Harrison v Commissioner of State Revenue
[2018] QCATA 75
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- Unreported Judgment
- Appeal Determined (QCA)
- Harrison v Commissioner of State Revenue[2018] QCATA 75
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Harrison v Commissioner of State Revenue[2018] QCATA 75
Harrison v Commissioner of State Revenue[2018] QCATA 75
QUEENSLAND CIVIL AND ADMINISTRATIVE TRIBUNAL
CITATION: | Harrison v Commissioner of State Revenue [2018] QCATA 75 |
PARTIES: | FRANCIS LISTER HARRISON (appellant) |
| v |
| COMMISSIONER OF STATE REVENUE (respondent) |
APPLICATION NO/S: | APL172-16 |
ORIGINATING | GAR225-15 |
MATTER TYPE: | Appeals |
DELIVERED ON: | 1 June 2018 |
HEARING DATE: | 16 November 2016 and subsequently on the papers |
HEARD AT: | Brisbane |
DECISION OF: | Judge S Sheridan, Deputy President Member Roney QC |
ORDERS: |
|
CATCHWORDS: | APPEAL – TAXES AND DUTIES – LAND TAX – LIABILITY FOR LAND TAX – Aggregation of land – Where land tax was assessed as payable on aggregate value of properties on the basis that the appellant owned all three properties – Where assessment of land tax appealed – Whether the appellant is the owner of each three properties in own right – Whether the appellant is the trustee of each property for adult children – Whether constructive trust by means of an estoppel – Whether constructive trust arose from common intention of parties – Whether trust arose from promise to leave property by will – Whether trust sub modo arose out of a promise to convey an interest in land – Whether the words “trustee of a trust” in s 20 of the Land Tax Act 2010 (Qld) extend to fiduciaries Land Tax Act 2010 (Qld), s 8, s 10, s 19, s 20, Schedule 4 Queensland Civil and Administrative Tribunal Act 2009 (Qld), s 142, s 142(1), s 146, s 147 Allen v Snyder [1977] 2 NSWLR 685, distinguished Barns v Barns (2003) 214 CLR 169, distinguished Chang v Registrar of Titles (1976) 137 CLR 177, considered Giumelli v Giumelli (1999) 196 CLR 101, considered Golden Mile Property Investments Pty Ltd (in Liq) v Cudgegong Australia Pty Ltd (2015) 89 NSWLR 237, considered Harrison v Commissioner of State Revenue [2016] QCAT 150 Haque v Haque (No 2) (1965) 114 CLR 98, considered In the Marriage of Dawes [1989] 98 FLR 375, considered Kern Corporation Ltd v Walter Reid Trading Pty Ltd (1987) 163 CLR 164, considered KLDE Pty Ltd v Commissioner of Stamp Duties (1984) 155 CLR 288, considered Lysaght v Edwards (1876) 2 Ch D 499, considered Muschinski v Dodds (1985) 160 CLR 583, considered Parsons v McBain (2001) 109 FCR 120, considered Riches v Hogben [1985] 2 Qd R 292, considered Sidhu v Van Dyke (2014) 251 CLR 505, considered Stern v McArthur (1988) 165 CLR 489, considered Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315, considered
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APPEARANCES |
|
Appellant: | Self-represented |
Respondent: | M Brennan QC with M K Conrick |
This matter was heard and in part determined on the papers pursuant to s 32 of the Queensland Civil and Administrative Tribunal Act 2009 (Qld). | |
REASONS FOR DECISION
- [1]In 2013 and 2014, the appellant in these proceedings and the applicant in the initial review proceedings (the appellant), was relevantly the registered owner of three residential properties in Brisbane. The Commissioner of State Revenue assessed there to be land tax payable on the aggregate value of those three properties (excluding for the purposes of that valuation a fourth property which was the appellant’s principal place of residence). Land tax was in respect of the 2013/14 year assessed in August 2013 at $8,955.00 and in respect of the 2014/15 year assessed in August 2014 at $10,109.95. The obligation to pay land tax arises under the terms of the Land Tax Act 2010 (Qld) (LTA).
- [2]The appellant objected to those assessments. The Commissioner considered those objections, but in due course disallowed the objections, for which reasons were given. The appellant applied for a review of that decision, and in reasons delivered on 28 April 2016, Member K A Barlow QC dismissed the application, and therefore essentially upheld the assessments. The appellant has appealed that decision to this Tribunal.
- [3]The central issue to be determined in this appeal is whether the Commissioner, and in turn QCAT, was correct in law in concluding that the appellant is the owner in his own right of each of the three properties or whether, as the appellant contends, he is the trustee in each case of the relevant property for his individual adult children, and therefore he ought not be assessed as being liable for land tax on the aggregate value of the three properties; in other words, whether he should be assessed separately in respect of each property as if he were a separate owner in the capacity as trustee for another person in relation to each property.
Appeals on questions of law
- [4]Pursuant to s 142 of the QCAT Act, a party to a proceeding may appeal to the appeal tribunal against a decision of the tribunal in the proceeding, but an appeal under s 142(1) on a question of fact or a question of mixed law and fact may be made only if the parties obtain the appeal tribunal’s leave to appeal. Section 146 sets out what the powers of the tribunal are in deciding an appeal against a decision on a question of law only. Pursuant to s 147, in deciding an appeal on a question of fact or mixed law and fact, the appeal is to be decided by way of rehearing.
