Scheduled maintenance

Revenue NSW online services will be unavailable between 8.00am and 7.00pm on Sunday, 21 October due to scheduled maintenance. We apologise for any inconvenience.

Rubino Investments Pty Ltd ATF the Rubino Family Trust v Chief Commissioner of State Revenue [2018] NSWCATAD 133

Date of judgement 27 June 2018 Proceeding No. 2017/224981
Judge(s) Senior Member Hamilton SC
Court or Tribunal New South Wales Civil and Administrative Tribunal
Legislation cited Duties Act 1997

Taxation Administration Act 1996
Catchwords TAXES AND DUTIES - stamp duty - nominal duty on transfer to new trustee - s 54(3) Duties Act - necessity for pre-existing, continuing trust estate - necessity of continuity of beneficial ownership - onus of proof - exemption from duty for transfer to rectify consequences of fraudulent conduct or to reverse transfer declared void or voidable - s 65(24) Duties Act - what was relevant fraudulent conduct - what is a declaration of void or voidable-pre-incorporation declaration of trust
Cases cited Commissioner of State Revenue v Victoria Gardens Developments Pty Limited [2000] VSCA 233

Rubino v Pineview Property Holdings Pty Ltd [2016] NSWSC 904; [2016] NSWSC 1780

Sportscorp Pty Ltd v Chief Commissioner of State Revenue [2004] NSWSC 1029

Background

These proceedings concerned the Chief Commissioner’s decision to assess the Taxpayer to duty at ad valorem rates on a dutiable value of $3.7 million in respect of the transfers of two properties located in Galston, NSW (“the Galston Properties”) from Pineview Property Holdings Pty Ltd (“Pineview”) to the Taxpayer. The Taxpayer claimed that the transfers should have been liable to nominal duty under s. 54(3) of the Duties Act 1997 (“the Act”) or alternatively, that the transfers should have been exempt from duty under s. 65(24)(a) of the Act.

On 27 June 2018, Senior Member Hamilton SC of the NSW Civil and Administrative Tribunal (“the Tribunal”) delivered his decision in the above proceedings, confirming the duties assessments issued by the Chief Commissioner of State Revenue (“Chief Commissioner”) in respect of the transfers of the Galston Properties.

Facts

The key facts are:

  1. Mr and Mrs Rubino Senior (“the Rubinos”) were the registered proprietors of the Galston Properties. In 2011 or 2012, the Rubinos transferred these properties to Pineview. It was anticipated that Pineview would hold the Galston Properties on trust for the Rubinos, and these properties would be mortgaged to ANZ bank as a means for the Rubinos to obtain loan funds.

  2. In legal proceedings which followed, the Rubinos claimed that they had been fraudulently induced into signing the transfers of the Galston Properties to Pineview and that they had been deprived of their interest in these properties. In Rubino v Pineview Property Holdings Pty Ltd [2016] NSWSC 904, White J rejected the Rubinos’ claims, finding that at all times, the Rubinos relied on their son, Frank Rubino, who knew and consented to the transfers of the Galston Properties to Pineview as a means to obtain loan funds. Whilst George Dimitriou, the Rubinos’ financial advisor who organised the transfers, was found to have committed fraud, his Honour held that the Rubinos had not been deprived of their land as a result of this fraud.

  3. In September 2016, following the decision of White J, Frank Rubino arranged for the creation of the Rubino Family Trust. On 1 October 2016, the trust deed creating the Rubino Family Trust was executed (“2016 Trust Deed”). The Taxpayer was appointed as the trustee of this trust, notwithstanding that this was before its incorporation on 10 October 2016.

  4. Frank Rubino claimed that the purpose of executing the 2016 Trust Deed was to formally record the terms of an existing, undocumented trust which he erroneously believed had been created by Mr Dimitriou in 2012. He contended that the Taxpayer had been appointed as a new trustee of the alleged 2012 “trust”.

