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Lygon Nominees Pty Ltd v Commissioner of State Revenue [2005] VSC 247 (13 July 2005)
Last Updated: 13 July 2005
IN
THE SUPREME COURT OF VICTORIA
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Not Restricted
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AT
MELBOURNE
COMMERCIAL
AND EQUITY
DIVISION
VICTORIAN TAXATION
APPEALS
No.
9557 of 2003
No. 9558 of 2003
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(ACN 004 911 942)
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v
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COMMISSIONER OF STATE
REVENUE |
Respondent
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JUDGE:
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WHERE
HELD:
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Melbourne
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DATE
OF HEARING:
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CASE
MAY BE CITED AS:
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Lygon
Nominees Pty Ltd v Commissioner of State Revenue |
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LAND TAX
– Trustee the registered proprietor of land held under 12 trusts
– Land held under 11 discretionary trusts and 1 unit
trust – Whether
trustee is “the owner of different lands in severalty for different
beneficial owners” –
Land Tax Act
1958 (Vic), ss 3, 6, 8, 51 and 52
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APPEARANCES:
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Counsel
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Solicitors
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For the Appellant
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Mr B Shaw QC
Mr P Zappia
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L F Sartori
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For the Respondent
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Mr J Merralls QC
Mr C Horan |
Solicitor to the Commissioner of State Revenue
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1 These two
appeals concern the land tax payable by the applicant (“the
taxpayer”) in its capacity as trustee of 12 separately-constituted
trusts.
All of the trusts are connected in some way with members of the Liuzzi family.
Both appeals rely on the same facts and raise
a common question for
determination.
2 Appeal No
9557 of 2003 concerns an assessment by the respondent (“the
Commissioner”) dated 9 August 2002 in respect of
land held as at 31
December 1999 (“the 2000
assessment”).
Appeal No 9558 of 2003 concerns an assessment dated 24 June 2002 in respect of
the subsequent year (“the 2001
assessment”).
The 2000 and 2001 assessments assessed the taxpayer to land tax on the basis of
the total value of all the land held by
the taxpayer as trustee of the 12 trusts, as at midnight on 31 December 1999 and
31 December 2000 respectively (“the
assessment dates”).
3 The taxpayer
objected to the 2000 and 2001 assessments on two grounds, only one of which is
pursued
here.
The taxpayer argued that the lands were held in trust for “different
beneficial owners” and should therefore have been
assessed separately, in
accordance with s.52 of the Land Tax
Act 1958 (the
“Act”).
4 The
Commissioner determined that the exception in s.52 did not apply, as the
taxpayer did not own the land in trust for “different
beneficial
owners”. In disallowing the objection, the Commissioner relied upon the
decision of this court in Commissioner of
State Revenue v Famajohn Nominees Pty
Ltd
(“Famajohn”). In that case it was held that members of a
class of objects of a discretionary trust or a power of appointment were not
“beneficial
owners” within the meaning of s.52(1).
5 Before examining
the competing legal arguments, it is necessary to briefly describe the various
trusts of which the taxpayer was the
trustee. There was no dispute about these
facts.
6 As at
the assessment dates, the taxpayer was the registered proprietor of various
lands in Victoria which it held on trust for the
12 separate trusts. Each of
the trusts was established by a trust
deed.
7 Each
trust had a trust fund which comprised the initial settled sum and other
property transferred to the trustee to hold upon trust.
In each case, land
formed part of the trust fund as at the assessment dates.
8 One of the
trusts was a unit
trust.
The remaining trusts were all discretionary
trusts.
9 In
very broad terms, the trust deeds for the discretionary trusts all had the
following common features:
(a) in relation to
income:
(i) the trustee had a discretionary power to
pay, apply or set aside the net income of the trust fund in each year for the
benefit
of a specified class of objects; and
(ii) the
trustee had a discretionary power to accumulate
income;
(b) in relation to
capital:
(i) the trustee had the power to advance
capital to or for the benefit of any beneficiary prior to the vesting day or
termination
date, as the case may be (“vesting day”);
and
(ii) on the vesting day, the trustee had a
discretionary power of appointment among a specified class of objects, in
default of which
the fund was held on trusts for other classes of
objects.
10 Further
undisputed details of the trusts, including the various classes of objects, are
contained in the schedule hereto.
11 Each owner of
land is liable to pay land tax based on the total unimproved value of all land
owned by it at midnight on 31 December
in the preceding
year.
An owner includes any person entitled to any land for any estate of freehold in
possession and includes every person who by virtue
of the Act is deemed to be an
owner.
Tax is payable at the rates specified in the second schedule to the
Act.
12 The
key provisions here are ss.51 and 52, which are in the following terms:
“51. Equitable
owners to be liable as if legal owners subject to deduction of any tax paid by
legal owner
Subject
to the other provisions of this Act, the owner of any equitable estate or
interest in land shall be assessed and liable in
respect of tax as if the estate
or interest so owned by him was legal, but there shall be deducted from the said
tax so payable by
him in respect of that estate or interest the amount of any
tax paid in respect thereof by the legal owner of the land.
