Chief Commissioner of State Revenue v Benidorm Pty Ltd

1. [1]

   MEAGHER JA: I agree with Leeming JA.

2. [2]

   LEEMING JA: The Chief Commissioner appeals, as of right, from the decision of the primary judge revoking the assessment of ad valorem duty upon a document described as “Declaration of Trust by Nominee”: Benidorm Pty Ltd v Chief Commissioner of State Revenue [2020] NSWSC 471. The issue is whether the document amounted to a “declaration of trust” within the meaning of the definition of that term in s 8(3) of the Duties Act 1997 (NSW) and was therefore a “dutiable transaction”. There are no contested facts.

3. [3]

   The first question is one of contractual construction: what is the legal effect of the document? The answer is, as the primary judge correctly held, that it had none, because it merely duplicated what was reproduced in its recitals and had already been achieved by the death of the previous sole beneficiary and the granting of probate and resealing of his will.

4. [4]

   The second question is one of statutory construction: does s 8(3) of the Duties Act make a document which does not effect a transaction but merely acknowledges the existing position liable to duty? The answer is, again as the primary judge correctly held, that it does not.

5. [5]

   The result and the analysis are different from the position which would have obtained under the Stamp Duties Act 1920 (NSW). That is because, as Mr Slater QC put it, “[t]he 1997 Duties Act fundamentally changes the basis of stamp duty in New South Wales”: A H Slater, “Unlearn your stamp duty lore” (1998) 36(9) Law Society Journal 40. That is no understatement. Some of the submissions which have been advanced in this litigation fail to appreciate the consequences of that change. To be fair, in part that is because while the Duties Act has profoundly changed, some of its language still reflects the superseded approach of a tax on instruments, rather than upon transactions, and this in turn gives rise to the main point in this appeal, the construction of the Duties Act.

6. [6]

   The litigation had an unusual procedural history. As the primary judge recounted at [3], the parties exchanged full submissions and participated in an oral hearing earlier in 2019, in relation to a similar application based on a notice of assessment addressed to Mr Stubbs. Those proceedings were dismissed by consent and the Chief Commissioner withdrew the notices of assessment. The matter was relitigated at the end of 2019 based on notices of assessment to Benidorm. The parties supplied notes of relevant paragraphs following the High Court’s decision in Commissioner of State Revenue (WA) v Rojoda Pty Ltd [2020] HCA 7; 94 ALJR 423. The consequence was that the parties’ oral submissions before the primary judge were very brief (those of the Chief Commissioner were some 5 pages of transcript) and the written submissions very long. That background doubtless contributed to the consequence that the reasons of the primary judge occupy some 346 paragraphs, the large majority of which summarise the submissions before her Honour.

7. [7]

   In an appeal which amounts to two questions of law – one of contractual construction, one of statutory construction – on uncontested facts, there is little utility in summarising separately the lengthy reasons at first instance or the lengthy submissions of each party. Instead, these reasons commence with the facts, then address contractual construction, and statutory construction, exposing the parties’ submissions and the reasoning of the primary judge in the course of dealing with the grounds of appeal.

Factual background

1. [8]

   On 1 May 2007, Mr John Phillip Dawson, a Sydney solicitor acting on instruction from Mr John Nicholas Robinson, a resident of Guernsey, caused Benidorm Pty Ltd to be incorporated. Mr Dawson was Benidorm’s sole director and shareholder.

2. [9]

   On 16 May 2007, at around the time Benidorm entered into a contract for the purchase of an apartment on Macquarie Street in Sydney for some $12,050,000, Mr Dawson executed a declaration of trust acknowledging that he held his shares in Benidorm as a mere nominee for Mr Robinson. By the time the litigation commenced (although not initially), it was common ground that Mr Robinson provided the whole of the purchase price to Benidorm.

3. [10]

   On 31 May 2007, Benidorm (as the trustee) and Mr Robinson (as sole beneficiary) entered into the First Declaration of Trust, whereby Benidorm declared that it had entered into the contract for the purchase of the apartment at Mr Robinson’s request and cost, and declared that it would hold the title to the apartment as trustee for Mr Robinson. The operative clauses were as follows:

4. [11]

   Also on 31 May 2007, Benidorm, Mr Dawson and Mr Robinson entered into a Custodian Agreement, obliging Mr Dawson to act on Mr Robinson’s instructions (including to resign at his request) and to keep the relationship between Benidorm and Mr Robinson confidential. Mr Robinson gave a broad indemnity in favour of Benidorm and Mr Dawson for liabilities connected with the apartment and the shares in Benidorm.

5. [12]

   On 27 June 2007, the sale of the apartment was completed. Ad valorem duty of $783,994.00 was paid on the contract.

6. [13]

   In this litigation, it has been common ground that the First Declaration of Trust was liable to duty of $50, because it fell within s 55(1)(a)(ii) of the Duties Act, being a vesting of the apartment by the “apparent purchaser” (the registered proprietor, Benidorm) in favour of the “real purchaser” (Mr Robinson, who provided the purchase price).

7. [14]

   Mr Robinson died on 13 September 2013, in Guernsey. By his will dated 11 September 2013, Mr Robinson appointed Mr Derek Stubbs as his sole executor and beneficiary. On 6 December 2013, a grant of probate issued in Guernsey and on 23 December 2014 that grant was resealed in this Court. There were no other material assets in Australia. The evidence did not disclose the position outside Australia.

8. [15]

   On 29 January 2015, Mr Dawson executed a document described as a declaration of nominee in respect of the Benidorm Shares, in which he declared that, in consequence of Mr Robinson’s death and the terms of the will, Mr Dawson now held the Benidorm Shares on trust for Mr Stubbs absolutely as sole beneficiary and as the sole executor of Mr Robinson’s estate.

