided that it is evidenced by a writing, which need not be

ATC 4756

contemporaneous with the transaction but may be brought into existence later: Forster v Hale (1798) 3 Ves Jr 696; Rochefoucauld v Boustead [1897] 1 Ch 196; Permanent Trustee Co v Scales (1930) 30 SR (NSW) 391. The Federal Court has held - correctly it is suggested - that para (a) does not extend to declarations of trust of land, so that para (b) is to be seen neither as otiose nor as imposing requirements additional to those of para (a): Secretary, Department of Social Security v James (1990) 95 ALR 615, Lee J, relying particularly on the review by Kennedy J of the history of the provisions in Abjornson v Urban Newspapers Pty Ltd [1989] WAR 191 at 198-9; Hagan v Waterhouse (1992) 34 NSWLR 308 at 385-386 per Kearney J.''

(Department of Social Security v James has since also been approved in
Di Pietro v Official Trustee in Bankruptcy (1995) 59 FCR 470 at 478 per Jenkinson J, 481 per Sackville J with Tamberlin J agreeing and Low (As liquidator of Lekker Pty Ltd) v Dykgraaf [2001] WASC 332 per Bredmeyer M.)

301. To conclude that an express trust arose in the present case, it is necessary to identify some writing, signed by CMPI, whether contemporaneous or not, evidencing CMPI's oral declaration of trust (that is, its acceptance of ISPT's written offer). The only document that might constitute such writing is a letter from CMPI to ISPT dated 27 January 1995 in which CMPI stated:

``We wish to retire as a nominee under the above Trust. Could you please nominate a replacement nominee. Note that the replacement nominee may not be, nor may it become, a beneficiary of the Trust.''

302. The writing required by s. 23C(1)(b) must include the terms of trust, but this can be done by reference to another (potentially unsigned) document: Department of Social Security v James at 622. The only document that contains the terms of the trust in this case is the trust deed. The only possible connection between the letter from CMPI and the trust deed is the heading ``ISPT Coles Myer ([Forster/ Eastgate]) Property Trust (No 1)'' and the reference to ``the above Trust'' and ``the Trust''. These are references to the trust itself, not to the trust deed. Accordingly, the terms set out in writing in the trust deed cannot be said to have been incorporated into the letter from CMPI, with the result that s. 23C(1)(b) prevents a finding that an express trust arose at Step 5.

Constructive or resulting trust?

303. Section 23C(2) provides that resulting, implied and constructive trusts can arise notwithstanding that the requirements in s. 23C(1) have not been met. Accordingly, it is necessary to determine whether such a trust has arisen in the present case. I have already concluded that the doctrine of merger of estates would not prevent such a trust from arising.

304. Mason P considered (at 649A and 653F) that such a trust arose upon receipt of the purchase price and CMPI's appointment as nominee (by virtue of CMPI's oral acceptance of ISPT's offer).

305. There seem to be four ways in which a trust might arise in such a situation, notwithstanding the absence of writing:

Proprietary interest created by contract

306. The oral acceptance by CMPI of ISPT's written offer to purchase the property created a contract whereunder ISPT promised to pay $17,973,995 for the Forster property and $39,859,745 for the Eastgate property. One of the terms of the contract (set out in the written offer, TB p 129) was that:

``Once the purchase price is paid in full, CMPI is appointed to hold the property as a nominee under the deed establishing the Trust for so long as CMPI remains the registered proprietor.''

Given that only CMPI was capable of declaring itself a trustee of the property in favour of ISPT, that term must be regarded as amounting to a

ATC 4757

promise by CMPI to constitute itself trustee of the property in such a way as to cause the property to be held on trust for ISPT as trustee for the Forster No. 1 Trust.

307. The authors of Ford & Lee, Principles of the Laws of Trusts, looseleaf, LBC have said (at para 6010):

``A contract made for valuable consideration to create a trust can have two levels of operation. First, it can create contractual rights which may be enforced by a decree of specific performance or an award of damages. At that level it is primarily significant as creating rights in personam in the person entitled to the benefit of the performance of the duties. Secondly, it can lead to the creation of equitable proprietary rights in the property which is to be held on trust as soon as the property is ascertained and value has been given. In that second level of operation a trust can come into existence before the party bound to create it acts to create it. Where creation of a trust by transfer to a particular transferee on trust has been promised the promisor holds the property on a constructive trust... for the intended transferee who in turn holds the property on subtrust for the intended beneficiary. Where creation of a trust by a declaration has been promised the promisor is treated as if he or she had declared a trust. The first level of operation is referred to as the contractual effect, the second is called the proprietary effect.''

308. To this it might be added that the intended beneficiary will only acquire an interest if it is entitled to have the agreement enforced by a court by order of specific performance of the contract or injunctive relief. In Pullan v Koe [1913] 1 Ch 9 a marriage settlement settled property on the husband, wife, and prospective children. The wife also promised to settle after-acquired property on the same trusts. She later received 285 pounds which she invested in part in bearer bonds which remained at the bank in the husband's name until his death whereupon the trustees sought to obtain the bonds from the husband's executors on behalf of the settlements. Swinfen Eady J said (at 13-14):

``It was contended that the bonds never in fact became trust property, as both the wife and husband were only liable in damages for breach of covenant, and that the case was different from cases where property which has once admittedly become subject to the trusts of an instrument has been improperly dealt with, and is sought to be recovered. In my opinion as soon as the 285l. was paid to the wife it became in equity bound by and subject to the trusts of the settlement. The trustees could have claimed that particular sum, could have obtained at once the appointment of a receiver of it, if they could have followed the money and claimed the investment.

This point was dealt with by Jessel MR in Smith v Lucas [18 Ch D 531, 543] where he said `What is the effect of such a covenant in equity? It has been said that the effect in equity of the covenant of the wife, as far as she is concerned, is that it does not affect her personally, but that it binds the property: that is to say, it binds the property under the doctrine of equity that that is to be considered as done what ought to be done. That is in the nature of specific performance of the contract no doubt. If, therefore, this is a covenant to settle the future-acquired property of the wife, and nothing more is done by her, the covenant will bind the property'.''

309. The principle referred to in Pullan v Koe has been referred in recent times by the Full Federal Court in
Sonenco (No 77) Pty Ltd v Silvia (1989) 89 ALR 437 and by Gummow J in
Herdegen v FC of T 88 ATC 4995; (1988) 84 ALR 271. The principle is an application of the maxim that equity regards as done that which ought to be done: see Re Lind [1915] 2 Ch 345 at 360 and 373,
Patti v Belfiore (1958) 100 CLR 198 at 210.