- Trustees
to be liable as if beneficially
entitled
(1)
Every person in whom land is vested as a trustee, shall make returns and be
assessed and liable in respect of the tax as if he
were beneficially entitled to
such land, save that when he is the owner of different lands in severalty in
trust for different beneficial
owners who are not, by reason of joint occupation
or otherwise, liable to be jointly assessed for tax in respect of the same, the
tax so payable by him shall be separately calculated and assessed in respect of
each of those lands; and save also that when a trustee
is also the beneficial
owner of other land, he shall be separately assessed in respect of that land,
and of the land of which he
is a trustee, unless by reason of joint occupancy or
for any other reason he is liable to be jointly assessed independently of this
section.
(2)
Provided that any trustee who has paid any tax under this section shall be
entitled to be repaid the amount he has so paid by
the owner of any equitable
estate or interest in land who is also liable to pay such tax and in addition
shall have a right to be
recouped out of any of the trust property in his hands
subject to the same or the like trusts as the land on which the tax is
charged.”
13 The burden of
proving that the assessments are excessive lies upon the
taxpayer.
14 There is no
dispute that the taxpayer was the owner of “different lands” within
the meaning of s.52(1). The question
is whether the lands were held in
severalty in trust for “different beneficial owners”.
“Beneficial owner”
is not a term defined in the
Act.
15 The
taxpayer says that each of the trusts did have “beneficial owners”
for the purposes of s.52 and the different lands
were held “in severalty
in trust for different beneficial owners”. Accordingly, the taxpayer
ought to have been assessed
separately in respect of the lands which it held for
each trust, and not on an aggregated basis.
16 The
Commissioner says that none of the discretionary trusts had “beneficial
owners” at the relevant times. Even if the
unit trust had beneficial
owners, there were no beneficial owners of the discretionary trusts and
therefore the lands were not held
on trust for “different beneficial
owners.”
17 In
Famajohn,
Balmford J held that the expression “beneficial owner” in
s.52 could be equated with the expression “owner of any
equitable estate
or interest” in s.51. In that case, the trustee held one piece of land as
bare trustee for an individual
beneficiary and another piece of land as the
trustee of a discretionary trust. While it was not in issue that the
beneficiary was
the beneficial owner of the first-mentioned piece of land,
Balmford J held that there was no “beneficial owner” of the
land
held subject to the discretionary trust. Accordingly, the trustee did not hold
the different lands “in trust for different
beneficial owners”
within the meaning of s.52 and assessment should be on an aggregated
basis.
18 The
Commissioner says Famajohn is
correct,
not distinguishable and ought to be followed unless the court is convinced that
it is clearly
wrong.
Accordingly, for the purposes of the proviso in s.52, there were no
“beneficial owners” of any of the lands held by the
taxpayer subject
to the discretionary trusts.
19 The
taxpayer says Famajohn was wrongly
decided, alternatively, is relevantly distinguishable as there were no
“takers in default” in that case.
The taxpayer says that Balmford J
did not provide any reasons for adopting an approach which was contrary to the
well-established
principle of statutory construction that where the legislation
employs different words within an Act, it intends those words to be
given a
different
meaning.
20 The
taxpayer identifies three categories of persons who it says may be regarded as
the “beneficial owners” of the lands
held subject to the
discretionary trusts:
(a) the “takers in default” of the fund
as at the vesting day;
(b) the objects of the powers of appointment (eg
the general beneficiaries); and
(c) the objects of the powers of appointment
together with the takers in default.
The Commissioner says that none of those classes of
persons has an interest in the land which is sufficient to fall within the
meaning
of “beneficial owners”.
General construction
issues
21 Section 3 of
the Act relevantly defines “owner” as meaning, unless inconsistent
with the context or subject matter, “every
person entitled to any land for
any estate of freehold in possession”. The taxpayer says that the s.3
definition cannot apply
in relation to s.51, because s.3 talks of the
“owner of an estate” and s.51 talks of an “owner of any
equitable
estate or
interest.”
22 The
Commissioner says that at least where the land is vested in a trustee as
registered proprietor, in order to be a “beneficial
owner” of that
land for the purposes of s.52, a person must have an interest that amounts to an
“equitable” entitlement
to an estate of freehold in possession.
23 Even if
s.52 is capable of application in relation to estates or interests vested in a
trustee other than an estate of freehold in
possession, a person can only be
“beneficial owner” of any such estate or interest in circumstances
where that person
enjoys the estate or interest “in
possession”.
24 I
accept that the expression “beneficial owner” in the context of
revenue legislation has not always been equated with
“equitable
owner” in the technical sense in which the term is used in
equity.
Obviously, it is necessary to have regard to the specific legislation in each
case.
25 Section
51 provides that “the owner of any equitable estate or interest in
land” shall be assessed and liable as if the
estate or interest was legal,
subject to the deduction of any amount of tax paid by the legal owner of the
land. The heading to
that section refers to such persons as “equitable
owners”.
26 I
agree with Balmford J in Famajohn that
it is consistent with the scheme of the Act that the term “beneficial
owner” in s.52 should be construed as having
the same meaning as
“the owner of any equitable estate or interest in land” in
s.51.
In other words, the term contemplates beneficiaries who may be capable of being
assessed to land tax in respect of their equitable
estate or interest pursuant
to s.51, and who may be liable to reimburse the trustee under s.52(2).
