Nev Ham Nominees Pty. Limited v. Commissioner of Stamp Duties.

Judges:
Sheppard J

Court:
Supreme Court of New South Wales

Judgment date: Judgment handed down 14 March 1978.

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Sheppard J.: This is an appeal by way of stated case pursuant to the provisions of sec. 124 of the Stamp Duties Act, 1920. The question at issue is the amount of stamp duty to be paid upon a deed of acknowledgement dated 26th May, 1976. The Commissioner contends that it is chargeable with ad valorem duty pursuant to the provisions of para. (2) of that part of the second schedule to the Act dealing with declarations of trust. That paragraph and para. 1 and 3 of the first column of that part of the schedule are as follows:

``DECLARATION OF TRUST -

• (1) Any instrument declaring that a person in whom property is vested as the apparent purchaser thereof holds the same in trust for the person or persons who have actually paid the purchase-money therefor.
• (2) Any instrument declaring that any property vested or to be vested in the person executing the same is or shall be held in trust for the person or persons or purpose or purposes mentioned therein notwithstanding that the beneficial owner or person entitled to appoint such property may not have joined therein or assented thereto.
• (3) Any such instrument as aforesaid by which (a) the same trusts are declared as have been declared in respect of the same property by an instrument duly stamped with ad valorem duty under this Act or (b) the trusts declared are the same trusts as those upon or subject to which the same property was conveyed to the person declaring the trust by an instrument duly stamped with ad valorem duty under this Act or (c) the same trusts are declared as have been declared by a will in respect of the same property and any death duty payable in respect of that property by reason of the death of the testator who made such will has been paid.''

Until this morning the primary contention of the plaintiff was that the deed was dutiable as a deed not otherwise charged in the schedule and liable to a fixed duty of six dollars. Alternative submissions were that it was a declaration of trust falling within para. (3)(b) of the schedule above set out or, if not that, a conveyance falling within para. (4)(c) of that part of the schedule dealing with conveyances of any property. I refer also to sec. 73(1)(c) of the Act. The plaintiff is now in agreement that the deed is liable to stamp duty pursuant to para. (2) of the schedule as set out but, for

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reasons which I shall later mention, contends that the duty is no more than $740. Notwithstanding that concession it does not give up its submission that the deed falls also within the provisions of the paragraphs numbered (3)(b) and (4)(c) abovementioned.

The facts of the matter may be shortly stated. By deed of discretionary trust dated 22nd March, 1976, made between Finance Underwriters Pty. Limited and Neville John Ham, Neville John Ham acknowledged the receipt of the sum of fifty dollars to be held by him on discretionary trusts contained in the deed and by the deed it was acknowledged that the trust thereby constituted was to be called ``The Ham Family Property Trust''. The beneficiaries of the trust were members of the family and certain other persons who are referred to in the schedule to the deed of trust. On 26th May, 1976, three documents were executed. Firstly, there was a deed made between the aforesaid Neville John Ham and the plaintiff, that is, Nev Ham Nominees Pty. Limited, whereby Neville John Ham retired as the trustee of The Ham Family Property Trust and appointed the plaintiff as trustee thereof. Next there was executed the deed of acknowledgement which is in question here. I shall come to the terms of that deed a little later. Finally, on 26th May, 1976, the plaintiff entered into a contract for the purchase of certain land known as 367-369 Pennant Hills Road, Pennant Hills, from a company, Peter Warren (Management) Pty. Limited. The contract was contained in an instrument executed by the plaintiff and stated to be made on 26th May, 1976, between Peter Warren (Management) Pty. Limited, of the one part, and Nev Ham Nominees Pty. Limited, a company duly incorporated and having its registered office at the address mentioned, as trustee of The Ham Family Property Trust, of the other part. By the contract the vendor agreed to sell and the plaintiff agreed to purchase the property for the sum of $147,500. The contract provided that the plaintiff should, on the signing thereof, pay by way of deposit the sum of $14,750.

The order of execution of documents executed on 26th May, 1976, was thus the deed of appointment of new trustee, the deed of acknowledgement and the contract. That is established not by the stated case but by evidence given by Neville John Ham. He also said that following upon the execution of the documents in the order which I have mentioned discussions took place between his solicitor and the solicitor for the vendor as to the terms of the contract of sale. Subsequent to those discussions the form of the contract of sale signed was altered in the way that is described in his evidence. Later that evening Mr. Ham was advised by his solicitor that the contract of sale, as amended, had been exchanged by him with the solicitor for the vendor. It is obvious that the case was compiled in the belief that the deed of acknowledgement was executed after the contract of sale. Furthermore, there are statements in the recitals and operative parts of the deed of acknowledgement which would suggest that this was so, but the evidence of Mr. Ham is otherwise, and that evidence has not been challenged by the Commissioner.