310. For the principle to apply to the present case, the oral agreement that the property be thenceforth held by CMPI on trust for ISPT as trustee of the Forster No. 1 Trust must have been such that a court would have ordered specific performance at the appropriate time, or would have ordered some injunction to protect ISPT's rights. The interest created would reflect the degree of protection that the court would provide:
Stern v McArthur (1988) 165 CLR 489 at 522,
Chan v Cresden Pty Ltd (1989) 168 CLR 242 at 253.

311. The first obstacle to that conclusion is the Statute of Frauds. Section 23C(1)(a) of the Conveyancing Act provides that:

ATC 4758

``no interest in land can be created or disposed of except by writing signed by the person creating or conveying the same, or by the person's agent thereunto lawfully authorised in writing, or by will, or by operation of law.''

312. Section 23C(2) provides that:

``This section does not affect the creation or operation of resulting, implied, or constructive trusts.''

313. Section 54A(1) provides that:

``No action or proceedings may be brought upon any contract for the sale or other disposition of land or any interest in land, unless the agreement upon which such action or proceedings is brought, or some memorandum or not thereof, is in writing, and signed by the party to be charged or by some other person thereunto by him lawfully authorised.''

314. In the present case it is necessary to determine whether the above provisions apply to a contract containing a promise that the legal and beneficial owner of property constitute itself trustee of it in favour of the promisee. In the present case the contract clearly does not meet the requirements of either section.

315. There has been some uncertainty whether a contract for the sale of land is subject to the requirements in s. 23C(1)(a) and its equivalents. The decision of the High Court in
Adamson v Hayes (1973) 130 CLR 276 led to differing views being taken in Western Australia. In Parker v Manessis [1974] WAR 54, Redden v Wilks [1979] WAR 161 and Trifid Pty Ltd v Ratto [1985] WAR 19 it was held that the equivalent of section 23C did so apply, because of the equitable interest created by a contract for the sale of land. The opposite view was taken in Monte v Buongiorno [1978] WAR 49. The problem has recently been resolved for New South Wales, however, by the decision of the Court of Appeal in Baloglow v Konstandis [ 2001] NSWCA 451 where it was unanimously held, after consideration of the Western Australian cases, that a contract for the sale of land was subject only to the requirements of s. 54A, and not s. 23C. The equitable interest created by a contract for the sale of land is not an interest to which s. 23C(1)(a) applies. Similarly, therefore, in the present case, the equitable interest created by the contract to declare a trust cannot be an interest to which s. 23C(1)(a) applies.

316. It remains, however, to consider the operation of s. 54A in these circumstances. There does not seem to be any explicit authority on the question whether a contract to create a trust is a ``contract for the sale or other disposition of land or any interest in land'' and thus required to be in writing. It seems to me, however, that s. 54A does not apply to such a contract. Two factors in particular tend towards that conclusion.

317. First, it is necessary to consider the effect of a declaration of trust and to determine whether it is a ``disposition of land or any interest in land''. The decision in DKLR Holding Co (No 2) Pty Ltd v Commr of Stamp Duties (NSW) is useful in this respect. Gibbs CJ said (at ATC 4131-4132; CLR 442)

``... The property comprised in the declaration of trust was the entire property in the land in question. Before the transfer was executed 29 Macquarie was the legal owner of the land; it had the whole right of property in the land, but had no separate equitable estate in it, for its equitable estate was absorbed in the legal estate.... However, the property as to which the trust was declared - the property comprised in the declaration - was the whole right of property in the land, and not the bare legal estate, for it was not until the declaration of trust became operative that any separate equitable estate was created.''

318. Aickin J said (at ATC 4145; CLR 463):

``... It is a fundamental principle of both the common law and of equity that the holder of an estate in fee simple cannot be a trustee of that fee simple for himself for what he holds is a single estate, being the largest estate known to the law.''

319. Mason J drew attention to the fact that stamp duties legislation proceeds on the ``fiction'' that a declaration of trust amounts to transfer of an interest in land. His Honour said (at ATC 4141; CLR 457):

``... The statute proceeds upon the fiction or footing that the declarant imparts an equitable estate or interest to the beneficiary. Dixon CJ in Tooheys Ltd v Commr of Stamp Duties (NSW) observed:

`... that in applying the rates appropriate to a conveyance to a declaration of trust,

ATC 4759

you are required to treat the person declaring the trust as imparting property to the objects or purposes of the trust...'''

Mason J (and Dixon CJ), therefore, clearly thought that a declaration of trust amounted to something other than the imparting of an interest in the subject property.

320. Brennan J said (at ATC 4151; CLR 473-474):

``... Before the transfer it [the trustee] did not hold legal and equitable estates in the property: it held the legal estate alone. There was no equitable estate, for a person cannot be trustee for himself alone.''

321. In Acorn v MCS Microcomputer Systems Pty Ltd (1984) 4 IPR 214 Smithers J said (at 219), referring to an agreement to assign intellectual property for value (where such assignment had not yet taken place, and the operation of s. 196(3) of the Copyright Act 1968 (Cth) (which requires an assignment of copyright to be in writing in order to be effective):

``It is normally the consequence of such a transaction that, value having been given, an equitable interest in the subject thereof arises in the party giving it: see Central Trust and Safe Deposit Co v Sinder [1916] AC 266 at 272; Fairweather v Fairweather (1944) 69 CLR 131 at 154. In such a case the equitable interest arises not by way of transfer but by activation in equity of the conscience of the receiver of the valuable consideration. A trust is created; there is not a transfer or assignment; there is no transmission of an equitable interest. The estate arising from a declaration a trust is appropriately spoken of as the estate created thereby; thus per Gibbs CJ in DKLR Holding Co (No 2) Pty Ltd v Commr of Stamp Duties (NSW) (1982) 149 CLR 491. It is appropriate also to speak of the fiction that by a declaration of trust the declarant `imparts' to the beneficiary an equitable estate or interest upon which the Stamp Duties Act 1920 (NSW) operates; per Mason J in the last-mentioned case at 457. Where there is no transmission s. 196(3) of the Act is not involved. Similarly where there is an enforceable contract to transfer property the equitable interest arising in the proposed transferee is not the product of a transfer but an exercise in creation.''

322. Smithers J therefore seems to have considered that in the case of both a declaration of trust and a trust arising consequent to an enforceable contract for value to transfer property the trust that is created involves no ``transmission'' of an interest, but exclusively a creation of an interest in the beneficiary. In my opinion this disqualifies a contract for the declaration of a trust from being a contract for the disposition of land to which section 54A would apply.