27 Thus,
where different beneficiaries under different trusts hold equitable estates of
freehold in possession in different lands, at
least two consequences will
follow: the trustee must be separately assessed under s.52 in respect of each of
those lands, and each
of the beneficiaries will be liable to be assessed under
s.51.
Presumed purpose
28 The taxpayer
says that the expression as it appears in s.52 should be construed broadly, so
as to apply to the interests held by objects
of commonly used trusts, such as
unit trusts and discretionary trusts. It says that such an approach would
promote the purpose evident
behind ss.51 and 52, which is to impose land tax on
individual trusts, treating them as entities, and to avoid the aggregating
effect
of s. 8(1) for trustees who are trustees of more than one
trust.
29 The
taxpayer also says that the Commissioner’s interpretation is likely to
lead to all sorts of problems which cannot have been
intended by parliament, a
type of “floodgates argument”. For example it is said that a
solicitor in a suburban practice
or a trustee
company:
“is likely to be the trustee of lots
of trusts and lots of deceased estates, and many of them will own land and many
of them
will be subject to discretionary trusts. If [Balmford J in
Famajohn] is right, then that suburban
solicitor trustee will be liable to aggregation of both lots of land held on
discretionary trusts,
despite the fact that one of them was set up by the Jones
family who lived in Toorak who’d never heard of the Smith family
who lived
in Prahran, and they had absolutely nothing to do with one
another.”
30 Whilst
it may be accepted that solicitors and trustee companies may well be the
trustees of numerous trusts and estates, it seems
likely that most of those
trusts or estates will not be discretionary in nature. The very nature and
extent of the powers bestowed
upon the trustee of a discretionary trust, and the
purposes behind the establishment of discretionary trusts, are such that the
trustee
is unlikely to be a person whose discretion may be exercised amongst the
trust objects without regard to the wishes from time to
time of the settlor,
appointor or guardian.
31 There is
no extrinsic material, such as reports of parliamentary proceedings or law
reform bodies, which sheds any light on the purpose
of or intention behind the
relevant provisions. This is perhaps not surprising, given that s.52(1) has not
been amended since its
enactment in the Land
Tax (Consolidating) Act
1928.
32 No
foundation is given for the “evident purpose” asserted by the
taxpayer, and I agree with the Commissioner that it is
no more than an unfounded
gloss on the words of the statute.
Trustee’s right of
recoupment
33 The taxpayer
says that its contentions concerning the application of s.52 are supported by
the operation of the section as a whole,
including the provisions dealing with
recoupment by the trustee of tax paid by
it.
34 Section
52(2) provides that a trustee who holds land on trust shall have the right to
recoup any liability for land tax, inter alia,
out of the trust property. The
taxpayer says that this gives statutory recognition to the trustee’s
equitable right of indemnification
out of trust assets for expenses properly
incurred in the administration and execution of the
trust.
35 The
taxpayer argues that its interpretation of the expression “beneficial
owner” would enable it as trustee to recoup
its tax liability from the
trust property which it holds for the several trusts, as that liability could be
said to arise from the
proper administration of each trust respectively. It
says that the Commissioner’s interpretation of s.52(1) would frustrate
the
operation of s.52(2), because it has the effect of imposing on the taxpayer an
additional (higher) tax liability which cannot
be recouped from the trusts for
which it acts as trustee on the application of the ordinary principles
concerning the trustee’s
right of
indemnification.
36 I
do not agree that the Commissioner’s construction of s.52(1) would
frustrate the operation of s.52(2) or prevent the recoupment
by the trustee of
its land tax liability out of the trust assets. In addition to any rights of
indemnification expressly conferred
by the trust deed, s.52(2) confers on a
trustee who has paid any tax under s.52 an additional right “to be
recouped out of
any of the trust property in his hands subject to the same or
like trusts as the land on which the tax is charged.”
37 The
statutory right of recoupment from trust funds is separate to the right of
reimbursement from the owner of any equitable estate
or interest which is also
conferred by s.52(2), and is not limited by equitable principles.
The discretionary trusts
38 The term
“discretionary trust” is a matter of usage not
doctrine.
It is commonly used to describe a “species of express trust where the
entitlement of beneficiaries to income, to corpus or
both is contingent upon
their selection by the trustee or other designated person, whether on one
occasion or from time to time,
from a nominated
class”.
39 The
Commissioner says that to require that there must be a “beneficial
owner” of property that is held subject to a discretionary
trust is to
adopt the fallacy identified in Commissioner
of Stamp Duties (Qld) v
Livingston,
in that it:
“assumes mistakenly that for all
purposes and at every moment of time the law requires the separate existence of
two different
kinds of estate or interest in property, the legal and the
equitable... What matters is that the court will control the [trustee]
in the
use of his rights over assets that come to him in that capacity, but will do so
by the enforcement of remedies which do not
involve the admission or recognition
of equitable rights of property in those assets. 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.”
40 I
was referred to the decision of the High Court in
Glen v Federal Commissioner of Taxation
and in particular the judgment of Griffith CJ:
"In my opinion the term 'estate in possession' is used in
the Land Tax Assessment Act in the
sense explained by Mr Butler. This is not only the natural, but the only just,
interpretation that can be put on the words.
