|Date of judgement||07 April 2014|
|Judge(s)||R Seiden SC, Principal Member|
Block, Senior Member
Bennett, General Member
|Court or Tribunal||New South Wales Civil and Administrative Tribunal Appeal Panel|
ADMINISTRATIVE LAW Civil and Administrative Tribunal (NSW) Appeal Panel
DUTIES declaration of trust over land whether declaration of trust was over dutiable property whether permissible to look outside declaratory provision to broader trust instrument to identify property - premium interest component - market rate interest component - failure of Tribunal to take submission into account - leave to extend appeal to the merits
Australian Gas Light Co v Valuer-General (1940) 40 SR (NSW) 126
Farrar v Commissioner of Stamp Duties (1975) 5 ATR 364
Tooheys Limited v Commissioner of Stamp Duties (NSW)  SR (NSW) 539
The Taxpayer appealed against decisions of the Tribunal at first instance to uphold the Chief Commissioner’s assessment of ad valorem duty on a declaration of trust and refusal to remit interest for late payment.
The Appeal Panel upheld the Chief Commissioner’s assessment of duty, confirming that the Tribunal made no error of law in taking into account the instrument as a whole, including the recitals, to determine the property subject to the declaration of trust. However the Appeal Panel ordered that the premium interest be remitted because the Taxpayer had been under a genuine misapprehension that the deed was exempt under s.125 of the Duties Act, and had satisfied the onus of proof in this regard.
The Taxpayer sought a review of the Chief Commissioner’s Notice of Assessment dated 6 January 2012 (“the Assessment”) which assessed ad valorem transfer duty plus market rate and premium rate interest on a trust deed executed by the Taxpayer on 1 September 2011 (“the Trust Deed”). The Trust Deed established the Al-Saeed Educational and Welfare Trust.
The Chief Commissioner assessed ad valorem transfer duty as payable on the Trust Deed on the basis that it contained a declaration of trust over identified dutiable property being land at 1492 Camden Valley Way, Leppington (“the Property”). The assessment proceeded on the basis that the declaration of trust in the Trust Deed satisfied the statutory definition of ‘declaration of trust’ in the Duties Act 1997 (“the Act”).
The Trust Deed was executed by the Taxpayer on 1 September 2011. The Trust Deed provided, amongst other things, the following details:
“… the Trustee shall hold the settlement sum and all monies and property both real and personal which may hereafter be given to the Trust for the general purpose of the Trust… UPON TRUST to apply them in establishing and maintaining in perpetuity, in accordance with the terms of this Deed for promoting the study of education and for the welfare of the general public and all matters relating thereto.” (clause 1); and
The Property referred to in Recital C was acquired by the Taxpayer by way of a contract of sale entered into on 2 September 2011, ie, one day after the Taxpayer had entered into the Trust Deed. The purchaser in the contract was described as ‘Al-Saeed & Associates Pty Ltd atf Al-Saeed Educational and Welfare Trust’.
The Act creates and charges duty on a number of transactions including "a declaration of trust over dutiable property": s 3; s 8(1)(b)(ii). Section 9(1) provides, in effect, that the duty charged on a declaration of trust is to be charged as if it were a transfer of dutiable property. Pursuant to s 9(2)(c) a transfer of the property the subject of the declaration is taken to have occurred when the declaration of trust is made. Section 8(3) of the Act defines, exhaustively, the expression "declaration of trust" as follows:
declaration of trust means any declaration (other than by a will or testamentary instrument) that any identified property vested or to be vested in the person making the declaration is or is to be held in trust for the person or persons, or the purpose or purposes, mentioned in the declaration although the beneficial owner of the property, or the person entitled to appoint the property, may not have joined in or assented to the declaration.
Dutiable property is defined in s 11 of the Act. Relevantly, dutiable property includes land in New South Wales (s 11(1)(a)) but does not include money.