9. [16]

   Also on 29 January 2015, Benidorm and Mr Stubbs executed the document giving rise to this litigation. It was titled “Declaration of Trust by Nominee” but following the parties’ language I shall refer to it as the Second Declaration of Trust. It was expressed to be and executed as a deed. Although Mr Stubbs resides in Guernsey, it appears to have been executed in Sydney (the witness attesting to his signature gives as her address the office address of Mr Dawson’s firm). The recitals were as follows:

10. [17]

    The Schedule identified the apartment. There were three operative clauses as follows:

11. [18]

    Benidorm was the registered proprietor of the apartment. Between 2007 and 2013, it held that property on trust for Mr Robinson. The proper law of that trust was New South Wales: that was the place where the trust would be administered and the location of the trust assets and the trustee.

12. [19]

    Upon the granting of probate and its resealing in New South Wales, s 44 of the Probate and Administration Act 1898 (NSW) vested, with retrospective effect from the date of his death, the entirety of Mr Robinson’s equitable interest under the trust in his executor, Mr Stubbs. Thus Benidorm held the apartment on trust for Mr Stubbs in his capacity as executor of Mr Robinson’s unadministered estate, the sole beneficiary of which was Mr Stubbs. As the Commissioner correctly acknowledged in his written and oral submissions, “Stubbs as executor attained the same right that Robinson held under the Benidorm Trust”.

13. [20]

    The litigation has proceeded on the common basis (albeit without any evidence) that the estate was not fully administered. It is probably sufficient, for the purposes of the analysis, that the estate had not been fully administered on 29 January 2015 when the Second Declaration of Trust was executed.

14. [21]

    It was not, at least in principle, necessary for the estate to have been fully administered in order for the executor to administer the will and transfer title to estate property in accordance with the wishes of the deceased. An executor can make an interim distribution (including under s 92 of the Probate and Administration Act) prior to the final distribution on completion of the administration. But there is nothing to suggest that that has occurred in respect of the apartment.

15. [22]

    It follows that on 29 January 2015, before the execution of the second declaration of trust, Mr Stubbs had an interest in the apartment in two quite separate capacities. First, as executor under Mr Robinson’s will, he had vested in him precisely that equitable interest in the apartment which had vested in Mr Robinson prior to his death. Secondly, as sole beneficiary under Mr Robinson’s will, he had an entitlement to the due administration of the estate, and (at the least) “an expectation that the [equitable interest in the apartment formerly held on trust for Mr Robinson] would pass to [him] upon completion of the administration, subject to [its] being realized to meet any outstanding liabilities and to defray the costs of administration” (I have paraphrased what a unanimous High Court said of the interest of a specific devisee in Official Receiver in Bankruptcy v Schultz (1990) 170 CLR 306 at 314; [1990] HCA 45).

16. [23]

    As personal representative, Mr Stubbs was subject to the obligations and incidents of executorship, essentially to gather in the property of the estate, pay creditors and distribute the property in accordance with the will. There was no evidence of the process of administering the estate and, in particular, whether there were any creditors of the estate. It may be assumed that there were some, insofar as Benidorm continued to incur, at the very least, expenses connected with its ownership of legal title to the apartment. Thus, Benidorm would become liable to pay, and presumably did from time to time pay, rates, charges, strata levies and the like, and would under the first trust deed be entitled to be indemnified by Mr Robinson in respect of those expenses. Mr Stubbs, as executor, was obliged to indemnify Benidorm for any amounts outstanding prior to Mr Robinson’s death, and all amounts paid thereafter.

17. [24]

    Even in the absence of the written indemnity in the First Declaration of Trust, the position would be the same, according to the “rule” in Hardoon v Belilios [1901] AC 118. That “rule” preceded that appeal by centuries, as was explained in Balkin v Peck (1998) 43 NSWLR 706. It was not universal, as Lord Lindley emphasised shortly thereafter in an appeal from this Court: Wise v Perpetual Trustee Co Ltd [1903] AC 139 at 149; few legal propositions are. However, there is no reason to doubt that it applied to the trust created when the apartment was acquired by Benidorm. The position is now different, because of s 100A of the Trustee Act 1925 (NSW) which, while only introduced in November 2019, abrogates the rule in Hardoon v Belilios with retrospective effect; I shall return to this below.

18. [25]

    There is also the possibility, entirely unexplored on the evidence, that there might be other creditors of Mr Robinson who might seek to press their claims against the estate. I emphasise this, because in circumstances where Mr Stubbs was both sole executor and sole beneficiary under Mr Robinson’s will, the only other persons with any interests in the estate are estate creditors.

19. [26]

    Buckley J was alive to the qualifications upon the rights of a personal representative who was also sole beneficiary of a deceased estate in Re Leigh’s Will Trusts [1970] Ch 277. Speaking of an administratrix who was the sole next of kin of her husband’s deceased estate which included a parcel of shares, his Lordship said at 284:

20. [27]

    I respectfully agree. The administratrix did not enjoy an absolute title to the shares, despite being sole next of kin and having legal ownership of it. When she died, it was not clear beyond argument that the shares would be distributed to her as part of the administration of the estate, because her successor as administrator of her husband’s estate might choose to administer it differently (such as by selling the shares to pay estate creditors).

21. [28]

    Thus it is not the case that, in January 2015, Mr Stubbs as executor and sole beneficiary of Mr Robinson’s deceased estate had the same rights in respect of the apartment as Mr Robinson had enjoyed. Mr Stubbs as sole beneficiary might be expected, subject to others who might have a claim on the estate, to succeed to that interest, but that had not as yet occurred, and his interest as beneficiary of the unadministered estate fell short of absolute ownership.

22. [29]

    Those considerations make it important to distinguish between Benidorm holding the apartment on trust for Mr Stubbs as executor and Benidorm holding the apartment on trust for Mr Stubbs when the administration of the deceased estate is complete and (assuming it has not been necessary to sell the apartment to pay estate creditors) Mr Stubbs as sole beneficiary under Mr Robinson’s will is placed in the same position as Mr Robinson had been.

23. [30]

    To anticipate what follows, one possible construction of the Second Declaration of Trust is that it looks forward to the time when the administration of the deceased estate is complete. Another possibility is that it operates immediately, and purports to place Mr Stubbs in the same position, then and there, as he would be in if the estate were fully administered and all estate creditors had been paid. A third is that the Second Declaration of Trust speaks merely to Mr Stubbs’ position as executor.