323. The second reason that a contract for the creation of a trust is not a contract for the ``disposition of land or any interest in land'' is that a declaration of trust need not meet the requirements of s. 23C(1)(a): Department of Social Security v James, Hagan v Waterhouse, Di Pietro v OTIB, Low (As liquidator of Lekker Pty Ltd) v Dykgraaf. It would be a perverse result if a declaration of trust was not a creation or disposition of land for the purposes of s. 23C(1)(a) whereas a contract to create a trust was a contract for the disposition of land or any interest in land for the purposes of s. 54A.

324. It should be noted in passing that the decisions in Grey v Inland Revenue Commissioners [1960] AC 1 and Oughtred v Inland Revenue Commissioners [1960] AC 206 support the proposition that a declaration of a trust over an equitable interest amounts to a ``disposition'' of a subsisting interest for the purposes of the United Kingdom equivalents of s. 23C(1)(c). However that support should not, I think, be seen to extend to a simple declaration of trust by the full beneficial owner of land especially in light of what was said in DKLR Holdings and Acorn v MCS Microcomputers.

325. The result, therefore, is that the oral contract whereunder CMPI promised to declare itself trustee over the property in favour of ISPT as trustee of the Forster No. 1 Trust was enforceable at the suit of ISPT, and therefore created an equitable interest in the land in ISPT upon payment of the purchase money by it (Step 5). Therefore, in my opinion, the land was trust property at Step 5.

326. For the sake of completeness, however, and in case I am wrong and s. 54A does apply to a contract to declare a trust, it is appropriate to consider whether the doctrine of part- performance would operate to render the contract enforceable notwithstanding the lack of writing.

ATC 4760

327. The operation of the doctrine of part- performance is expressly reserved by s. 23E of the Conveyancing Act. In the present case, part- performance would not operate to render the contract enforceable. The only act of purported part-performance upon by ISPT was the payment of the consideration agreed to in return for CMPI's promise to constitute itself trustee of the property, such consideration being, for practical purposes, the purchase price for each of the properties. The acts relied upon must be ``referable to some such agreement as that alleged'' (Maddison v Alderson (1883) 8 App Cas 467 at 479 per Lord Selborne LC) and they must be ``unequivocal'' (see, for example,
McBride v Sandland (1918) 25 CLR 69 at 78 per Isaacs and Rich JJ;
Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 431 per Brennan J). Historically, the mere payment of purchase money has not been a sufficiently unequivocal act to amount to part- performance: Maddison v Alderson at 478-79 per Lord Selborne LC, Clinan v Cooke (1802) 1 Sch & Lef 40 at 41, Hughes v Morris (1852) 2 DeGM&G 349 at 356, Brittain v Rossiter (1879) 11 QBD 123, Jones v Peters [1948] VLR 331. The decision of the House of Lords in Steadman v Steadman [1976] AC 536 is arguably authority to the contrary in England (see especially at 541 per Lord Reid and at 570-571 per Lord Salmon). However, Steadman v Steadman is yet to be accepted in Australia, where courts have preferred traditional formulations of the requirements of the doctrine of part-performance. In
McMahon v Ambrose [1987] VR 817 Tadgell J (at 846-847) stated that, notwithstanding Steadman v Steadman, the Australian decisions in cases such as
JC Williamson Ltd v Lukey and Mulholland (1931) 45 CLR 282, McBride v Sandland and
Francis v Francis [1952] VLR 321 (which supported the traditional, pre-Steadman formulation) still represented the law in Australia. In Waltons Stores (Interstate) Pty Ltd v Maher Brennan J (at 432) formulated the doctrine in traditional terms. In
Australia and New Zealand Banking Group Ltd v Widin (1990) 26 FCR 21 at 37 the Full Federal Court held that it was for the High Court to decide whether Steadman ought to be followed in Australia. Similarly, in Ogilvie v Ryan [1976] 2 NSWLR 504 (at 523) Holland J declined to follow Steadman in the absence of endorsement of it by the High Court. Accordingly, and in line with what was said by the Full Federal Court in Australian and New Zealand Banking Group Ltd v Widin, Steadman cannot be said to have altered the position in Australia that payment of a purchase price, without more, is not enough to activate the doctrine of part-performance. That being so, the doctrine of part performance has no role to play in the present case.

328. In summary, the doctrine of part- performance does not apply here, so that the contract under which CMPI promised to constitute itself trustee could not be enforced if the Statute of Frauds applied to it. In my opinion, and as already stated, the Statute of Frauds does not apply. The contract was enforceable, and as such created an equitable interest in ISPT. Accordingly, the land was trust property at Step 5 and the exception in s. 73(2A) of the Stamp Duties Act applies. However, in the event that I am wrong, and the oral contract created no such interest, I shall also consider other possibilities whereby a trust might have arisen at Step 5.

The Statute of Frauds cannot be used as an instrument of fraud

329. It might be argued that the Statute of Frauds did not apply to CMPI's oral declaration of trust by virtue of the operation of the principle that the Statute of Frauds cannot be used as an instrument of fraud. This principle has been taken to mean that a plaintiff claiming beneficial ownership of land previously conveyed by it to another may prove by parol evidence that the land was conveyed on trust for it, and may be entitled to a declaration that the transferee holds the land on trust for it notwithstanding that the declaration of trust does not satisfy the requirements of the Statute of Frauds: Rochefoucauld v Boustead [1897] 1 Ch 196, McCormick v Grogan (1869) LR 4 HL 82 at 97, Booth v Turle (1873) LR 16 Eq 182; Re Duke of Marlborough; Davis v Whitehead [1894] 2 Ch 133 at 141, Cadd v Cadd (1909) 9 CLR 171,
Organ v Sandwell [1921] VLR 622,
Last v Rosenfeld [1972] 2 NSWLR 923. It is not necessary that the conveyance was fraudulently obtained: the doctrine will apply whenever the legal owner asserts absolute entitlement under the conveyance so as to defeat the beneficial interest: Bannister v Bannister [1948] 2 All ER 133.

330. The situation in the present case is clearly different to the situation in which the doctrine normally been applied. The present

ATC 4761

case does not concern a conveyance on terms that the property be held on trust for the conveyor. Rather it involves a promise, for value, by CMPI that it would constitute itself trustee of the land. The principle in Rochefoucauld v Boustead has been held not to apply to a simple voluntary oral declaration of trust made by a person absolutely entitled to land:
Wratten v Hunter [1978] 2 NSWLR 367,
Last v Rosenfeld [1972] 2 NSWLR 923 at 928, 930, 933. In Last v Rosenfeld Hope J said (at 928):

``While equity did not prevent the Statute of Frauds applying in those cases where a person had made an oral declaration of trust in respect of land already held by the declaror, it did, at any rate in some cases, give relief notwithstanding the terms of the statute, in those cases where a person acquired property on terms that he would hold as trustee for the person transferring to him.''

