Tay v Chief Commissioner of State Revenue  NSWSC 338
|Date of judgement||6 April 2017||Proceeding No.||2015/113063 & 361534|
|Court or Tribunal||Supreme Court of New South Wales|
|Legislation cited||Duties Act 1997
State Revenue Legislation Amendment Act 2008
Taxation Administration Act 1996
Trustee Act 1925
|Catchwords||REVENUE AND TAXES – Duties Act 1997 (NSW) ss 63 and 163A – Will contained trust for sale and for distribution of cash to residuary beneficiaries – Transfer of shares in landholder from deceased estate to residuary beneficiary in partial satisfaction of bequest – Transfer made with agreement of all residuary beneficiaries as part of family agreement under which shares in three companies were transferred to three beneficiaries – Whether agreement was an agreement to vary the trusts of the will (s 63(2)) – Whether an appropriation as referred to in s 46 of the Trustee Act 1925 (NSW) (s 63(1)(a)(iii)) – Whether acquisition of interest in landholder company exempt under s 163A(d) as being solely the result of the distribution of deceased’s estate|
|Cases cited||Beck v Henley  NSWCA 201; (2014) 11 ASTLR 457
Carr v Carr (1987) 8 NSWLR 492
Commissioner for State Revenue v Victoria Gardens Developments Pty Ltd  VSCA 233
Commissioner of State Revenue v Lend Lease Funds Management Ltd (2011) 33 VR 204;  VSCA 182
Goulding v James  2 All ER 239
In Re Holt’s Settlement; Wilson v Holt  1 Ch 100
In re Lepine Pty Ltd  1 Ch 210
Inland Revenue Commissioners v Holmden  AC 685
Jopling v Inland Revenue Commissioners  2 KB 282
Long v Controller of Stamps  VR 796
Permanent Trustee Co (Canberra) Ltd v Finlayson (1968) 122 CLR 338
Perpetual Trustee Co Ltd v Commissioner of State Revenue  VSC 177; (2000) 44 ATR 273
Re Beverly; Watson v Watson  1 Ch 681
Re Dion Investments Pty Ltd (2014) 87 NSWLR 753;  NSWCA 367
Re Estate Late Austin Mack (1956) 73 WN (NSW) 218
Re Mack (1956) 73 WN (NSW) 218
Saunders v Vautier (1841) 4 Beav 115; 49 ER 282
Spens v Inland Revenue Commissioners; Hunt v Inland Revenue Commissioners  3 All ER 295
White Rock Properties Pty Ltd v Commissioner of State Revenue  VSCA 77
Wigley v Crozier (1909) 9 CLR 425
The plaintiff sought review of two duties assessments issued by the defendant to the plaintiff in respect of a share transfer by the executors of the estate of the late Tay Tee Peng (“the deceased”) of 33,053,508 shares in Memocorp Australia Pty Ltd (“Memocorp”) to the plaintiff (“the estate transfer”). Memocorp owns substantial land in NSW, and the estate transfer was assessed with share transfer duty of $642,727.20 and with landholder duty of $25,988,568.08.
The estate transfer arose in circumstances where the deceased’s last will provided that all of his assets were to be sold, and the proceeds of that sale were to be distributed amongst the deceased’s four children in specified percentages. The plaintiff’s entitlement under the will was to receive 29% of the net proceeds of sale. At the time of distributing the deceased’s estate, rather than selling all of the assets of the estate, the four beneficiaries under the will entered a Deed of Family Agreement, whereby it was agreed that each of the beneficiaries would receive certain assets of the estate as part of their respective entitlements under the will. Relevantly, it was agreed in the Deed of Family Agreement that the plaintiff would take all of the deceased’s shares in Memocorp. Significantly, it was also agreed in the Deed of Family Agreement that the other beneficiaries would sell their existing shares in Memocorp to the plaintiff.
Share transfer duty proceeding
The issues in the share transfer duty proceeding arose under s 63 of the Duties Act 1997 (NSW). The key issue was whether the estate transfer amounted, as the plaintiff contended, 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 in s.63(1)(a)(iii). In the alternative, the plaintiff submitted that the estate transfer was made to a beneficiary of property that was the subject of a trust for sale, within the duty concession in s.63(1)(a)(ii).
White J found in relation to the share transfer proceeding that the beneficiaries did not, by executing the Deed of Family Agreement, agree to a resettlement (or variation) of the trusts of the will, but rather they consented to the trustee appropriating specific assets towards the entitlements of the beneficiaries under the will. Accordingly, His Honour found that the estate transfer was an appropriation within s.63(1)(a)(iii), with the effect that the duty concession in that section was held to apply.
His Honour also found (at ) that, even if s.63(1)(a)(iii) did not apply, there was no reason that the duty concession in s.63(1)(a)(ii) should not apply. In this respect His Honour favoured a literal approach to the interpretation of s.63(1)(a)(ii).
Landholder duty proceeding
The issues in the landholder duty proceeding arose because the plaintiff claimed an exemption from landholder duty under s.163A(d) of the Duties Act. The Chief Commissioner submitted that the estate transfer was not exempt because it was not “acquired solely as the result of the distribution of the estate of a deceased person ... effected in the ordinary course of execution of a will”, as was required by s 163A(d). This submission was made on the basis that the estate transfer was not authorised by the will, and was made pursuant to the Deed of Family Agreement.
White J found that the shares were not acquired by the plaintiff solely as a result of the distribution of an estate. In particular, His Honour found (at ) that an “additional operative cause of the plaintiff’s acquiring the shares was the agreement of the family members contained in the Deed of Family Agreement (the “DoFA”). A key part of His Honour’s reasoning in this regard appears to be his finding that the DoFA did more than merely distribute the deceased’s estate. At  White J states:
“the plaintiff acquired the deceased’s shares in Memocorp both as a result of the distribution of the estate and as a result of the other residuary beneficiaries’ consenting to the transfer and thereby surrendering their right themselves to call for a transfer of a proportion of the deceased’s shares in Memocorp, and also agreeing to the additional transfers for which the DoFA provided.”
Another key aspect of His Honour’s reasoning was that he found the use of the word “solely” in s.163A(d):
“means that it is not enough that the direct or the immediate cause of the acquisition was the distribution of the estate” (at ).
His Honour quoted approvingly from a number of Victorian decisions that had considered the term “solely” (eg White Rock Properties Pty Ltd v Commissioner of State Revenue  VSCA 77 and Commissioner of State Revenue v Lend Lease Funds Management Ltd  VSCA 182), and found that those cases:
demonstrate that where the means by which a person acquires an interest in the landholder is part of a wider transaction, then it can be said that the interest is not acquired solely as a result of the particular means by which the interest was acquired” (at ).
Accordingly, His Honour found that the ad valorem landholder duty assessed of $25,988,568.08 was payable by the plaintiff in respect of the estate transfer.
His Honour made the following orders:
In proceeding 2015/113063 (the share transfer duty proceeding) order that the defendant’s decisions dated 3 July 2014 and 16 July 2014 to assess the plaintiff as being liable to pay ad valorem marketable securities duty on the transfer of shares in Memocorp Australia Pty Ltd from the executors of the estate of the late Tee Peng Tay to the plaintiff dated 28 May 2014, be revoked.
In proceeding 2015/361534 (the landholder duty proceeding) order that the defendant’s assessment dated 14 May 2015 be confirmed.