24. [31]

    The primary judge rejected as a matter of construction the second possibility, because it is not possible for the executor lawfully to abrogate his duties as executor of the deceased estate. As will be seen, I have concluded that her Honour was correct. It follows that any creditors of the estate continued to be able, after the execution of the Second Declaration of Trust, to be paid out of the assets of Mr Robinson’s estate in accordance with s 82 of the Probate and Administration Act.

Construction of the Second Declaration of Trust

1. [32]

   It was not suggested that there was evidence of surrounding circumstances going beyond what was recited in the Second Declaration of Trust itself. Nor was it suggested that the Declaration of Nominee executed on the same day took the matter any further. The construction of the Second Declaration of Trust turns merely upon the document.

2. [33]

   Recitals A, B and C of the Second Declaration of Trust uncontroversially and accurately record the first trust deed, Mr Robinson’s death and will and the grants of probate.

3. [34]

   Recital D is potentially controversial. It correctly recites that the entirety of Mr Robinson’s beneficial interest under the first trust had now become vested in Mr Stubbs, by dint of s 44 of the Probate and Administration Act. However, it was not true that the deceased estate had been administered, if that was thought to fall within Recital D. But the natural reading of that recital, particularly insofar as it uses the language of “vested” immediately following the reference to the grant of probate and the resealing, is that it describes the effect of s 44, and does not go further and speak to the administration of the deceased estate. After all, the recital does not mention the terms of the will, or that Mr Stubbs now enjoyed rights in relation to the deceased estate in two capacities, as executor and sole beneficiary.

4. [35]

   The critical question for the purposes of s 8(1)(b)(ii) of the Duties Act is the legal effect of cl 1. Clause 1 presents three questions of construction. First, does it operate immediately, or only in the future, in light of the word “will”? Secondly, does it refer to Mr Stubbs as the “New Beneficiary” in his capacity as executor, or in his capacity as sole beneficiary under the will? Thirdly, what is the force of “absolutely in the place of and as successor to”?

5. [36]

   It may be accepted that there is a measure of imprecision in the document. It is styled “Declaration of Trust by Nominee” but the operative clause is preceded by “It is hereby acknowledged and declared”. An acknowledgment ordinarily records a previously existing state of affairs, while a declaration is one of the canonical ways of creating a trust. The difference may be important under the Duties Act.

6. [37]

   The key to construing cl 1 is to attend to the first of those three questions, which is to say, when does the clause operate. This is the subject of ground 6 of the appeal.

7. [38]

   Clause 1 is expressed in the future tense, which on one view supports a construction that it is only speaking to the time following the completion of the administration of the deceased estate (there being no other time in the future at which it could commence to operate). But a number of considerations point against that conclusion.

   1. (1)

      First, from the trustee’s perspective, it is known that Mr Robinson has died. The trustee will be continuing to incur expenses as registered proprietor of the apartment. The most important thing from the perspective of the trustee (and of its sole director and shareholder, Mr Dawson) was to confirm that Mr Stubbs would be obliged to indemnify Benidorm for those expenses, and to do so with immediate effect. As between Benidorm and the personal representative of Mr Robinson, there is no reason for cl 1 to speak to the administration of the estate.

   2. (2)

      Secondly, if cl 1 only commences to operate in the future, when the deceased estate is administered, it is not clear when that will be. That is of significance because the similar opening words in cl 2 (“The New Beneficiary will indemnify the Trustee …”) are apt to be read in the same way as cl 1. From the trustee’s point of view, there will be an indefinite period, not in the trustee’s control nor even necessarily in its knowledge, before these two clauses operate. That would seem an unlikely intention to impute to the parties.

   3. (3)

      Thirdly, that construction accords with the natural meaning of recital D, and the absence of any reference to the fact that Mr Stubbs is sole beneficiary under the will.

   4. (4)

      Fourthly, that construction does not do undue violence to the words “The Trustee will hold ...” and “The New Beneficiary will indemnify ...”. As a matter of ordinary English, “will” can connote a state of affairs commencing now and extending into the future.

8. [39]

   Another way of putting this is that the Second Declaration of Trust is executed by the trustee and personal representative of the original, now deceased, beneficiary. What matters as between those parties is the confirmation that Mr Stubbs would step into the shoes of the deceased, not least for the purposes of Benidorm having a clear entitlement to indemnification for the ongoing costs of holding the apartment.

9. [40]

   As the primary judge explained at [302], if cl 1 were to be regarded as speaking to the trustee holding the property for Mr Stubbs in his capacity as sole beneficiary of the deceased estate, then this would have the consequence of circumventing the due administration of the estate by “effectively vesting in Mr Stubbs the beneficial interest in the Macquarie Street Apartment absolutely at a time when, if and where the estate were not yet fully administered, Mr Stubbs held the beneficial interest subject to the due administration of other estate interests”. As her Honour, with respect correctly, noted at [303], the Second Declaration of Trust could not do that. The passages from Schultz and Re Leigh’s Will Trusts reproduced above, concerning the qualified entitlement of a personal representative who is also a beneficiary of the estate, make plain that it was not possible to place Mr Stubbs in the position he would be in following completion of the administration of the estate, because that would prejudice the interests of creditors.

10. [41]

    It is possible that Mr Stubbs and, perhaps, Mr Dawson did not fully appreciate the two different capacities Mr Stubbs enjoyed under Mr Robinson’s will, or their impact on the trust before the estate was fully administered. There is no evidence on that, and if there were it would be of doubtful admissibility, to say the least. But that does not prevent the Court from favouring a construction which makes commercial sense and disfavouring a construction which purports to do that which cannot legally be done.

11. [42]

    Clauses 2 and 3 take the matter no further. It may be noted that the words in cl 3 “The Trustee will transfer ...” are quite different from the similar words in cll 1 and 2. The obligation upon the Trustee to transfer the legal estate to the sole beneficiary who calls for it is a one-off event, bringing to an end the trust relationship. That contrasts with the continuing obligations upon both trustee and beneficiary to which cll 1 and 2 refer. There is no difficulty in concluding that the future tense in cl 3 refers to a single act in the future, following the beneficiary’s direction, while the future tense in cll 1 and 2 refers to a continuing state of affairs, commencing on 29 January 2015 and extending into the future. It is a nice illustration of the nuanced complexity in seemingly straightforward everyday English, and the interaction between syntax and semantics.