For the tax is an annual tax, and
the "owner" of the land is the person who is in the present enjoyment of the
fruits which presumably
afford the fund from which it is paid.
The respondent's argument is based on the assumption that
whenever the legal estate in land is vested in the trustee there must be
some
person other than the trustee entitled to it in equity for an estate of
freeholding possession so that the only question to
be answered is who is the
owner of that equitable estate. In my opinion, there is a prior enquiry namely,
whether there is any such
person. If there is not, the trustee is entitled to
the whole estate in possession, both legal and
equitable....
41 It is
well-established
that there may be situations in which property is held on trust, but where at
least for a time there is no person entitled in equity
to that property, for
example:
(a) Property
held by the executor of an unadministered estate;
(b) Property
held on trust for accumulation during a stipulated period, with a power of
appointment at the end of that period;
(c)
Property vested in a trustee in bankruptcy subject to an obligation to realise
the assets and distribute them pro rata among
creditors and to the extent of any
surplus to thereafter hold the assets for the bankrupt after payment of the
costs of administration;
(d) Property held on trust for charitable purposes;
or
(e) In
certain cases, property held subject to a discretionary trust where there is no
beneficiary with an interest in the trust property.
42 Accordingly,
as a matter of principle, it is not necessary for the lands which are held
subject to the discretionary trusts to have
had a “beneficial owner”
as at the assessment dates.
The interest of “takers
in default”
43 Each of the
trusts nominated persons who were “takers in default” of appointment
in relation to capital as at the relevant
vesting day. Some also nominated
“takers in default” in relation to income.
44 The
taxpayer argues that takers in default have an equitable interest in the trust
property, whether it is vested or contingent.
The interest is defeasible or
subject to divestment upon the trustee exercising his or her powers of
appointment under the trust
deed.
45 In support
of this submission, the taxpayer’s counsel relied inter alia upon
Commissioner of Succession Duties (SA) v
Isbister,
where Williams J said:
“A similar position would arise where there is a trust
in default of appointment. Until the exercise of the power, the donee
who took
in default of appointment would be entitled to the property. A release of the
power of appointment would not create a fresh
trust in default of appointment.
His already existing estate would become indefeasible because it would no longer
be liable to be
defeated. In that case, as in the present case, the increase in
commercial value would arise through an event happening which operated
upon an
already existing interest to give it added value. It would simply remove a blot
on the title. It would not substitute a
new and more valuable interest in lieu
of an interest which previously existed.”
46 The taxpayer
also says that
Famajohn is
distinguishable in that there were no “takers in default” in that
case. The Commissioner’s senior counsel, Mr
Merralls QC, informed me that
he appeared in
Famajohn and his
recollection was that there were takers in default in that case. It is not
apparent from the reasons for decision in
Famajohn that the parties addressed the
position of takers in default, or that her Honour was asked to consider any
issue arising out of their
existence or non-existence in that case.
47 Given the
provisions of the trust deeds, it is necessary to consider separately the
position of takers in default in relation to income
and
capital.
48 With
the exception of the Fredfonz and Fredmarghi Trusts, none of the discretionary
trusts provides for the distribution of income
in default of appointment. In
such circumstances, the trustee must either exercise the power to appoint one or
more beneficiaries
as the recipient of some or all of the net income, or must
exercise the power to accumulate income. In other words, subject to the
power
to accumulate, the power to distribute net income to beneficiaries is a trust
power which must be exercised, although the trustee
retains a discretion as to
the manner in which it is exercised. With the exception of the Fredfonz and
Fredmarghi Trusts, there
are no “takers in default” in respect of
income.
49 Each trust
deed contains a power of appointment in relation to capital as at the vesting
day, and provides for the “takers in
default” of any such
appointment. However, the taxpayer’s contentions do not identify the
relevant “takers in
default” who are said to have an equitable
interest in the trust property and thereby to be “beneficial owners”
of that property. I agree with the Commissioner that:
(a) The
first category identified in most of the deeds is such of the primary
beneficiaries as shall be living as at the vesting day,
or the living children
of any primary beneficiary who dies prior to the vesting day. It is likely that
this class of persons will
not be closed before the vesting day (including as at
the assessment dates). Accordingly, it will not be possible at any given time
to identify the persons who will fall within this category at the vesting day.
New primary beneficiaries may be born, and existing
primary beneficiaries may
die before the vesting day.
(b) Furthermore,
the trust deeds contemplate that the above category may not effectively dispose
of the whole of the trust fund and
make further provision for the distribution
of capital to persons (other than settlor) who would be entitled to the estate
of the
appointer if he died intestate or, if there are no such persons, upon
trust for such charitable purposes as the trustee may determine.
It is those
provisions which may be regarded as specifying the ultimate “takers in
default”.
50 I accept for
present purposes that the members of a class entitled in default of appointment
have vested but defeasible interests
in the subject matter of the
trust.
However, where all members of that class are not yet in existence or are not yet
ascertained, it is not possible to identify the
persons who will have an
interest in the trust fund at the vesting day. Further, in the present case,
there may be no such persons
at the vesting day, in which case the trust fund
will be held on trust for charitable purposes. Accordingly, the class of
persons
who take in default of appointment cannot be regarded as
“beneficial owners” within the meaning of
s.52.