331. At 930 his Honour said:

``All the above cases are, of course, cases where the person against whom it is sought to enforce a trust had acquired property upon terms that he should hold as trustee; they were not cases where a person holding property, after his acquisition of it, constituted himself as trustee.''

332. At 932 his Honour said:

``Although courts of equity would not thus permit the statute to be made an instrument of fraud, `By this it cannot be meant that equity will relieve against a public statute of general policy in cases admitted to fall within it': Maddison v Alderson. Thus it has never been doubted that the Statute of Frauds applies to a mere voluntary declaration of trust by a person who at all material times was the owner of the relevant property: Organ v Sandwell.''

333. Two conclusions can confidently be drawn. First, the Statute of Frauds will not prevent the enforcement of a trust where land was conveyed to the legal owner on condition that it be held for the benefit of the conveyor. Second and notwithstanding this, the Statute of Frauds will apply where a legal owner with full beneficial ownership makes a voluntary oral declaration of trust over the land. The present case falls into neither of these categories. CMPI was not conveyed the land by ISPT, but its declaration of trust was not voluntary: it was made in consideration for the purchase price.

334. To determine whether the principle that the Statute of Frauds cannot be used as an instrument of fraud applies in the case of a non- voluntary oral declaration of trust by an absolutely entitled owner, it is necessary to consider the basis upon which it has been applied in the past (ie in cases in which land has been conveyed subject to an oral condition that it be held on trust for the conveyor). Although there is very little judicial discussion of the matter, the decisions flowing from Rochefoucauld v Boustead turn on the fact that the conveyee's title would not have come into existence but for the conveyee's acceptance of the trust. This is the view taken by the authors of Equity: Doctrines and Remedies (fourth edition, at para 12-125) and by Mahon J in
Avondale Printers v Haggie [1979] 2 NZLR 124, who said (at 162-163), referring to Rochefoucauld v Boustead and the cases following it, that:

``In each case the party seeking to assert the legal title was held liable as trustee for the plaintiff by virtue of the oral agreement or promise of the defendant, and the true rationale of all these decisions undoubtedly is that the transferor would not have parted with his interest in the absence if the oral undertaking given by the transferee. That is the conclusion reached by Meagher, Gummow and Lehane in Equity: Doctrines and Remedies (1975) at p 308 and I agree with that opinion.''

This analysis of the principle is attractive due to its resonance with promissory estoppel.

335. Furthermore, it should be noted that such an approach would not leave a non- voluntary intended beneficiary of an oral trust without remedy. As discussed above, a promise to constitute a trust may, if supported by consideration, be enforced if the contract is in writing or part-performed, and will, indeed, create an equitable interest in the promisee commensurate with the degree of protection a court would provide.

336. If this approach is correct then the principle that the Statute of Frauds cannot be used as an instrument of fraud is limited to cases in which the legal owner of property has only obtained its legal title by acceding to the existence of a trust. That clearly is not the case here.

ATC 4762

Analogy with purchaser under uncompleted contract

337. In the context of a contract for the sale of land, the vendor, upon receipt of the purchase money, holds the property on trust for the purchaser. In
Stern v McArthur (1988) 165 CLR 489 Deane and Dawson JJ said (at 523), in respect of a contract for the sale of land, that ``when the purchase money has been paid title has been made or accepted and the purchaser is entitled to a conveyance or transfer'' the vendor is bare trustee for the purchaser.

338. In the present case, some analogy might be drawn between a contract for the transfer of a legal interest and a contract under which the full beneficial owner promises to constitute himself trustee of the property, especially if the latter can be characterised as a contract for the sale of an equitable interest in the property. If this analogy is valid, then CMPI might be regarded as holding the property on trust for ISPT as trustee of the Forster No. 1 Trust from the time ISPT paid the purchase price. However, the analogy cannot be regarded as valid.

339. A promise by a full beneficial owner to constitute itself trustee of the property in favour of the promisee cannot be equated to a contract to assign the equitable interest. A declaration of trust by a legal owner with full beneficial ownership cannot be equated with the assignment of the equitable estate. A legal owner with full beneficial ownership does not own two estates, one legal and other equitable:
DKLR Holding Co (No 2) Pty Limited v Commr of Stamp Duties (NSW) 80 ATC 4279; [1980] 1 NSWLR 510, Acorn Computers Ltd v MCS Microcomputer Systems Pty Ltd (1984) 4 IPR 214. Accordingly, a declaration of trust by a legal owner with full beneficial ownership should be regarded as creating an equitable estate in the beneficiary rather than divesting the legal owner of the equitable estate and vesting it in the beneficiary. As such, in my opinion, it is inappropriate to consider the transaction in terms of the principle whereunder the vendor holds as trustee upon payment of the purchase money. Rather, this case should be considered with reference to the principle applied in Pullan v Koe discussed above, where an enforceable agreement to create a trust creates an equitable interest in the promisee. For interest's sake, however, it might be noted that the principles are both applications of the maxim that equity regards as done what ought to be done and are illustrations of equity's tendency to regards interests as created or disposed where there are enforceable instruments for their creation and disposition: see also Walsh v Lonsdale (1882) 21 Ch D 9 (contract to lease treated as an equitable lease), Frederick v Frederick (1721) 1 P Wms 710 (contract to assign treated as an assignment) and Simultaneous Colour Printing Syndicate v Foweraker [1901] 1 QB 771 (contract to issue debentures meant that intended debenture holders had priority over an execution creditor).

Estoppel

340. The final means by which it might be argued a trust arose at Step 5 is the operation of the doctrine of estoppel. As will become evident the operation of the doctrine of estoppel in this context is uncertain and involves principles yet to be fully developed. Because of this, and the conclusion reached above that ISPT acquired an equitable interest in the land by virtue of the oral contract whereunder CMPI promised to declare a trust over the land, I propose to subject the possibility of an estoppel to only limited analysis.

341. Estoppel will aid the plaintiff if it can establish that, after step 5, CMPI would be estopped from denying that it held the land on trust for ISPT as trustee of the Forster No. 1 Trust and that that estoppel immediately created a proprietary interest in the land in ISPT. In my opinion, an estoppel probably could be made out. CMPI clearly induced an expectation in ISPT that CMPI would validly constitute itself trustee of the property in favour of ISPT. ISPT, in reliance on that expectation paid over the contract price. It appears, therefore, that the elements of an estoppel are made out: see, for example,
Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387. This is the case notwithstanding that the same transaction also amounted to an oral contract. In other words, at step 5, not only was CMPI due to perform its promise that it would declare a trust (such promise being enforceable at the suit of ISPT and therefore creating an equitable interest in ISPT), but CMPI was also estopped from denying the existence of the trust. The estoppel arises notwithstanding the lack of writing: estoppel outflanks the Statute of Frauds: Waltons Stores at 433, 446.

