FEDERAL COURT OF AUSTRALIA

Transcription

1 FEDERAL COURT OF AUSTRALIA Ellison v Sandini Pty Ltd [2018] FCAFC 44 Appeal from: Sandini Pty Ltd v Commissioner of Taxation [2017] FCA 287 Sandini Pty Ltd v Commissioner of Taxation (No 2) [2017] FCA 905 File number(s): WAD 172 of 2017 WAD 173 of 2017 Judge(s): SIOPIS, LOGAN AND JAGOT JJ Date of judgment: 27 March 2018 Catchwords: INCOME TAX capital gains tax roll over relief whether Family Court order resulted in a change of ownership within the meaning of s of the Income Tax Assessment Act 1997 (Cth) (the ITAA) whether Family Court order constituted CGT event A1 as defined in of the ITAA whether the effect of Family Court order was such that the roll over relief provisions contained in Subdivision 126-A of the ITAA were engaged whether primary judge erred in holding that a change of ownership had occurred as a result of the deeming provision contained in s of the ITAA EQUITY unnumbered and uncertificated shares in public company creation of trust over part of shareholding by Family Court order - beneficial ownership requirement for certainty of subject of trust shares as a fungible asset Legislation: Constitution s 75 Bankruptcy Act 1966 (Cth) s 121 Bankruptcy and Family Law Legislation Amendment Act 2005 (Cth) Company Law Review Act 1988 (Cth) Corporations Act 2001 (Cth) ss 768A, 1070A, 1070B Family Law Act 1975 (Cth) ss 35, 78, 79, 79A, 106A Income Tax Assessment Act 1936 (Cth) s 160ZZMA Income Tax Assessment Act 1997 (Cth) ss , 104-1, 104-5, , , , , , , 126-1, 126-5, , Judiciary Act 1903 (Cth) ss 38, 39, 39B Taxation Administration Act 1953 (Cth)

2 Taxation Laws Amendment Act 1989 (Cth) Tax Law Improvement Act (No 1) 1998 (Cth) Family Law Rules 2004 (Cth) r Explanatory Memorandum, Tax Law Improvement Act (No 1) 1998 (Cth) Cases cited: Archibald Howie Pty Ltd v Commissioner of Stamp Duties [1948] HCA 28; (1948) 77 CLR 143 Baker v Paul [2013] NSWCA 426 Beck v Henley [2014] NSWCA; (2014) 11 ASTLR 457 Bellinz Pty Ltd v Commissioner of Taxation (Cth) (1998) 84 FCR 154 Burt v Commissioner of Taxation [1912] HCA 74; (1912) 15 CLR 469 Colonial Bank v Whinney (1885) 30 Ch D 261 Commissioner of Taxation v Consolidated Media Holdings [2012] HCA 55; (2012) 250 CLR 503 Commissioner of Taxation v Futuris Corporation Ltd [2008] HCA 32; (2008) 237 CLR 146 Commissioner of Taxation v McNeil [2007] HCA 5; (2007) 229 CLR 656 Commissioner of Taxation v Totalisator Administration Board (Q) (1990) 170 CLR 508 Corin v Patton [1990] HCA 12; (1990) 169 CLR 540 Coshott v Woollahra Municipal Council [2008] NSWCA 176 Edwards v Santos Limited [2011] HCA 8; (2011) 242 CLR 421 Eisner v Macomber, 252 U.S. 189 (1920) Executor Trustee and Agency Co of South Australia Ltd v Deputy Federal Commissioner of Taxes (South Australia) [1939] HCA 35; (1939) 62 CLR 545 Herdegen v Federal Commissioner of Taxation [1988] FCA 419; (1988) 84 ALR 271 Human Rights and Equal Opportunity Commission v Mount Isa Mines Pty Ltd [1993] FCA 535; (1993) 46 FCR 301 Hunter v Moss [1993] EWCA Civ 11; [1994] 1 WLR 452 Inland Revenue Commissioners v Blott [1921] 2 AC 171 Jones v Daniel [2004] FCAFC 278; (2004) 141 FCR 148 Kartinyeri v The Commonwealth [1998] HCA 22; (1998) 195 CLR 337 Kennon v Spry [2008] HCA 56; (2008) 238 CLR 366 Kent v Vessel Maria Luisa (No 2) [2003] FCAFC 93; (2003) 130 FCR 12

3 KLDE Pty Ltd v Commissioner of Stamp Duties (Qld) [1984] HCA 63; (1984) 155 CLR 288 Langford and Coleman [1992] FamCA 68; (1992) 16 Fam LR 228 Lavin v Toppi [2015] HCA 4; (2015) 254 CLR 459 Lionsgate Australia Pty Ltd v Macquarie Private Portfolio Management Ltd [2007] NSWSC 371; (2007) 62 ACSR 522 Mac-Jordan Construction Ltd v Brookmount Erostin Ltd (in receivership) (1991) 56 BLR 1; [1992] BCLC 350 Mullane v Mullane [1983] HCA 4; (1983) 158 CLR 436 National Mutual Life Association of Australia Ltd v Commissioner of Taxation [2009] FCAFC 96; (2009) 177 FCR 539 National Provincial Bank Ltd v Ainsworth [1965] UKHL 1; (1965) AC 1175 Newcastle Airport Ltd v Chief Commissioner of State Revenue [2014] NSWSC 1501; (2014) 99 ATR 748 Official Trustee in Bankruptcy v Mateo [2003] FCAFC 26; (2003) 127 FCR 217 Oil Basins Ltd v Commonwealth [1993] HCA 60; (1993) 178 CLR 643 Pearson & Ors v Lehman Brothers Finance SA & Ors [2010] EWHC 2914 (Ch) Pearson & Ors v Lehman Brothers Finance SA [2011] EWCA Civ 1544 Petroleum (Timor Sea) Pty Ltd v Minister for Resources [1994] FCA 1002; (1994) 49 FCR 155 Pilmer v The Duke Group Ltd (in liq) [2001] HCA 31; (2001) 207 CLR 165 Platypus Leasing Inc v Commissioner of Taxation [2005] NSWCA 399; (2005) 61 ATR 239 Priest v Ross Asset Management Limited (In liq) [2016] NZHC 1803 Re London Wine Co (Shippers) Ltd [1986] PCC 121 Re Rose [1952] Ch 499 Re Totalisator Administration Board of Queensland [1989] 1 Qd R 215 R v Australian Broadcasting Tribunal; Ex parte Hardiman [1980] HCA 13; (1980) 144 CLR 13 R v Toohey; Ex parte Meneling Station Pty Ltd [1982] HCA 69; (1982) 158 CLR 327 Shortall v White [2007] NSWCA 372 Simic v New South Wales Land and Housing Corp [2016] HCA 47; (2016) 339 ALR 200

