|Date of judgement||30 November 2020|
|Judge(s)||Senior Member S E Frost|
|Court or Tribunal||New South Wales Civil and Administrative Tribunal|
Land tax – land owned by the trustee of a unit trust – fixed trust –special trust – definition of ‘owner’ – present right of beneficial enjoyment of the land
Glenn and others v Federal Commissioner of Land Tax (1915) 20 CLR 490;  HCA 57
CPT Custodian Pty Ltd v Commissioner of State Revenue (2005) 224 CLR 98;  HCA 53
Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603;  NSWCA 407
Byrnes v Kendle (2011) 243 CLR 253;  HCA 26 Sayden Pty Ltd v Chief Commissioner of State Revenue (2013) 83 NSWLR 700;  NSWCA 111
The Applicant was the trustee of a unit trust established by a trust deed dated 26 June 2007. The fund was vested in the trustee upon trust for the unit holders. Clauses 18 and 23 of the trust deed set out the beneficial interest of unit holders; provided for the convening of meetings of unit holder; and dealt with termination.
The Applicant sought a review of the Chief Commissioner’s decision to assess the unit trust as a special trust for the 2015 to 2019 land tax years.
Clause 3 of the trust deed dealt with the beneficial interest of unit holders, as follows:
The relevant provisions of the Land Tax Management Act included:
The Applicant submitted that the entirety of cl. 3(4) of the deed operated as an “overriding and paramount” clause through the use of the introductory words: “notwithstanding any other provision of this deed” and that properly construed, those introductory words applied not only to the first sentence but also to the second sentence of cl. 3(4) . It was therefore contended that the clause displaced the remaining provisions of the deed, such as clauses 18 and 23. It was submitted that cl. 3(4) conferred on the unit holders a right and entitlement to the land itself and such a right constituted a present right of beneficial enjoyment of the land, as opposed to an entitlement to a beneficial interest in the fund as an entirety .
The Chief Commissioner disagreed with the Applicant’s construction of cl. 3(4) of the trust deed  and argued that the words “notwithstanding any other provisions of this deed” should not be read into the second sentence of cl. 3(4). The Chief Commissioner further argued that even if those words were read into the second sentence, they should not be construed as overriding the other clauses and can only have the effect of resolving any inconsistencies with other provisions of the deed. No such inconsistencies with cl. 3(4) and the other provisions existed. The combined effect of cl. 3(4) and the other provisions regarding the winding up of the trust imposed various conditions. Until such conditions were satisfied, there was no right to have the trust wound up and the land (or the proceeds of its sale) distributed.
The Tribunal referred to the High Court cases of Glenn and others v Federal Commissioner of Land Tax (1915) 20 CLR 490 and CPT Custodian Pty Ltd v Commissioner of State Revenue (2005) 224 CLR 98 where it was held that the essential element of an “estate in possession” is for the owner to have a present right of beneficial enjoyment, and where it involves a trust, the first step to ascertaining this is to construe the terms of the trust.
The Tribunal found that the words “notwithstanding any other provisions of this deed” could not be read into the second sentence of cl. 3(4). Orthodox drafting to achieve this result would have seen a repetition of such an expression in the second sentence . Alternatively, the expression could have been used as a kind of chapeau to introduce the two ideas that followed it .
Even the use of the word “further” at the beginning of the second sentence was found to fall short of importing such an “overarching qualification” .
The Tribunal also dismissed the Applicant’s alternative submission, that cl. 3(4) was an “overriding and paramount clause” that displaced the remaining provisions of the deed, due to the content falling short of achieving such an end . The second sentence was found simply to confirm the power of the unit holders to require the Trustee to wind up the trust, rather than displacing or ignoring the conditions imposed on that power by the other provisions .
It was held that as the other provisions of the deed set out the powers, duties, rights and obligations of the trustee and unit holders, the language used in cl. 3(4) would have to point strongly towards the outcome of displacing such provisions . The clearest language dictating such a result was required and the language failed to meet this threshold of clarity .
Applying Glenn and CPT Custodian, the Tribunal found that the Applicant’s case must fail as the unit holders did not possess a present right of beneficial enjoyment of the land at any of the relevant taxing dates . This was because it was found that cl. 3(4) did not override the other provisions of the deed. The Tribunal agreed with the Chief Commissioner’s submission that due to the conditions imposed by the other clauses of the deed, no right existed for the unit holders to have the trust wound up and the land (or the proceeds of its sale) distributed. The most they had was a power to call a meeting to vote for the trust to be wound up (cl. 18), and even this was restricted to a unit holder possessing at least 50% of the units (cl. 23) . Although both unit holders held no less than 50%, the admission of another unit holder would have made such an enjoyment conditional. The mere possibility that another unit holder could be admitted was found to make cl. 23 a restriction on the unit holders’ present right of beneficial enjoyment of the land.
The land tax assessments for the 2015 to 2019 land tax years are confirmed.