12. [43]

    Accordingly, I conclude that cl 1 on its proper construction provides that the trustee with immediate effect and into the future holds the legal title to the apartment for Mr Stubbs in his capacity as executor. Contrary to ground 6 of the appeal, cl 1 operates immediately. Contrary to ground 5 of the appeal, the references to Mr Stubbs are to him in his capacity as executor.

13. [44]

    It follows that the Second Declaration of Trust had limited effect. It is true that, in theory, it would be inconsistent with a renunciation of probate by Mr Stubbs, but there is nothing to suggest that there was ever any practical likelihood of that occurring, and it formed no part of the Commissioner’s submissions (even if it was not clear that by 29 January 2015 Mr Stubbs could not renounce probate). But Benidorm’s and Mr Stubbs’ confirmation that the property is now held for the latter “absolutely” in the place of and as successor to Mr Robinson precludes that possibility. As between the Australian company Benidorm and the new beneficiary, based in Guernsey, there was now clear confirmation that the former’s expenses could be indemnified by the latter, the “New Beneficiary”. But cl 1 was merely confirmation of an existing state of affairs.

14. [45]

    It would have been more accurate for the operative clauses of the document to be preceded by words merely of acknowledgment, rather than acknowledgment and declaration. However, as the primary judge concluded, the document did no more than acknowledge what was the position as between Benidorm and Mr Stubbs following the grant of probate and the resealing of the will.

Duties Act 1997 (NSW)

1. [46]

   The Duties Act represents a departure from the approach taken for decades and indeed centuries in this area. As explained in the preface to D G Hill, Stamp, Death, Estate and Gift Duties (Law Book Co, 1970):

2. [47]

   Until July 1998 (when the Duties Act 1997 commenced), the general precept was that stamp duty was a tax upon instruments, rather than upon transactions. Latham CJ said that “[i]t is true that, as has often been said, the Stamp Duty Acts impose duties upon instruments and not upon transactions. It is obvious that you can stick a stamp or impress a stamp upon an instrument, but not upon a transaction”: Commissioner of Stamp Duties (Q) v Hopkins (1945) 71 CLR 351 at 360; [1945] HCA 14. To the same effect, in DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties (NSW) (1982) 149 CLR 431 at 449; [1982] HCA 14, Mason J had said, by reference to earlier authority:

3. [48]

   These propositions were more recently repeated in Allders International Pty Ltd v Commissioner of State Revenue (Vic) (1996) 186 CLR 630; [1996] HCA 58, where it was said that this was “settled law” by Brennan CJ at 641 and of which Dawson J (dissenting) said that it was a conclusion as to the nature of the tax “which has been accepted for many years by countless authorities both in this country and elsewhere” at 649. Allders concerned stamp duty on a lease at Tullamarine Airport. The Commissioner submitted that the legislation, properly analysed, “was a statute about instruments, not places, still less Commonwealth places” (see the joint judgment at 665). The same point was made in the joint judgment in Commissioner of State Revenue (Vic) v Pioneer Concrete (Vic) Pty Ltd (2002) 209 CLR 651; [2002] HCA 43 at [43], referring to “the significance of the fact that stamp duty is a tax on instruments, not on transactions”. It would not be difficult to multiply instances of judicial statements of the highest authority to the effect that stamp duty is a tax on instruments, rather than transactions.

4. [49]

   Those statements have been superseded by the new regime introduced by the Duties Act 1997. That was the fundamental change to which Mr Slater QC referred in the article mentioned at the beginning of these reasons. The article went on to state:

5. [50]

   Slater QC ended his article with this prescient sentence:

6. [51]

   The prescience of that admonition is illustrated by this litigation. In opening the appeal, senior counsel for the Commissioner encapsulated the submissions thus:

7. [52]

   To summarise what follows, there are two difficulties with that submission. First, it does not attend to the critical question now posed by statute, which turns on whether there is a transaction which engages the Act, as opposed to whether there is an instrument which does so. Secondly, if a document has no operative effect, and one cannot otherwise identify some transaction which engages the Act, then no duty is payable.

8. [53]

   Duty is now broadly speaking imposed on transactions, rather than instruments.

9. [54]

   The critical provision imposing duty is s 8, which provides as follows:

10. [55]

    It will be noted that s 8(1) charges duty on a “transfer” of dutiable property and the eight specified “transactions” involving land or dutiable property. The definition of “dutiable transactions” in s 8(2) confirms the basic notion of a tax on transactions rather than upon instruments.

11. [56]

    The limbs of s 8(1) apply to “dutiable property”, which is defined in s 11 fairly widely, including land in New South Wales, shares in a New South Wales company and units in a New South Wales unit trust. By s 19, duty is charged on the dutiable value of the dutiable property subject to the dutiable transaction at the relevant rate set out in Pt 3.

12. [57]

    The element of “dutiable transaction” in s 8(1)(b)(ii) which is “a declaration of trust” is exhaustively defined in s 8(3). Central to the Chief Commissioner’s submissions was the proposition that it was sufficient if the Second Declaration of Trust fell within that definition. Central to Benidorm’s submissions was the proposition that it was necessary for the Second Declaration of Trust to amount to a “transaction” within the meaning of s 8(1)(b).

13. [58]

    Section 10 provided as follows:

14. [59]

    Section 15 provided that where a dutiable transaction that was liable to ad valorem duty under Ch 2 was not effected by an instrument, the transferee must make a written statement within 3 months, and the obligation to pay duty will be discharged by lodging the statement and paying duty upon it.

15. [60]

    Note what is absent from s 8. There is no reference to “instrument”. There is no reference to writing. A transaction, even one which is entirely oral (such as delivery of goods the subject of an offer of sale, or a declaration of trust of personalty which is dutiable property) is a dutiable transaction. Section 10 puts the matter beyond argument.