- [5]For the respondent, it was submitted that this meant that there was an appeal on a question of law as of right, but in relation to appeals on questions of fact or mixed questions of law and fact, the appellant needed to identify what that question was and to identify the grounds upon which leave was sought to review that decision. It was submitted that pursuant to s 146, the appeal on a question of law is an appeal in the strict sense, and not an appeal by way of rehearing.
- [6]The appellant filed an extensive written submission dealing with the question of whether an appeal on a question of law was an appeal in the strict sense and not a rehearing. Ultimately, the arguments which went on this issue fell on rather barren ground because the position is that what is sought to be reviewed is whether the unchallenged facts as found fall within the terms of a statutory enactment properly construed. Such a question is generally regarded as a question of law.[1] Moreover, there was no new evidence that was sought to be adduced.
- [7]The parties each accepted that the findings of fact of the member were unchallenged, and that there had been no change to the law that was sought to be applied. In the circumstances, it is unnecessary to consider the precise scope of the operation of s 142, s 146 and s 147 of the QCAT Act.
Factual findings below
- [8]For the purposes of the appeal, we proceed on the basis of the uncontested findings of fact made by the member below. The following findings may be extracted from the reasons.
- [9]The appellant is married to Gailene Harrison. They have three children. For ease of identification, adopting the same practice as the tribunal below, we shall refer to them as Amy, Tom and Matthew.
- [10]Some time before April 2008, the appellant and Mrs Harrison made agreements with Amy and Tom, and some years later, a similar agreement with Matthew, to the effect that:
- (a)the appellant would buy a house near his home, in which Amy and her family would live;
- (b)the appellant would buy a house near his home, in which Tom and his family would live;
- (c)Tom and his wife would sell the house which they currently owned;
- (d)the appellant would buy a house near his home, in which Matthew would live;
- (e)for the purpose of buying those houses, the appellant would borrow funds from his bank, which would take a mortgage over each property, and the appellant would make the repayments on those loans;
- (f)each of Amy, Tom and Matthew would pay a reasonable rent for their respective houses to the appellant while he lives and, if he pre-deceases Mrs Harrison, after his death to her while she lives;
- (g)the purpose of the rent in each case was to defray the costs of the mortgages and then to provide a source of income for the appellant and Mrs Harrison in their retirements; and
- (h)the appellant and Mrs Harrison would make mutual wills, under which they would leave each of the houses to the survivor of them and the survivor would leave to Amy, Tom and Matthew respectively the house in which each child lives.
- (a)
- [11]Later, to give effect to those agreements:
- (a)in April 2008, the appellant bought a property in Paddington, into which Amy and her family moved, where they have since lived and in respect of which Amy pays an agreed rent to the appellant;
- (b)in or around June 2008, the appellant bought a property in Bardon, into which Tom and his family moved, where they have since lived and in respect of which Tom pays an agreed rent to the appellant;
- (c)at about the same time as (b) happened, Tom and his wife sold their former home;
- (d)in about December 2011, the appellant bought another property in Paddington, into which Matthew moved, where he has since lived and in respect of which Matthew pays an agreed rent to the appellant;
- (e)in October 2011, in anticipation of completion of the purchase of the property for Matthew, the appellant and Mrs Harrison made mutual wills, in which they referred to the arrangements that they had made with their children concerning the properties and they provided for the properties to be left to each of the respective children on the death of the survivor; and
- (f)the appellant and Mrs Harrison have since made new wills, but in relevant respects they contain the same terms of the wills referred to in paragraph (e).
- (a)
- [12]In their wills, the appellant and Mrs Harrison also made the following statements in the course of explaining the background to the gifts of the properties to their children (quoting from the appellant’s will):
For their better security, and to achieve flexibility and reduce the cost, including of any applicable taxes, if any of them wanted to sell their houses and buy another, I agreed (by exchange of emails) with each of Amy and Tom, and has [sic] agreed orally with Matthew, such agreement to be confirmed by an exchange of emails, to sell them their house for the price that I paid for it, with it being understood that if such a sale were completed, that they would continue to make payments commensurate with the rent previously paid.
Relevant statue law
- [13]Section 8 of the LTA provides as follows:
8 Who is liable to pay land tax
The owner of taxable land when a liability for land tax arises is liable to pay the tax.
- [14]Section 10 of the LTA provides a definition of the expression “owner” for the purposes of s 8 as follows:
10 Meaning of owner
(1) The owner of land includes the following –
- a person jointly or severally entitled to a freehold estate in the land who is in possession;
- a person jointly or severally entitled to receive rents and profits from the land;
- a person taken to be the owner of the land under this Act.
- The fact that a person is the owner of land under a provision of this Act does not prevent another person also being the owner of the land.
- This section is subject to sections 12 to 14, 22 and 23.
- [15]Part 4, s 19 and s 20 of the LTA provide for the method of assessing land tax. They provide as follows:
Part 4 Assessment of land tax
Division 1 Aggregation of land
19 General principle—taxable land is aggregated
- A taxpayer’s liability for land tax must be assessed on the total taxable value of all taxable land owned by the taxpayer when the liability arises.
Example –
An individual owns 2 properties that are both taxable land. The properties each have a taxable value of $500,000. The taxpayer’s liability for land tax is worked out using the total taxable value of $1,000,000.
- This section is subject to sections 20 and 21.
20 Separate assessment of trust land
- The liability for land tax of a taxpayer who is a trustee of a trust must be separately assessed on the taxable land that is subject to the trust, as if that land were the only land owned by the taxpayer as a trustee.
- However, subsection (1) does not apply if –
- the taxpayer is trustee of more than 1 trust; and
- the interests of the beneficiaries of 2 or more of the trusts are, when the taxpayer’s liability for land tax arises, the same.
