Chief Commissioner of State Revenue v Benidorm Pty Ltd [2020] NSWSC 471
Background
The Chief Commissioner appealed from a decision of Ward CJ to revoke a duties assessment issued to Benidorm Pty Ltd (“Benidorm”) which levied duty on a deed on the basis that the deed constituted a “declaration of trust” and was therefore dutiable under s. 8(1)(b)(ii) of the Duties Act 1997 (NSW) (“Duties Act”).
The Deed was executed by Benidorm as trustee, and (relevantly) “acknowledged and declared” that Benidorm held property for Mr Stubbs “in place of and as successor to” a deceased beneficiary. At first instance, her Honour found that the Deed did not constitute a “declaration of trust”, because it merely acknowledged the existing legal position whereby the interest of the deceased beneficiary had already vested in Mr Stubbs as the executor of his estate due to the operation of the Probate and Administration Act 1898 (NSW).
The Statutory Framework
The relevant provisions of the Duties Act were:
Section 8 - Imposition of duty on certain transactions concerning dutiable property
- This Chapter charges duty on:
- a transfer of dutiable property, and
- the following transactions:
- a declaration of trust over dutiable property,
[…]
- … 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.
Primary Decision
At first instance, Ward CJ in Eq held that the definition of a declaration of trust in s. 8(3) of the Duties Act does not encompass mere acknowledgments of existing trusts. That is to say, in order to come within the definition, a declaration of trust must have “a legal consequence, or consequences, beyond merely acknowledging that which already exists” [at 227].
Her Honour applied Gageler J’s minority judgment in the High Court decision in Chief Commissioner of State Revenue v Rojoda Pty Ltd [2020] HCA 7 in the context of similar Western Australian legislation. At [240], Ward CJ in Eq found that “Gageler J recognised that a purported ‘declaration of trust’ that does no more than acknowledge the legal position that had already come to exist is not, relevantly, a ‘declaration of trust’”.
Issues
The issues in the appeal were:
- whether a document titled "Declaration of Trust" which merely acknowledged an existing legal position was liable to duty pursuant to s. 8(3) of the Duties Act; and
- whether the Deed had any legal effect beyond merely acknowledging the existing legal position.
Submissions
The Chief Commissioner contended that if the Deed satisfied the statutory definition of “declaration of trust” under s. 8(3) of the Duties Act then nothing more was required to levy it to duty. The Chief Commissioner further contended that s. 8(3) encompassed the mere acknowledgement of an existing trust. Referring to clause 1 of the Deed, the Chief Commissioner submitted that the Deed satisfied the statutory definition and was therefore subject to duty.
In support of this construction of s. 8(1) of the Duties Act, the Chief Commissioner further submitted that the exemptions and concessions contained in ss. 18, 50, 54 and 55 told against a construction that declarations with no operative effect were not a dutiable transaction, because otherwise those provisions would have no work to do.
Alternatively, the Chief Commissioner submitted, if the statutory definition did require a declaration of trust to do “something more than” acknowledge an existing trust, the Deed did have an “operative effect” and therefore satisfied this requirement.
Benidorm submitted that the definition in s. 8(3) of the Duties Act was not satisfied by an instrument that constitutes a mere acknowledgement of an existing trust. The definition required that the instrument vest the identified property for a person at the time of the instrument or at a future time, and that the instrument must effect a transaction.
Court of Appeal decision
The Court of Appeal unanimously held that a document which does not effect a transaction, but merely acknowledges an existing legal position, is not liable to duty under the Duties Act.
The Court held that given the focus of the Duties Act is now on “transactions” rather than “instruments”, it is necessary, when considering whether a document is said to be subject to duty, to construe it at the outset in order to identify whether it amounts to a “transaction” within the meaning of s. 8(1)(b) of the Duties Act. If it does not, it is not subject to duty.
The Court further found that the Deed had limited effect and agreed with the findings of Ward CJ that the document did no more than acknowledge the existing position between Benidorm and Mr Stubbs following the grant of probate and the resealing of the will. It followed that the Deed was held not to be a dutiable transaction..
Orders
The Court dismissed the appeal, with costs.
https://www.caselaw.nsw.gov.au/decision/175b4000ab74a5c9c88102d5