At the time that the deed of acknowledgement was executed the assets which were subject to the control of the trustee were the original sum of fifty dollars mentioned, and a further sum of $14,750, being the amount to be paid by way of deposit pursuant to the contract, a total of $14,800.

The deed of acknowledgement referred to The Ham Family Property Trust and, amongst other things said:

``WHEREAS the Trustee (that is the plaintiff) in its capacity as Trustee of THE HAM FAMILY PROPERTY TRUST using funds and assets held by it as Trustee under the terms of the said Deed constituting THE HAM FAMILY PROPERTY TRUST together with monies loaned to it as such Trustee has in its capacity as such Trustee decided to invest in certain real estate.''

It went on to recite that the contract had been executed, but of course that was, in the light of the evidence, not a correct statement, and continued:

``AND WHEREAS the Trustee now wishes to put on record the fact that it is purchasing such property in its position and capacity and subject to its rights as Trustee under the Deed constituting THE HAM FAMILY PROPERTY TRUST and subject to all the powers, authorities and rights therein set out and vested in the Trustee and in the Beneficiaries therein referred to.''

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The operative part of the deed is as follows:

``1. The Trustee acknowledges that the funds held in the Trust Account of Gell, Rockliff & Co. as Solicitors acting on the purchase of the said property are funds held by them on behalf of the Trustee as Trustee under the terms of the said Deed of Discretionary Trust constituting THE HAM FAMILY PROPERTY TRUST.

2. The Trustee acknowledges that upon obtaining title to the said property described in the said Schedule it will hold such property as Trustee under the terms of the said Deed of Discretionary Trust constituting THE HAM FAMILY PROPERTY TRUST.

3. The Trustee declares that the purchase of the property described in the Schedule hereto is within the powers of investments as set out in the said Deed and maintains its right to indemnity from the Trust Fund described in the said Deed for all liabilities incurred in the purchase of the said property.''

As I have earlier said, the plaintiff now concedes that the deed is liable to duty in the sum of $740. That is five per cent of $14,800. It is duty at the rate provided for in the sixth schedule to the Act on the total amount of the funds under the control of the trustee at the time of the execution of the deed. Plainly the plaintiff is correct in making this concession. I say that because of the words, ``Any instrument declaring that any property vested in the person executing the same is held in trust for the persons mentioned therein.'' It is true that the moneys in question were, at the time of the execution of the deed, already the subject of the trust. The deed was no more than declaratory of that circumstance, but it nevertheless falls squarely within the words of the paragraph and is liable to duty accordingly. s

Although that is the view which I have as to why the concession made by counsel for the plaintiff was rightly made, it is not the reason given by him for making it. He stuck steadfastly to the submission that the only declarations of trust caught by para. (2) of the relevant part of the schedule were those which operated to confer interests not previously existing. The reason he was prepared to make the concession was that the payment of the moneys into the trust account and the execution of the deed of acknowledgement were all part of the one transaction; cf.
Cohen & Moore v. I.R. Commrs. (1933) 2 K.B. 126. I do not take that view, firstly, because it ignores the use of the word ``is'' in the paragraph in question and, secondly, because one has to construe that paragraph in context with para. (1) and (3) of the relevant part of the schedule. Both those paragraphs impose duty, true it is a fixed duty, upon declarations of trust which do not operate otherwise than as declarations of existing rights.

So much having been said, I can now come to the real question at issue between the parties. The basis of the plaintiff's submission that no more duty than that which was conceded was payable is that the deed was executed before the contract for sale. A not insubstantial interval passed between its execution and the exchange of contracts which took place later in the day. Until that exchange took place neither the trustee nor the beneficiaries of the trust had any interest in the property. The property continued to belong absolutely to the vendor. It was only after the exchange that the trustee acquired an equitable estate in it. Notwithstanding its terms, the declaration of trust did not therefore declare a trust of property then vested in the trustee. The words, ``Any instrument declaring that any property vested in the person executing the same is held in trust'', did not operate in relation to the property to be acquired but only in relation to the moneys already vested in the trustee to which I have referred.