- If subsection (1) does not apply, the taxpayer’s liability for land tax as trustee of the trusts mentioned in subsection (2)(b) must be assessed on the total taxable value of all taxable land that is subject to those trusts.
- [16]The Dictionary in Schedule 4 provides definitions relevantly as follows:
beneficiary, of a trust, means a person entitled to a beneficial interest in land or income derived from land that is the subject of the trust.
…
trustee includes –
- a person appointed or constituted trustee by any of the following –
- act of parties;
- order or declaration of a court;
- operation of law; and
- an executor or administrator, guardian, committee, receiver or liquidator; and
- a person –
- administering or controlling land affected by an express or implied trust; or
- acting in a fiduciary capacity; or
- possessing, controlling or managing the land of a person under a legal or other disability.
The appellant’s approach
- [17]The appellant contended that the three properties were to be separately assessed under s 20 on the basis that each property was held on trust.
- [18]Apart from setting out the facts and asserting that the land was held on trust, the precise legal basis for the assertion was not apparent from the letter of 11 March 2013 sent by the appellant to the Commissioner or the letters of objection dated 19 March 2015 and 15 April 2015.
- [19]In his application to review the decision, the appellant stated that the decision was wrong because the Commissioner should have concluded that under the mutual wills leaving the properties to the beneficiaries “an institutional (not remedial) constructive trust arose when the beneficiary acts on the basis of the mutual wills”. The reliance on the beneficiaries having acted on the basis of the mutual wills also features in the submissions filed 3 December 2015.
- [20]
- [21]In his grounds of appeal, the appellant repeated the earlier argument raised in his objections that an institutional (as opposed to remedial) constructive trust, or other equitable rights, have arisen in favour of the appellant’s adult children (and in one case, one of the adult children and his wife) in respect of the three subject residential properties.
- [22]The appellant also argued that the learned Member wrongly held that it was necessary, in order for the trust to come into existence, that the putative beneficiaries had suffered detriment by their reliance on the arrangements; that the learned Member ought to have held that the trusts, or other equitable rights, arose by virtue of the agreements or, in the alternative, by virtue of the parties having acted on the agreements.
- [23]In the alternative, the appellant argued that the learned Member ought to have characterised the facts proved as amounting to a detriment.
Additional grounds of appellant
- [24]In his written submissions in support of the appeal, the appellant again referred to the existence of the mutual wills, but added new arguments: that a constructive trust arose from the common intention of the parties, that the trust arose from partial completion of the contract to transfer and that the appellant was a fiduciary within the definition of trustee.
- [25]The High Court has made clear on numerous occasions that the “finality principle” applies to appeals, so “except in the most exceptional circumstances, it would be contrary to all principle to allow a party, after a case has been decided against him, to raise a new argument which, whether deliberately or by inadvertence, he failed to put during the hearing when he had an opportunity to do so”.[4]
- [26]On the other hand, the arguments really concern issues of law, and whether the facts as found are capable of bringing the case under the umbrella of some accepted legal category of trust. For the most part, the contentions that the appellant makes in support of them involve the exercise of re-construing the facts in a way that seeks to place them into what is sought to be a differently characterised form of trust from that which was contended for below. In those circumstances, it is expedient to deal with the arguments.[5]
- [27]We therefore propose to permit the grounds of appeal to be expanded beyond those which were raised below and will deal with the appellant’s contentions in support of these alternative bases, and his other arguments as well.
The decision below
- [28]In essence, the learned Member concluded that he could not be satisfied on the evidence that the appellant held the properties on trust for his respective children.
- [29]The learned Member referred in his reasons at [37] to the decision in Giumelli v Giumelli, in which it was said as follows:
[2] In submissions to this Court, the term “constructive trust” was used to identify the nature of the equitable remedy granted by the Full Court. Care is required in the use of the term “constructive” in this context. Professor Scott has pointed out:
“It is sometimes said that when there are sufficient grounds for imposing a constructive trust, the court ‘constructs a trust’. The expression is, of course, absurd. The word ‘constructive’ is derived from the verb ‘construe’, not from the verb ‘construct’ … The court construes the circumstances in the sense that it explains or interprets them; it does not construct them.”
…
[3] A constructive trust of this nature is a remedial response to the claim to equitable intervention made out by the plaintiff. It obliges the holder of the legal title to surrender the property in question, thereby bringing about a determination of the rights and titles of the parties.[6]
- [30]The learned Member considered that this passage succinctly set out the principles that applied to the circumstances of this case. He held that if there is a trust, it arose from the circumstances under which it would be inequitable for the appellant to rely on his legal ownership of the properties to deny that the children have an interest, proprietary in nature, in their respective properties.
- [31]It was held that for the appellant to succeed in this application, the nature of that interest must be such that a court would, if necessary, construe the circumstances as having given rise to a trust in each child’s favour. The interest created by that trust would be a current beneficial interest in the fee simple of the relevant property, although that interest cannot (absent express agreement between all relevant parties) be converted into a legal interest until the death of the survivor of the appellant and Mrs Harrison or pursuant to the options to purchase the properties. In the meantime, each child had, the learned Member held, a contractual obligation to pay “rent” to the appellant (and, if he predeceases her, later to Mrs Harrison).
- [32]The learned Member considered that it had not been clearly demonstrated on the evidence before him that a constructive trust had arisen in favour of each child. He had regard to what he saw as clear evidence of promises to the children that they may occupy the properties as their family homes during the lives of the appellant and Mrs Harrison, without having to buy the properties or to pay interest on the loans obtained by the appellant to purchase the properties, or to pay the usual costs of ownership such as rates; and that, ultimately, they will become the legal owners of the properties.