4 State of Queensland v Congoo [2015] HCA 17; (2015) 256 CLR 239 Tanwar Enterprises Pty Ltd v Cauchi [2003] HCA 57; (2003) 217 CLR 315 Telstra Corporation Ltd v The Commonwealth [2008] HCA 7; (2008) 234 CLR 210 Wellington Capital Ltd v Australian Securities and Investments Commission [2014] HCA 43; (2014) 254 CLR 288 Wende v Horwath (NSW) Pty Limited [2014] NSWCA 170; (2014) 86 NSWLR 674 Western Australian Trustee Executor & Agency Co v Commissioner of Taxation (Western Australia) [1980] HCA 50; (1980) 147 CLR 119 White v Shortall [2006] NSWSC 1379; (2006) 68 NSWLR 650 Wingadee Shire Council v Willis [1910] HCA 35; (1910) 11 CLR 123 Yanner v Eaton 1999] HCA 53; (1999) 201 CLR 351 Date of hearing: August 2017 Heydon JD, Meagher, Gummow and Lehane s Equity: doctrines and remedies, (5 th Ed, LexisNexis Butterworths, 2015) Goode, Sir Roy, Are Intangible Assets Fungible? (Lloyd s Maritime and Commercial Law Quarterly 379, 2003) Registry: Division: National Practice Area: Category: Western Australia General Division Taxation Catchwords Number of paragraphs: 214 Counsel for Ms Ellison: Solicitor for Ms Ellison: Counsel for the Commissioner of Taxation: Solicitor for the Commissioner of Taxation: S Owen-Conway QC Park Legal Solutions J Hmelnitsky SC with D Hume Australian Government Solicitor

5 Counsel for Sandini Pty Ltd: Solicitor for Sandini Pty Ltd: S H P Steward QC with F D O Loughlin Jackson McDonald

6 ORDERS WAD 172 of 2017 BETWEEN: DEBBIE MAREE ELLISON First Appellant WAVEFRONT ASSET PTY LTD (ACN ) ATF THE FELSTEAD FAMILY TRUST Second Appellant AND: SANDINI PTY LTD (ACN ) ATF THE KARRATHA RIGGING UNIT TRUST First Respondent WABELO PTY LTD (ACN ) ATF THE ELLISON FAMILY TRUST Second Respondent CHRISTOPHER JAMES ELLISON (and others named in the Schedule) Third Respondent WAD 173 of 2017 BETWEEN: AND: COMMISSIONER OF TAXATION First Appellant SANDINI PTY LTD (ACN ) ATF THE KARRATHA RIGGING UNIT TRUST First Respondent WABELO PTY LTD (ACN ) ATF THE ELLISON FAMILY TRUST Second Respondent CHRISTOPHER JAMES ELLISON (and others named in the Schedule) Third Respondent JUDGES: DATE OF ORDER: 27 MARCH 2018 SIOPIS, LOGAN AND JAGOT JJ THE COURT ORDERS THAT: 1. The appeals be allowed. 2. The declaration made on 22 March 2017 be set aside.

7 - ii - 3. The orders of 7 August 2017 as to costs be set aside. 4. The further amended originating application filed 7 September 2016 be dismissed. 5. The appellants file and serve proposed orders and short written submissions as to costs within 14 days. 6. The respondents file and serve proposed orders and short written submissions as to costs within a further 14 days thereafter. 7. Costs be determined on the papers unless any party objects at the time they comply with orders 5 and 6 above as required. Note: Entry of orders is dealt with in Rule of the Federal Court Rules 2011.

8 REASONS FOR JUDGMENT SIOPIS J: 1 I have had the very considerable benefit of reading the reasons for judgment of Jagot J. For the reasons given by Jagot J, I agree that the appeal be allowed and that the orders proposed by Jagot J be made. I certify that the preceding one (1) numbered paragraph is a true copy of the Reasons for Judgment herein of the Honourable Justice Siopis. Associate: Dated: 27 March 2018