  5. On 28 November 2016, the Galston Properties were transferred from Pineview to the Taxpayer for consideration of $3.7 million (“Transfers”). The Taxpayer held the Galston Properties on trust for the Rubinos and their grandchildren. Duty was assessed on the Transfers at ad valorem rates.

Statutory Framework

The key issue in dispute was whether the Transfers should have been subject to:

  1. The duty concession in s. 54(3) of the Act, which provides that nominal duty is chargeable in respect of a transfer of dutiable trust property which occurs as a consequence of the appointment of a new trustee, and the transfer is not part of a scheme to avoid duty; or

  2. The duty exemption in s. 65(24)(a) of the Act, which provides that no duty is chargeable in respect of a transfer of dutiable property that is made to rectify the consequences of fraudulent conduct by another person, or to reverse a transfer of dutiable property that has been declared by a court to be void or voidable.

Submissions

The Taxpayer submitted that s. 54(3) of the Act applied as the Transfers should have been treated as transfers which occurred as a consequence of the appointment of a new trustee.

The Taxpayer argued that in the alternative, s. 65(24)(a) of the Act applied as the Transfers were made to rectify the consequences of Mr Dimitriou’s fraudulent conduct, or pursuant to the Supreme Court’s declaration that the initial transfers from the Rubinos to Pineview were void or voidable.

The Chief Commissioner submitted that s. 54(3) of the Act was inapplicable as this section required there to be a trust in existence prior to the transfer to the new trustee, and a continuity of beneficial ownership of the trust property. In particular, the Chief Commissioner contended that:

  1. The Taxpayer had not satisfied its onus of proof that the Rubino Family Trust was the same trust as the alleged 2012 “trust” or the trust found by White J;

  2. The Rubino Family Trust could not be the same trust as that found by White J as the terms and beneficiaries of the Rubino Family Trust were different to that trust as found by White J; and

  3. The Rubino Family Trust had not been validly established as it was settled before the Taxpayer was incorporated and therefore there could not have been a valid appointment of a new trustee.

The Chief Commissioner further argued that s. 65(24)(a) of the Act did not apply because:

  1. The Transfers were not to rectify the fraudulent conduct found by White J; and

  2. White J had specifically found that the initial transfers from the Rubinos to Pineview were not fraudulent.

Decision

  1. Section 54(3) of the Act

    The Tribunal accepted the Chief Commissioner’s submission that the s. 54(3) concession required “the prior existence of a trust” which remained “the same trust” before and after the appointment: [22].

    The Tribunal noted the absence of any documentary evidence or corroborating evidence of the existence of the alleged 2012 “trust” and held that the Taxpayer had failed to prove on the balance of probabilities that the alleged 2012 “trust” had existed on the same terms as the Rubino Family Trust: [24].

    The Tribunal further considered that the Rubino Family Trust had a “widely defined class of beneficiaries” compared to the trust found by White J, and therefore, the Transfers were not transfers to the Taxpayer as a “substitute trustee” for Pineview of a pre-existing trust: [25].

    The Tribunal did not determine whether the Rubino Family Trust was validly created, as it was not necessary to do so in light of the above findings: [26].

  2. Section 65(24) of the Act

    The Tribunal agreed with the Chief Commissioner’s position that the Transfers were not to rectify fraudulent conduct, as White J had specifically found that the initial transfers from the Rubinos to Pineview were not fraudulent: [29].

    The Tribunal also held that the Transfers were not pursuant to any Supreme Court declaration that the earlier transfers from the Rubinos to Pineview were void or voidable, as no finding to that effect had been made in the decision of White J: [33].

Orders

  1. The application is dismissed.
  2. The Chief Commissioner’s assessments are confirmed.

Link to decision

Rubino Investments Pty Ltd ATF the Rubino Family Trust v Chief Commissioner of State Revenue [2018] NSWCATAD 133

Last updated: 24 July 2018