To bring the deed within the paragraph the Commissioner has to rely upon the words ``to be vested'' therein. If they are not applicable his case fails. His submission is that as a matter of the ordinary use of English they are applicable. He contends that they mean ``intended to be vested'' or ``expected to be vested''. The plaintiff submits that such a view is erroneous. Its counsel contends that the words ``to be vested'' only apply where there is a legal obligation on the part of some third person (the owner or other person in whose control the property is) to vest the property in the trustee, or a legally enforceable right in the trustee to have the property vested in him. If that be a correct view the provision cannot here apply because until the exchange of contracts the owner of the property was under no legal obligation to the trustee or anyone else in relation to the property, nor did the

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trustee have any right to have the property vested in it.

The question is which of these competing views is the correct one. I confess to having had difficulty in reaching a conclusion.

Before proceeding I should refer to what was said by the Chief Justice (Dixon C.J.) in
Tooheys Limited v. Commr. of Stamp Duties (1961) 105 C.L.R. 602 at pp. 611-612. His Honour said:

``It was said for the appellants that the schedule, in defining the instrument called a declaration of trust, introduced the words `or to be vested' to cover cases where a presently operative declaration of trust applies to some property or rights existing in the trustees but nevertheless property remains to be vested in them. A further point was made that there were no `persons mentioned' in the deed as beneficiaries of the trust within the meaning of the paragraph. But that is better considered as an independent argument: what matters for the purposes of the argument now in hand is that when the instrument was presented for the determination of the Commissioner there were no members of the fund. In my opinion the argument unduly restricts the meaning and application of the paragraph. The words `any property vested or to be vested' seem to me to be directed simply to the two cases, namely the case of the declaration of a trust of property then vested in the person who declares the trust and the second case of a declaration of trust in advance of the vesting in the person who declares it of property which it is intended to make the subject of the trust. Here the first payment to be made is stated and quantified: no objection is possible on the ground that there is no property that can be identified or ascertained.''

That passage may be thought to be in line with some of what was said by Walsh J. in Toohey's case when that case was in the Supreme Court ((1960) S.R. 539 at pp. 545-6). His Honour said:

``But the question which I have just propounded and considered is not decisive of the case. For the description of an instrument contained in para. (2) under the heading `declaration of trust' in the schedule is not so phrased as to be confined to declarations which create or which evidence a trust which is thereby or has already been completely constituted in such a way that property is then irrevocably subjected to the trust, and that the trusts are thenceforth immediately enforceable. Because of the inclusion of the words `vested or to be vested' and the words `is or shall be held in trust', the description extends to cases where no property is as yet vested in the proposed trustee, and it extends to cases in which no trust presently operative is declared. Thus it extends, in my opinion, to instruments which would not be classified, in the ordinary language of an equity lawyer, as being declarations of trust. The question is not, therefore, whether this deed is, in the ordinary sense of the term, a declaration of trust, but whether it satisfies the statutory description. It is only to be expected that this description would go beyond the ordinary sense of the term, since `ordinary' declarations of trust are included in the definition of `conveyance' and are thus chargeable without recourse to the provision now under consideration.''

I shall say more of that in a moment.

The Commissioner, of course, relies upon the passage I have cited from the judgment of Dixon C.J., particularly upon the use by so learned and careful a judge of the words ``which it is intended to make the subject of the trust''. Reliance is also placed upon his Honour's rejection of the appellant's submission that the words in question were intended ``to cover cases where a presently operative declaration of trust applies to some property or rights existing in the trustees but nevertheless property remains to be vested in them''.

But as counsel for the plaintiff submitted, what the Chief Justice said has to be looked at and considered in the context of the factual situation with which he was confronted. Toohey's case concerned the liability to stamp duty of a deed entered into between a company and trustees the purpose of which was to provide a superannuation fund and scheme for the benefit of the company's employees. At the time the deed was entered into the trust that it was intended to establish was not operative because there were no members and no funds had been transferred to the trustees by the company. But the essential difference between that case and the present was that there was a clear obligation imposed by the deed upon the

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company to pay a sum to the trustees for the purposes of the trust. The company was bound to vest in the trustees that sum. In contradistinction the vendor here was not, at the time of the execution of the deed, bound to vest in the trustee the property which it was contemplated would be bought. If it were not for the words used by the Chief Justice I could not therefore regard the case as being in point. I do not regard what Walsh J. said as throwing any light on the matter. He was concerned, so it seems to me, with the fact that there were no members and no funds so that at the time that the deed was executed the trust was inoperative. That is what he referred to when he said at p. 545, referring to para. (2) of the relevant part of the schedule,

``and it extends to cases in which no trust presently operative is declared. Thus it extends, in my opinion, to instruments which would not be classified, in the ordinary language of an equity lawyer, as being declarations of trust.''