9 - 2 - REASONS FOR JUDGMENT LOGAN J: 2 I have had the privilege of reading in draft the reasons for judgment of Jagot J. 3 I gratefully adopt her Honour s summary of the facts, issues and submissions of the respective parties to the appeal and of the reasons of the primary judge. Her Honour has also extracted relevant legislative provisions. None of these do I repeat. For consistency, I shall also use the abbreviations adopted by her Honour. 4 For the reasons which follow, I would dismiss the appeals. 5 The evidence in this case in relation to the application by Ms Ellison for the making and amendment of an order (I refer to the orders collectively as, the order ) under s 79 of the Family Law Act (Cth) (Family Law Act), the subsequent lodgement of a consent by her and Mr Ellison and supporting materials and their approval by the Family Court, all, seemingly, without any attention to the possible federal revenue law consequences of the order proposed, made and later amended, gives pause for thought about the risks of over-specialisation in both the practising profession and the judiciary. However this may be, the task in these appeals is just to determine what those consequences were. 6 The method chosen for the determination in the original jurisdiction for the determination of those consequences, via the seeking of declaratory relief, was permissible but unusual. 7 The original jurisdiction of this Court includes, subject to a presently immaterial exception in relation to criminal jurisdiction, jurisdiction in any matter, arising under any laws made by the Parliament : s 39B(1A)(c) of the Judiciary Act 1903 (Cth) (Judiciary Act). The determination of a CGT liability under the Income Tax Assessment Act 1997 (Cth) (ITAA97) is, unquestionably, one arising under the laws made by the Commonwealth parliament. Further, it is patent from the antecedent correspondence that a justiciable controversy in relation to that liability had arisen. So there could be no doubt that this Court had jurisdiction to entertain the proceeding and to grant declaratory relief so as to quell the controversy: Edwards v Santos Limited (2011) 242 CLR Because the Commissioner is the Commonwealth s chief revenue officer and was sued as a representative of the Commonwealth, this Court was not the only court which had jurisdiction

10 - 3 - to grant the declaratory relief sought. The original jurisdiction of the High Court includes jurisdiction in all matters in which the Commonwealth or a person being sued on behalf of the Commonwealth is a party: s 75(iii), Constitution. Oil Basins Ltd v Commonwealth (1993) 178 CLR 643 (Dawson J) offers an example of the recognition by the High Court of this jurisdiction in relation to a federal revenue law controversy. 9 Because this aspect of the High Court s jurisdiction is not, by virtue of s 38 of the Judiciary Act, made exclusive of the jurisdiction of the several courts of the States, those courts, within the limits of their several jurisdictions, could also have entertained this proceeding, on the basis that it was a matter in which the High Court has original jurisdiction or in which original jurisdiction can be conferred upon it : s 39(2), Judiciary Act. Both the amount of the asserted tax liability and limits on the ability of the inferior courts of the States to grant declaratory relief would have meant that the proceeding was one apt only for institution in the Supreme Court of a State. 10 In earlier times, the lack of a comprehensive assessing regime in sales tax legislation sometimes saw the parties to a justiciable controversy avail themselves of this jurisdiction possessed by a State Supreme Court. Re Totalisator Administration Board of Queensland [1989] 1 Qd R 215 (McPherson J) offers an example of the recognition of this Supreme Court declaratory jurisdiction in a case ultimately disposed of in the High Court in relation to a sales tax controversy (sub nom Commissioner of Taxation v Totalisator Administration Board (Q) (1990) 170 CLR 508). 11 These days, the combination of a more comprehensive assessment regime in federal revenue statutes, the existence under Pt IVC of the Taxation Administration Act (Cth) (Taxation Administration Act) of a right of appeal to this Court in its original jurisdiction if dissatisfied with an objection decision in respect of such an assessment and the related consequence that this Court is the usual forum for the determination of federal revenue law controversies would usually see the Commissioner, if he had not already done so, make and then tender in a State Supreme Court a certified copy of that assessment. The effect of that tender would not deprive the State Supreme Court of jurisdiction to grant declaratory relief but rather the conclusive evidentiary quality of that assessment in that court as to the taxation liability (s , Table, item 2, Sch 1, Taxation Administration Act) would render futile the prosecution of that declaratory proceeding in that court by a person who disputed that assessed liability: Platypus Leasing Inc v Commissioner of Taxation (2005) 61 ATR 239.

11 In the present proceeding, the Commissioner could have made an assessment and then tendered it. The adoption of this course would also not have deprived this Court of the jurisdiction to entertain the proceeding but, as in a State Supreme Court, would have rendered the proceeding futile in so far as a party sought to dispute that assessed taxation liability. The Commissioner chose not to adopt that course in this proceeding. Such choices fall to be made in the Commissioner s general administration of taxation laws. He is hardly to be criticised for making the choice which he did. The proceeding was brought in the usual forum for the resolution of federal revenue law liability disputes. Further, the controversy was not just one between one party and the Commissioner but also between the parties to a marriage, only one of whom was in agreement with the Commissioner as to the taxation consequences of the order made in the matrimonial causes jurisdiction. The declaratory proceeding offered a convenient way in which each of those interested in the determination of the controversy could be made parties. Comparatively, in a taxation appeal under Pt IVC of the Taxation Administration Act, only a recipient of an assessment could have objected against that assessment and, in turn only a person dissatisfied with an objection decision could have instituted a taxation appeal. None of that means that the Commissioner was bound not to issue an assessment but it is possible to see, in the circumstances of this case, why, reasonably, he chose not to. 13 The existence of a jurisdiction to grant declaratory relief is one thing, whether, as a matter of discretion, to exercise that jurisdiction so as to grant relief is quite another. Ms Ellison initially made the decision by the primary judge to exercise the discretion a ground of appeal but chose not to press this ground. I respectfully agree with Jagot J that this this retreat was a sound step. That, notwithstanding the existence of a power to assess and the related objection and appeal regime described, the Commissioner chose not to assess and then tender an assessment but instead actively to participate in the proceeding as a party was a powerful factor, in conjunction with the continuance of the controversy, favouring the exercise of a discretion to grant relief. The position may have been different if a Pt IVC taxation appeal proceeding had been pending in this Court and, for some reason, the Commissioner had chosen not to tender the assessment concerned: Commissioner of Taxation v Futuris Corporation Ltd (2008) 237 CLR 146. No error of principle was entailed in the decision by the primary judge that the case was one in which it was apt to grant declaratory relief. 14 The question on the appeal is whether the declarations made by the primary judge as to the taxation liability controversy were correct?