51 In
addition, whatever equitable interest might be held by the “takers in
default”, it is vested in interest and not in
possession. An interest
will be vested in possession when it enables the holder to claim now whatever
may be the subject of the
interest.
52 The future
interests of the “takers in default” do not make those persons
“beneficial owners”. The term “beneficial
owner” should
be construed as requiring “the right at least to deal with the property as
one’s
own”.
The class of persons who will comprise the “takers in default” at
the vesting day clearly does not have any such right.
The interest of objects of a
power of appointment
53 The taxpayer
says that the objects of discretionary trusts, other than the takers in default,
had an equitable interest in the trust
property in “a broad sense”.
Those objects had a right, recognised and enforceable in equity, to have the
trust duly
administered in accordance with the terms of the trust
deed.
They were entitled to take legal proceedings to prevent the taxpayer from
disposing of the lands which it held on trust to persons
outside the range of
objects designated in the trust deed. Moreover, the trustee owed a fiduciary
duty to those objects as to the
manner in which it exercised its powers of
appointment including in determining whether or not to exercise the
power.
54 The
objects of discretionary trusts undoubtedly have such rights, which are choses
in action. But can such rights be regarded as
an interest in trust property in
the relevant sense?
55 The
taxpayer says that a right such as the right to due administration is a right
which is referrable and relates to trust
property.
It can be enforced against anyone to whom the trust property may come other than
a bona fide purchaser for value. Accordingly, it
is said that the right
represents an equitable interest in the land which is sufficient to confer upon
those objects the status of
“beneficial owners” within the meaning
of s.52.
56 In my
opinion, the reference in s.52 to “beneficial owners” does not
extend to the holders of any equitable interest in
trust property in “a
broad sense”. It requires a proprietary interest in the relevant
land.
57 The
members of the class of objects at any given time do not have, even
collectively, an entitlement to the net income of the fund.
Because the class
is not closed, it is possible that another member may come into existence before
a reasonable time for the distribution
of the accrued income has
elapsed.
Further, and in any event, the trustee has a power to accumulate income.
58 Neither
the right to due administration of the trust nor the fiduciary obligations owed
by the trustee is capable of making the object
of a power of appointment into a
“beneficial owner” of the subject matter of the trust. The right of
an object to take
legal proceedings to prevent a disposal of income or capital
by the trustee to persons outside the designated objects does not involve
the
assertion of a proprietary right by the object and does not require the
conclusion that the object has a proprietary interest
in particular assets
within the fund or is a “beneficial owner” of such
assets.
59 There
is another way in which the taxpayer argues that the objects of a discretionary
power or a mere power may be said to have an
interest in the trust property such
as to constitute them “beneficial owners” for the purpose of s.52.
As a class, the
objects of a trust power or the objects of a mere power together
with the takers in default (if all can be identified and are
sui juris) are entitled to combine
to terminate the trust and call for its
distribution.
The objects, as a class, may be said to be beneficially entitled to the trust
property and as a class are therefore the “beneficial
owners” of the
property.
60 However,
the Saunders v Vautier principle is
capable of applying only where all the objects are ascertained and are
sui juris and unanimously consent to
the termination of the trust. In practice, such a situation may often be
impossible to achieve because
- as is the case with the discretionary trusts in
this case - the class of objects is so widely described as to prevent
identification
or, even if the present members are identified, the class is not
closed to future members. Further, in this case, the class of objects
includes
charitable purposes, and is likely to include infants both presently existing
and those yet to be
born.
61 Here,
there are no identifiable persons who are able collectively to exercise a right
to terminate the trust and to require the taxpayer
to transfer the trust
property to them. The objects “as a class” cannot be regarded as
the “beneficial owners”
of the property within the meaning of
s.52.
62 The taxpayer
says that the objects of the Thornbury Unit Trust were “beneficial
owners” within the meaning of s.52. The
nature of their respective
interests in the trust property was such as to constitute them “beneficial
owners” even if
that expression is to be construed narrowly so as to mean
the “owners of any equitable estate or interest”.
63 Consistently
with the reasoning of the Court of Appeal in
Arjon Pty Ltd v Commissioner of State
Revenue, I accept that the unit holders in the Thornbury Unit Trust
collectively held the full “beneficial interest” in the trust
property and could therefore be regarded as the equitable owners of the
property.
64 However,
even though they were the “beneficial owners” of the land held as
trustee of the Thornbury Unit Trust, there
were no “beneficial
owners” of any of the lands held subject to the discretionary trusts.
Accordingly, the lands were
not held on trust for “different beneficial
owners”.
65 This
result is analogous to the facts in
Famajohn, where the taxpayer held one
piece of land as bare trustee for a beneficial owner, and the other piece of
land as trustee of a discretionary
trust.
“Different”
beneficial owners
66 Given my
findings that the discretionary trusts had no “beneficial owners” at
the assessment dates, it is not necessary
for me to determine whether the lands
held by the taxpayer in respect of each trust were held for
“different” beneficial
owners.
Proposed orders
67 For these
reasons, I propose to order that the appeals be dismissed with costs.