342. Although this analysis appears technically correct, it does give rise to some

ATC 4763

problems. First, such an estoppel would arise in relation to every contract affecting land (including a contract for the sale of land) and would render the Statute of Frauds irrelevant. The authors of Cheshire and Fifoot, Law of Contract, 7ed, Butterworths, 1997 have said (at para 16.67), referring to the decision in
Collin v Holden [1989] VR 510:

``It may be heretical to suggest this, but is this not an argument which might be used in all Statute of Frauds cases? Admittedly in this case there was very specific conduct which could be identified as detrimental reliance. But in view of the restrictive application of the doctrine of part- performance (which was not discussed by Tadgell J in Collin v Holden), estoppel provides greater potential for avoiding the statutory defence. [In the US promissory estoppel has been so used: McIntosh v Murphey (1970) 52 Haw 29, 36-7; 469 P 2d 177,181.] There are signs that this is happening. [See
ANZ Banking Group Ltd v Widin (1990) 2 FCR 21; Sharp v Anderson (1995) Aust Contract Rep ¶90-051].''

343. Secondly, even if CMPI were estopped at Stage 5, they would not necessary hold the property on trust for ISPT at that point. Traditionally, proprietary estoppels have attracted a range of remedies, including declarations of full ownership (eg Dillwyn v Llewellyn (1862) 4 DeGF&J 517), the right to use (eg
Pearce v Pearce [1977] 1 NSWLR 170; Re Sharpe [1980] 1 WLR 219) and the right to compensation (eg Raffaele v Raffaele [1962] WAR 29). ``[T]he court must look at the circumstances in each case to decide in what way the equity can be satisfied...'': Plimmer v Wellington Corporation (1884) 9 App Cas 699. The nature of the right acquired by a party who has the benefit of an estoppel (prior to the court declaring the respective rights of the parties) is obscure. In ER Ives Investments Ltd v High [ 1967] 2 QB 379 at 395, for example, Lord Denning MR said that the right was not a proprietary interest. On the other hand, in Plimmer v Wellington Corporation the right was described as an ``estate or interest in, to or out of the land'' within the meaning of the Public Works Act 1882. It has been argued that cases of proprietary estoppel necessarily involve the imposition by the court of a constructive trust (see Ford and Lee at para 22420, contra Pascoe v Turner [1979] 1 WLR 431 at 435 where the English Court of Appeal held that an estoppel operated, but that there was no constructive trust) but even if this were the case, it is not clear whether such a trust would be regarded as having arisen prior the court's having brought to light its existence.

344. Finally, the decision of the High Court in
The Commonwealth of Australia v Verwayen (1990) Aust Torts Reports ¶81-036; (1990) 170 CLR 394 should be mentioned. A majority held that the appropriate remedy in a case of estoppel was the minimum equity required to undo the detriment created by the plaintiff's reliance. In the present case, the minimum equity required would presumably be reimbursement of ISPT by CMPI of the contract price. This is an additional obstacle to the success of the proposition that estoppel operated to create a trust at Step 5.

Absence of written approval of CMPI

345. The final argument against the existence of a trust at Step 5 comes from the fact that the prior written approval of the unitholder (CMPI) was not sought before CMPI was appointed nominee. The power conferred on ISPT to appoint a nominee is to be found in clause 8.10 of the trust deed (TB, p 77). Clause 8.10(a) provides that:

``With the prior written approval of the Unitholders, any investment forming part of the Fund may be held by or in the name of a nominee or custodian appointed by the Trustee. Subject to this clause 8.10, the exercise of any power or discretion exercisable by the Trustee under this deed remains exercisable by the Trustee notwithstanding such appointment.''

346. It should be noted at the outset that this provision is inconsistent with clause 2.2 of the supplementary agreement, which provides:

``No further approval of Unitholders is required for the registered title for Eastgate and Forster to remain in the name of Coles Myer Property Investments Limited as a nominee under the relevant Trusts of for ISPT Nominees to hold as a nominee under the relevant Trusts.''

347. The relationship between the various agreements executed is not entirely clear. The first relevant agreement entered into appears to have been the joint venture agreement, dated 28 November 1994. The supplementary agreement was executed on 27 January 1995, as was the

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trust deed. The supplementary agreement is situated before the trust deed in the Tender Bundle. Recital B of the supplementary agreement states that ``The purpose of this agreement is to supplement the provisions of the Joint Venture Agreement''. The terms of the supplementary agreement reflect such a purpose. Clause 1.2 provides that:

``The terms of the Joint Venture Agreement continue to apply concurrently with this agreement and are confirmed in all respects, except that, in the event of any inconsistency between the Joint Venture Agreement and this agreement, this agreement will prevail.''

It is clear that the parties' intended that the supplementary agreement operate as a variation of the joint venture agreement.

348. Clause 1.4 of the trust deed provides that:

``In the event of any inconsistency between the terms of this deed and the Joint Venture Agreement, the provisions of the Joint Venture Agreement will prevail. The rights and obligations of the Trustee, Manager and Unit Holders under this deed may be altered, varied, added to or abrogated by the terms of the Joint Venture Agreement.''

349. The situation can therefore be summarised in the following way. The joint venture agreement was varied by the supplementary agreement, and the supplementary agreement is to prevail in the case of inconsistency between the two. The joint venture agreement prevails over the trust deed. If the plaintiff could demonstrate that the joint venture agreement was not only varied by the supplementary agreement, but actually incorporated its terms, then clause 2.2 of the supplementary agreement might (having become part of the joint venture agreement, which, by virtue of clause 1.4 of the trust deed, prevails over the trust deed) prevail over clause 8.10 of the trust deed. However, in my opinion, no such intention arises from the respective agreements.

350. Therefore, the question of which provision prevails must be determined by the order in which the supplementary agreement and the trust deed were executed. There is no evidence on this point, so that it is preferable to decide the question on other grounds if possible.