12 15 It is tempting to answer that question just by concurring with the reasons of the primary judge but that would neither afford respectful recognition of a considered view to the contrary which Jagot J proposes to express (with which Siopis J proposes to concur) nor do justice to the submissions carefully made on behalf of each of the parties. 16 As always with a liability which is reliant for its existence on a statute, it is necessary, in determining whether such a liability has arisen, to commence with the text of that statute, construed having regard to context, subject matter and purpose: Commissioner of Taxation v Consolidated Media Holdings (2012) 250 CLR 503 at [39]. That means that the starting point must be the ITAA97, the relevant provisions in which are set out in the judgment of Jagot J. 17 From these it emerges that the relevant CGT event is CGT event A1, which arises on the disposal of a CGT asset: s 104-5, ITAA97. The shares in question (2,115,000 MIN shares owned by Sandini) constitute a CGT asset. The time when that CGT event occurs is also specified in s Perhaps surprisingly, given that the making of orders in the matrimonial causes jurisdiction was consensually promoted by Mr Ellison and Ms Ellison, it was not suggested by any party that there was any antecedent disposal contract. On the basis that there was no such contract, the time of CGT event A1 was when the entity which hitherto owned the shares stopped being their owner. For this purpose, what is relevant is a change in the beneficial ownership of the shares: s (2), ITAA97. A suggestion made on behalf of Mr Ellison in submissions that the change in ownership had to be both legal and beneficial is contrary to that provision and must be rejected. 18 At first blush, one might have thought that the answer as to when and by what the requisite change in beneficial ownership occurred was straightforward. It occurred by virtue of the court order when that order was made on 21 September After all, the order made under s 79 of the Family Law Act spoke from the date of its making: Kennon v Spry (2008) 238 CLR 366 at [129] per Gummow and Hayne JJ. Of this order, the primary judge observed (at [142]): As noted in Lysaght v Edwards (1876) 2 Ch D 499, a right to specific performance to compel the transfer of an asset can be equated with beneficial ownership. In this instance, Ms Ellison had a more substantive right than a right to obtain an order for specific performance. She already had an order of the Family Court for the transfer of the shares within seven days.

13 I respectfully agree with this observation. The order made under s 79 of the Family Law Act in respect of the shares at least worked an alteration in the equitable ownership of those shares: Mullane v Mullane (1983) 158 CLR 436 at 445 (Mullane v Mullane). The order is not materially distinguishable from those which this Court in Official Trustee in Bankruptcy v Mateo (2003) 127 FCR 217 and in Jones v Daniel (2004) 141 FCR 148, in the application of Mullane v Mullane, regarded as effecting a change in beneficial ownership. For reasons which follow, the subject of the order was identifiable. 20 On and from the making of the order, it was Ms Ellison who enjoyed all of the attributes of the MIN Shares which gave them value. All that Sandini retained was the bare legal ownership in those shares. It held them as constructive trustee for Ms Ellison. It was Ms Ellison who enjoyed the dispositive power in respect of the shares. The evidence discloses that she exercised this in favour of her family trust. As the primary judge correctly found (at [22]), the trustee of the trust became the bare legal owner of the share on its registration as owner on 4 October The Commissioner contended that there was insufficiency of identity in the shares referred to in the order for there to be a change in beneficial ownership. There was, with respect, a Dickensian quality to this submission, perhaps grounded in the nostalgic recollection of individually numbered, paper share certificates, physical scrip, duly produced at a company s share registry for cancellation and issuing of a fresh certificate or indorsement following a share transfer transaction. One might, with respect, have thought that ordinary experience of share transfer transactions in the digital age would have given pause for thought about the advancing of this submission. As it happens, it is without merit. 22 The subject of the rights given by the order was identifiable: 2,115,000 MIN shares owned by Sandini. The evidence before the primary judge (paragraph [5] of the affidavit of Mr Gould sworn on 14 June 2016) was that the shares in MIN were of the same class, were unnumbered and were not evidenced by the issue of physical scrip. To adopt an applicable description offered by Dixon J in Archibald Howie Pty Ltd v Commissioner of Stamp Duties (1948) 77 CLR 143 at [154], the interest transferred was that part of Sandini s congeries of rights in personam measured by the number of shares referred to in the order. Such rights would include rights to dividends, to capital and to vote in meetings of the company. 23 The number of shares beneficial ownership in which was transferred to Ms Ellison by the order was nothing more than the means of quantifying her proportionate interest constituted