Section 58 of the Act charges duty on a declaration of trust over non-dutiable property or unidentified property. Of particular relevance is sub-s 58(2) which provides as follows:
Duty of $500 is chargeable in respect of an instrument executed in New South Wales that declares that property, although not identified in the instrument, when vested in the person executing the instrument is to be held in trust for a person or persons or a purpose or purposes mentioned in the instrument.
The Tribunal, at first instance through Judicial Member M Hole, affirmed the Assessment: Hole JM’s decision is found at  NSWADT 155 (“the Decision”).
At  of the Decision, the Tribunal identified the question as follows:
The question then to be answered is whether the Trust Deed is a declaration of trust satisfying the statutory definition of "declaration of trust" in the Act.
The Tribunal concluded that the Trust Deed was a declaration of trust that satisfied the statutory definition in s 8(3) of the Act. In reaching this conclusion the Tribunal considered the Trust Deed as a whole.
Finally, the Tribunal rejected the then Applicant's claim that the penalty ought to have been remitted.
At the hearing the Taxpayer refined its grounds of appeal, in effect, to the following three propositions (the Grounds):
The Taxpayer's primary submission was that in determining whether a declaration satisfies the statutory definitions one must confine the scope of enquiry to the declaration itself. The Taxpayer's submission was that there must be a single declaration that satisfies all of the elements required by s 8(3), in order for there to be a dutiable transaction under s 8(1)(b)(ii). The Taxpayer contended that one may not look outside the declaration to see whether all the elements are satisfied.
The Taxpayer submitted that in this case clause 1 of the Trust Deed created the Trust over the Trust Fund. The Trust Fund, at the time of the declaration comprised only the settlement sum. In other words, the Trust was created over the settlement sum in accordance with clause 1, but not over the Property. The Taxpayer submitted that if the Property became part of the Trust Fund (as to which see Ground 2), it became part of the Trust Fund of the pre-existing trust when it was acquired on behalf of the Trust. The Taxpayer emphasised that s 8(3) applies where the words in question create a trust: Farrar v Commissioner of Stamp Duties (1975) 5 ATR 364 at 370. It does not apply where the words in question subject property to an existing trust.
The Chief Commissioner contended that the text of s 8(3) of the Act supported a construction that the Property need not be identified in the particular declaration. The only matters that needed to be "mentioned" in the declaration are names of the beneficiaries or purposes of the Trust. The express stipulation (in s 8(3)) that those matters be mentioned in the declaration is to be contrasted with the absence of such a specific requirement in relation to the identity of the property.
Further, the Chief Commissioner contended that none of the leading authorities in relation to declarations of trust mandate a conclusion that the property must be identified in the declaration. The Chief Commissioner highlighted that Handley AJA in Chief Commissioner of State Revenue v Platinum Investment Management Ltd (2011) 80 NSWLR 240 at  (“Platinum Investment”) said that "the property to be vested must be identified when the instrument is first executed". His Honour did not refer to any requirement that such property be mentioned or identified in the declaration itself.
Finally, the Chief Commissioner pointed to a hiatus in the legislation that tended against the Taxpayer's construction. If the Taxpayer's contention is accepted, many transactions would escape duty. Section 58 levies duty on declarations of trust over unidentified property. To fall within s 58 the property must be "not identified in the instrument". Declarations of trust over property identified in an instrument but not in the particular clause declaring the trust would escape duty on the Taxpayer's construction and this cannot have been intended.
The Taxpayer contended that Recital C does not describe any property that could or would, once vested, become part of the Trust Fund as defined in the Trust Deed. Accordingly, even if permissible to construe the declaration in clause 1 by reference to other provisions of the Trust Deed, there is nevertheless no declaration of trust that satisfies the statutory definition. This submission is based on the difference in language employed in Recital C and clause 1. Recital C refers to "acquiring" the Property (and it was agreed that the acquisition was effected by a purchase of the Property) and the declaration in clause 1 is limited to property "given" to the Trust.