- [33]He held that there was clear evidence that each child had acted on those promises by moving into the relevant house, paying rent and using it as the family home, and in the case of one child, selling their current family home.
- [34]Although there was no evidence, the learned Member readily inferred that each child had arranged his or her financial and family affairs on the basis of and in reliance on the promises. However, the learned Member said there was no evidence from the children nor from the appellant of what they have done in this respect (other than moving in and paying rent) nor whether they have suffered any detriment as a result.
- [35]The learned Member referenced assertions made by the appellant in submissions that the children had also paid or contributed towards the cost of maintenance and repairs of, and improvements to, the houses, but the member held that there was no evidence of this.
- [36]The learned Member considered that he was not satisfied that the children had suffered any detriment as a result of the steps taken.
- [37]He held that:
[40] I do not consider that the option to purchase the land that has been granted to each child necessarily negates the existence of a constructive trust. That agreement is in effect an appendage to the agreement under which, if there is a trust, the child has a beneficial interest in the land, but is only entitled to the legal interest upon the death of the survivor of Mr and Mrs Harrison. In effect, the child can bring forward legal ownership to the time that he or she wishes to acquire a different family home, but only on the basis that he or she pay for that ownership. Acquisition of legal title (temporarily) on that basis would put an end to any existing trust.
[41] If there were sufficient evidence of the children’s respective circumstances and of detriment caused to them by their reliance on the arrangements, a court in equity may regard the circumstances as giving rise to a constructive trust in favour of each child in the relevant property. They may be difficult to describe, but the court may recognise the circumstances giving rise to a constructive trust (or elephant) when it sees them.
[42] However, in the absence of that evidence, most of the arrangements between Mr and Mrs Harrison and their children are indications that Mr Harrison is the outright owner of the properties and simply lets them to his children with an option to purchase in certain circumstances. He is the registered owner of the fee simple of each property. He pays all the usual expenses of ownership. He receives rent for each property. He declares that rent and deducts expenses, presently making losses that, for income tax purposes, are set off against his other sources of income. He has granted each child an option to purchase the property in which that child lives. He has purported to bequeath each property under his will – to Mrs Harrison or to each child if he survives her. In all these respects, Mr Harrison’s circumstances indicate his absolute ownership of the properties and therefore pass the “duck test”.
[43] In the course of my consideration of this case, I have vacillated between opposite conclusions. Although I have found the line difficult to draw, I have concluded that Mr Harrison has not, on this occasion, demonstrated by evidence that he holds the legal fee simple in the properties on trust for his respective children, each of whom has a beneficial interest in his or her house under a constructive trust arising from the circumstances. Therefore, Mr Harrison has not satisfied me that he is a trustee of each property by operation of law.
[44] In saying this, I do not suggest that, on sufficient evidence, Mr Harrison could not persuade the Commissioner or the tribunal to the contrary if he were to object to any later assessments of land tax on the properties. Nor do I gainsay the possibility of a future express declaration of trust by Mr Harrison, with consequential changes to his and Mrs Harrison’s wills, which may affect his future liability to land tax on the three properties. I simply hold that, on this occasion, he has not met the onus of proving his case.[7]
Nature of proceedings
- [38]It is convenient at this stage to refer to the unusual nature of this litigation. This is not a case where the court is approached to grant relief against (unconscionable) conduct by a registered proprietor of land. It is a case where the registered proprietor contends that he is bound by his own promises, agreements and conduct which are inconsistent with his bare legal (as opposed to equitable) rights as registered proprietor.
- [39]It was not argued by the respondent Commissioner, however, that the principles that apply in the determination as to the existence of a trust in the usual situation did not apply to the construction of s 20 of the LTA. That approach was clearly appropriate and consistent with the approach of the Full Court of the Federal Court in Parsons v McBain[8] where the court rejected the notion that a constructive trust first comes into existence when so declared by the court. In Parsons, the court referred with approval to the comments by Deane J in Muschinski v Dodds,[9] where he said:
… there does not need to have been a curial declaration or order before equity will recognise the prior existence of a constructive trust… Where an equity court would retrospectively impose a constructive trust by way of equitable remedy, its availability as such a remedy provides the basis for, and governs the content of, its existence inter partes independently of any formal order declaring or enforcing it. In this more limited sense, the constructive trust is also properly seen as both ‘remedy’ and ‘institution’.[10]
Estoppel by representation
- [40]It is convenient to firstly deal with the characterisation of the facts that appear to have quite properly concerned the learned Member; namely, whether or not there was a constructive trust by means of an estoppel, under the principles discussed by the High Court in Giumelli.
- [41]That case was chiefly concerned with the type of equitable relief to which the plaintiff was entitled following the promises made to him. The considerations which led the High Court to give personal relief as an alternative to the imposition of a proprietary remedy do not apply here.
- [42]The more relevant principle is that discussed by McPherson J in Riches v Hogben,[11] which was approved by the majority of the High Court in Giumelli[12] and more recently in Sidhu v Van Dyke.[13] In Riches v Hogben, McPherson J found that the plaintiff had established all that needed to be proved to entitle him to specific performance of the contract but, in case he was wrong, said that he was also persuaded that the same result can be reached in favour of the plaintiff on the basis of an equity of expectation. His Honour stated:
That is said in the texts to be a form of equitable estoppel that arises where the plaintiff is led by the defendant’s representations to expect that he has been or will be given an interest in property of the defendant, and where the plaintiff is encouraged by the defendant to act to his detriment on that representation.[14]
- [43]Orders were made declaring that the defendant held the property on trust for the benefit of the plaintiff and requiring that the defendant forthwith transfer the land into the name of the plaintiff and deliver possession of the land subject to an undertaking that the plaintiff pay the amount of any liabilities by way of reimbursement to her as trustee.