14 - 7 - by this congeries of rights in personam. That same proportion may be re-expressed from time to time by different numbers of shares: Commissioner of Taxation v McNeil (2007) 229 CLR 656 at [38] per Gummow A-CJ, Hayne, Heydon and Crennan JJ, citing with approval an explanation offered by Viscount Finlay in Inland Revenue Commissioners v Blott [1921] 2 AC 171, at An observation made in Eisner v Macomber 252 U.S. 189 (1920), at 208, though made in the era of physical scrip, remains relevant in the digital age for the description which is offered of the nature of the proportionate interest conferred by the holding of a particular number of shares: Certainly the interest of the stockholder is a capital interest, and his certificates of stock are but the evidence of it. They state the number of shares to which he is entitled and indicate their par value and how the stock may be transferred. They show that he or his assignors, immediate or remote, have contributed capital to the enterprise, that he is entitled to a corresponding interest proportionate to the whole, entitled to have the property and business of the company devoted during the corporate existence to attainment of the common objects, entitled to vote at stockholders' meetings, to receive dividends out of the corporation's profits if and when declared, and, in the event of liquidation, to receive a proportionate share of the net assets, if any, remaining after paying creditors. 25 As, with respect, the primary judge recognised, it is nothing to the point that there was a greater number of shares in MIN than 2,115,000. That did not prevent a change in the beneficial ownership of some of those shares via the court order. As Leeming JA remarked in Beck v Henley (2014) 11 ASTLR 457 at [40], Shares are plainly specifically severable. Hence their name (emphasis in original). The identification of individually numbered shares in MIN is unnecessary in the same way as such identification was unnecessary for the valid creation of a trust in respect of part of a parcel of shares: White v Shortall (2006) 68 NSWLR 650 at [210] to [247] per Campbell J. 26 The Commissioner was not a party to the Family Court proceeding. He must take the order as he finds it in the same way as he is bound to assess in accordance with other orders made in proceedings to which he is a stranger: Executor Trustee and Agency Co of South Australia Ltd v Deputy Federal Commissioner of Taxes (South Australia) (1939) 62 CLR 545 at per Latham CJ; at Dixon J and at 572 per McTiernan J. Such orders form part of the taxable substratum, already determined by a court of competent jurisdiction. The Commissioner s submissions as to the form of the order should, for this reason alone, be rejected. In any event, contrary to the Commissioner s submissions, the order does not purport to be made under s 79(1)(d) of the Family Law Act, only s 79. The amendments

15 - 8 - made to s 79 of that Act were not material when compared with the original wording with the observation being made in the explanatory memorandum that, that s 79(1)(d), largely replicate[d] the existing law (Bankruptcy and Family Law Legislation Amendment Bill 2005, Revised Explanatory Memorandum, par [55]). Even if there were some defect in the form of the order, that did not affect its legal efficacy. The analysis of the order made by the primary judge at [161] through [171] was correct. 27 This is sufficient to dispose of the appeals but the same result follows from an alternative proposition put to and accepted by the primary judge. 28 Even if either Ms Ellison were but a constructive recipient of the MIN shares and if the relevant CGT event Al were the transfer of the MIN shares by Sandini to Wavefront, Ms Ellison was sufficiently involved in that transfer to enliven under the ITAA97 ss and roll-over. 29 In these provisions, a CGT event is termed a trigger event : s 126-5(1). The text of s does not require that the person who is in fact the transferee of the CGT asset that is subject to the trigger event be a spouse or former spouse before roll-over relief is available. Instead, what is required is a trigger event, and for a spouse or former spouse to be involved in it. The Commissioner s submission that a transfer must be to a spouse or former spouse has no textual support in s Instead, that submission is nothing more than a muffled echo of different language used in the former s 160ZZMA of the Income Tax Assessment Act 1936 (Cth) (ITAA 1936). 30 On any view of the facts, a CGT event Al occurred. Likewise, on any view, Ms Ellison was involved in that event. She was the beneficiary of the order. It was by her direction that her desired registration of the shares occurred. That is involvement in a CGT event. Without Ms Ellison's direction, the transfer would have been to her personally and her involvement would have been different, and passive, by way of being a recipient. Further, the transfer would not have happened but for the order. These circumstances constitute sufficient involvement in the CGT event for the purposes of s of ITAA97. Thus, roll over is available. 31 Section is directed to beneficial ends. It relieves taxpayers from taxation burdens which would otherwise arise. The evident policy of s is to defer crystallisation of a CGT liability. The text and those beneficial ends are conducive to a liberal construction of

16 - 9 - the provision: Burt v Commissioner of Taxation (1912) 15 CLR 469 and Western Australian Trustee Executor & Agency Co v Commissioner of Taxation (Western Australia) (1980) 147 CLR 119. The construction advanced on behalf of the first to fourth respondents to each appeal and accepted by the primary judge is in accordance with such a construction of s and should be accepted as correct. 32 It follows that each appeal should be dismissed, with costs. I certify that the preceding thirty-one (31) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Logan. Associate: Dated: 27 March 2018

17 REASONS FOR JUDGMENT JAGOT J: SUMMARY 33 The issue in these appeals is whether the first respondent, Sandini Pty Ltd as trustee for the Karratha Rigging Unit Trust (or KRUT), was entitled to rollover relief by the operation of ss , Subdivision 126-A or of the Income Tax Assessment Act 1997 (Cth) (ITAA 1997). 34 The claim for rollover relief is based on property settlement orders of the Family Court of Australia between husband (Mr Ellison) and wife (Ms Ellison) under s 79 of the Family Law Act 1975 (Cth). The orders joined Sandini Pty Ltd as trustee for the Ellison Family Trust to the Family Court proceedings and required it in that capacity to do all acts and things and sign all documents necessary to transfer to Ms Ellison 2,115,000 shares in a publicly listed company known as Mineral Resources Limited or MIN. Sandini was not the trustee of the Ellison Family Trust at any time but did own more shares in MIN than 2,115,000 in its capacity as the trustee of the KRUT. In response to a request by Ms Ellison, Sandini transferred 2,115,000 shares not to Ms Ellison as referred to in the orders, but to a company she controlled known as Wavefront Asset Pty Ltd. Sandini, Mr Ellison, and associated entities then sought a declaration that Sandini was entitled to rollover relief, which the primary judge granted. The Commissioner of Taxation and Ms Ellison dispute that entitlement. 35 Resolving the issue involves answering the following questions: (1) did the Family Court orders mean that a change in ownership as referred to in s (2) of the ITAA 1997 had occurred so that Ms Ellison beneficially owned 2,115,000 of the larger parcel of MIN shares to which Sandini held title at the time the order was made? The primary judge found that the orders had this effect, but the Commissioner contends that whatever rights were vested in Ms Ellison as a result of the orders those rights did not amount to equitable or beneficial ownership of any shares in MIN which Sandini owned in its capacity as trustee of the KRUT. Ms Ellison also contends that a change of ownership requires a transfer of legal title which the orders did not effect;

