|Date of judgement||6 May 2020|
|Court or Tribunal||Supreme Court|
Duties Act 1997 (NSW) s 63
Alexander v Chief Commissioner of State Revenue  NSWCATAD 180
Clyne v Deputy Federal Commissioner of Taxation (1981) 150 CLR 1;  HCA 40
Foots v Southern Cross Mine Management Pty Ltd (2007) 234 CLR 52;  HCA 56
House of Peace Pty Ltd v Bankstown City Council (2000) 48 NSWLR 498;  NSWCA 44
McGraw-Hinds (Aust) Pty Ltd v Smith (1979) 144 CLR 633;  HCA 19
Tay v Chief Commissioner of State Revenue 
The Plaintiff sought review of a duties notice of assessment issued by the Chief Commissioner on 25 July 2019 in respect of a transfer of land located at Ida Avenue, Mosman, New South Wales (“Ida Avenue Property”).
The Plaintiff is one of three adult children of the Deceased”, who left her estate equally to her three children: the Plaintiff, the Plaintiff’s brother and the Plaintiff’s sister. The Deceased appointed the three beneficiaries as her executors.
The residuary estate comprised four properties and an amount of cash. The properties were
an Ida Avenue Property and three units in Hampden Street, Mosman, New South Wales.
By a transmission application dated 17 May 2018, the Plaintiff, the Plaintiff’s brother and the Plaintiff’s sister, as Executors, transferred the Ida Avenue Property to the Plaintiff.
It was common ground between the parties that as at the date of the Transmission Application, the value of the Ida Avenue Property exceeded one third of the value of the residual estate, as it represented 34.8% of the estate.
The key issue in dispute was whether the Transmission Application amounted to an appropriation of the Deceased’s property that was made “in or towards satisfaction” of the Plaintiff’s entitlement under the trusts contained in the Deceased’s Will, within the duty concession contained in s.63(1)(a)(iii) of the Duties Act 1997 (“the Act”).
In the alternative, the Plaintiff submitted that the Transmission Application was made under an
agreement between the beneficiaries to vary the trusts contained in the will, with the effect
that the duty concession in s.63(2) of the Act applied.
The Chief Commissioner assessed the Transmission Application to ad valorem duty on
the basis that neither duties concession applied.
Section 63 (Deceased estates) of the Act provides (relevantly) as follows:
(a) a transfer of dutiable property by the legal personal representative of a deceased
person to a beneficiary, being: …
(iii) an appropriation of the property of the deceased person (as referred to in section 46 of the Trustee Act 1925) in or towards satisfaction of the beneficiary’s entitlement under the trusts contained in the will of the deceased person or arising on intestacy, and …
1. Appropriation – s.63(1)(a)(iii) of the Act
The Court accepted the Chief Commissioner’s submission that the reference in s.63(1)(a)(iii) to an appropriation of property “in or towards satisfaction” of a beneficiary’s entitlement under the trusts contained in the Will, does not apply to an appropriation of property which exceeds such an entitlement. In particular, the Court referred to a dictionary definition of the term “satisfaction”, which normally means “the payment of a debt or fulfilment of an obligation” (at ). Whilst cautioning that “words used must take their meaning by reference to the context in which they appear, and cannot be determined merely by reference to a dictionary”, the Court found there was “no reason to think that the Parliament intended ‘satisfaction’ to have a different meaning in the subsection” (at ).
In relation to when a determination was required to be made as to whether s.63(1)(a)(iii) of the Act was satisfied, the Court accepted the Chief Commissioner’s submission that this was required to be assessed as at the date of execution of the Transmission Application, being 17 May 2018.
Accordingly, for the purpose of assessing whether the “appropriation of …property” represented by the Transmission Application was “in or towards satisfaction” of the Plaintiff’s entitlement under the Will for the purpose of s 63(1)(a)(iii), the value of the Ida Avenue Property that was appropriated, and of the Plaintiff’s “entitlement” under the Will, had to be assessed at the same date. In making this finding, the Court rejected the Plaintiff’s submission that where, as here, the value of the residue had not been realised (because no steps had been taken at the time of the Transmission Application to develop the other properties), the question of whether an appropriation of property from the estate was “in or towards satisfaction of the beneficiary’s entitlement” under the Will was a matter for the Executors, provided they were acting bona fide.
2. Agreement to vary the trusts – s.63(2) of the Act
The Court rejected the Plaintiff’s submission that if the Transmission Application did not fall within the ambit of s 63(1)(a)(iii), it must necessarily fall within the ambit of s 63(2). Rather, the Court found that if an appropriation does not fall within the ambit of s.63(1)(a)(iii) “then the question of whether it falls within the ambit of s 63(2) must depend upon whether the requirements of that subsection are satisfied; namely, that there be an “agreement” of the kind the subsection calls for” (at ).
The Plaintiff contended that the fact the Executors (who were the beneficiaries) had all executed the Transmission Application was sufficient for the Court to infer that the beneficiaries had agreed to vary the trusts contained in the Will, within s.63(2) of the Act.
However, the Court was not prepared to make such a finding, referring to the fact that none of the beneficiaries had given evidence or explained the effect of any such agreement. Whilst it was not necessary to decide the question of how the dutiable value of the Ida Avenue Property should be calculated if it were found that s.63(2) applied to the Transmission Application, Stevenson J made the following observations in that regard:
Stevenson J proposed to dismiss the Plaintiff’s application for review, and directed the parties to bring in short minutes to give effect to his reasons.