The Chief Commissioner contends that it is apparent from the Trust Deed read as a whole, that the expression "given" in clause 1 must be read as "acquired". Unless it is read this way, the Property, which was objectively intended to be held on the express terms of the Trust Deed would not be, because the Property would not satisfy the definition of Trust Fund in clause 1.
The Taxpayer replied that notwithstanding that the Property did not satisfy the definition of Trust Fund, it would nonetheless be held for the purposes referred to in the Trust Deed, having been acquired with the Trust Fund.
The Taxpayer contended that the Tribunal ignored a substantive aspect of its case: the reasons why interest ought to have been remitted. At  of the then Applicant's submissions, at first instance, it was said, in relation to the remission of interest:
Further, the Tribunal should revoke the Assessment to the extent that the Chief Commissioner assessed (and did not remit) interest at the combined market and premium rates, or at the very least, at the premium rate, because the Applicant:
Section 275 of the Duties Act refers to an exemption for charitable and benevolent bodies.
At  of the Decision the Tribunal said:
The Applicant has not provided any reasoning to revoke the market component of interest, nor any reasoning to revoke the premium rate of interest. Accordingly as the Applicant bears this onus which has not been discharged, the imposition of the interest components are confirmed.
The Chief Commissioner contended that the then Applicant's submissions were not ignored, they were simply not backed up by reasons and accordingly there is no error.
Clause 1 of the Trust Deed itself makes reference to the rest of the Trust Deed by stating that the Trustees must hold the Trust Fund "in accordance with the terms of this Deed". It is therefore artificial to construe clause 1 in isolation and the Appeal Panel disagreed with the Taxpayer that clause 1 itself contains the whole of the declaration of trust. The Appeal Panel held that it is therefore necessary to have regard to the whole of the Trust Deed. They observed that they are supported in their view by the decision in Platinum Investment which is the only relevant decision under the Act. There the operative clause, clause 2.2(a), provided as follows:
The Appeal Panel noted that in the Platinum Investment case one was required to look beyond clause 2.2 to the definitions (clause 1.1) and a schedule in order to be able to fully identify the dutiable property mentioned in clause 2.2 (the Consideration Shares) and the quantum of shares.
They also held that furthermore, contrary to ground (1)(a) of the amended grounds of appeal, s 58 would not apply, because the Property is identified in the instrument (see Ground 2 below). On the Taxpayer's construction of s 8(3), s 58 could not be engaged, thus exposing the gap in the legislation.
For the foregoing reasons, where a declaration of trust is found in an instrument and it is not expressly or impliedly quarantined (as it is not here) it is permissible to look to the whole of the instrument to determine whether the elements of s 8(3) are satisfied. Accordingly, there was no error of law in the Tribunal construing clause 1 with Recital C.
The conclusion of the Tribunal, that the Property would satisfy the definition of Trust Fund once vested in the Trustee was reasonably open. The fact alone that Recital C to the Trust Deed refers to the Property is capable of supporting that conclusion.
Further, the Trust Deed gives power to the Trustee to invest monies of the Trust Fund and to change those investments: clauses 3.1 and 3.2 (extracted at  of the Decision). On the Taxpayer's case (that the Trust Fund does not extend to purchased assets) no future investment of the Trust Fund would satisfy the definition of Trust Fund. This is unlikely to have been intended. This supports a conclusion that, viewed objectively, the Property satisfied the definition of the Trust Fund.
Accordingly, no error of law is demonstrated as there is some basis for the conclusion that Recital C identified property the subject of the declaration.
Having regard to the relevant cases (such as Molyneux and Vermeesch v Chief Commissioner of State Revenue (RD) (No 2)  NSWADTAP 41), there was no justification for the remission of market rate interest.
The Appeal Panel accepted that the Taxpayer had been operating under a misapprehension as to whether the exemption on the grounds of charitable status applied to the Trust Deed. In that regard, the Appeal Panel found with respect to Ground 3 that there was an error of law: there was a basis for the remission of the premium component of interest, which was not taken into account by the Tribunal at first instance. They therefore ordered that the premium interest component of the Assessment be remitted.