18 (2) did the Family Court orders, either by reason of the change in beneficial ownership which the primary judge found had occurred and held to constitute CGT event A1 as defined in s of the ITAA 1997 or the transfer of shares by Sandini to Wavefront, engage the rollover relief provision in s (1)(a) of the ITAA 1997? This provision refers to a trigger event which involves a company (the transferor) or a trustee (also the transferor) and a spouse or former spouse (the transferee) of another individual because of a court order under the Family Law Act. The primary judge held the provision was engaged on both bases. The Commissioner and Ms Ellison contend the provision was not engaged as the orders did not effect a change in ownership of the shares (as the first basis) and no shares were transferred to the spouse or former spouse as transferee and thus Ms Ellison was not involved as s (1) requires (as to the second basis). Ms Ellison also contends that no shares were transferred because of the Family Court orders; and (3) does s (1) of the ITAA 1997, which provides that Pt 3-1 and Pt 3-3 of the ITAA 1997 (the latter of which contains s ) apply as if a person has received money or other property if it has been applied for your benefit or as you direct, mean that ss (2) and/or (1)(a) are deemed to apply to Ms Ellison because she directed the transfer of shares to Wavefront? The primary judge held that s (1) operated in this way. The Commissioner and Ms Ellison contend that s (1) only operated to engage provisions in Pts 3-1 and 3-3 of Ch 3 to the ITAA 1997 involving the receipt of money or other property. 36 For the reasons given below, I consider that the Commissioner s contentions should be accepted, as should Ms Ellison s contention that the shares in MIN which Sandini transferred to Wavefront were not transferred because of the Family Court orders. Accordingly, the appeals should be allowed and the declaration in Sandini s favour as to rollover relief which the primary judge made should be set aside. STATUTORY PROVISIONS Family Law Act 37 Section 78 of the Family Law Act is in these terms: (1) In proceedings between the parties to a marriage with respect to existing title or rights in respect of property, the court may declare the title or rights, if any, that a party has in respect of the property.

19 (2) Where a court makes a declaration under subsection (1), it may make consequential orders to give effect to the declaration, including orders as to sale or partition and interim or permanent orders as to possession. 38 Section 79 of the Family Law Act provides that: (1) In property settlement proceedings, the court may make such order as it considers appropriate: (a) (b) in the case of proceedings with respect to the property of the parties to the marriage or either of them - altering the interests of the parties to the marriage in the property; or in the case of proceedings with respect to the vested bankruptcy property in relation to a bankrupt party to the marriage - altering the interests of the bankruptcy trustee in the vested bankruptcy property; including: (c) (d) an order for a settlement of property in substitution for any interest in the property; and an order requiring: (i) (ii) either or both of the parties to the marriage; or the relevant bankruptcy trustee (if any); to make, for the benefit of either or both of the parties to the marriage or a child of the marriage, such settlement or transfer of property as the court determines. (2) The court shall not make an order under this section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order. (4) In considering what order (if any) should be made under this section in property settlement proceedings, the court shall take into account: (a) (b) the financial contribution made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last-mentioned property, whether or not that lastmentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and the contribution (other than a financial contribution) made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last-mentioned property, whether or not that last-mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and

20 (c) (d) (e) (f) the contribution made by a party to the marriage to the welfare of the family constituted by the parties to the marriage and any children of the marriage, including any contribution made in the capacity of homemaker or parent; and the effect of any proposed order upon the earning capacity of either party to the marriage; and the matters referred to in subsection 75(2) so far as they are relevant; and any other order made under this Act affecting a party to the marriage or a child of the marriage; and 39 By s 79A of the Family Law Act: (g) any child support under the Child Support (Assessment) Act 1989 that a party to the marriage has provided, is to provide, or might be liable to provide in the future, for a child of the marriage. (1) Where, on application by a person affected by an order made by a court under section 79 in property settlement proceedings, the court is satisfied that: (a) (b) (c) (d) (e) there has been a miscarriage of justice by reason of fraud, duress, suppression of evidence (including failure to disclose relevant information), the giving of false evidence or any other circumstance; or in the circumstances that have arisen since the order was made it is impracticable for the order to be carried out or impracticable for a part of the order to be carried out; or a person has defaulted in carrying out an obligation imposed on the person by the order and, in the circumstances that have arisen as a result of that default, it is just and equitable to vary the order or to set the order aside and make another order in substitution for the order; or in the circumstances that have arisen since the making of the order, being circumstances of an exceptional nature relating to the care, welfare and development of a child of the marriage, the child or, where the applicant has caring responsibility for the child (as defined in subsection (1AA)), the applicant, will suffer hardship if the court does not vary the order or set the order aside and make another order in substitution for the order; or a proceeds of crime order has been made covering property of the parties to the marriage or either of them, or a proceeds of crime order has been made against a party to the marriage; the court may, in its discretion, vary the order or set the order aside and, if it considers appropriate, make another order under section 79 in substitution for the order so set aside. (1A) A court may, on application by a person affected by an order made by a court under section 79 in property settlement proceedings, and with the consent of all the parties to the proceedings in which the order was made, vary the order or set the order aside and, if it considers appropriate, make another order