----
SCHEDULE
OF TRUSTS
68 The Liuzzi San
Paulo Trust, the San Marco Trust, the Prince Trust and the Polenta Trust were
settled by trust deeds which contained
similar terms (“the four common
trusts”). Each had a vesting day of 30 June 2054 or such earlier date as
the trustee
may
appoint.
69 The
“primary beneficiaries” were:
“All the children of all present and future children
of Fernando Liuzzi and Maria Liuzzi whether living at the date of this
deed or
born hereafter.”
70 The
“general beneficiaries” were:
(a) the primary beneficiaries;
(b) the brothers, sisters, spouses and children of
the primary beneficiaries and the spouse and children of such brothers and
sisters
and the spouses and children of the children of the primary
beneficiaries;
(c) any body corporate in which any beneficiary owns
or holds a beneficial share or in which the trustee of any trust in which any
beneficiary has any interest, owns or holds a beneficial share, whether or not
such corporation or trust is in existence as at the
date of deed;
(d) the trustee (in his capacity of trustee) or any
trust in which any beneficiary has an interest whether or not such trust is in
existence as at the date of the deed;
(e) any relative by blood or marriage of Fernando
Liuzzi who the trustee may at any time nominate in writing to be a general
beneficiary;
(f) such additional persons, corporations and trusts
(if any) as are named and described in the fifth part of the schedule as
additions
to the class of general beneficiaries.
71 Each of the
four common trusts had different groups of people named as additional general
beneficiaries in the schedule. The Liuzzi
San Paolo Trust also had additional
general beneficiaries (for income, not capital) added by a supplementary
deed.
72 Clause 3(i)
of each trust deed conferred a power upon the trustee in each accounting period
until the vesting day to distribute:
“the whole or such part (if any) as he shall think fit
of the net income of the trust fund of that accounting period for such
charitable purposes and/or for the benefit of all or any one or more exclusive
of the other or others of the general beneficiaries
living from time to time in
such proportions and in such manner as the trustee in his absolute discretion
shall think fit.”
73 Clause 3(ii)
of each trust deed permitted the trustee to accumulate the whole or any part of
the income of the trust fund and add
such income to the trust
fund.
74 Clause 4
of each trust deed conferred a power of appointment upon the trustee to the
following effect, namely that on the vesting
day, the trustee stood possessed of
the trust fund:
“upon trust for such charitable purposes and/or for
such of the general beneficiaries for such interests and in such proportions
and
for one to the exclusion of the other or others as the trustee may
appoint.”
75 Clause 4
also made provision for takers in default of appointment. In particular, in
default of any appointment by the trustee, the
trustee stood possessed of the
trust fund on the vesting day upon trust:
(a) for such of the primary beneficiaries as shall be
living on the vesting day and if more than one as tenants in common in equal
shares absolutely;
(b) and in the event that any part of the trust fund
was not validly disposed of for the person or persons who would be entitled to
the estate of the appointor first described in the eighth part of the schedule
[Fernando Liuzzi] pursuant to law of Victoria if the
said appointor had died on
the vesting day intestate and a widower and domiciled in Victoria and as if the
settlor had predeceased
the intestate and if there be no such persons upon trust
for such charitable purposes as the trustee may determine.
76 Clause 15
permitted the trustee with the written consent of the appointor to revoke, add
to or vary provisions of the trust deed and
to declare any new or other trusts
or powers concerning the trust fund or any part thereof.
The Liuzzi Mount Trust (No
2)
77 The Liuzzi
Mount Trust (No 2) was settled by a deed which contained similar terms to the
four common trusts but differed in the following
relevant respects:
(a) the vesting day was 30 June 2070:
(b) the “primary beneficiaries”
were:
“Fernando
Liuzzi and the spouse from time to time of Fernando Liuzzi and all the children
present, future, natural and adopted
of Fernando Liuzzi.”
(c) the “general beneficiaries” were:
“the
primary beneficiaries, the spouse from time to time, widows, widowers and
descendants of any of the primary beneficiaries,
any eligible corporation or
eligible trust, any eligible relative and any institution, body or organisation
from time to time established
in Australia and which is or are charitable at
law, any object or purpose in Australia which is charitable at law and the
additional
person or persons named and described in the fifth part of the
schedule but shall exclude the excluded persons unless specifically
named in the
fifth part of the schedule.”
78 No additional
“general beneficiaries” were named in the schedule.
79 The Doncaster
Trust was settled by a deed which contained similar terms to the four common
trusts but differed in the following relevant
respects:
(a) the vesting day was “on the death of the
last survivor of the said Ferdinando Liuzzi and Maria Liuzzi and their said
children
or such earlier date as the trustee may appoint;
(b) the “primary beneficiaries”
were:
“the
grandchildren of Ferdinando Liuzzi and Mary Liuzzi whether living at the date of
this deed or born thereafter.”
(c) the classes of “general
beneficiaries” included the classes that were identified for the four
common trusts as well
as any relative by blood or marriage of the primary
beneficiaries.
80 The following
additional persons were added to the classes of “general
beneficiaries”:
“the said Fernando Liuzzi and Mary Liuzzi and their
children whether living at the date of this deed or born thereafter.”