- [44]There is no suggestion in this case that the arrangements were not genuine, and did other than reflect what had been agreed between the parties. In other words, there is no suggestion that the arrangement was a sham.
- [45]We note that the learned Member observed that in his consideration of the case, he had vacillated between opposite conclusions. It is not difficult to see how that could have occurred, and the same situation presents itself to this Tribunal.
- [46]The evidence here demonstrates that the agreement was one to leave the property to the children, and was not merely a promise to make a will in a particular form to do so at some other time.
- [47]We accept that the present case involved the giving of specific consideration on the part of the children, not only their promises under the agreement but in one case selling an existing property to take up occupation. Furthermore, it was accepted that each of the children had performed the part of the agreement by paying the so-called “rent” on the property.
- [48]In our view, the learned Member erred in failing to conclude that there was evidence of sufficient detriment to establish a constructive trust based upon the arrangements in place between the parties. The result is that at the time of the relevant assessments, the appellant held each of the three relevant properties on trust individually for each of those adult children.
Common intention constructive trust
- [49]Because it raises similar considerations, it is convenient to next deal with the argument raised by the appellant on appeal that in fact the category of constructive trust which arose in these circumstances is what is sometimes referred to as a common intention constructive trust.
- [50]In the seminal Australian case of Allen v Snyder,[15] it was held that a constructive trust could be imposed according to the actual express or inferred common intention of the parties. In the present case, there is unchallenged evidence as to the existence of an agreement that the children would have their respective properties on the death of the appellant and his wife.
- [51]In Allen v Snyder, there was no express mention of the need for the plaintiff to establish detriment. It was that fact which the appellant sought to rely upon. Subsequent authorities, however, have insisted on the existence of detriment as well as common intention.[16]
- [52]In our view, in any event, there was sufficient detriment to enable a conclusion to be reached that the appellant held each of the properties on constructive trust based on the common intention of the parties.
Trust arising from promises to leave property by will
- [53]The essence of the appellant’s argument in the original application for review by the tribunal was that it was established that a trust could arise from a promise to leave property by will, and that this was an accepted form of constructive trust.
- [54]The first question is whether there is an enforceable promise to leave property by will. An ancillary question is whether, where there was such a promise, that was an acknowledged form of constructive trust.
- [55]On the facts as found, by the terms of the agreements, the children were each required to do something, in each case slightly different. In the case of Tom and his wife, they were required to sell the house which they currently owned, and live in a house which would not be in their name but would be in the appellant’s name. In each case, part of the arrangement, which seems to be inconsistent with the notion of a trust or a constructive trust presently existing, is the notion that the children would pay “rent”, although it is possible that a person with only a beneficial interest in property who is in occupation of the property could pay a form of rent to a trustee, or for that matter co-owners.
- [56]One of the terms of the arrangement which was made was an agreement that the appellant and Mrs Harrison would make mutual wills under which they would leave each of the houses to the survivor and then the children. There is nothing to suggest that this agreement was one which left open the possibility that the appellant, or his wife, could revoke these wills without there being legal consequences. In other words, objectively the arrangement appears to have been designed to create an enforceable obligation on the appellant and his wife to leave those properties by will, as part of other concurrent and ongoing obligations, both on themselves and on each of the children. The making of the wills was an act consistent with the terms of the parties’ agreements.
- [57]Both parties made reference to cases concerning the position of a beneficiary or potential beneficiary, in circumstances in which there was an agreement by parties to make mutual wills.
- [58]The precise language of a relevant will made on 17 October 2011 was in these terms:
Gailene and I agreed [with the relevant tenant/beneficiaries] that: ... we would leave the house to them on the death of the later of us to die.
- [59]That is certainly evidence of an agreement having been made, and the appellant says an agreement to leave the property rather than simply make a will.
- [60]One of the decisions relied upon by the Commissioner was that of Barns v Barns & Others.[17] That case concerned a deed made between parents and a son to execute mutual wills in a form provided for in a deed, and the subsequent execution of those wills in accordance with the terms of the deed. The wills left the property owned to the son on trust for the spouse, but if that spouse did not survive, the property went to the son.
- [61]The husband died and his wife survived. Their daughter brought a family provision application against the father’s estate under the Inheritance (Family Provision) Act 1972 (SA) (Inheritance Act). On behalf of the son as executor of the estate of the deceased father and the wife, it was contended that the deed (and the wills made in accordance with the deed) operated to give rise to a trust in favour of the son as executor and the wife and that as a consequence there was no property in the estate which might be subject to an order under the Inheritance Act.
- [62]Given the nature of the application in Barns, the central issue concerned the effect of the operation of the Inheritance Act upon the deed made between the parents and son and the mutual wills executed pursuant to the deed. The court rejected that the effect of the deed (and wills) was to give rise to a trust. The court found that, at the time of his death, the deceased was the legal and beneficial owner of his assets. The deed (and the wills) did not operate to render incompetent the application by the daughter for provision out of the estate pursuant to the Inheritance Act.