351. In my opinion, even if clause 8.10 of the trust deed prevails and the power conferred on ISPT as trustee to appoint a nominee is subject to ISPT's having obtained prior written approval of the unitholders, the trust created upon the making of the oral contract to create a trust and the payment of the purchase price is valid. ISPT would have a valid defence to an action by CMPI for breach of trust. CMPI obviously consented to, and were complicit in, the appointment of CMPI as nominee. In
Spellson v George (1992) 26 NSWLR 666 Handley JA said (at 669-670):

``It is established by long standing authority that the consent of a beneficiary to conduct by trustees which would otherwise be a breach of trust may be a defence to any action by that beneficiary for that breach. However, as the other judgments demonstrate, the same authorities establish that consent is only a prima facie defence and that the Court must consider in detail `all the circumstances' in order to determine whether it would be `fair and equitable' for that beneficiary to complain of that breach... Consent may take various forms. These include active encouragement or inducement, participation with or without direct financial benefit, and express consent. Consent may also be inferred from silence and lack of activity with knowledge. However, consent means something more than a state of mind. The trustee must know of the consent before the breach.''

352. In the present case all the elements of the defence of consent seem to be made out, and no action for breach of trust could be brought by CMPI. Alternatively, if there were any doubt as to ISPT's knowledge of CMPI's consent prior to the purported appointment of the nominee, the defence of acquiescence would probably be available. The authors of Ford and Lee Principles of the Laws of Trusts have said (at paragraph 18120):

``Acquiescence to a past breach is more often pleaded than consent beforehand. A beneficiary who expressly adopts a transaction cannot thereafter complain of it although the trustee must show that the beneficiary had `full knowledge' of the act complained of and also of her or his rights in respect thereof: Lindsay Petroleum Co Ltd v Hurd (1874) LR 5 PC 221 at 239; Erlanger v New Sombrero Phosphate Co Ltd (1878) 3

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App Cas 1218 at 1279; Tyson v Tyson (1901) 1 SR (NSW) Eq 18 at 20; Re Morish [ 1939] SASR 305 per Murray CJ at 316; see [ 18060]. Acquiescence may consist of an affirmative act such as adoption or the giving of a release, or it may consist in the beneficiary's lying by with knowledge of the claim: Re Langlands (1901) 21 NZLR 100; Re Kerr (1904) 24 NZLR 1; Swain v Law Society [1982] 1 WLR 17.''

353. In any event, even if no such defence could be made out, it could not be suggested that the appointment was void ab initio notwithstanding that it was made in breach of trust. A transaction made in breach of trust is not void ab initio, it is voidable at the suit of the beneficiary: see Pilcher v Rawlins (1872) 7 Ch App 259, Thomson v Clydesdale Bank Ltd [ 1893] AC 282, Fels v Knowles (1906) 26 NZLR 604, Tuckett v Rice [1917] VLR 36, Tito v Waddell (No 2) [1977] Ch 106 at 241.

Decision on status of the land after Step 5

354. A trust came into existence when ISPT paid the purchase price and CMPI came under an obligation to perform its contractual promise to constitute itself trustee of the land. The contract was enforceable at the suit of ISPT. Accordingly, an equitable interest was created in ISPT commensurate with that which a court of equity would protect. The trust arose notwithstanding the lack of writing. Section 23C does not affect the operation of constructive or resulting trusts: s. 23C(2). Section 54A did not apply. Because the Statute of Frauds did not apply to the creation of this interest, it is unnecessary to find part- performance (as to which ISPT would have faced the insuperable difficulty that mere payment of the purchase price could not be sufficient part-performance).

355. A trust may also have come into existence pursuant to some estoppel. However this outcome is doubtful and the equitable interest acquired by ISPT pursuant to the contract to create a trust renders it unnecessary to decide the matter on this ground.

356. The other arguments for a trust coming into existence at Step 5 (the application of the principle whereby the Statute of Frauds cannot be used as an instrument of fraud, and the application, by analogy of the principle whereby the vendor under a contract for the sale of land holds the land on trust for the purchaser after the latter pays the purchase price) cannot be accepted.

357. In the light of these conclusions, it is unnecessary to consider the plaintiff's alternative submission that the land became trust property at some point during Steps 7, 8 and 9, but it may be dealt with briefly. If the land did not, in fact, become an asset of the Forster No 1 Trust at Step 5 then CMPI continue to hold it absolutely until Step 9, whereupon it was transferred to the plaintiff (as nominee of ISPT under the Forster No 1 Trust). In such circumstances, such a transfer could not possibly amount to the appointment of a new trustee for the purposes of s. 73(2A) of the Stamp Duties Act 1920.

PART 7 - ``NOMINAL CONSIDERATION''

The issues

358. I turn now to the additional question regarding the applicability of s. 73(2A) to the transaction that was the subject of further evidence and submissions. Section 73(2A) is expressed to apply to transfers ``made for nominal consideration''. The operative words of each of the transfers now under discussion were that the transferor, CMPI:

``... acknowledges receipt of the consideration of Nil and as regards the land specified above transfers to the Transferee an estate in fee simple.''

The central question in this part of the case is whether a transfer so expressed is properly regarded as ``made for nominal consideration''.

359. The Chief Commissioner contends that s. 73(2A) should be read literally and that the transfers, framed in the way I have described, fall outside the ambit of the exemption. That argument proceeds on the simple footing that ``nil'' indicates no consideration and is therefore inconsistent with the proposition that there is any consideration at all, whether ``nominal'' or otherwise. Nominees raises three arguments against this construction: first, that the statute should be construed to apply to transfers for no consideration as well as those for nominal consideration, second, that the transfer, although expressed to be for no consideration, was in reality for some nominal consideration, viz, the acceptance by the transferee of its obligations as trustee and, third, that s. 9(2) of the Taxation Administration Act 1996 compels the reassessment to be made on

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the basis that a transfer for no consideration falls within the exemption, that being the assessment practice at the time of the original assessment. I received evidence regarding such assessment practices.

Is ``nil'' a ``nominal consideration''?

360. In ordinary parlance, the expression ``nominal consideration'' denotes merely token consideration, or consideration in name only. The fourth meaning of ``nominal'' in the 1993 edition of ``The New Shorter Oxford Dictionary'' is:

``Existing in name only, not real or actual; merely named, stated, or expressed, without reference to reality or fact; minimal in relation to the true value, token; so small or insignificant as hardly to justify the name.''

361. ``Nominal consideration'' is, on one view, the minimum required to support a simple contract at common law and is distinguishable from both valuable consideration and adequate consideration (see, for example, Re Abbott (a Bankrupt) [1983] 1 Ch 45;
Barton v Official Receiver (1986) 4 ACLC 533; (1986) 161 CLR 75). Understood in this way, ``nominal consideration'' is not given unless something passes. If nothing passes, there is no consideration and therefore not even ``nominal consideration''. It is on that basis that a conveyance in which the ``consideration'' is expressed to be ``nil'' might be said not to be ``a conveyance made for nominal consideration''.