What is the significance then of the use by the Chief Justice of the words relied upon by the Commissioner? Were they meant by him to have a significance outside the facts of the case? Of course, what his Honour has said, could be put aside on the basis that it is an obiter dictum, but I would not do that if I thought that his Honour had turned his mind to the problem here in question. I would adopt what he regarded as the proper view of the section.

Having given the matter due consideration, I have reached the conclusion that it was not intended by him to deal with the ambit of the expression ``to be vested'' in the relevant paragraph. That question did not arise. Plainly the words did apply in relation to the matter that was before him, and it was right to say that the property was property which was intended to be made the subject of the trust. That was the common intention of the parties to the deed in question. But that intention was expressed in a deed made between the two parties. The intention so expressed gave rise to a legal obligation. Accordingly, I do not regard Toohey's case as an authority which is relevant on the question here at issue. No other authority cited in argument appears to me to be in point.

The provision in question is in a revenue statute. If an impost is to be exacted, the circumstances which must exist for its exaction must be stated with reasonable clarity. If there be any ambiguity the taxpayer is entitled to have the ambiguity resolved in his favour. If the Commissioner's argument be right, what is the limit of the operation of the provision? There may be many circumstances in which persons will declare themselves trustees of property yet to be acquired. Such declarations will have no immediate effect; indeed, in the situation of a volunteer they may never have effect; cf.
Permanent Trustee Company v. Scales 30 S.R. 391, and the dissenting judgment of Latham C.J. in
Commr. of Stamp Duties v. Hopkins (1945) 71 C.L.R. 351 at p. 360. And if property ultimately comes into the hands of a person fixed with an obligation to hold it in trust for another, that obligation may arise not because of any then existing instrument but by reason of the law relating to resulting or contructive trusts. Thus there is, if the Commissioner's submission be sound, a large grey area of uncertainty as to just what connection or nexus there must be between the declaration of trust and the acquisition of the property which it is intended or expected will be acquired. In other words what, for the purposes of the provision, must be the degree of intention or expectation? Furthermore, a duty is imposed at ad valorem rates upon the value of the property in question. The property may never be acquired. One ought not, in my opinion, readily ascribe to the legislature an intention to impose that category of duty when the circumstances may well be that the property will never come into the hands of the intended trustee to become subject to the equitable estate which would then arise; compare such a situation with that which arises in relation to a contract for sale where a refund of duty may be obtained in the circumstances provided for in sec. 41(7) of the Act. There is no comparable provision dealing with a case such as this.

The matters I have mentioned have led me to the conclusion that the plaintiff's submissions are to be preferred to those of the Commissioner.

The fact that I have reached that conclusion makes it unnecessary for me to deal with further submissions made on behalf of the plaintiff. They were, firstly, that there were no ``persons mentioned'' in the instrument in question within the meaning of those words in the paragraph. That is because of the way in which the deed of acknowledgement in question referred to the family trust. Although

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I do not need to express a view on that submission I indicate that I would not have acceded to it. I regard what was said in relation to that part of the paragraph in Toohey's case as being apposite here.

Other submissions made, as I have earlier mentioned, were that the deed notwithstanding the concession that was made that it fell to the degree indicated, within para. (2) of the relevant part of the schedule, fell also within para. (3)(b) thereof, or within para. (4)(c) of that part of it dealing with conveyances of any property. All I say about those submissions is that it does not seem to me that the deed of acknowledgement here fits the language of either of those provisions. But for the reasons earlier given it is my opinion that the appropriate amount of duty in the light of the concession that was made this morning is $740 and not the amount which the Commissioner has purported to charge.

It remains to answer the questions asked in the case. I answer them as follows:

Question (a) Yes, but only to the extent of the moneys which were the subject of the trust at the time the deed was executed on 26th May, 1976; questions (b), (c) and (d), do not arise; question (e) $740; question (f), by the defendant.