Port Stephens Development Pty Ltd was the registered proprietor of land with respect to which the Director-General of National Parks and Wildlife had been seved with notices requesting the land be resumed
In order to maximise claims for compensation, a large number of lots were established adopting the structure of ISPT.
Hundreds of trust deeds were executed, of which one particular trust (The Pacinette Property Trust) had two classes of units – A Class units and Ordinary units.
Initially Sealark Pty Ltd held 10 A Class units.
The trust deed provided that upon the issue of such units, the property received in consideration for the allotment would form a separate fund called the A Fund. A Class unit holders were entitled to a fractional interest in the corpus of the A Fund. Ordinary unit holders were not entitled to any interest in the assets of the A Fund and A Class unit holders were not entitle to any interest in the Trust Fund. On redemption of all A Class units, the assets of the A Fund were to become part of the Trust Fund.
Whether a change of beneficial ownership between S and P had occurred.
- If so, at what point had P acquired the right to the beneficial ownership of the shares?
When the consideration was provided to Sealark, if not earlier upon the acceptance by Sealark of the written offer, a change in the relationship between Sealark and Pacinette took place. The equitable interest in the land was then vested in Pacinette as trustee of The Pacinette Property Trust.
The change in beneficial ownership was not defeated by the requirement for writing (s 23C of the Conveyancing Act 1919 (NSW)) either because of the exception of a constructive trust (s 23C(2)) or because to use the statute in the circumstances would constitute it an instrument of fraud.
- The promise of consideration created the constructive trust or use of the statute as an instrument of fraud, regardless of the form of that consideration.
- Hence, the promised consideration in the form of an allotment of A Class units did not enliven the exception in s 44(2)(d) of the Stamp Duties Act 1920 (NSW), for a change of beneficial ownership occurring as the consequence of the issue or redemption of units in a unit trust scheme.
Due to the change in beneficial ownership outside the aforementioned exception, the appellant was denied the right to prove that change and consequently its entitlements to compensation for resumption of the land, as the operation of s 29(3) of the Stamp Duties Act prevented the instrument in question from being given in evidence.
Would the fact that Sealark was sole unit holder of those units have the consequence, that the “beneficial ownership” of the equitable interest in land had not changed because that interest was still to be found, by reason of the issue of the units, in the hands of Sealark?
- The answer must be that there had been a change.
- Consistently with the reasoning in CPT Custodian and with the terms of the Pacinette Trust Deed, Sealark would not have any interest in any particular part of the Trust Fund or in any investment thereof.
There was a change in beneficial ownership prior to the redemption of Sealark’s units and the allotment of units to Pacinette. Consequently, the Stamp Duty Act applied. The steps taken were ineffective to avoid stamp duty and, because no stamp duty was paid, proof of the transaction was denied. No equitable interest had been acquired so as to attract an entitlement to compensation.
The change in beneficial ownership was brought about, and was the consequence of the fact that the consideration (no matter what form that consideration took) was provided by Pacinette to Sealark.
There is no suggestion that the Court in this case was of the view that ISPT had been wrongly decided.
The critical difference between this case and ISPT is that in ISPT, CMPI held the full legal title to the land and was the only unit holder in the Forster No 1 Trust when ISPT made its written offer to purchase the land. In Halloran, Sealark only held an equitable interest in the land when Pacinette as trustee, offered to purchase that interest in consideration for the allotment of further A Class units in the trust.