- [63]Gleeson CJ held:
[29] In argument in the present case, an attempt was made to demonstrate that the effect of the deed and the mutual wills was that, upon his death, the deceased was not the beneficial owner of any property; for that reason there was no estate of the deceased within the meaning of the Act; and therefore the Act was incapable of having any effect. That argument, which appeared in some respects to confuse the position of the deceased with that of the second respondent as survivor, fails. The relevant principles are set out in the judgment of Dixon J in Birmingham v Renfrew. He spoke of the doctrines of equity affecting the conscience of the survivor in a case of mutual wills. They give rise to what he called a floating obligation, suspended during the lifetime of the survivor, which descends upon the assets of the survivor at the death of the survivor and then crystallizes into a trust.
…
[30] In Nowell v Palmer, Mahoney JA spoke cautiously of the difficulty in defining the exact nature of the "interest ... of a special kind" which the promisee has in the assets of the promisor in a case such as the present. Up to and at the time of his death the deceased was the legal and beneficial owner of his assets; those assets passed to the first respondent, as executor; and the second respondent will in due course of administration become entitled to them under the deceased's will. That was the very method by which, in the deed, it was contemplated that the second respondent would acquire them. The deed provided for devolution by will. The deceased did not transfer his assets to the second respondent during his lifetime.[18]
- [64]Gummow and Hayne JJ held that:
[77] It was submitted to the Full Court (and repeated in argument before this Court) that "the obligations" into which Mr Barns, Mrs Barns and Mr Malcolm Barns entered on 2 May 1996 (the date of the Deed and the wills) "gave rise to a trust" in favour of Mrs Barns and Mr Malcolm Barns and that, as a consequence, there was no property in the estate of Mr Barns which might be the subject of an order under the Inheritance Act.
[78] Undoubtedly whilst the nature and content of trust and contract are distinct, there is no dichotomy between them. Thus, as Mason and Deane JJ pointed out in Gosper v Sawyer: "the trust, particularly the resulting and constructive trust, represents one of the most important means of protecting parties in a contractual relationship and of vindicating contractual rights.” That statement has an added significance as an illustration of a fundamental point made by Viscount Radcliffe in Commissioner of Stamp Duties (Q) v Livingston when he said: "Equity in fact calls into existence and protects equitable rights and interests in property only where their recognition has been found to be required in order to give effect to its doctrines."
[79] The submission of the first respondent appears to involve alternative possibilities. The first is that the Deed on its proper construction was an immediate declaration of trust binding the assets of the two testators. The second assumes that there was no immediately effective declaration of trust but posits subsequent equitable intervention by reason of unconscientious conduct. Neither proposition should be accepted.
[80] There is no substance in a submission by which the relations between the parties to the Deed were translated from the level of contract to that of trust so as to bind the property of Mr Barns forthwith and in advance of his death. In Central Trust and Safe Deposit Co v Snider, Lord Parker of Waddington, for the Judicial Committee, said:
"A contract to devise a beneficial interest assumes an estate in the person who contracts sufficient to enable the contract to be performed, and it would be contrary to ordinary equitable principles to construe a promise to settle as a present declaration of trust."[19]
- [65]It follows from Barns that the mere execution of the wills, even containing a promise to leave specific property, did not involve a transfer of the beneficial ownership of the assets, and would require something more to create a present declaration of trust.
Trusts sub modo
- [66]A further argument raised in the written submissions for the appellant in the appeal was in support of a finding of the existence of what he described as a trust sub modo arising out of a promise to convey an interest in land. He contended this was in no way different from a promise to convey under a contract of sale. He submitted that the agreements in place created a trust, which also arose from partial completion of the contracts to transfer those individual properties.
- [67]The appellant submitted that a vendor of property is treated in all respects as a trustee: Lysaght v Edwards.[20] It was said by the appellant that the principle extends to create such a trust when property is said to be transferred by will.
- [68]The appellant referred to a number of High Court decisions Haque v Haque (No 2),[21] cited with approval in KLDE Pty Ltd v Commissioner of Stamp Duties;[22] Chang v Registrar of Titles,[23] Kern Corporation Ltd v Walter Reid Trading Pty Ltd,[24] Stern v McArthur,[25] and Tanwar Enterprises Pty Ltd v Cauchi[26] and to authorities in the Queensland Court of Appeal.[27]
- [69]The language of some of those authorities supports the proposition upon which the appellant relies, namely, that at the time of the entry into a valid contract of sale for land the position of the vendor becomes that of a trustee.
- [70]The position is not, however, quite so clear. In Lysaght v Edwards itself, Jessell MR went on to say:
In other words, the position of the vendor is something between what has been called a naked or bare trustee, or a mere trustee (that is, a person without beneficial interest), and a mortgagee who is not, in equity (any more than a vendor), the owner of the estate, but is, in certain events, entitled to what the unpaid vendor is, viz., possession of the estate and a charge upon the estate for his purchase money.[28]
- [71]Kitto J in Haque, referring to Lysaght v Edwards, explained that by the operation of equitable principles a vendor “had to an extent” transferred the beneficial ownership to the purchaser; with the result that for some purposes a vendor was in a position of trustee, though for some he was not.[29]
- [72]Mason J in Chang considered that:
It has long been established that a vendor of real property under a valid contract of sale is a trustee of the property for the purchaser.[30]
- [73]However, Barwick CJ in the same case did not consider that an unpaid vendor could be regarded as a trustee under the Trusts Act.[31] Jacobs J considered it doubtful whether a vendor under a contact of sale could properly be considered as a trustee within the meaning of the Trusts Act unless settlement had taken place and all that remained to be done was to transfer or convey the outstanding legal estate.[32]
- [74]Deane J in Kern[33] and Deane and Dawson JJ in Stern v MacArthur[34] considered it wrong to characterise the position of an ordinary unpaid vendor of land under an uncompleted contract of sale as that of a trustee. In their view, the purchaser would have an equitable interest in the land which reflects the extent to which equitable remedies are available to protect the purchaser’s contractual rights and the vendor would have obligations to the purchaser in equity, but the vendor would continue to have beneficial rights which would vary according to the circumstances.
