You do a lot of work with Samantha, a local accountant, so are not surprised when she calls to say she has a group of clients who are pooling their resources to buy a country property called ”Last Retreat” located not so far from the town in which you live and work.
There are half a dozen investors so Samantha asks you to set up a unit trust for the purpose. Samantha asks how much stamp duty is payable on the deed so you tell her that the standard $500 applies provided it is not a declaration of trust over an existing property. She laughs and says “I wish” as the auction has yet to be held and there is hot competition for it. Samantha asks if you could defer setting up the trust as her clients may miss out but when you point out this would involve double duty if they are successful she readily agrees you should proceed.

Samantha has acquired a trustee company for the purpose which she has named “Last Retreat Farms Pty Ltd”.

Given the specific purpose of the trust you include in the recitals a statement of the trustee’s intention to purchase “Last Retreat”.

You have a settlor set up the trust with a nominal $10, have it executed then send it off for stamping.

The Sting

Two things happen one dreadful Tuesday. First you receive a call from Samantha saying her clients were successful for a price of $3 million and that the contract will be with you soon. This is a surprise because you thought there was some time yet before the auction and that you would have been asked to review the contract before the bidding started.

But the second surprise was worse: a letter from the OSR requesting evidence of the value of “Last Retreat” on the basis that section 8 of the Duties Act applied. You ring up and say “Bollocks” as the property was not held by the trustee when the deed was signed. But the officer tells you that section 8(3) defines “declaration of trust” to include future property as well as property presently held.

You nervously thank him and say you will have a look and call him back.

You then read section 8(3) the relevant bits of which say: “declaration of trust means any declaration … that any identified property vested or to be vested in the person making the declaration is or is to be held in trust for the person or persons, … mentioned in the declaration although the beneficial owner of the property … may not have joined in or assented to the declaration”

“Goodness” (or something like that) you mutter then go back to the deed and see in clause 1 the standard words that : “The Trustee shall hold the settlement sum and all monies and property both real and personal which may hereafter be given to the Trust for the general purpose of the Trust (all which sums are included below in the expression “The Trust Fund”) UPON TRUST in accordance with the terms of this Deed”

“What a relief” you think because, as everyone knows, the recitals to a deed give the background and it is only in the operative part that sets out the trustee’s powers and duties. You ring back the OSR person to explain this to him. He sympathises but points to the 2014 decision of the Appeals Panel of the Civil and Administrative Tribunal in Al-Saeed and Associates Pty Ltd atf Al-Saeed Education and Welfare Trust v Chief Commissioner of State Revenue[2014] NSWCATAP 11 in which it was held that the words “this deed” in clause 1 of the deed in that case had to be read as a reference to the whole deed – including the recitals.

You ponder that it was a only Tribunal decision which may or may not be followed by a higher court but there was seemingly no appeal – so maybe you should advise a challenge?

When you convey the news Samantha is not impressed. She clearly indicates that a claim against your PI policy is the preferred option.

What you will never do again is to mention a particular property in a trust instrument.

This article is general information only and should not be relied on without obtaining further specific information.

Author: Jim Main