362. Nominees' primary argument in favour of the proposition that ``nil'' must, in the present case, be taken to be ``nominal consideration'' is that any other construction would lead to an absurd result. If the section is to be construed otherwise, a situation would arise where a transfer for no consideration would be liable for duty in full, a transfer for some trifling consideration (such as $1 or a peppercorn) would be liable for $2 duty only, and a transfer for more than such a trifling consideration would be liable for duty in full. Such an outcome would undoubtedly be strange, especially when one considers the objective the exemption is obviously intended to achieve, that is, to ensure that a fixed duty only is payable where there is nothing more than the retirement or change of trustee in an existing trust.

363. This situation calls to mind the words of Brennan CJ, Dawson, Toohey and Gummow JJ in
CIC Insurance Limited v Bankstown Football Club Limited (1997) 9 ANZ Insurance Cases ¶ 61-348; (1997) 187 CLR 384, where their Honours said (at ANZ 76,853; CLR 408):

``... In particular, as McHugh JA pointed out in Isherwood v Butler Pownow Pty Ltd, if the apparently plain words of a provision are read in the light of the mischief which the statute was designed to overcome and of the objects of the legislation, they may wear a very different appearance. Further, inconvenience or improbability of result may assist the court in preferring to the literal meaning an alternative construction which, by the steps identified above, is reasonably open and more closely conforms to the legislative intent.''

364. As I have said, when the ``plain words'' of s. 73(2)(a) ``are read in the light of the mischief which the statute was designed to overcome'' there is significant ``improbability of result''. On the other hand, however, the reference in the section to ``nominal consideration'' is clear, and the construction for which nominees contends may not be ``reasonably open'', especially when one considers the principle expressio unius est exclusio alterius. However, ``The use of the word `ambiguity' in the context of statutory interpretation is not restricted to lexical or verbal ambiguity and syntactic or grammatical ambiguity. It extends to circumstances in which the intention of the legislature is, for whatever reason, doubtful'':
Repatriation Commission v Vietnam Veterans' Association of Australia NSW Branch Inc (2000) 48 NSWLR 548 per Spigelman CJ.

365. The intention of Parliament in using the words ``made for nominal consideration'' is not immediately clear. There is nothing of assistance in the parliamentary debates. The phrase first appeared in 1920 with the introduction of the Stamp Duties Act 1920. It was then contained in s. 73(1), which read:

``(1) The following instruments are not to be charged with ad valorem duty as conveyances, namely:

  • (a) An instrument merely appointing a new trustee or executed on the retirement of a trustee or a conveyance made for nominal consideration upon the appointment or the retirement of a trustee

    ATC 4767

    (whether the trust is expressed or implied).''

That section evolved into the section now under examination. It has always included the reference to nominal consideration.

366. Both parties suggested that the reference to nominal consideration was included to reflect a conveyancing practice of the time whereby nominal consideration was given to rebut the presumption of a resulting trust. Woodman has said (Woodman and Nettle, The Torrens System, 2 ed, LBC, 2001, at para 46.140)

``In a conveyance of land under old system title, consideration was necessary to rebut the presumption of a resulting use. This gave rise to the practice, in conveyances by way of gift, of inserting a consideration of ten shillings or some other nominal amount. The need for a nominal consideration in common law conveyances was removed by s. 44(1) of the Conveyancing Act, as from 1 July 1920.

For land under the Real Property Act, the need for nominal consideration probably never existed. The favoured view is that the Statute of Uses never applied to the statutory code operating under the Real Property Act (see, for example, Hogg, The Australian Torrens System (1905) pp 891, 892; Jacob's Law of Trusts (6th ed, 1997), para 1220), although the contrary view has also been expressed - namely that the Statute of Uses could apply to Torrens title land, so that a resulting use could arise on a voluntary transfer of Torrens Title land (see
Newcastle City Council v Kern Land Pty Ltd (1997) 42 NSLWR 273 at 281, per Windeyer J; his Honour then went on to hold that s. 44(1) of the Conveyancing Act 1919 would nowadays prevent a resulting use from arising; but the operation of that section would seem to be restricted to old system title).

Nevertheless, the practice of transferring land under the Act in consideration of one dollar still occurs (even though s. 10 of the Taxation Administration Act 1996 requires the true consideration to be disclosed when duty is being assessed). At one time the practice may have been attributable to a misplaced dread of attracting a Registrar- General's caveat; or to a belief that using the words `will' or `devise' in a transfer was out of order. Nowadays the only apparent explanation for continuing the practice is an unquestioning devotion to precedent.''

367. When attempting to discover the legislative intention behind a statute, common practice of professionals has long been a useful and valid extrinsic aid to interpretation. In 1744 Lord Hardwicke said, in Bassett v Bassett (1744) 3 Atk 203 (at 208), ``The uniform opinion and practice of eminent conveyancers has always had great regard paid to it by all courts of justice''. In Escoigne Properties Ltd v Inland Revenue Commissioners [1958] AC 549, Lord Denning MR said (at 566):

``In this country we do not refer to the legislative history of an enactment as they do in the United States of America. We do not look at the explanatory memoranda which preface the Bills before Parliament. We do not have recourse to the pages of Hansard. All that the courts can do is take judicial notice of the previous state of the law and of other matters generally known to well informed people.''

368. Of course, the extrinsic aids excluded by Lord Denning MR are available in this State today (Interpretation Act 1987. s. 34), but this does not discount the validity of common practice as an aid to interpretation. It has since been said that his Lordship's reference to ``well informed people'' might be understood as ``learned lawyers'' (see Cross, Statutory Interpretation, 2ed, Butterworths, 1987, p 191).

369. No evidence of conveyancing practice was tendered. However, because both parties proffered the same explanation for the inclusion of ``nominal consideration'' in the section, I am prepared to accept that the conveyancing practice to which I have referred did, in fact, exist, and that that practice was the reason for the inclusion of the phrase ``nominal consideration'' in the section. That being the case, I think that it would be absurd to exclude from the operation of s. 73(2A) transfers for no consideration by adhering unnecessarily to a literal reading of a section which was phrased with obsolete conveyancing practices in mind. The following passage from the joint judgment Mason and Wilson JJ in
Cooper Brookes (Wollongong) Pty Ltd v FC of T 81 ATC 4292; (1981) 147 CLR 297 (at ATC 4305-4306; CLR 320-321) is relevant:

``The rules of [construction], as DC Pearce says in Statutory Interpretation, (p. 14), are no more than rules of common sense,

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designed to achieve this object. They are not rules of law. If the judge applies the literal rule it is because it gives emphasis to the factor which in the particular case he thinks is decisive. When he considers that the statute admits of no reasonable alternative construction it is because (a) the language is intractable or (b) although the language is not intractable, the operation of the statute, read literally, is not such as to indicate that it could not have been intended by the Legislature.