21 under section 79 in substitution for the order so set aside. Income Tax Assessment Act Part 3-1 of Ch 3 of the ITAA 1997 contains s which is in these terms: (1) This Part and Part 3-3 apply to you as if you had received money or other property if it has been applied for your benefit (including by discharging all or part of a debt you owe) or as you direct. (2) Those Parts apply to you as if you are entitled to receive money or other property: (a) (b) if you are entitled to have it so applied; or if: (i) (ii) you will not receive it until a later time; or the money is payable by instalments. 41 Part 3-1 also contains Div 104 which includes the following provisions: This Division sets out all the CGT events for which you can make a capital gain or loss. It tells you how to work out if you have made a gain or loss from each event and the time of each event. It also contains exceptions for gains and losses for many events (such as the exception for CGT assets acquired before 20 September 1985) and some cost base adjustment rules CGT events Event number and description A1 Disposal of a CGT asset [See section ] Time of event is: when disposal contract is entered into or, if none, when entity stops being asset's owner Capital gain is: capital proceeds from disposal less asset's cost base Capital loss is: asset's reduced cost base less capital proceeds (1) CGT event A1 happens if you * dispose of a * CGT asset. (2) You dispose of a * CGT asset if a change of ownership occurs from you to

22 another entity, whether because of some act or event or by operation of law. However, a change of ownership does not occur if you stop being the legal owner of the asset but continue to be its beneficial owner. (3) The time of the event is: (a) (b) when you enter into the contract for the * disposal; or if there is no contract - when the change of ownership occurs. 42 Section contains defined terms including, except so far as the contrary intention appears: "CGT event" means any of the CGT events described in Division 104. A CGT event described by number (for example: CGT event A1 ) refers to the relevant event in that Division. "dispose of" a * CGT asset: you dispose of a CGT asset (in its capacity as a CGT asset) in the circumstances specified in section "spouse" of an individual includes: (a) (b) another individual (whether of the same sex or a different sex) with whom the individual is in a relationship that is registered under a * State law or * Territory law prescribed for the purposes of section 2E of the Acts Interpretation Act 1901 as a kind of relationship prescribed for the purposes of that section; and another individual who, although not legally married to the individual, lives with the individual on a genuine domestic basis in a relationship as a couple. 43 Part 3-3 of Ch 3 of the ITAA 1997 contains these provisions: A same-asset roll-over allows a capital gain or loss an entity makes from disposing of a CGT asset to, or creating a CGT asset in, another entity to be disregarded. For a disposal, certain attributes of the asset are transferred to the receiving entity (1) There is a roll-over if a * CGT event (the trigger event) happens involving an individual (the transferor) and his or her * spouse (the transferee), or a former * spouse (also the transferee), because of: (a) a court order under the Family Law Act 1975 or under a * State law, * Territory law or * foreign law relating to breakdowns of relationships between spouses; or (2) Only these * CGT events are relevant: (a) CGT events A1 and B1 (a disposal case); and

23 (b) CGT events D1, D2, D3 and F1 (a creation case). (4) A * capital gain or a * capital loss the transferor makes from the * CGT event is disregarded (1) There are the roll-over consequences in section if the trigger event involves a company (the transferor) or a trustee (also the transferor) and a * spouse or former spouse (the transferee) of another individual because of: (a) a court order under the Family Law Act 1975 or under a * State law, * Territory law or * foreign law relating to breakdowns of relationships between spouses; or 44 As the primary judge explained at [123] of his reasons: With the making of a court order such as the Family Court Order, there are two rollover consequences. The first is that if the roll-over has taken place, no tax is paid by the transferor and the transferee inherits or acquires the cost base of the assets as they were historically when held by the transferor. In this way, tax is deferred until the next disposition of the family asset. The underlying policy is apparently that the transfers of assets arising on a marital breakdown, as on a transfer of assets in other circumstances such as death, are not the occasion for exigibility. In both those instances, there is not the sale for purpose of making a gain, but rather in this instance, necessary compliance with a court order... BASIC FACTS 45 Mr Ellison and Ms Ellison were married. As noted, Sandini was the trustee of the KRUT. Sandini as the trustee for the KRUT owned over 35 million shares in an Australian public company, MIN. KRUT is a unit trust in which Wabelo Pty Ltd as trustee for the Ellison Family Trust is the sole unit holder. The Ellison Family Trust is a discretionary trust the beneficiaries of which include Mr Ellison and another company Ellison (WA) Pty Ltd, which has one issued share beneficially owned by Mr Ellison. Ms Ellison was the sole director and shareholder of Wavefront, the trustee of the Felstead Family Trust. 46 After the breakdown of their marriage, Ms Ellison applied to the Family Court for orders under s 79 of the Family Law Act. 47 On 21 September 2010 the Family Court made orders by consent between Mr Ellison and Ms Ellison. The order was in these terms: ORDERS BY CONSENT are hereby pronounced in terms of the Minute of Consent Orders dated 15 September 2010, a sealed copy of which is attached.