- [75]The difficulty for the appellant on this ground is illustrated by a more recent New South Wales Court of Appeal decision in Golden Mile Property Investments Pty Ltd (in Liquidation) v Cudgegong Australia Pty Ltd.[35] There, in referring to the “General Principles”, the court said:
[98] The relationship between the vendor and purchaser at the moment of entry into a valid contract for sale of land has in the past been described in the terms of a trust. Thus, it has been said that, at that moment, “the vendor becomes in equity a trustee for the purchaser of the estate sold … [i]n other words, the position of the vendor is something between what has been called a naked or bare trustee, or a mere trustee (that is, a person without beneficial interest), and a mortgagee who is not, in equity (any more than a vendor), the owner of the estate”.
[99] Clearly enough, where one person holds land on trust for another, that other person would be regarded as having an equitable interest in that land. While a vendor of real property under a valid contract of sale may become a trustee of the property for the purchaser, there is a question as to the time when such a trust relationship arises and as to the precise character of that relationship. Until it is known whether the contract will be performed, the vendor is not in the position of a constructive trustee, although the vendor may be described as a trustee sub modo. That is to say, the vendor under an unconditional contract may be regarded as a trustee, conditionally upon nothing happening to prevent performance of the contract. The vendor may be regarded unconditionally as a trustee for the purchaser when the contract is performed by the purchaser by payment of the purchase price. When title is made out and the purchaser has paid the purchase price under a contract in respect of which the remedy of specific performance is available, the vendor becomes a constructive trustee of the property sold.
[100] However, the use of the language of trust to describe the respective positions of the vendor and purchaser has fallen out of favour. Where there are rights outstanding on both sides of a contract for the sale of land, the description of the vendor as a trustee tends to conceal the essentially contractual relationship that governs the rights and duties of the respective parties. While, in some sense, the equitable estate in the land passes to the purchaser, the vendor has a right to payment of the purchase price and has a charge or lien on that estate as security for payment of the purchase price, together with the right to retain possession of the land until the price is paid. The purchaser must either pay the purchase price or lose the equitable interest acquired on making the contract.[36]
- [76]It follows that this line of authority would not support the proposition that, upon the making of the agreements, the properties were held under trust for the purposes of the LTA.
- [77]There is a further factual distinction, and that is that, as the Commissioner points out, the children of the appellant could not be described as purchasers. The only payment made by them is by way of rent, and it is not suggested that this is a contribution to the purchase price. There is, we have found, a promise to convey the properties on the death of the appellant and his wife which are or would be enforceable in equity, but there has been no payment of a deposit by the children and no transfer or even partial transfer of the legal title.
- [78]This ground of appeal is rejected.
The “extended definition” under s 20 of the LTA and fiduciaries
- [79]The final issue, which is another that we need not decide having regard to what we have concluded above, concerns the assertion in ground 1 of the Notice of Appeal, that even if it ought not to have been held that there was an institutional constructive trust, there were other equitable rights arising by virtue of the fiduciary relationship which it is contended existed between the appellant and his children.
- [80]This argument regarding the notion of a trust relationship arising out of a fiduciary obligation was not developed before the learned Member below, and is only faintly touched upon in the appellant’s submissions here.
- [81]Reference was made to submissions in reply by the appellant to the proposition that the question is not whether the tribunal erred in law in failing to find that a fiduciary duty existed, but whether in fact such a duty existed. This leads to the contention that in such a relationship, there was an obligation to act in good faith which in some way established the existence of a trust.
- [82]In the appellant’s submissions, it was contended that the notion standing behind s 20 was that where a person was not entitled to use the land solely for their own interests, there was to be no aggregation of land ownership for the purposes of assessing taxable value. This was developed by the contention that the appellant was a fiduciary because he was “not entitled to ignore the interests of the other party”. In the alternative, if that submission were rejected, he contended that he was the trustee of the trust by analogy to circumstances which arise when there are contracts to leave specific property by will.
- [83]We are not persuaded that the language of s 20 is so wide as to contemplate the proposition that where it uses the expression “trustee of a trust”, it is referring to a person who has fiduciary obligations which might include the duty to act in good faith to a child to whom arguably a fiduciary relationship might exist. We therefore dismiss this ground of appeal.
- [84]In terms of the third category of potential trusteeship, the so-called extended definition, the appellant contended that the draftsperson’s use of the expression “trustee of the trust” cannot result in the statutory definition of “trustee” excluding fiduciary relationships. It was said there can be no reason of principle or policy for a distinction to be made between the meaning of “trustee” in s 20 and elsewhere. We do not accept that submission.
- [85]The reference to the words “of a trust” in our view exclude the possibility of other kinds of relationships falling short of relationships constituting another as a “trustee of a trust”.
Taxation issues in relation to income
- [86]The appellant informed the tribunal below, including in his written submissions, and it accepted as evidence, that he declares the rent paid by the children for each property in his personal income tax returns and has set off the net loss on the properties, after taking into account expenses of owning them (such as borrowing costs, insurance, rates and depreciation) against his other personal income.
