Balcaskie Investments Pty Limited v Chief Commissioner of State Revenue [2017] NSWCATAD 19

Background

A joint venture was involved in the acquisition, consolidation, redevelopment, subdivision and partition of several parcels of land in Milsons Point. One of the joint venturers was Mrs Shirley Tina Wall, as trustee of the Shirley Wall Family Trust. The Trust was established on 1 August 2002 by a deed of settlement (“the Original Deed”). The Trust was a discretionary trust and the beneficiaries are defined to include a potentially large group of relatives of Mrs Wall, and certain bodies corporate or trusts nominated by the Trustee or with which the relatives of Mrs Wall who are themselves beneficiaries have a prescribed connection. On the date of establishment the trust acquired an interest in real property. On 8 January 2010, following the redevelopment and partitioning of the land those interests became represented by Folio Identifiers 15/SP83350 (“Lot 15”) and 16/SP83350 (“Lot 16”).

On 12 January 2011, Mrs Wall and the applicant executed a deed appointing a new trustee (“the 2011 Deed”). Mrs Wall removed herself as Trustee and appointed the applicant as Trustee of the Trust in her place. Mrs Wall also exercised her power under cl. 14 of the Original Deed to amend the principal deed by including a new cl. 22 in the following terms:

“The Original Trustee and the New Trustee and any future and past trustees are absolutely prohibited from being a beneficiary under the Trust Deed or from otherwise directly or indirectly benefiting under the Trust Deed and this clause will not be capable of amendment or revocation.”

Recital G of the 2011 Deed provides as follows:

“The parties wish to ensure that the Original Trustee and the New Trustee will not be entitled to any direct or indirect benefit or interest in the Trust.”

Clause 14 of the Original Deed provides as follows:

“The Trustee may at any time and from time to time by written or oral resolution or Deed revoke add to or vary all or any of the provisions contained in this Deed (including this clause), as varied altered or added to by any previous variation alteration or addition, provided always that:

1. no such variation alteration or addition may be in favour of or for the benefit of the Ineligible Beneficiaries or result in any benefit to the Ineligible Beneficiaries; and
2. no such variation alteration or amendment shall affect the beneficial entitlement to any amount set aside for any beneficiary prior to the date of the variation alteration or addition;

subject always to paragraphs (a) and (b) of this clause, nothing in this clause or any other provision of this Deed shall prevent the Trustee from changing the persons or legal entities who are within the definition of ‘Beneficiary’ or ‘Beneficiaries’ pursuant to this Deed”.

Following Mrs Wall’s death, applications were executed by the applicant to record a new proprietor recognising the change of trustee from Mrs Wall to the applicant. The applications were lodged with the Chief Commissioner for stamping. However on 19 August 2015, the Chief Commissioner informed the applicant that he was not satisfied that s. 54(3) of the Duties Act applied and the transactions would be subject to ad valorem duty and interest.

The Statutory Framework

The issue in review is whether the second cumulative condition of s. 54(3)(b) of the Duties Act 1997 is satisfied.

Duties Act 1997

54. Change in trustees

    …
    3. Duty of $50 is chargeable in respect of a transfer of dutiable property to a person other than a licensed trustee company, a special trustee, a trustee of a self-managed superannuation fund or a trustee of a special disability trust as a consequence of the retirement of a trustee or the appointment of a new trustee, if the Chief Commissioner is satisfied that, as the case may be:
       1. none of the continuing trustees remaining after the retirement of a trustee is or can become a beneficiary under the trust, and
       2. none of the trustees of the trust after the appointment of a new trustee is or can become a beneficiary under the trust, and
       3. the transfer is not part of a scheme for conferring an interest, in relation to the trust property, on a new trustee or any other person, whether as a beneficiary or otherwise, to the detriment of the beneficial interest or potential beneficial interest of any person.
       If the Chief Commissioner is not so satisfied, the transfer is chargeable with the same duty as a transfer to a beneficiary under and in conformity with the trusts subject to which the property is held, unless subsection (3A) applies.

Decision

The issue was whether the applicant, or future trustees, could become a beneficiary under the trust for the purposes of s.54(3)(b). The decision focussed upon the construction of the trust deed, specifically the interpretation and interrelation of cls 14 and 22. The applicant and the Respondent made submissions on contractual construction, the effect of Recital G and the possibility of there being an estoppel by convention. However Senior Member Boxall was of the view at [14] that it was purely a matter of contractual construction of the trust deed.

The applicant and the Chief Commissioner made divergent submissions on the construction on cls 14 and 22. The Respondent submitted that the concluding words in cl.14 give the trustee the power to change the persons who are beneficiaries and expressly provide that this power prevails over “any other provision of this Deed”.

Senior Member Boxall held, in line with the applicant’s submissions, that cl. 22 of the trust deed is a specific provision and in accordance with the normal principles of contractual construction it must be read as prevailing over the general authority granted in cl.14 including amendments to the definition of Beneficiary or Beneficiaries. It was found that cl.22 was a provision that expressly and specifically prohibited any trustee, past, present or future, from becoming a Beneficiary, and expressly prohibits its own amendment or revocation.

As such it was held that the Chief Commissioner should properly have concluded that the condition set out in s.54(3)(b) was satisfied and ad valorem duty and interest was not payable on the transactions.

Orders

Senior Member Boxall made the following orders:

1. I revoke:
   1. the assessment under the Duties Act 1997 of duty pursuant to the Duties Notice of Assessment issued to the applicant on 24 August 2015 in relation to the Lot 15 Application; and
   2. the assessment under the Duties Act 1997 of duty pursuant to the Duties Notice of Assessment issued to the applicant on 4 September 2015 in relation to the Lot 16 Application; and
2. The assessments referred to in order 1 above are remitted to the Respondent to issue Duties Notices of Assessment which conform to the construction of the Trust Deed set out in these reasons for decision.

Link to decision

Balcaskie Investments Pty Limited v Chief Commissioner of State Revenue [2017] NSWCATAD 19