16. [61]

    Contrast the regime under the Stamp Duties Act 1920 (NSW). Part 3 was titled “Duties on Instruments”, within which ss 16 and 17 made general provision for the stamping of instruments.

17. [62]

    Indeed, it is no accident that the name of the statute has changed. It is properly described as a Duties Act, rather than a Stamp Duties Act, because the incidence of tax has nothing to do with any vellum, parchment or paper upon which a stamp may be affixed or impressed.

18. [63]

    The most telling contrast, to my mind, turns on Div 3A of Pt 3 of the 1920 Act, which was titled “Transactions otherwise than by dutiable instruments”. In light of the Commissioner’s reliance upon it (to which I shall return), it warrants separate consideration.

19. [64]

    In contrast with the tenor of the balance of the statute, Div 3A of Pt 3 applied to “transactions” which caused or resulted in a change in the beneficial ownership of an estate or interest in a list of property identified in s 44(1), and required a person to lodge an instrument, on which duty was payable, “if the person would have been liable to pay such duty in respect of the transaction had such an instrument been executed”: s 44A(1A). In Chief Commissioner of Stamp Duties v ISPT Pty Ltd (1998) 45 NSWLR 639 at 642, Mason P described Div 3A as an anti-avoidance measure designed to strike at a broad suite of tax avoidance schemes.

20. [65]

    That exceptional circumstance, whereby an oral transaction which was effective to cause a change in beneficial ownership triggered an obligation to bring into existence a piece of paper on which duty was charged, well illustrates the essentiality of the duty under the Stamp Duties Act 1920 (NSW) being a duty on instruments. There is no counterpart to Div 3A in the Duties Act 1997. Even the obligation imposed by s 15 of the latter statute to bring into existence a written statement does not alter the fact that the dutiable transaction was the non-written transaction, and duty was payable upon that transaction (although the obligation to do so is taken to be satisfied by lodgement of the statement).

21. [66]

    One of the measures to which Div 3A was directed was the use of so-called “Claytons contracts” (a rare example of the name of a legal concept being derived from an advertising campaign): see M Stone and V Lesnie, “Some Thoughts on Beneficial Interests and Beneficial Ownership in Revenue Law” (1996) 19(1) UNSWLJ 181 and B Wallace and P Collins, Practical Stamp Duties (2nd ed, Legal Books, 1991), ch 2. This turned on the classic statement by Hawkins J sitting at first instance in Carlill v Carbolic Smoke Ball Company [1892] 2 QB 484 at 490 of the operation of the (recently enacted) Stamp Act 1891 (UK):

22. [67]

    Hawkins J rejected this limb of the company’s defence to Ms Carlill’s claim for £100 in accordance with its advertisement, and this point was not argued on appeal. Even so, it is an authoritative statement of the effect of the Stamp Act 1891 and the Stamp Duties Act 1920 (NSW) prior to the introduction of Div 3A. In MacRobertson Miller Airline Services v Commissioner of State Taxation (WA) (1975) 133 CLR 125 at 135 and 144-145; [1975] HCA 55, Stephen J and Jacobs J regarded that as “well settled” and “established by a long line of authority”. Thus acceptance of an offer by unwritten words or conduct could effect the sale or mortgage of, say, a chattel in ways which, but for Division 3A, would not give rise to an obligation to pay duty.

23. [68]

    The application of that approach may be seen underlying familiar cases such as Grey v Inland Revenue Commissioners [1960] AC 1 and Oughtred v Inland Revenue Commissioners [1960] AC 206. Both were challenges to ad valorem duty imposed on documents brought into existence after oral transactions. The opening words of Viscount Simonds’ speech in Grey as reported in the Appeal Cases at 12 are:

24. [69]

    Grey and Oughtred represent fairly straightforward attempts to sidestep the incidence of stamp duty by relying on the construction given by Hawkins J and consistently applied thereafter. A more elaborate example may be seen in the litigation culminating in Halloran v Minister Administering National Parks and Wildlife Act 1974 (2006) 229 CLR 545; [2006] HCA 3, which concerned many hundreds of transactions which took place in May 1998, weeks before the commencement of the Duties Act 1997 on 1 July 1998, which were aimed at outflanking the incidence of stamp duty, including Div 3A of Pt 3 of the Stamp Duties Act 1920. The attempt was unsuccessful. The joint judgment of the High Court observed at [19] that Div 3A “depart[ed] from the traditional form of stamp duty legislation by in substance imposing a duty on transactions rather than instruments”.

25. [70]

    This body of litigation at the ultimate appellate level serves to emphasise the fundamental nature of the change from taxing instruments to taxing transactions effected by the Duties Act 1997. I shall return below to the Commissioner’s submissions based upon Div 3A.

26. [71]

    Although there is no counterpart to Div 3A, the Chief Commissioner also relied upon various provisions dealing with exceptions or concessions to what would otherwise be dutiable transactions.

27. [72]

    First, s 18 is titled “No double duty” and includes subsections (6) and (6A) as follows:

28. [73]

    Neither of those exemptions applied to the Second Declaration of Trust (subsection (6) applies where trust property is transferred to a new trustee, while subsection (6A) applies where the beneficiary is the same). But the Chief Commissioner submitted that those provisions told against a construction that declarations of trust with no operative effect were not a dutiable transaction, because otherwise they would have no work to do.

29. [74]

    Secondly, special provision is made in s 55 for when property is vested in an “apparent purchaser” when some other person (“the real purchaser”) provides the purchase price:

30. [75]

    Section 55(1) was relevant to the assessability of the First Declaration of Trust. But it was also invoked by the Chief Commissioner on the question of construction. Once again, it was submitted that this provision told against a document which merely recorded an existing state of affairs (for example, a resulting trust brought about by the provision of the entirety of the purchase price by a person other than the registered proprietor) not being a dutiable transaction.

31. [76]

    Thirdly, s 63 is titled “Deceased estates” and relevantly provides:

32. [77]

    That is to be read with s 65(12) which provides that no duty is chargeable “on the vesting of dutiable property in a legal personal representative of a deceased person”. Once again, the Commissioner submitted that the concessional treatment of transfers in accordance with a will supported his construction.

