BD Corporation Pty Ltd v Chief Commissioner of State Revenue [2015] NSWCATAD 163

Date of judgement 6 August 2015 Proceeding No. 1410477
Judge(s) A Verick, Senior Member
Court or Tribunal New South Wales Civil and Administrative Tribunal
Legislation cited Administrative Decisions Review Act 1997

Civil and Administrative Tribunal Act 2013

Duties Act 1997

Taxation Administration Act 1996
Catchwords STATE REVENUE – Stamp Duties – existence of a declaration of trust – s 8(1)(b)(ii) Duties Act 1997 - burden of proof on applicant - whether burden of proof discharged – s 100(3) of the Taxation Administration Act 1996
Cases cited B & L Linings v Chief Commissioner of State Revenue [2008] NSWCA 187; (2008) 74 NSWLR 481

Chief Commissioner of State Revenue v Paspaley [2008] NSWCA 184

Cornish Investments Ltd v Chief Commissioner of State Revenue [2012] NSWADT 204

Cornish Investments Pty Ltd v Chief Commissioner of State Revenue (RD) [2013] NSWADTAP 25

Federal Commissioner of Taxation v Dalco (1990) 168 CLR 614

Gardiner v Chief Commissioner of State Revenue (NSW) (2004) 59 NSWLR 549

Gauci v Federal Commissioner of Taxation (1975) 135 CLR 81

Hyhonie Holdings Pty Ltd v Leroy [2004] NSWCA 72

McEvoy v McEvoy [2012] NSWSC 1494

Metricon Qld Pty Ltd v Chief Commissioner of State Revenue [2013] NSWSC 982

Owens v Lofthouse [2007] FCA 1968

Reitano v Reitano [2012] NSWSC 1127

Strang v Strang [2009] NSWSC 760

Tasty Chicks Pty Ltd v Chief Commissioner of State Revenue [2011] HCA 41; (2011) 245 CLR 446

Background

In early August 2010, Mr Zhang and Mr Elias agreed to acquire an investment property situated at Rockdale (“the Rockdale Property”) as partners.  The investors were to be the companies, Aqua Blu Swimwear Pty Ltd (owned by Mr Zhang) and Auspat International Pty Ltd (owned by Mr Elias and his wife).  They agreed that the property should be owned by the Rockdale Unit Trust with the Applicant, B D Corporation Pty Ltd, as the trustee.

Both Mr Zhang and Mr Elias in their affidavits confirmed that the deed of declaration of unit trust was signed on 28 August 2010 before the purchase of the Rockdale Property.  The Applicant was the corporate trustee under the Unit Trust Deed.  The Trust Deed was executed by both Mr Zhang and Mr Elias in their capacity as directors of the unit holders.  However, the Trust Deed was not signed by the Applicant. 

On 31 August 2010, the Applicant executed a contract to purchase the Rockdale property.

On 17 February 2012, the Chief Commissioner issued to the Applicant a notice of assessment of duty in the sum of $129,920.07 on the value of the Rockdale Property.

Issue

The issue before the Tribunal was whether there was a transaction within the meaning of s.8(1)(b)(ii) of the Duties Act, or in other words, whether there was a declaration of trust over dutiable property such that duty would be imposed pursuant to s.8.

The Applicant’s case was that while a Deed of Declaration of Trust had been executed, at the time of execution of the Deed, the Rockdale Property “was not vested or to be vested in the Applicant”.  The Applicant’s Counsel indicated the Applicant was only relying on the s.58 documents filed by the Chief Commissioner, and in particular, the copy of the Unit Trust Deed which was not executed by the Applicant.

The Applicant contended it “only has the onus of proving that the Respondent wrongly assessed duty” on the Deed, as a “dutiable transaction” and that the Applicant “has discharged that onus by tendering the written instrument”, the Deed, “which clearly is not executed by the Applicant, the person to whom the property is to be vested’. 

The Chief Commissioner submitted the Applicant has to “establish on the balance of probabilities that there was no dutiable transaction within the meaning of s8(1)(b(ii) of the Duties Act” and that it had failed to do so.   

Counsel for the Chief Commissioner referred to several authorities that establish that a “declaration of trust may be made in writing, orally, by conduct or by a combination of these matters”.  He also noted the liability to duty under the Duties Act was in respect of transactions as opposed to instruments.

The Chief Commissioner relied on several matters of fact to support the conclusion that a declaration of trust was made.  The key facts relied on were: it could be implied from the conduct of the parties, specifically the conversation between Mr Zhang and Mr Elias wherein it was agreed that the Rockdale Property would be owned by the Rockdale Unit Trust and the trustee would be the Applicant; the Unit Holders Agreement and The Trust Deed themselves demonstrated the intention of the parties that the Rockdale Property be vested in the Applicant as trustee for the unit holders; and the contract entered into by the Applicant for the purchase of the Rockdale Property contained a notation that “BD Corporation purchased the Rockdale Property atf Rockdale Unit Trust”.

Decision

The Tribunal reviewed the legislation and authorities with respect to the applicant’s onus of proof in state revenue matters, and the role of the Tribunal.   

In relation to determining the existence of a trust, the Tribunal cited and applied legal principles set out by his Honour Pembroke J in McEvoy v McEvoy [2012] NSWSC 1494.  The key question is whether there is language or conduct that shows a sufficiently clear intention to create a trust.  The court may look to the nature of the transaction and the whole of the circumstances attending the relationship between the parties.

The Tribunal observed that the Applicant sought to discharge its onus by simply pointing to the fact that the Applicant did not sign the Unit Trust Deed as evidenced by the copies of the Unit Trust Deed in the bundle of s.58 documents and the Chief Commissioner’s decision on objection.  However, the Tribunal noted the Applicant’s contention was contrary to all other relevant facts and circumstances, in particular the sworn statements made by Mr Zhang and Mr Elias, two key persons who had first-hand knowledge of what occurred at the relevant time.   While Counsel for the Applicant indicated that the Applicant did not place any reliance on these statements, they had been filed and the Tribunal was therefore required to have regard to these statements in reaching the “correct and preferable” decision.

While it is clear that a director of the Applicant did not sign the copies of the Unit Trust Deed in the s.58 documents, in itself that is not sufficient to conclude that the Applicant was not a trustee of the Unit Trust and a party to a declaration of trust.  In the absence of any other evidence, the sworn statements of both Mr Zhang and Mr Elias clearly acknowledge that the Applicant was, at the relevant time, the trustee of the trust.

Neither Mr Zhang nor Mr Elias “was produced” to give evidence.  The Tribunal therefore drew the inference that neither one of them would have assisted in establishing that the Applicant was not a trustee or a party to a declaration of trust in respect of the Rockdale Property at the relevant time.

The Applicant had to establish, on the balance of probabilities, that it was not a party to any dutiable transaction within the meaning of s.8(1)(b)(ii) of the Duties Act prior to the contract to purchase the Rockdale Property.  The Tribunal held that the Applicant failed to discharge the burden of proof. 

Although not necessary to do so, the Tribunal went further and found that the sworn statements before the Tribunal confirmed that the Applicant was a party to a deed of declaration of trust.

Accordingly the assessment was confirmed.

Link to decision

BD Corporation Pty Ltd v Chief Commissioner of State Revenue [2015] NSWCATAD 163

Last updated: 17 May 2016