The Liuzzi (Torquay) Family
Trust
81 The Liuzzi
(Torquay) Family Trust was settled by a deed which contained similar terms to
the four common trusts but differed in the
following relevant respects:
(a) the vesting day was “the date of the death
of the survivor of the said Fernando Liuzzi and Maria Liuzzi”;
(b) the “primary beneficiaries”
were:
“Fernando
Liuzzi and Maria Liuzzi both of 71 Mount Street Eaglemont and the children of
Fernando Liuzzi and Maria Liuzzi.”
(c) the “general beneficiaries” included
the same classes as those set out in the Liuzzi Mount Trust (No 2) Deed.
82 No additional
“general beneficiaries” were named in the schedule.
83 The F L Perth
Trust was settled by a deed which nominated as vesting day “the last day
within the perpetuity period or such
earlier date as the trustee may with the
prior written consent of the appointor in his discretion in writing
appoint.”
84 The
“primary beneficiaries” were:
“Maria Liuzzi, Alfonso Liuzzi, Elena Liuzzi, Renato
Liuzzi, Margherita Liuzzi and the children whether now living or born hereafter
of any person named in this schedule and spouse for the time being of any person
named or described in this part of the schedule.”
85 The classes of
“general beneficiaries” were the same as those set out in the Liuzzi
Mount Trust (No 2) Deed and no additional
persons were named as general
beneficiaries in the
schedule.
86 The
“income beneficiaries” were:
“the primary beneficiaries, the general beneficiaries
and the additional persons (if any) named and described in the sixth part
of the
schedule but shall exclude the excluded persons.”
87 No additional
income beneficiaries were named in the sixth part of the
schedule.
88 Part
2 of the deed conferred power upon the trustee to distribute the whole or any
part of the income of the trust fund of each financial
year for such of the
income beneficiaries or primary beneficiaries as the trustee determined in his
absolute discretion or to accumulate
the whole or any part of the income as an
accretion to the trust
fund.
89 Clause 3
conferred a power of appointment upon the trustee to the effect that on the
vesting day, the trustee held the capital of
the trust fund upon trust for such
of the primary beneficiaries and the children of the primary beneficiaries and
the descendants
then living of any such child who is then dead in such
proportions and to one or others to the exclusion of others as the trustee
should think
fit.
90 Clause 3
made provision for takers in default of appointment. In particular, in the
event that the trusts referred to for the general
beneficiaries failed, the
trustee held the trust fund for such person or persons who would be entitled to
the estate of the appointor
[Fernando Liuzzi] pursuant to law of Victoria if the
said appointor had died on the vesting day intestate and a bachelor in such
shares as they would have been entitled or as the trustee thinks fit.
91 Clauses 7.1
and 7.2 permitted the trustee by deed to vary, add to or substitute the
provisions of the trust deed including the powers
of appointment conferred by
the trust deed.
92 The trust deed
of the Liuzzi Family Trust nominated the vesting day as the date of the death of
the survivor of Fernando Liuzzi and
Maria
Liuzzi.
93 The
“primary beneficiaries” were:
“the children of Fernando Liuzzi, Butcher and Maria
Liuzzi Married Woman, both of Westbourne Grove, Northcote.”
94 The
“general beneficiaries” were:
“the primary beneficiaries the brothers and sisters
spouses and children of the primary beneficiaries the spouses children and
grandchildren of such brothers sisters and children and such additional persons
(if any) as are named and described or defined in
the schedule as additions to
the class of general beneficiaries...”
95 Fernando
Liuzzi and Maria Liuzzi were named in the schedule as additional “general
beneficiaries”.
96 Clause 3(i)
conferred a power upon the trustee in each accounting period until the vesting
day to distribute “the whole or such
part (if any) as [he] shall think fit
of the net income of the trust fund of that accounting period for such
charitable purposes
and/or to or for the benefit of all or such one or more
exclusive of the others or other of the general beneficiaries living from
time
to time in such proportions and in such manner as the trustee[s] in [his]
absolute discretion (but after considering the wishes
of the guardian)......
shall think
fit.”
97 Pursuant
to cl. 3(ii) and subject to cl. 3(iii), if the trustee failed to
distribute any income pursuant to cl.3(i) he held that income
on trust for the
persons successively described in paragraphs (a), (b) and (c) of
cl. 4.
98 Clause
3(iii) permitted the trustee, notwithstanding cll. 3(i) and 3(ii) of the
deed, to accumulate the whole or any part of the income
of the trust fund and
hold such income as an accretion to the capital of the trust
fund.
99 Clause
4 conferred a power of appointment upon the trustee to the following effect,
namely that on the vesting day the trustee stood
possessed of the trust
fund:
“in trust for such charitable purposes and/or for such
of the general beneficiaries for such interests and in such proportions
and for
one to the exclusion of the other or others as the trustee[s] may with the
consent of the guardian by instrument in writing
revocable or irrevocable before
the vesting day appoint
PROVIDED
ALWAYS that the trustee[s] shall not without such consent revoke any
revocable appointment
AND PROVIDED
FURTHER that if there is no guardian alive the trustee[s] shall have no
such power of appointment.”