33. [78]

    The Commissioner also relied on the exemptions in s 50 (for cancelled agreements) and the concessional treatment in s 54 where there is a change of trustee.

34. [79]

    It is true that the current form of the Act bears many similarities with its predecessors, notwithstanding the basal change from instrument to transaction. In particular, the structure in the definition of “declaration of trust” between property “vested” or “to be vested” is found in Sch 2 par 2(a) considered in earlier cases, including Toohey’s Ltd v Commissioner of Stamp Duties (1960) 60 SR (NSW) 539 and Commissioner of Stamp Duties (NSW) v Pendal Nominees Pty Ltd (1989) 167 CLR 1; [1989] HCA 19. It follows that, as the Commissioner submitted, a “declaration of trust” for the purposes of s 8(1)(b)(ii) is apt to be broader than what the law of trusts might regard as a declaration of trust.

35. [80]

    However, the focus on transactions, rather than instruments, means that at the outset it is necessary, when a document is said to be subject to duty under the Act, to construe it in order to identify whether it amounts to a transaction within the meaning of s 8(1)(b). In order to do that, the starting point is the legal position which obtained immediately before the Second Declaration of Trust was executed on 29 January 2015.

Does the definition in s 8(3) extend to a mere acknowledgment of an existing trust?

1. [81]

   The principal issue argued on appeal, to which the large majority of the dispositive reasons of the primary judge was directed (52 paragraphs from [227]-[278]) was whether the definition of “declaration of trust” in s 8(3) applied to a document which merely acknowledged an existing trust. This is the subject of grounds 2 and 4 of the appeal.

2. [82]

   On the one hand, s 8(1) contains powerful indications that the basis of imposing duties under the statute is transactional, involving an alteration in legal or equitable rights, rather than turning on the existence of a particular piece of paper. Hence, the central definition of “dutiable transaction” in s 8(2), which extends to transfers of dutiable property and any of “the following transactions” in s 8(1)(b). Each of the listed transactions in s 8(1)(b) denotes, as a matter of ordinary legal terminology, something which alters the legal or equitable rights or obligations concerning property. That, after all, is the natural meaning of “transaction” in this context.

3. [83]

   Most significantly, there is no reference to instrument. There is no reference to any requirement of writing. There is no Div 3A. An oral declaration of trust of personalty, which has for centuries been effective without writing as a matter of general law, now is a dutiable transaction if the property answers the description of “dutiable property” as defined in s 11. Section 10 confirms that the duty does not turn on the existence of an instrument.

4. [84]

   The principal source of the complexity of the submissions on statutory construction is that despite the changes summarised above, the current legislation still discloses much drafting dating from the time when its predecessor imposed a tax on instruments (save for some anti-avoidance measures) and accordingly there is force in the proposition that earlier decisions on comparably worded provisions continue to apply. In particular, s 18(6) closely resembles the concessional treatment in paragraph (3) of the Second Schedule of the Stamp Duties Act 1920. Subsections 18(6) and (6A), and to a lesser extent s 50, are difficult to reconcile as exceptions or concessional provisions if the statute only applies to transactions, and not to documents which merely acknowledge an existing state of affairs.

5. [85]

   But to my mind the solution to the principal questions of statutory construction is straightforward. This is a case, like many, where the parties point to a conflict in the provisions of the same statute. The conflict is simply stated. Section 8 proceeds on the basis that duty is now imposed on transactions rather than instruments, but many of the exemptions and provisions governing concessional treatment still disclose language redolent of the earlier statute.

6. [86]

   In Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355; [1998] HCA 28, the joint judgment said at [70]:

7. [87]

   That approach is settled. It is regularly applied, either using identical language (as in the unanimous judgment in Plaintiff S4/2014 v Minister for Immigration and Border Protection (2014) 253 CLR 219; [2014] HCA 34 at [35]), or words to the same effect, including the references to a “hierarchy” in Plaintiff S297/2013 v Minister for Immigration and Border Protection (2014) 255 CLR 179; [2014] HCA 24 at [25] in the judgment of Crennan, Bell, Gageler and Keane JJ and in the companion judgment of Hayne and Kiefel JJ in Plaintiff M150 of 2013 v Minister for Immigration and Border Protection (2014) 255 CLR 199; [2014] HCA 25 at [89]. Examples could readily be multiplied.

8. [88]

   There is little scope to doubt which is the leading provision and which is the subordinate provision. Nor can there be much room for debate as to the hierarchy of the apparently conflicting provisions. The new regime, starting with the change of title of the Act, and confirmed in the basal provisions of ss 8, 10 and 11, confirms that it is a tax upon transactions not instruments. It is quite inconsistent with that radically altered legislative policy for duty to be charged on documents which are mere pieces of paper and do not effect any transaction whatsoever.

9. [89]

   This was raised when the appeal was heard:

10. [90]

    I regard that as a well planned response to a predictable question. I deal with each element of it below.

11. [91]

    True it is that in Chief Commissioner of State Revenue v Platinum Investment Management Ltd (2011) 80 NSWLR 240; [2011] NSWCA 48, this Court, and in particular Handley AJA, noticed the similar drafting in provisions of the Duties Act and applied decisions on the counterparts to those provisions in the Stamp Duties Act 1920. That may be seen most clearly from [63] and the reasoning at [67]-[83] based on the approach taken to the words “vested or to be vested” in the definition of “declaration of trust” in s 8(3) based on the construction those same words in the 1920 statute had received in Toohey’s Ltd v Commissioner of Stamp Duties and in Commissioner of Stamp Duties (NSW) v Pendal Nominees Pty Ltd (1989) 167 CLR 1; [1989] HCA 19. After summarising the provisions and the decision, Handley AJA noted at [83] that “[t]he Court should apply these decisions and the contrary was not argued”.

12. [92]

    It follows that the approach in Platinum lacks precedential authority: cases are only authorities for what they decide: Coleman v Power (2004) 220 CLR 1; [2004] HCA 39 at [79]; CSR Ltd v Eddy (2005) 226 CLR 1; [2005] HCA 64 at [13].

13. [93]

    But that is not to doubt the correctness of the approach. To the contrary, I think the parties in Platinum correctly proceeded on the basis that the earlier decisions on the materially identically worded provisions should be applied. The question in Platinum was whether a deed selling shares which had not been allotted was a “declaration of trust” by reason of the words “to be vested” in the definition. I see no reason to doubt that the parties were correct to proceed on the basis that decisions on the same words in the earlier statute were relevant to whether a deed which on any view effected a real transaction was a dutiable transaction under the Duties Act 1997. The difficulty which confronts the Chief Commissioner’s reliance on Platinum is that it says nothing about the presently relevant point.

14. [94]

    The issue in this appeal is quite different. The issues in Platinum did not turn on the change from taxing instruments to taxing transactions. It by no means follows that acceptance of the continuing applicability of some authorities as to the effect of some provisions of the repealed legislation entails that the earlier authorities answer a different issue arising on the different facts of the present appeal. (That has not prevented the parties from exchanging submissions on whether the definition of “declaration of trust” contains one or two “limbs”. Save to say that there is no reason to confine the extended definition to cases which would amount to a declaration of trust in equity, it is unnecessary to address these submissions.)

15. [95]

    The Commissioner also drew attention to the similarities between the old Div 3A and the requirement in s 15 to bring into existence a written document, in support of the submission that “the distinction [between former and current statute] is not as great as it looks at first blush”. I cannot agree. The fundamental change is between a tax on instruments and a tax on transactions. Even the anti-avoidance provisions of former Div 3A preserved the form that the tax was on an instrument, while s 15 does not detract from the fact that the transaction is rendered dutiable. No doubt for some purposes assistance may be derived from the learning associated with the earlier statute. But as Slater QC emphasised decades ago, some things must be unlearnt. The question is whether a tax on transactions applies when there is no transaction and an instrument has been brought into existence acknowledging an existing state of affairs. On that issue, similarities between aspects of the former regime and the new regime are of limited assistance.

16. [96]

    Insofar as the Commissioner’s submission relied on the exceptions and concessions, it sought to produce the result that the tax imposed by s 8 is not confined to a tax on transactions, but extends to a tax on instruments which do not effect any transaction. But save perhaps in truly extraordinary cases, an exception or a concession cannot be the “leading provision” in the sense stated by Lord Herschell in Institute of Patent Agents v Lockwood [1894] AC 347 at 360 or the High Court in Project Blue Sky. After all, the High Court explained in Project Blue Sky that this was necessary in order to determine the hierarchy of the provisions. An exception is, almost by definition, subordinate in the hierarchy to the taxing provision which it qualifies. One does not reach the exception unless and until the taxing provision is engaged. Subsections 18(6) and (6A) are aptly styled exceptions, rather than provisos. The same may be said of the concessional provisions.

17. [97]

    On the approach I favour, that the Duties Act does not apply to a mere acknowledgment of an existing position, the exceptions and concessions to which the Chief Commissioner pointed may still have work to do. As the primary judge said at [270], there is a difference between a transfer and a declaration. The consequence of property being transferred to a person to hold on trust, and a declaration that the person holds property on trust, may produce precisely the same result, vis-à-vis the trustee, beneficiary and property and persons dealing with the trustee, but they are conceptually different transactions, and there may be seen therefore to be sense in s 18(6) and s 63(1)(a)(ii). There may also be work to be done by s 18(6A) where one declaration of trust “supersedes” another, depending in part upon the meaning to be given to “supersede”.

18. [98]

    The Chief Commissioner relied, before the primary judge, upon Crowther v Commissioner of Stamp Duties [1978] 1 NSWLR 82 (Sheppard J) and in this Court relied further on his Honour’s earlier decision in Nev Ham Nominees Pty Ltd v Commissioner of Stamp Duties (NSW) [1978] 1 NSWLR 259, and on Sully J’s judgment in Upper Hunter Timbers Pty Ltd v Chief Commissioner of Stamp Duties (NSW) (1993) 27 ATR 47. In both decisions, Sheppard J stated that the statutory definition in the schedule to the 1920 Act, which corresponds to “declaration of trust” in s 8(3) of the 1997 Act, extended to a mere acknowledgment of an existing trust and concluded that “the legislature intended to catch instruments which were no more than declaratory of an existing position”: Crowther at 89. The Commissioner said that Upper Hunter Timbers was a decision where the express declaration confirmed the earlier position.

19. [99]

    The primary judge distinguished Crowther on its facts and preferred the reasoning of Gageler J in Rojoda which is addressed below. In this Court, the Commissioner contended that Crowther was indistinguishable.

20. [100]

    With respect, these first instance decisions on the superseded legislation take the matter no further. Why would decisions on legislation based on instruments which held that instruments which had no legal effect were dutiable have any precedential weight in relation to different legislation which founded a liability to pay duty on a dutiable transaction?

21. [101]

    The parties exchanged elaborate submissions on the reasons of Gageler J in Rojoda. Indeed, Benidorm submitted that they engaged the principle governing the precedential weight to be given to comparable legislation in Australian Securities Commission v Marlborough Gold Mines Ltd (1993) 177 CLR 485; [1993] HCA 15 as expanded in Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22 to extend to “seriously considered dicta”, with the result that:

22. [102]

    This in turn led to elaborate submissions by the Commissioner, based on the oral submissions in the High Court in Rojoda to determine what had been argued.

23. [103]

    With respect, all of this rests on a false premise. Gageler J dissented in Rojoda. True it is that his dissent was not based on the construction of the statute. Nonetheless, his Honour’s dissenting judgment in no way binds this Court (or any other court): Federation Insurance Ltd v Wasson (1987) 163 CLR 303 at 314; [1987] HCA 34. There is room to debate just how much, if at all, what was said in Farah extends the principles of precedent beyond what had been established as a matter of comity. But that issue may be put to one side, because whatever the effect of Farah, it was explicitly framed at [134] in terms of “seriously considered dicta of a majority of this Court”. What was said in Farah does not extend to dissenting judgments. How could any expansion of the rules of precedent beyond ratio decidendi extend to a dissent (which, ex hypothesi, is inconsistent with at least one element of the ratio decidendi)?