On the other hand, when the judge labels the operation of the statute as `absurd', `extraordinary', `capricious', `irrational', or `obscure' he assigns a ground for concluding that the Legislature could not have intended such an operation and that an alternative interpretation must be preferred. But the propriety of departing from the literal interpretation is not confined to situations described by these labels. It extends to any situation in which for good reason the operation of the statute on a literal reading does not conform to the legislative intent as ascertained from the provisions of the statute, including the policy which may be discerned from those provisions.''

370. Here, the literal interpretation of the statute, in the form of a finding that ``nil'', being literally no consideration, was not ``nominal consideration'', would undoubtedly yield a result characterisable as absurd, extraordinary, capricious or irrational.

371. It is instructive, in this context, to consider the decision of the High Court in
DKLR Holding Co (No 2) Pty Ltd v Commr of Stamp Duties (NSW) 82 ATC 4125; (1982) 149 CLR 431. Although the point now in issue was not argued in that case, observations about the status of the particular transfer under an earlier version of s. 73(2A) are pertinent. The provision there under consideration, like the provision I am required to apply, referred to ``a conveyance made for nominal consideration''. The instrument in question was a memorandum of transfer under the Real Property Act by which a transferor:

``in consideration of Nominal (the receipt whereof is hereby acknowledged), paid to the transferor by [the transferee] hereby transfers to [the transferee] an estate in fee simple in the land described in the following schedule...''

372. Gibbs CJ described this as a ``conveyance, made for nominal consideration''. Mason J, with whom Stephen J agreed, said that it was ``a conveyance within s. 65 and was expressed to be made for nominal consideration''. Aickin J said that there was ``no doubt that it was made for a `nominal consideration'''. Brennan J described the transfer as ``expressed to be made for a nominal consideration''.

373. A form of words by which a transferor refers to ``Nominal'' as having been ``paid'' by the transferee and acknowledges ``receipt'' of ``Nominal'' is, in every realistic way, a nonsense. The only thing that can be both ``paid'' and ``received'' is money. A reference to ``Nominal'' is not a reference to money and is therefore not apt to show that any consideration at all passed or was accepted as having passed. ``Nominal'' therefore had in DKLR Holding Co the same connotation as ``nil'' in the context with which I am dealing.

374. I am satisfied that s. 73(2A) reflects an unstated assumption that there is no such thing as a conveyance made without consideration. The reference to ``a conveyance made for nominal consideration'' covers a case in which the expressed consideration is not real, having an existence in name only. Transferors who purport to acknowledge receipt of (and to convey in consideration of) $1 or a peppercorn or ``nominal'' or ``nil'' must, I think, be regarded as communicating a uniform and consistent message, namely, that the transfer, although expressed to be made for the ``consideration'' so described, is made without any real consideration at all. In each case, therefore, the supposed consideration is to be regarded as existing in no more than name and is ``nominal consideration''. My conclusion is that each of the transfers with which I am presently concerned is therefore ``a conveyance made for nominal consideration'' as referred to in s. 73(2A).

375. I also note briefly that this conclusion is supported by the principle omne majus continet in se minus. In Tower Hamlets London Borough Council v Miah [1992] QB 622, for example, Scott LJ held that the term ``leased'' in the Housing Act 1985 (UK) also encompassed premises that had merely been licensed. His Lordship said (at 630) ``It simply makes no sense to hold that a... licence obtained from a local authority gives a greater security than a...

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tenancy strictly so-called. It is a... permissible construction of para 6 of Sch 1... to hold that the greater includes the less...''. Similarly, Bennion has said (Bennion, Statutory Interpretation, 4ed, Butterworths, 2002, p. 476):

``The concept that the greater includes the less is akin to the reverse concept that it is commonsense to assume that an Act remedying a lesser mischief is also intended to remedy a greater mischief of the same class.

Example 197.9 It was held that tenements were `houses' and not `other buildings' within the meaning of the Housing Act 1957 (repealed) s. 42(1) since otherwise, while a group of eight unfit houses in which sixteen families lived could be declared a clearance area, a group of eight unfit houses in which ninety families lived could not. `It would be strange indeed if the section had to be construed so that it was effective to abolish the smaller evil but the not greater.' [ Quiltotex Co Ltd v Minister of Housing and Local Government [1966] 1 QB 704, per Salmon LJ at 712.]''

Decision

376. On a proper construction of s. 73(2A), the instruments of transfer at issue in these proceedings must be regarded as ``made for nominal consideration'' since, in the context, the word ``nil'' indicates ``nominal consideration''. It is therefore unnecessary for me to address Nominees' second argument that the transfers, although expressed to be for ``nil'' consideration, were in truth made for some consideration and that consideration is properly described as ``nominal''. It is also unnecessary to consider the evidence concerning assessment practices relevant to such transfers.

PART 8 - THE VALUATION ISSUE

Issue not relevant

377. The one matter remaining is Nominees' submission that any ad valorem duty should be assessed on the footing that the property transferred at Step 9 was of purely nominal value, so that ad valorem duty would be of a negligible amount.

378. It is unnecessary to pursue this. If a trust arose at Step 5, s. 73(2A) applied and duty of $2 only was chargeable. If no trust arose, the transfer of the land by CMPI to the Nominees (as nominee of ISPT under the Forster No 1 Trust) could not have been a transfer of the bare legal estate and there would be no basis for arguing that the interest of the registered proprietor had no real value. Matters that may arise from the decision of the High Court in
Commr of State Revenue (Vic) v Pioneer Concrete (Vic) Pty Ltd 2002 ATC 4876; (2002) 209 CLR 651 therefore need not be discussed.

PART 9 - DISPOSITION OF PROCEEDINGS

Summary of conclusions

379. The conclusions I have reached may be summarised as follows:

Orders

380. Nominees, as plaintiff, is entitled to relief generally in accordance with paragraphs 1 to 4 of the summons filed on 29 March 2001 (see [9] above). It is desirable, however, that order 4 (which must, in any event, be revised to take account of orders already made by consent with respect to fines and interest thereon) be framed so as to refer to the precise amounts of duty paid and the dates of payment so that there will be certainty as to their effect. These are no doubt matters that can be agreed.

381. I direct that short minutes giving effect to this judgment be filed by delivery to my Associate within fourteen days.

382. On costs, I am disposed to think that, although the Chief Commissioner was successful in countering some of the contentions advanced by Nominees, the success of Nominees has been such as not to warrant any departure from the general rule that costs should follow the event. I shall, however, hear submissions on costs at a time to be fixed, should the Chief Commissioner indicate that he seeks to resist such an outcome.

 

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