100 Clause 4 made
provision for takers in default of appointment. In particular, in default of
any appointment by the trustee, the trustee
stood possessed of the trust fund on
the vesting day in trust:
(a) for such of the primary beneficiaries as shall be
living on the vesting day and attain the age of 21 years as tenants in common
in
equal shares absolutely;
(b) and in the event that any part of the trust fund
is not validly disposed of for the statutory next of kin who are according to
law next of kin of the guardian first named in the schedule (Fernando Liuzzi)
who are living when the same falls or fall into possession
as tenants in common
in equal shares absolutely and if there shall be no such next of kin upon trust
for such charitable purposes
as the trustees may determine.
101 Pursuant to
cl. 20, the trustee was empowered, with the consent of the guardian if
alive, by deed to revoke add to or vary all of
the trusts or declare any new or
other trusts or powers concerning the trust fund.
The Fredmarghi Trust and the
Fredfonz Trust
102 The
Fredmarghi Trust and the Fredfonz Trust were settled by deeds which were in
similar
terms.
103 Clause
13(1) nominated the following as the “termination date”:
(a) the date which the trustee with the written
consent of the appointer determines; or
(b) 80 years from the date of this deed [being 1
December 1998].
104 Clause 3
nominated the following “beneficiaries”:
“(a) Fernando Liuzzi and Maria Liuzzi;
(b) any
child or grandchild or great grandchild or great great grandchild of Fernando
Liuzzi or Maria Liuzzi born before the termination
date;
(c) the
spouse of any child or grandchild or great grandchild or great great grandchild
of Fernando Liuzzi or Maria Liuzzi born
before the termination date;
(d) any
parent, brother or sister, nephew or niece of Fernando Liuzzi or Maria Liuzzi;
(e) any
brother or sister of either parent or grandparent of Fernando Liuzzi or Maria
Liuzzi, and any spouse or former spouse of
any such brother or sister;
(f) any
uncle, aunt, cousin, nephew or niece (by marriage) of Fernando Liuzzi or Maria
Liuzzi and any spouse or former spouse of
any such uncle, aunt, cousin, nephew
or niece;
(g) a
corporation in which a beneficiary owns a share beneficially;
(h) a
trustee of a trust in which a beneficiary has an interest;
(i) a
trustee of any charitable trust;
(j) any
association, society, authority, institution, church, religious order,
corporation, person or entity which at the time a
distribution of income or
capital is to be made is exempt from income tax ... or if at the relevant time a
gift of money to such
body is deductible against assessable income of the
donor....”
105 Clause 4
conferred power upon the trustee to distribute the whole or any part of the
income of the trust fund in each financial year
to such of the living
beneficiaries as the trustee in its discretion determined or to accumulate the
whole or any part of the income
as an accretion to the trust
fund.
106 Clause
5 conferred a power of appointment upon the trustee to the following effect,
namely that until the trust is wound up the whole
or any part of the trust fund
is held by the trustee for:
“such one or more of the beneficiaries to the
exclusion of the others as are then living or in existence and if more than one
in such shares or proportions as the trustee in its discretion may at any time
or times determine.”
107 Clause
5(1)(b) made provision for takers in default of appointment. In particular, on
termination of the Fredmarghi Trust and the
Fredfonz Trust respectively, the
capital available for distribution which had not been the subject of a
distribution by the trustee
was to be held for the following default
beneficiaries named in cl. 13(2)(d):
“(i) The
children of Fernando Liuzzi and Maria Liuzzi and if more than one in equal
shares as tenants in common...:
(ii) If the
whole or any part of the trust fund fails to vest in any one or more of the
beneficiaries referred to in cl. 13(2)(d)(i),...
for the persons who would
be entitled to the estate of Fernando Liuzzi if he had died intestate on the
termination date domiciled
in Victoria.
(iii) If the
whole or any part of the trust fund fails to vest in any one or more of the
beneficiaries referred to in cll. 13(2)(d)(i)
or (ii), for such charitable
objects as the trustee determines, and in such proportions as the [trustee]
elects, and in default of
any such determination or election, as determined in
his absolute discretion by the Chief Justice for the time being of the Supreme
Court of Victoria...”
108 Pursuant to
cl. 10, the trustee was empowered with the consent of the appointor (if
any) by deed to alter, vary or revoke any trust
or provision of the deed other
than cll. 7, 8(1) and 10.
109 The Thornbury
Unit Trust was a unit trust which had the following unit holders:
(a) Lygon
Nominees Pty Ltd and Lou Nominees Pty Ltd as trustees of the Binkemba
superannuation fund; and
(b) Lygon
Nominees Pty Ltd.
110 Clause 3
provided that the trust fund was held by the trustee upon trust:
“For the unit holders absolutely in proportion to the
number of units held by them.”
111 Clause 21
conferred a power upon the trustee to appropriate from time to time to the unit
holders such money or other property out
of the assets of the trust fund as the
trustee thought fit, each appropriation being proportionate to the units held.
112 Pursuant
to cl. 10(a), the Thornbury Unit Trust was to continue until the date of
distribution specified in the third schedule unless
earlier determined. The
date specified in the third schedule was 30 June
2073.
113 Pursuant
to cll. 10(c) and (d), upon determination of the Thornbury Unit Trust the
trustee was required to realise the assets of the
trust fund and distribute the
proceeds among the unit holders proportionately to the number of units held by
them.
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