24. [104]

    None of the foregoing is to deny the persuasive (as opposed to precedential) value of Gageler J’s reasoning. There are many very famous dissenting judgments whose reasoning on points of principle is unimpeachable and which have attained canonical status. Windeyer J’s dissenting judgment in Norman v Federal Commissioner of Taxation (1963) 109 CLR 9; [1963] HCA 21 on the law of voluntary assignments and Mason J’s dissenting judgment in Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41; [1984] HCA 64 on fiduciary obligations are obvious examples. Those judgments have immense authority because of the quality of their reasoning, not because of any operation of the extended principles of the law of precedent.

25. [105]

    The issue is not one of precedent, but of persuasive value of the reasoning. In my respectful opinion, Gageler J’s reasoning in relation to the operation of the Western Australian legislation is correct. Further, it is not inconsistent with anything in the joint judgment of the majority.

26. [106]

    The majority and minority judgments in Rojoda took different views of the nature of partnership property after the partnership was dissolved. It was at that point that deeds were entered into by the surviving partners. Gageler J, in dissent, concluded at [99] that the deeds acknowledged the existing position:

27. [107]

    To the contrary, the majority judgment addressed Rojoda’s submission that the deeds created no new trust as follows:

28. [108]

    None of that reasoning is inconsistent with the proposition that if no new equitable rights are created, then the deeds would not have created a dutiable transaction. Indeed, the example in the majority judgment of replacing a discretionary trust by a fixed trust tends to suggest that “the creation of new equitable rights” was necessary, as well as being sufficient, to attract duty, insofar as it is a more complicated example than executing a document acknowledging the existing discretionary trust.

29. [109]

    With respect to the Chief Commissioner’s submissions to the contrary, it is difficult to reconcile a tax on transactions with the result that a document which merely acknowledges an existing state of affairs is a dutiable transaction.

Did the Second Declaration of Trust have operative effect?

1. [110]

   Finally, and by way of fallback, the Commissioner by ground 3 of his appeal submitted that the Second Declaration of Trust had operative effect. It was put that:

2. [111]

   I do not agree. The first and second points do not deal with the legal effect of the document but rather an evidentiary question going to proving its contents. But that does not make it a transaction for the purposes of s 8. Either there was or was not a dutiable transaction. Why should a document which makes proof of the transaction easier alter whether there was a transaction in the first place? The third point goes no further, because it begs the question as to the existing obligations which predated execution of the document. The fourth point is, with respect, a distraction. It is not to the point whether an instrument uses “mandatory”, “directory” or “anticipatory” language, or any other sort of language. The question is one of construction. Either the document on its proper construction has a legal effect or it does not. I have addressed the difficulties of construction earlier; they are not without force. However, once the proper construction of the document is determined, its precise text is not to the point.

3. [112]

   The fifth and sixth points turn on cll 2 and 3. But I do not see that either of these clauses performs any work.

4. [113]

   Clause 2 contains an indemnity. However, it is to be recalled that in 2015, s 100A of the Trustee Act had not been enacted, the rule in Hardoon v Belilios was in force in New South Wales, and the personal obligation of a beneficiary to indemnify the trustee for liabilities properly incurred remained in force. True it is that cl 2 is now important, in that in the absence of such an indemnity, the beneficiary would now no longer be subject to any such obligation: s 100A(2). But cl 2 takes the matter no further than the express indemnity in the First Declaration of Trust.

5. [114]

   Clause 3 does nothing more than to state the ordinary obligation of a trustee in accordance with the “rule” in Saunders v Vautier (1841) 4 Beav 115; 49 ER 282. Just like the “rule” in Hardoon v Belilios, the power on the part of a beneficiary to bring a trust to an end predated the decision: see Beck v Henley [2014] NSWCA 201 at [32]. As was pointed out in CPT Custodian Pty Ltd v Commissioner of State Revenue (Vic) (2005) 224 CLR 98; [2005] HCA 53 at [50], the trustee’s obligation is slightly more nuanced than being obliged to transfer the whole of the trust property to a competent sole beneficiary, because the trustee’s entitlement to look to the trust property to discharge liabilities properly incurred takes priority (“The classic nineteenth century formulation by the English courts of the rule in Saunders v Vautier did not give consideration to the significance of the right of the trustee under the general law to reimbursement or exoneration for the discharge of liabilities incurred in administration of the trust.”) But all of that is incorporated in cl 3 of the document. Once again, the document alters nothing.

6. [115]

   It follows that this ground should also be dismissed.

Orders

1. [116]

   For those reasons, the primary judge was correct to conclude that the Second Declaration of Trust merely acknowledged the existing position which obtained upon the grant of probate and resealing of Mr Robinson’s will, and correct to conclude that it was not a dutiable transaction. The appeal should be dismissed, with costs.

2. [117]

   PAYNE JA: I have read the judgment of Leeming JA in draft. I agree with the orders proposed by his Honour and with his reasons. The following observations are made by way of emphasis and are not intended to qualify that agreement.

3. [118]

   The Duties Act 1997 (NSW) effected a fundamental change to the basis of levying duty in this State. Chapter 2 of the Act, “Transactions concerning dutiable property” and Section 8 headed “Imposition of duty on certain transactions concerning dutiable property” emphasise that duty is now imposed on transactions rather than instruments.

4. [119]

   On 12 November 1997, in the second reading speech, Mr Debus, the Minister responsible for the Duties Bill in the Lower House said (New South Wales Legislative Assembly, Parliamentary Debates (Hansard), 12 November 1997 at 1612):

5. [120]

   The essence of the decision of the primary judge rests on a narrow proposition: that if a document styled as a “declaration of trust” as a matter of its proper construction merely acknowledges an existing state of affairs and does not affect the ownership of any legal or equitable property, it is not a property transaction which attracts duty.

6. [121]

   As the reasons of Leeming JA demonstrate, the Second Declaration of Trust had no operative effect and merely acknowledged the existing legal and equitable rights and obligations of the parties to the Deed. It was not a property transaction which attracted duty.