- [87]The learned Member did not specifically advert to the significance of this evidence in his analysis of whether the appellant held the properties on trust for his respective children. It was submitted on behalf of the respondent Commissioner that the manner in which he has treated that rental income for taxation purposes is relevant to that analysis.
- [88]The Commissioner referred to the fact that, for the purposes of Commonwealth income tax legislation, the appellant has submitted to a position by which he is to be treated as the legal and beneficial owner of each of the three properties which he has rented out in his personal capacity at a net loss, and that he was entitled to and did deduct that loss against his other personal income. Further, reference was made to the fact that simultaneously he contends that for the purposes of the LTA, he was not so beneficially entitled, but rather the beneficiaries were his three children.
- [89]Reference was made to the approach of the Full Court of the Family Court in In the Marriage of Dawes[37] in which the court suggested that litigants could not have their cake and eat it too; to represent one thing to the Commissioner of Taxation but come to court and say another.
- [90]We accept that it is undesirable that there be a situation in which an appellant expressly or impliedly represents one set of circumstances to the Commissioner of Taxation whilst at the other reserving a different position which suits a different advantage for the purposes of the LTA.
- [91]In response, the appellant contends that it was irrelevant that he generated rental income and derived a net personal loss from the properties except to the extent that that derivation supported the existence of a fiduciary position. Furthermore, the appellant seemed to suggest that there was some parallel with circumstances in which trustees are entitled to derive a benefit from being a trustee. But, of course, the benefit here is not remuneration from the administration of the trust, but rather the income derived ordinarily from ownership of the legal title to a residential lettable property.
- [92]The appellant argues that there is no evidence that he has made any representations that he is the beneficial owner of the three properties in a way inconsistent with his other arguments. That contention must be rejected because it is clear that such conduct does involve the making of an inconsistent representation as to the state of affairs associated with ownership of that property, to that which he contends for in this appeal. The appellant has not suggested that he filed separate tax returns as trustee, and his position appears to be that he sees himself as entitled to offset trust losses associated with ownership against his ordinary non-trust general income.
- [93]Notwithstanding the prospect that the appellant has expressly or impliedly represented one set of circumstances to the Commissioner of Taxation and another to the Commissioner of State Revenue, we do not see any need to reconcile those two positions by adopting one representation as more accurate than the other. If indeed any misrepresentation has been made to the Commissioner of Taxation, which has permitted a taxpayer to offset against personal services income, losses derived in a different capacity by reason of holding property as trustee for another person, that is a matter for the Commissioner of Taxation to enquire into and take such steps as is considered necessary in those circumstances. In the result, we do not consider this issue to be one which is of assistance in resolving the issues which arise for determination in this appeal.
Conclusion
- [94]In summary, we find that the properties were held on constructive trust; either by way of proprietary estoppel or common intention. We reject the other arguments relied upon by the appellant. In the circumstances, we uphold the appeal, set aside the respondent’s assessments, and remit the matter to the Commissioner for any assessment of land tax which might be made having regard to the findings we have made in this appeal.
Footnotes
[1] Collector of Customs v Pozzolanic Enterprises Pty Ltd (1993) 43 FCR 280, 287.
[2]Muschinski v Dodds (1985) 160 CLR 583.
[3] Giumelli v Giumelli (1999) 196 CLR 101 (Giumelli).
[4] Per Brennan CJ in Autodesk Inc v Dayason (No 2) (1993) 176 CLR 300, 309-10 quoting University of Wollongong v Metwally (No 2) (1985) 59 ALJR 481, 483.
[5] Connecticut Fire Insurance Company v Kavanagh [1892] AC 473.
[6] Giumelli v Giumelli (1999) 196 CLR 101.
[7] [2016] QCAT 150.
[8] (2001) 109 FCR 120.
[9] (1985) 160 CLR 583, 615.
[10] (2001) FCR 120, 125-6, [13].
[11] (1985) 2 Qd R 292.
[12] Per Gleeson CJ, McHugh, Gummow and Callinan JJ.
[13] (2014) 251 CLR 505.
[14] (1985) 2 Qd R 292, 300.
[15] [1977] 2 NSWLR 685.
[16] See Hohol v Hohol [1981] VR 221, 225; Cooke v Cooke [1987] VR 625; Green v Green (1989) 17 NSWLR 343, 355; Rasmussen v Rasmussen [1995] 1 VR 613, 616; Carruthers v Manning [2001] NSWSC 1130, [121]; Irvine v Scaysbrook [2005] NSWSC 565, [11].
[17] (2003) 214 CLR 169 (Barns).
[18] Ibid.
[19] Ibid, [77]-[80].
[20] (1876) 2 Ch D 499.
[21] (1965) 114 CLR 98, 124 (Haque).
[22] (1984) 155 CLR 288, 296.
[23] (1976) 137 CLR 177.
[24] (1987) 163 CLR 164.
[25] (1988) 165 CLR 489, 521.
[26] (2003) 217 CLR 315, 330-31.
[27]Bunny Industries Ltd v FSW Enterprises Pty Ltd (1982) Qd R 712; Zabart Pty Ltd v McKay [2002] QCA 280; Road Australia Pty Ltd v Commissioner of Stamp Duties [2001] 1 Qd R 327.
[28] (1876) 2 Ch D 499, 506.
[29] (1965) 114 CLR 98, 124.
[30] (1976) 137 CLR 177, 184.
[31] Ibid, 182.
[32] Ibid, 189.
[33] (1987) 163 CLR 164, 191.
[34] (1988) 165 CLR 489, 522.
[35] (2015) 89 NSWLR 237.
[36] Ibid, [100].
[37] [1989] 98 FLR 375, 390.