24 The attached sealed Minute of Consent Orders record the following: On the: Form 1 Application for Final Orders of the husband filed this day it is agreed that the following orders be made by consent: 1 Sandini Pty Ltd as trustee for the Ellison Family Trust ( Sandini ) be joined to these proceedings as second respondent. 2 Pursuant to s 79A of the Family Law Act 1975 as amended Orders inclusive of the orders made by consent on 23 September 2009 be set aside. 3 Within 7 days of orders being made Sandini do all acts and things and sign all documents necessary to transfer to the wife 2,115,000 Mineral Resources Limited shares. 49 These orders are signed by Mr Ellison and Ms Ellison. Mr Ellison has also signed in his capacity as: Sole Director and Sole Company Secretary of Sandini Pty Ltd in its own right and as trustee for the Ellison Family Trust Pty Ltd in accordance with Section 127 of the Corporations Act The parties agree that the orders were made under s 79 of the Family Law Act. 51 Orders of the orders made on 23 September 2009, as referred to in order 2 of the orders of 21 September 2010, would have given Ms Ellison an entitlement to a transfer of assets of a further $18.8 million. Failing payment by 1 December 2011, the orders also required Mr Ellison to transfer to Ms Ellison shares in MIN to the value of $2,500,000. The apparently more favourable terms of the 23 September 2009 orders compared to those of 21 September 2010 may explain why Ms Ellison is seeking to have the orders of 21 September 2010 set aside, but that is not an issue for this proceeding. 52 The divorce of Mr Ellison and Ms Ellison was effected by an order of the Family Court on 8 April 2010, the divorce order taking effect from 9 May By September 2010 Mr Ellison became aware that the orders of 23 September 2009 required him personally to transfer MIN shares to Ms Ellison to the value of $2,500,000 when, in fact, Sandini owned the shares as trustee for the KRUT. This is said by him to be the genesis of the orders of 21 September The 21 September 2010 orders refer to and join as a second respondent Sandini Pty Ltd as trustee for the Ellison Family Trust ( Sandini ). Sandini was not the trustee for the Ellison Family Trust. As noted, Sandini was and is the trustee of the KRUT.

25 The trustee of the Ellison Family Trust, as noted, was and is another company of which Mr Ellison is the sole director and company secretary, Wabelo. 56 Ms Ellison sent an to Mr Ellison on 29 September 2010 asking that the MIN shares be transferred to Wavefront as trustee for the Felstead Family Trust. 57 On 30 September 2010 Mr Ellison for Sandini and Ms Ellison for Wavefront signed a share transfer form for the transfer of 2,115,000 shares in MIN from Sandini to Wavefront. This transfer was registered on 4 October Sandini, Mr Ellison, Wabelo and Ellison (WA) commenced a proceeding seeking declaratory relief. They sought a declaration that on or before 30 September 2010 beneficial ownership of 2,115,000 shares in MIN owned by Sandini passed to Ms Ellison upon the making of the 21 September 2010 orders or steps taken as a consequence of these orders (defined as the Disposal). They also sought a declaration that in calculating the liability to income tax of the applicants for the year ended 30 June 2011 Sandini, in its capacity as trustee of the KRUT, is entitled to rollover relief in relation to the Disposal. 59 The primary judge held that the 21 September 2010 orders caused a change in ownership of 2,115,000 MIN shares owned by Sandini so that CGT Event A1 happened on the making of those orders within the meaning of s of the ITAA The primary judge also held that the facts engaged s of the ITAA 1997 which provide for rollover consequences if the trigger event involves a company (the transferor) or a trustee (also the transferor) and a spouse or former spouse (the transferee) of another individual because of: (a) a court order under the Family Law Act The primary judge further considered that s of the ITAA 1997 had the effect of deeming Wavefront s receipt of MIN shares to be receipt by Ms Ellison so that ss (2) and (1) of the ITAA 1997 were taken to apply to her. 62 As a result, the primary judge made the following declaration: For the income year 30 June 2011, the first applicant is entitled to the roll-over consequences in s of the Income Tax Assessment Act 1997 (Cth), due to the operation of s (1)(a) of the Income Tax Assessment Act 1997 (Cth) in relation to its disposal of the 2,115,000 Shares in Mineral Resources Limited as processed in 4 October The Commissioner and Ms Ellison contend that the primary judge was in error in each of the respects identified above.

26 THE PRIMARY JUDGE S REASONS 64 The primary judge rejected Ms Ellison s contention that the Court did not have jurisdiction to declare that Sandini was entitled to rollover relief. As his Honour said at [44] there is a genuine dispute about Sandini s entitlement to rollover relief which a declaration would quell. Ms Ellison does not challenge this conclusion in her appeal. 65 The primary judge also rejected Ms Ellison s argument that relief should be refused on a discretionary basis in that Sandini s seeking of the declarations effectively by-passed the statutory scheme in Pt IVC of the Taxation Administration Act 1953 (Cth) for the resolution of objections. While his Honour accepted that the availability of an alternative remedy is relevant to the discretionary power to grant a declaration, he was satisfied that the case presented a suitable vehicle for declaratory relief. As the primary judge said, the case involved novel questions of construction and the Commissioner, who had elected not to issue a notice of assessment pending resolution of the proceedings, accepted the suitability of the issues for resolution by declaratory relief (at [51]-[54]). Ms Ellison withdrew her ground of appeal alleging an error in the exercise of discretion during the course of the hearing of her appeal. Given the Commissioner s position, the decision not to pursue this ground of appeal was sound. 66 Before the primary judge there was one factual dispute, whether Ms Ellison sent an on 29 September 2010 to Mr Ellison requesting the transfer of the MIN shares to Wavefront. The primary judge found that Ms Ellison sent the (at [20]). There is no challenge to this finding in Ms Ellison s appeal. 67 The primary judge accepted that the orders of the Family Court involved the occurrence of CGT event A1. He held that the orders meant that there had been an immediate change of ownership in 2,115,000 of the MIN shares of Sandini as referred to in s (2) of the ITAA He considered this to be the effect of the reasoning in two Full Court decisions about orders under s 79 of the Family Law Act, Jones v Daniel [2004] FCAFC 278; (2004) 141 FCR 148 and Official Trustee in Bankruptcy v Mateo [2003] FCAFC 26; (2003) 127 FCR 217 by which he was bound (at [139], [153], [154] and [160]). 68 As to the availability of rollover relief in s (1)(a) of the ITAA 1997 Honour reasoned that: