FEDERAL COURT O F AUSTRALIA

Sand in i P t y L t d v Commiss ione r o f T a x a t i o n [2017] F C A 287

File number: WAD 754 o f 2015

Judge: MCKERRACHER J

Date o f judgment: 22 March 2017

Catchwords: INCOME TAX — capital gains tax — roll over relief—whether a family court order transferring shares to a familytrust may in some circumstances attract roll over reliefpursuant to subdiv 126−A o f the Income Tax AssessmentAct 1997 (Cth) ( 'ITAA') — whether s 126−15(1) o f theITAA extends to transfers to companies or trusts associatedwith a spouse or former spouse — whether transferee mustbe an individual for the purposes o f ss 126−5 and 126−15 ofthe ITAA − whether change in beneficial ownershipconstitutes a change in ownership for the purposes o f s 104−10(2) o f the ITAA — disposal o f ownership by operation oflaw − whether the making o f a family court orderconstituted a CGT event A l — whether steps taken infurtherance o f a family court order constituted theappropriation o f shares pursuant to that order − whetherthere was a change in ownership by reason o f constructivereceipt o f shares − whether there was a change in ownershipby reason o f s 103−10 o f the ITAA − whether a spouse orformer spouse's involvement in the change o f ownership issufficient to enliven ss 126−5 and 126−15 o f the ITAA

Legislation:

ADMINISTRATIVE L A W — jurisdiction — whether thecourt has jurisdiction to grant declaratory relief pursuant tos 398(1A) o f the Judiciary Act 1903 (Cth) — whether thereis a genuine controversy between the parties that issusceptible to judicial determination — whether declaratoryrelief is available when a tax assessment is yet to be issued

— whether Court should exercise its discretion to grantdeclaratory relief

TRUSTS − shares held on trust — certainty o f trust property− whether possible to have trust o f a certain number ofshares out o f a larger parcel o f shares

Family Law Act 1975 (Cth) s 79Federal Court o f Australia Act 1976 (Cth) s 21Income Tax Assessment Act 1936 (Cth) ss 19, 95, 160D,160M(1), 160M(2), 160ZZMA(1)

Cases cited:

Income Tax Assessment Act 1997 (Cth) subdiv 126−A, 126−5, 126−5(1), 126−15, 126−15(1), 126−15(1)(a), Pt 3−1, Pt 3−3,ss 1−3, 6−5(4), 102−5, 103−10, 104−10, 104−10(3), 104−10(3)(a), 104−10(3)(b), 104−55, 106−50, 108−5, 960−100(3),995−1(1)Judiciary Act 1903 (Cth) s 39B(1A), 78BTaxation Administration Act 1953 (Cth) Pt IVC

Ainsworth v Criminal Justice Commission (1992) 175 CLR564Akron Tyre Co Pty Ltd v Kittson (1951) 82 CLR 477Allina Pty Ltd v Commissioner o f Taxation (1991) 28 FCR203Anning v Anning (1907) 4 CLR 1049Batagol v Commissioner o f Taxation (Cth) (1963) 109 CLR243Bass v Permanent Trustee Co Ltd (1999) 198 CLR 334Beconwood Securities Pty Ltd v Australia and New ZealandBanking Group Ltd (2008) 246 ALR 361Baumgartner v Baumgartner (1987) 164 CLR 137Bellinz Pty Ltd v Commissioner o f Taxation (Cth) (1998) 84FCR 154BHP Petroleum (Timor Sea) Pty Ltd v Minister forResources (1994) 49 FCR 155Bob Jane T−Marts Pty Ltd v Commissioner o f Taxation(1999) 94 FCR 457Bons (t/a Scale Aviation Australia) v Commissioner ofTaxation (Cth) (1994) 28 ATR 239Brooks v Commissioner o f Taxation (Cth) (2000) 100 FCR117Burt v Commissioner o f Taxation (1912) 15 CLR 469CGU Insurance Limited (ACN 004 478 371) v Blakeley(2016) 327 ALR 564Chang v Registrar o f Titles (1976) 137 CLR 177Commissioner o f Taxation v Guy (1996) 67 FCR 68Corin v Patton (1990) 169 CLR 540Coshott v Woollahra Municipal Council [2008] NSWCA176Commissioner o f Stamp Duties v Livingston (1964) 112CLR 12Federal Commissioner o f Taxation v H (2010) 188 FCR440Craven v Official Trustee in Bankruptcy (unreported,Supreme Court o f New South Wales, Needham AJ, 26 July1991)

DKLR Holding Co (No 2) Pty Ltd v Commissioner o f StampDuties (NSW) [1980] 1 NSWLR 510Easterbrook v Young (1977) 136 CLR 308Federal Commissioner o f Taxation v ElecNet (Aust) Pty Ltd(2015) 239 FCR 359Federal Commissioner o f Taxation v Linter TextilesAustralia Ltd (in liq) (2005) 220 CLR 592Forster v Jododex Australia Pty Ltd (1972) 127 CLR 421George Attenborough & Son v Solomon [1913] AC 76Herdegen v Commissioner o f Taxation (Cth) (1988) 84ALR 271Human Rights and Equal Opportunity Commission v MountIsa Mines Ply Ltd (1993) 46 FCR 301Hunter v Moss [1994] 1 WLR 452In the Marriage o f Bourke (1993) 114 FLR 89In the Marriage o f Michiels (1991) 103 FLR 1James v Commonwealth (1939) 62 CLR 339Jones v Daniel (2004) 141 FCR 148Kinch v Walcott [1929] AC 482Kent v Vessel "Maria Luisa" (No 2) (2003) 130 FCR 12Lysaght v Edwards (1876) 2 Ch D 499Official Trustee in Bankruptcy v Mateo (2003) 127 FCR217Oil Basins Ltd v Commonwealth (1993) 178 CLR 643Oliver v Malanos (2011) 199 FCR 136Project Blue Sky Inc v Australian Broadcasting Authority(1998) 194 CLR 355Re Judiciary Act 1903−1920 and Navigation Act 1912−1920(1921) 29 CLR 257Re London Wine Co (Shippers) Ltd [1986] PCC 121Re McBain; Ex parte Australian Catholic BishopsConference (2002) 209 CLR 372Re Rose [1952] Ch 499Re Transphere Pty Ltd (1986) 5 NSWLR 309Scott v Bowden (2002) 194 ALR 593Shell's Se l f Service Pty Ltd v Deputy Commissioner ofTaxation (Cth) (1989) 98 ALR 165Shortall v White [2007] NSWCA 372Tanwar Enterprises Ply Ltd v Cauchi (2003) 217 CLR 315Taras Nominees Pty Ltd v Federal Commissioner ofTaxation (2015) 228 FCR 418Vasudevan v Becon Constructions (Australia) Ply Ltd(2014) 41 VR 445

WA Trustee Executor & Agency Co Ltd v Commissioner ofState Taxation (WA) (1980) 147 CLR 119White v Shortall (2006) 68 NSWLR 650Wingadee Shire Council v Willis (1910) 11 CLR 123Wise v Whitburn [1924] 1 Ch 460

Date o f hearing: 19 and 20 September 2016

Registry: Western Australia

Division: General Division

National Practice Area: Taxation

Category: Catchwords

Number o f paragraphs: 199

Counsel for the Applicants: Mr SHP Steward QC with Mr FD O'Loughlin

Solicitor for the Applicants: Jackson McDonald

Counsel for the FirstRespondent:

Solicitor for the FirstRespondent:

Mr JC Vaughan SC with Ms HA Tiplady

Australian Government Solicitor

Counsel for the Second and Mr S Owen−Conway QC with Mr J ParkThird Respondents:

Solicitor for the Second and Park Legal SolutionsThird Respondents:

ORDERS

WAD 754 of 2015

BETWEEN: SANDINI PTY LTD (ACN 008 921 417) AFT THEKARRATHA RIGGING UNIT TRUSTFirst Applicant

AND:

WABELO PTY LTD (ACN 008 921 426) AFT THE ELLISONFAMILY TRUSTSecond Applicant

CHRISTOPHER JAMES ELLISON (and another named in theSchedule)Third Applicant

COMMISSIONER OF TAXATION FOR THECOMMONWEALTH OF AUSTRALIAFirst Respondent

DEBBIE MAREE ELLISONSecond Respondent

WAVEFRONT ASSET PTY LTD (ACN 139 479 968) ATF THEFELSTEAD FAMILY TRUSTThird Respondent

JUDGE: MCKERRACHER J

DATE OF ORDER: 22 MARCH 2017

THE COURT DECLARES THAT:

1. For the income year 30 June 2011, the first applicant is entitled to the roll−over

consequences in s 126−5 o f the Income Tax Assessment Act 1997 (Cth), due to the

operation o f s 126−15(1)(a) o f the Income Tax Assessment Act 1997 (Cth) in relation

to its disposal o f the 2,115,000 Shares in Mineral Resources Limited as processed in

4 October 2010.

THE COURT ORDERS THAT:

2. The parties are to file submissions on costs to be dealt with on the papers, unless any

party wishes to be heard on costs.

Note: Entry o f orders is dealt with in Rule 39.32 o f the Federal Court Rules 2011.

REASONS F O R JUDGMENT

TABLE O F CONTENTS

CAN A FAMILY COURT O R D E R TRANSFERRING T O A FAMILY TRUSTATTRACT ROLL−OVER RELIEF?

RELEVANT STATUTORY FRAMEWORK

FACTUAL CIRCUMSTANCES

T h e entities and their resolutions

Family Cour t O r d e r and transfer of M I N Shares

T h e dispute with the Commissioner

DOES T H E COURT HAVE JURISDICTION?

Consideration

SHOULD T H E COURT EXERCISE ITS DISCRETION?

Consideration

APPLICANTS' ARGUMENT O N ROLL−OVER

Ms Ellison C G T event Al

Ms Ellison's involvement

T H E COMMISSIONER'S POSITION O N ROLL−OVER RELIEF

M S ELLISON'S POSITION O N ROLL−OVER RELIEF

CONSIDERATION

The effect of the Family Cour t Order

Defects

Certainty

T h e effect o f Ms Ellison's involvement

A final point

CONCLUSION

[1]

[6]

[12]

[12]

[17]

[26]

[28]

[42]

[50]

[52]

[55]

[56]

[77]

[81]

[103]

[118]

[123]

[161]

[172]

[188]

[189]

[190]

2

MCKERRACHER J:

CAN A FAMILY COURT ORDER TRANSFERRING TO A FAMILY TRUSTATTRACT ROLL−OVER RELIEF?

1 Mr Christopher James Ellison, Sandini Pty Ltd, as trustee for the Karratha Rigging Unit

Trust (KRUT), Wabelo Pty Ltd, as trustee for the Ellison Family Trust (EFT), and Ellison

(WA) Pty Ltd (EWA) seek declaratory relief. That relief is opposed by the Commissioner

of Taxation, Mr Ellison's former wife, Ms Debbie Maree Ellison, and Wavefront Asset Pty

Ltd. Since 17 September 2009, Ms Ellison has been the sole director, secretary and

shareholder of Wavefront.

2 Essentially, the applicants seek a declaration that a transfer of shares made at the instance of

Mr Ellison, in accordance with directions apparently given by Ms Ellison and pursuant toorders of the Family Court of Western Australia, attracts 'roll−over relief' pursuant tosubdiv 126−A of the Income Tax Assessment Act 1997 (Cth) (1997 Act). The

Commissioner's position turns on analysis of the transaction. Ms Ellison's position is that

the Court has no jurisdiction as no 'matter' has arisen in the constitutional sense; secondly, in

its discretion, the Court should not exercise its jurisdiction in the circumstances; and thirdly,

roll−over relief should not apply for reasons similar to those advanced by the Commissioner.

3 The primary and apparently simple issue in this case is whether Sandini should be entitled to

CGT roll−over relief in circumstances where:

(1) such relief would normally be available when an asset was transferred by and to aformer spouse under a family court order.

But in this instance:

(2) was transferred to a corporate entity solely controlled by the former spouse;

(3) in accordance with the former spouse's direction as to the manner of compliance with

the court order.

4 As the Commissioner argues, there is genuine doubt as to this point.

5 For reasons which follow, on the facts of this case, my conclusion is that the Court has and

should exercise jurisdiction and that the applicants are entitled to the declaratory relief

sought.

− 3 −

RELEVANT STATUTORY FRAMEWORK

6 This proceeding involves construction o f subdiv 126−A o f the 1997 Act. From the provisions

extracted below it may be seen that CGT roll−over relief (effectively a deferral) is relevantly

provided for in respect o f certain CGT events referred to as 'trigger events' that happen in the

context o f a marriage or relationship breakdown.

7 Section 126−5 (a CGT event involving spouses) relevantly provides that there is a roll−over if

a CGT event (the 'trigger event') happens involving an individual (the 'transferor') and his orher spouse or former spouse (the 'transferee') because o f a court order under the Family Law

A c t 1975 (Cth): s 126−5(1)(a). In a disposal case, only CGT events A l and B1 are relevant:

s 126−5(2)(a). Section 126−15 (a CGT event involving a company or trustee) relevantly

provides that there are the roll−over consequences in s 126−5 i f the trigger event involves a

company or a trustee (the 'transferor') and a spouse or former spouse (the 'transferee') of

another individual because o f a court order under the Family Law Act: s 126−15(1)(a). For aroll−over under s 126−A to be applicable the following elements are essential:

(a) there must be a relevant CGT event (in this case, the relevant trigger event

must be CGT event Al);

(b) the CGT trigger event must involve a spouse or former spouse (as defined in

s 995−1(1)) as a transferee; and

(c) the CGT trigger event must occur 'because o f a court order under the Family

Law Act.

8 The provisions must be seen in context, even i f they are not all immediately relevant to the

factual situation described in the next part o f these reasons. They provide as follows:

Subdivision 126−A − Marriage or relationship breakdowns

Table of sections

126−5 CGT event involving spouses

126−15 CGT event involving company or trustee

126−20 Subsequent CGT event happening to roll−over asset where transferor was a CFC or anon−resident trust

126−25 Conditions for the purposes of subsections 126−5(3A) and 126−15(5)

126−5 CGT event involving spouses

(1) There is a roll−over if a *CGT event (the trigger event) happens involving anindividual (the transferor) and his or her *spouse (the transferee), or aformer *spouse (also the transferee), because of:

− 4 −

(a) a court order under the Family Law Act 1975 or under a *State law,*Territory law or *foreign law relating to breakdowns of relationshipsbetween spouses; or

(b) a maintenance agreement approved by a court under section 87 of theFamily Law Act 1975 or a corresponding agreement approved by acourt under a corresponding *foreign law; or

(c) [repealed]

(d) something done under:

(i) a financial agreement made under Part VIIIA of the FamilyLaw Act 1975 that is binding because of section 90G of thatAct; or

(ii) a corresponding written agreement that is binding because ofa corresponding foreign law; of

(da) something done under:

(i) a Part VIIIAB financial agreement (within the meaning ofthe Family Law Act 1975) that is binding because ofsection 9OUJ of that Act; or

(ii) a corresponding written agreement that is binding because ofa corresponding foreign law; or

(e) something done under:

(i) an award made in an arbitration referred to in section 13H ofthe Family Law Act 1975; or

(ii) a corresponding award made in an arbitration under acorresponding State law, Territory law or foreign law; or

(I) something done under a written agreement:

(i) that is binding because of a State law, Territory law orforeign law relating to breakdowns of relationships betweenspouses; and

(ii) that, because of such a law, prevents a court making an orderabout matters to which the agreement applies, or that isinconsistent with the terms of the agreement in relation tothose matters, unless the agreement is varied or set aside.

(2) Only these *CGT events are relevant:

(a) CGT events Al and B1 (a disposal case); and

(b) CGT events D1, D2, D3 and Fl (a creation case).

Note: The full list of CGT events is in section 104−5.

(3) However, there is no roll−over if:

(a) the *CGT asset involved is *trading stock of the transferor; or

(b) for *CGT event Bl—title in the CGT asset does not pass to thetransferee at or before the end of the agreement.

− 5 −

(3A) There is no roll−over because of paragraph (1)(d), (da) or (1) unless theconditions set out in section 126−25 are met.

(4) A *capital gain or a *capital loss the transferor makes from the *CGT event isdisregarded.

Consequences for the transferee (disposal case)

(5) For a disposal case where the transferor *acquired the asset on or after20 September 1985:

(a) the first element of the asset's *cost base (in the hands of thetransferee) is the asset's cost base (in the hands of the transferor) atthe time the transferee acquired it; and

(b) the first element of the asset's *reduced cost base (in the hands of thetransferee) is worked out similarly.

Example: Your spouse transfers land to you because of a court order under the Family Law Act1975. Any capital gain or loss your spouse makes is disregarded.

If the land's cost base at the time you acquired it is $10,000, the first element of theland's cost base in your hands becomes $10,000.

Note 1: There are special indexation rules for roll−overs: see Division 114.

Note 2: A roll−over under this Subdivision may have an effect on the transferee's mainresidence exemption: see sections 118−178 and 118−180.

(6) For a disposal case where the transferor *acquired the asset before20 September 1985, the transferee is taken to have acquired it before thatday. •Note: A capital gain or loss you make from a CUT asset you acquired before 20 September

1985 is generally disregarded: see Division 104. This exemption is removed in somesituations: see Division 149.

(7) For a disposal case where the transferor *disposed of a *collectable or*personal use asset, the transferee is taken to have *acquired one.Note 1: Capital losses from collectables can be subtracted only from capital gains from

collectables: see section 108−10.

Note 2: Capital losses from personal use assets are disregarded: see section 108−20.

Consequences for the transferee (creation case)

(8) For a creation case, the first element of the asset's *cost base (in the hands ofthe transferee) is the amount applicable under this table. The first element ofits *reduced cost base is worked out similarly.

Creation

Event No. Applicable amount

D1 the *incidental costs the transferor incurred that relate to thetrigger event

D2 the expenditure the transferor incurred to grant the optionD3 the expenditure the transferor incurred to grant the rightFl the expenditure the transferor incurred on the grant, renewal or

extension of the lease

6

The expenditure can include giving property: see section 103−5.

126−15 CGT event involving company or trustee

(1) There are the roll−over consequences in section 126−5 if the trigger eventinvolves 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 relationshipsbetween spouses; or

(b) a maintenance agreement approved by a court under section 87 of theFamily Law Act 1975 or a corresponding agreement approved by acourt under a corresponding *foreign law; or

(d) something done under:

a financial agreement made under Part VIIIA of the FamilyLaw Act 1975 that is binding because of section 90G of thatAct; or

(ii) a corresponding written agreement that is binding because ofa corresponding foreign law; or

(da) something done under:

(i) a Part VIIIAB financial agreement (within the meaning ofthe Family Law Act 1975) that is binding because ofsection 9OUJ of that Act; or

(ii) a corresponding written agreement that is binding because ofa corresponding foreign law; or

(e) something done under:

(i) an award made in an arbitration referred to in section 13H ofthe Family Law Act 1975; or

(ii) a corresponding award made in an arbitration under acorresponding State law, Territory law or foreign law; or

(f) something done under a written agreement:

(i) that is binding because of a State law, Territory law orforeign law relating to breakdowns of relationships betweenspouses; and

(ii) that, because of such a law, prevents a court making an orderabout matters to which the agreement applies, or that isinconsistent with the terms of the agreement in relation tothose matters, unless the agreement is varied or set aside.

126−20 ...126−25 ...

−7−

9 CGT event A l is the subject o f s 104−10 o f the 1997 Act which provides as follows:

104−10 Disposal of a CGT asset: CGT event Al

(1) CGT event Al happens if you *dispose of a *CGT asset.

(2) You dispose o f a *CGT asset if a change of ownership occurs from you toanother 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 legalowner of the asset but continue to be its beneficial owner.Note: A change in the trustee of a trust does not constitute a change in the entity that is thetrustee of the trust (see subsection 960−100(2)). This means that CGT event Al will nothappen merely because of a change in the trustee.

• (3) The time of the event is:

(a) when you enter into the contract for the *disposal; or

(b) if there is no contract—when the change of ownership occurs.Example: In June 1999 you enter into a contract to sell land. The contract is settled in October1999. You make a capital gain of $50,000.

The gain is made in the 1998−99 income year (the year you entered into the contract) and notthe 1999−2000 income year (the year that settlement takes place).

Note 1: If the contract falls through before completion, this event does not happen becauseno change in ownership occurs.

Note 2: If the asset was compulsorily acquired from you: see subsection (6).

10 I t can be seen that subs (1) provides that CGT event A l happens i f a taxpayer disposes o f aCGT asset. The concept o f a 'COT asset' is provided for in s 108−5 o f the 1997 Act and

includes any kind o f property or a legal or equitable right that is not property. It can include

an equitable interest. Section 104−10(2) provides that a taxpayer disposes o f a CGT asset i f a'change o f ownership' occurs from the taxpayer to another entity, whether because of some

act or event or by operation o f law.

11 It further provides that a change o f ownership does not occur i f the taxpayer stops being the

legal owner o f the asset, but continues to be its beneficial owner.

FACTUAL CIRCUMSTANCES

T h e entities and their resolutions

12 The transfer o f shares in issue was a transfer o f 2,115,000 shares by Sandini in Mineral

Resources Limited (MIN) (MIN Shares) made following an order o f the Family Court made

on 21 September 2010 by consent (Family C o u r t Order). MIN was and is a public

company. Its shares were listed for trading on the Australian Securities Exchange.

−8−

13 Prior to 21 September 2010, Sandini owned 35,804,065 shares in MIN, including the MIN

Shares. As noted (in [1]), Sandini is and was, at all material times the trustee o f the KRUT.

Wabelo, in its capacity as trustee for the EFT was the sole holder o f units in the KRUT

during the whole o f the 2011 income year. Wabelo was the trustee o f the EFT, adiscretionary trust. The EWA was a proprietary company with one issued share. That share

was beneficially owned by Mr Ellison. EWA and Mr Ellison were members o f the class of

beneficiaries able to participate in discretionary distributions from the EFT.

14 Ms Ellison was married to Mr Ellison on 15 February 1992. They remained married until 9

May 2010. Wavefront was a proprietary company. As discussed above, since 17 September

2010, Ms Ellison has been the sole director, secretary and shareholder o f Wavefront. In

September 2010, Wavefront was the trustee o f the Felstead Family Trust (FFT). Wavefront

and the FFT, as an entity, are not connected with Mr Ellison.

15 On 30 June 2011, Sandini, as trustee o f the KRUT, made a resolution in the following terms:

RESOLUTION O F TRUSTEE

SANDINI P T Y LTD A T F KARRATHA R I G G I N G UNIT TRUST

H E L D O N 30 June 2011

PRESENT: [Mr Ellison] (Chairman)

APPLICATION OF INCOME: RESOLVED that the net income o f the trust for theaccounting period ended 30 June 2011 be appliedfor the benefit o f the undermentioned ordinary unitholders in the proportion to their ordinary unitholdings that the unit holder entitlements to becredited to them in the trust books o f account.

Unit Holder Percentage

Wabelo Pty Ltd ATF 100%Ellison Family Trust

SIGNED AS A CORRECT [SIGNATURE OF M R ELLISON]RECORD:

16 On 30 June 2011, Wabelo, as trustee o f the EFT, made a resolution in the following terms:

RESOLUTION O F TRUSTEE

WABELO P T Y L T D A T F ELLISON FAMILY TRUST

H E L D 30 JUNE 2011

PRESENT: [Mr Ellison] (Chairman)

− 9 −

APPLICATION OF RESOLVED that the net income o f the trust, exclusive o f theINCOME: amount o f any capital gain included in such income, for the

accounting period ending 30 June 2011 be applied for the benefito f the undermentioned beneficiaries in the proportions oramounts stated and that the beneficiaries' entitlements becredited to them in the trust books o f account.

Beneficiary Proportion o r AmountEllison (WA) Pty Ltd 100%

APPLICATION OF RESOLVED that pursuant to the provisions o f the Trust DeedCAPITAL GAINS: relating to partial vesting o f the trust capital, the amount o f —

1) The taxable capital gain o f the trust; or

2) The whole o f the capital gain included in the trust accounts

for the accounting period ending 30 June 2011 be applied for thebenefit o f the undermentioned beneficiaries in the proportions oramounts stated and that the beneficiaries' entitlements becredited to them in the trust books o f account.

Beneficiary Proportion o r Amount[Mr Ellison] 100%

SIGNED AS A [SIGNATURE OF M R ELLISON]CORRECTRECORD:

Family Court Order and transfer of MIN Shares

17 On 27 March 2008, Ms Ellison commenced proceedings in the Family Court with Mr Ellison

as respondent, seeking, amongst other things, alteration o f property interests pursuant to s 79

o f the Family Law Act. On 20 June 2008, the Family Court made initial orders relating to the

division o f the matrimonial property o f Mr and Ms Ellison. On 23 September 2009, the

Family Court made further orders relating to the division o f the matrimonial property o f Mr

and Ms Ellison (23 September 2009 Orders). The 23 September 2009 Orders required

Mr Ellison to transfer the shares in MIN to the value o f $2,500,000 i f Mr Ellison did not pay

a cash settlement amount in full b y 1 December 2011. On 8 April 2010, the Family Court

ordered in relation to the marriage o f M r and Ms Ellison that ' a divorce order be made, such

divorce order to take effect and thereby terminate the marriage on the ninth day o f May

2010'.

18 O n 21 September 2010, the Family Court Order was made as follows:

1. [Sandini] as Trustee for the [EFT] ('Sandini') be joined to these proceedingsas second respondent.

− 10 −

2. Pursuant to s 79A of the Family Law Act 1975 as amended Orders 2.3−5inclusive of the orders made by consent on 23 September 2008 be set aside.

3. Within 7 days of orders being made Sandini do all acts and things and signall documents necessary to transfer to [Ms Ellison] 2,115,000 [MIN Shares].

19 Contrary to the description in Order 1, Sandini has never been the trustee o f the EFT.

20 Whilst it is not common ground, I accept on the evidence, which I will discuss further below,

that the applicants have established that:

(a) on 28 September 2010, a transfer form was partly prepared for the transfer of

the MIN Shares;

(b) on 29 September 2010, Mr Ellison received an email sent that day from

Ms Ellison (29 September Email). The 29 September Email was sent from

the email address used by Ms Ellison for email communications;

(c) the 29 September Email was in response to an email sent to Ms Ellison by

Mr Ellison on 28 September 2010;

(d) Ms Ellison sent the 29 September Email;

(e) Ms Ellison was responsible for the instruction given to Mr Ellison in the 29

September Email; and

(f) the MIN Shares referred to in the 29 September Email were the shares

required to be transferred pursuant to the Family Court Order.

21 On 29 September 2010, the transfer form referred to above was completed with the details

provided in the 29 September Email. On 30 September 2010, Sandini as trustee for the

KRUT, executed a Standard Transfer Form for the transfer o f 2,115,000 shares, being the

MIN Shares, to Wavefront as trustee o f the FFT.

22 I t is not common ground, but I accept on the evidence, which I will discuss further below,

that the applicants have established that on 30 September 2010:

(a) Ms Ellison also executed the same Standard Transfer Form for the transfer of

the MIN Shares to Wavefront as trustee o f the FFT;

(b) the executed Standard Transfer Form referred to above was in accordance with

Ms Ellison's directions; and

(c) on 4 October 2010, the transfer o f the MIN Shares was registered.

23 By an affidavit relied upon by Ms Ellison in this proceeding and sworn on 14 September

2016, she deposed that she had no recollection o f writing or sending the 29 September Email

and she believed that it did not appear to have been written by her because it included

language she did not normally use. She acknowledged that it is possible that she wrote and

sent the email, but submits that it is improbable that she did so because she did not recall

doing so. It includes reference to 'SRN' and `ATF', when her evidence was that she did not

know what SRN and ATF meant at that time. Although she knew that at 29 September 2010

the FFT had been set up with Wavefront as trustee o f that Trust, she did not then understand

the purpose o f a family trust or how she should 'use it'. The trust had been set up by her

former accountant in September 2009.

24 Ms Ellison also says she has no recollection o f prior discussions with M r Ellison or any other

person about the 29 September Email. The first time she recollects seeing the email waswhen the ATO brought it to her attention in November 2014. She does not deny signing the

Standard Transfer Form. The signature on it appears to be her signature. Mr Ellison also

swore an affidavit o f 12 July 2016 that annexed an email o f 28 September 2010 which he sent

to Ms Ellison requesting from her the details o f where she wanted the MIN Shares transferred

to.

25 I have no reason to doubt that Ms Ellison has no recollection o f these particular events as she

says. Nonetheless, there is also absolutely no reason to doubt, having regard to commonexperience in all the circumstances and the nature o f the exchanges, the logic and the absence

o f any other explanation, that Ms Ellison did authorise the transaction, which was made in

accordance with her request and direction. I accept the applicants' submission that in

circumstances where:

(a) on 21 September 2010, the Family Court ordered the 2,115,000 MIN Shares

be transferred by Sandini to Ms Ellison;

(b) on 28 September 2010, Mr Ellison sent to Ms Ellison an email enquiring as to

her particulars for the transfer o f those Shares;

(c) the 29 September Email was by way o f response to the 28 September 2010

email to Ms Ellison;

(d) the 29 September Email was received by Mr Ellison from Ms Ellison's email

address;

− 12 −

(e) the entities referred to in the 29 September Email were entities that wereclosely connected with and controlled by Ms Ellison;

(f) on 30 September 2010, Ms Ellison signed a share transfer form conforming to

the particulars supplied in the 29 September Email; and

(g) there was no evidence to contradict the assertion that Ms Ellison sent the

29 September Email,

I have no hesitation in finding that Ms Ellison did in fact send that email.

The dispute with the Commissioner

26 On 20 August 2015, the Commissioner sent a letter to Mr Ellison notifying him that the

Commissioner intended to conduct an audit in relation to the 2011 income year regarding the

risk o f 'unreported capital gains' arising from the transfer o f the MIN Shares from Sandini.

On 4 September 2015, the Commissioner sent a letter to Mr Ellison setting out his position

paper regarding the audit. On 13 October 2015, Mr Ellison's tax advisers, RSM Bird

Cameron, sent a letter to the Commissioner responding to the position paper. This letter

stated, amongst other things, that upon the Family Court making its order o f 21 September

2010, or on 28 September 2010, being the date by which the orders needed to be performed,

beneficial ownership in the MIN Shares passed to Ms Ellison. One o f the central disputes,

which follows in the discussion below, is whether the effect o f the Family Court Order was to

pass beneficial ownership in the MIN Shares to Ms Ellison.

27 On 1 December 2015, the Commissioner sent a letter to Mr Ellison replying to the RSM letter

o f 13 October 2015. The Commissioner did not accept the contentions advanced in the RSM

letter. Instead the Commissioner asserted that the transfer o f the MIN Shares to Wavefront

was such as to constitute a CGT disposal o f the MIN Shares from Sandini, as trustee o f the

KRUT to Wavefront, which disposal did not attract subdiv 126−A (roll−over relief) under the

1997 Act. The disposal, o f course, was not made directly to Ms Ellison.

DOES T H E COURT HAVE JURISDICTION?

28 The applicants pursue declaratory relief pursuant to s 39B(1A) o f the Judiciary Act 1903

(Cth) and s 21 o f the Federal Court o f Australia A c t 1976 (Cth). Relevantly, s 39B(1A) of

the Judiciaty Act provides that the original jurisdiction o f this Court includes jurisdiction

• under any matter arising under any laws made by the Parliament, other than a matter in

respect o f which a criminal prosecution is instituted or any other criminal matter. Section 21

− 13 −

o f the Federal Court Act provides that the Court may, in civil proceedings in relation to a

matter in which it has original jurisdiction, make binding declarations o f right, whether or not

any consequential relief is, or could be, claimed. Moreover, s 21(2) o f the Federal Court Act

provides that a suit is not open to objection on the ground that a declaratory order only is

sought.

29 The key word for this part o f the debate between Mr Ellison and Ms Ellison in s 21 is

'matter' in s 39B. Broadly speaking, a 'matter' is a controversy for determination by the

Court. Without an immediate right, duty or liability to be established by a determination of

the Court, there cannot be a matter: Re Judiciary Act 1903−1920 and Navigation Act 1912−

1920 (1921) 29 CLR 257 per Knox CJ, Gavan Duffy, Powers, Rich and Starke JJ (at 265); Re

McBain; Ex parte Australian Catholic Bishops Conference (2002) 209 CLR 372 per

Gleeson CJ (at 389), per Gaudron and Gummow JJ (at 405) and per Haynes J (at 459).

30 A matter exists when it is necessary to determine a disputed right or defence or a disputed

title, privilege or immunity. A dispute concerning an issue which does not involve any

justiciable controversy is not capable o f being a matter: Scott v Bowden (2002) 194 ALR 593

per McHugh J (at [7]).

31 In Bass v Permanent Trustee Co Ltd (1999) 198 CLR 334, Gleeson CJ, Gaudron, McHugh,

Gummow, Hayne and Callinan JJ observed (at [45]) that a declaration ordinarily involves 'a

conclusive or final decision based on a concrete and established or agreed situation which

aims to quell a controversy'.

32 There is nothing novel about the usage o f declarations in the context o f revenue law to

determine rights and obligations arising under laws that impose commonwealth taxes. In Oil

Basins Ltd v Commonwealth (1993) 178 CLR 643, Dawson J (at 651) affirmed the Court's

power to make declaratory judgments in circumstances where an assessment had not only not

been made, but there was not any immediate prospect o f one being made. Nonetheless, there

were real questions as to the operation o f the Petroleum Resource Rent Tax Assessment Act

1987 (Cth) (PRRT Act) and real obligations and liabilities not wholly contingent on

assessments.

33 In arguing there is no 'matter', Ms Ellison relies upon Bob Jane T−Marts Pty Ltd v

Commissioner o f Taxation (1999) 94 FCR 457 per Hill, Sundberg and Mansfield JJ. In that

case, the Court concluded that declaratory relief was not an appropriate process given the

− 14 −

factual matters that still required resolution and that the evidence before the Court did notallow that resolution. There was no conclusion, (nor in my respectful opinion, could there

be), that declaratory relief would not be available in revenue cases.

34 In this case, as explained, there is a clear controversy between the applicants and the

Commissioner. A critical element of the controversy is who or which, if anyone, should be

taxed. The nature of the controversy is whether or not Sandini is entitled to roll−over relief

and, if so, who should be taxed as a consequence. If Sandini is entitled to roll−over relief, it is

not required to include any taxable capital gain in its net income as understood by s 95 of the

Income Tax Assessment Act 1936 (Cth) (1936 Act). If it is not entitled to roll−over relief, it

will be required to include taxable capital gains in its s 95 net income which, in turn, affects

the income tax liabilities of the other applicants.

35 T h e r e is nothing hypothetical about the facts which have all occurred in the past. It is only

the appropriate tax response which requires consideration on the established facts. Moreover,

in this situation, unlike Bob Jane T−Marts, the facts are all substantially agreed. Those that

are not agreed are in short compass (eg, the 29 September Email on which a finding has been

made).

36 Ms Ellison points to the fact that the Commissioner served a notice pursuant to s 78B of the

Judiciary Act (s 78B notice), due to the contention that there is no matter arising under the

Constitution for determination by the Court. I note that no Attorney seeks to intervene. It is

also, in my experience, the position that from time to time without s 78B notices being

served, submissions are raised to the effect that a proceeding does not involve a 'matter'.

Whether that is the correct course or not does not matter in this instance as the s 78B notice

has been served.

37 A justiciable controversy is identifiable independently of the proceedings brought for its

determination. It is the whole controversy in respect of which it is the function of the court orcourts exercising the judicial power of the Commonwealth to quell. It is the 'subject matter

for determination in a legal proceeding'. The context and width of the concept of 'matter'

lies at the heart of the notions of federal jurisdiction and the judicial power of the

Commonwealth. The word 'matter' is central to the operations of s 75, 76 and 77 of the

Commonwealth Constitution. The 'matter' is the justiciable controversy between the actors

to it comprised, as the superior courts have long held, of the substratum of facts and claims

representing or amounting to the dispute or controversy between or amongst them. The

− 15 −

meaning o f 'matter', as the High Court recently noted in CGU Insurance Limited (ACN 004

478 371) v Blakeley (2016) 327 ALR 564, is comprised o f two elements (in turn citing

Burmester H, "Limitations on Federal Adjudication", in Opeskin B and Wheeler F (eds), The

Australian Federal Judicial System (Melbourne University Press, 2000) p 232):

[...] the subject matter itself as defmed by reference to the heads of jurisdiction setout in Chapter III, and the concrete or adequate adversarial nature of the disputesufficient to give rise to a justiciable controversy.

38 Ms Ellison contends that the declaratory relief sought would merely be an advisory opinion

or an abstract declaration in the manner discussed in Re Judiciary Act 1903−1920; Ainsworth

v Criminal Justice Commission (1992) 175 CLR 564 and CGU Insurance, but see also the

discussion in Oil Basins (at 651).

39 Ms Ellison also submits that when Sandini did transfer the MIN Shares to Wavefront on 30

September 2010, it did so as trustee for the KRUT and not the EFT. The apparent error made

by the applicants in 'joining the wrong trust entity' is said to be crucial because the Family

Court Order was incapable o f being carried out on its precise terms and, as such, Sandini is

not entitled to roll−over relief. Ms Ellison says it is not possible to ignore the terms of the

Family Court Order and read it as i f the KRUT was substitutable for the EFT. Ms Ellison's

point is that it has always been open and a matter for the applicants to make an application to

the Family Court to amend the Family Court Order, i f they have grounds to do so. Indeed,

that has been recognised because Wabelo as trustee for EFT filed an application in the Family

Court on 21 June 2016 to amend the Family Court Order nunc pro tune to be:

[Sandini] as trustee for the Karratha Rigging Trust ('Sandini') be joined to theseproceedings as second respondent.

40 Unless and until the Family Court Order is amended in the terms sought by the applicants,

which amendment is opposed by Ms Ellison on various grounds, Ms Ellison says there is no

justiciable controversy that supports the declarations sought by the applicants because the

terms o f the Family Court Order as they stand cannot be carried out and were never carried

out. As such, Ms Ellison contends, the proposed declarations are, at best, both 'abstract' and

'hypothetical'.

41 Ms Ellison also deposes to the fact (in an affidavit sworn on 14 September 2016) that, in any

event, i f M r Ellison's application currently before the Family Court to amend the Family

Court Order nunc pro tunc is successful insofar as the Family Court pronounces orders on

that application, she will appeal that decision.

− 16 −

Consideration

42 Unlike Ms Ellison, the Commissioner does accept, and I agree, that the Court has jurisdiction

to make a declaration as to whether Sandini is entitled to roll−over relief under subdiv 126−A

of the 1997 Act in relation to the disposal of the MIN Shares. The Commissioner agreessubstantially with the contentions advanced on behalf of the applicants. However, the

Commissioner does not share the characterisation of the question as being not knowing who

to tax, but rather the Commissioner's position, as set out by letter of 1 December 2015 from

the Australian Taxation Office (ATO), is that there is 'genuine doubt' about the properapplication of the law in the circumstances. For that reason, unless the relevant uncertainty

can be practicably resolved, the Commissioner foreshadowed the issue of alternative

assessments. The case relied on by the applicants concerned the meaning of the term 'present

legal obligation' in a particular context: Federal Commissioner o f Taxation v H (2010) 188

FCR 440. But it was accepted in H, that unless and until an assessment was made, income

tax was not due and payable. The applicants make it clear that they are not suggesting to the

contrary.

43 In relation to the error the parties made in drafting the Family Court Order, for reasons below,

this error does not preclude the granting of declaratory relief.

44 There is a genuine question in dispute as to whether Sandini is entitled to roll−over relief. A

declaration in relation to that question will resolve that dispute.

45 Although the Commissioner is yet to issue an assessment, that does not affect the fact that

there is a genuine controversy between the parties that is susceptible to judicial

determination. The lack of any assessment does not render, hypothetical, the declaratory

relief sought. Whether Sandini is entitled to roll−over relief turns on the operation of the

1997 Act upon past events and is not contingent on an assessment being made. It is clear

from Oil Basins (especially at 651) that declaratory relief is available in circumstances when

no assessment has been issued. In that particular case, the Court otherwise considered the

circumstance to be inappropriate.

46 I t is necessary to make a ruling on the facts as they. occurred and when they occurred. If

some future changes arise then the consequence of those changes can be revisited. Were it

otherwise, it would never be possible to make a ruling and there would never be a justiciable

controversy in circumstances such as these merely because there was a possibility of events

changing sometime in the future.

−17−

47 Indeed, put another way, it may be that the outcome o f this proceeding would assist the

parties in their arguments and possibly the Family Court in determining how such existing orfuture applications should be addressed.

48 I do not accept the submission made for Ms Ellison that the declaratory relief sought in the

originating summons cannot be made until at least such time as the existing Family Court

proceedings have been dealt with, 'including any prospective appeals being heard and

determined'.

49 The Commissioner also suggests, and I agree, that i f a declaration is to be made, the

appropriate declaration should be:

In calculating the net income of the trust estate of The Karratha Rigging Unit Trustfor the income year 30 June 2011, the first applicant is entitled to the roll−overconsequences in s 126−5 [of the 1997 Act], due to the operation of s 126−15(1)(a) [ofthe 1997 Act] in relation to its disposal of the 2,115,000 Shares in Mineral ResourcesLimited as processed in 4 October 2010.

SHOULD T H E COURT EXERCISE ITS DISCRETION?

50 Ms Ellison also advances the argument, which is opposed by both the applicants and the

Commissioner, that there is an appropriate legislative scheme under Pt IVC o f the Taxation

Administration Act 1953 (Cth) (TAA) which provides a mechanism for the conduct of

taxation objections, reviews and appeals. The present situation involves the Commissioner

having undertaken an audit o f the taxation affairs o f Sandini and, having concluded in its

position paper that Sandini is not entitled to claim roll−over relief in relation to the MIN

Shares, has made clear its intention to issue Sandini with a notice o f amended assessment in

respect o f the MIN Shares. Ms Ellison points to Oil Basins where a prospective taxpayer

sued the Commissioner in advance o f an assessment. As noted above, Dawson J rejected the

contention that the declaration sought would be hypothetical because his Honour found it

would produce a consequence for the parties. In that case, the Commissioner had not only

not issued any assessments pursuant to the PRRT Act, but he conceded he had given no

indication that he had formed a view that the plaintiff was or was not liable to pay the

relevant tax. Ms Ellison stresses that this case is quite different because the Commissioner

has reached a view as to Sandini's entitlement.

51 Ms Ellison also contends that i f declaratory relief were granted in this case it would set an

undesirable precedent whereby taxpayers, having been informed by the Commissioner that

they are about to receive a notice o f assessment, may choose to seek a declaration before the

− 18 −

Court in an endeavour to have their objections to their assessment heard and determined

shortly prior to service of the notice of assessment. This, it is argued, would have the effect

that no obligation on the taxpayer to pay tax would arise prior to the determination of the

issues by the Court and would render substantially ineffective the scheme providing for

objections to be dealt with under Pt IVC of the TAA. Hence, the Court should exercise its

discretion, it is contended, to decline the declaratory relief sought on the grounds that there is

an established and more appropriate procedure available to challenge the validity of the

notice of assessment after it is issued.

Consideration

52 It may be accepted that one matter to take into account in exercising discretion to grant or to

refuse a declaration is the availability of an alternative remedy: Forster v Jododex Australia

Pty Ltd (1972) 127 CLR 421 per Gibbs and Walsh JJ (at 438) and Bob Jane T−Marts (at [4]).

53 Beyond this, I am unable to accept the submissions advanced by Ms Ellison. This particular

case raises entirely novel questions of construction on which respectable opposing views areadvanced. There are no outstanding factual matters to be resolved. It is, as the applicants and

the Commissioner accept, an entirely suitable vehicle for declaratory relief. The fact that the

formerly married parties may wish to revisit or recast orders made in the Family Court or to

seek new or different orders does not bear upon the facts as they exist now. Those

hypothetical possibilities will remain. In the meantime, it is desirable that this matter be

resolved. As indicated above, resolution of this matter may aid in determining appropriate

courses to be pursued, if any, in relation to any existing or proposed matters in the Family

Court.

54 Relevant to both topics is the factual dispute about whether or not Ms Ellison sent the

29 September Email and whether, if sent, it was sent as a director of Wavefront rather than in

her personal capacity. As I have indicated, I have found that she did send the 29 September

Email and that it was also sent on behalf of Wavefront, as she was the sole directing mind

and will of Wavefront. Nonetheless, the Commissioner submits that the case can be

determined without the necessity for any findings on those issues. That depends upon the

main debate on whether or not roll−over relief can arise. I turn to that issue.

− 19 −

APPLICANTS' ARGUMENT O N ROLL−OVER

55 The applicants argue that there are two bases on which Sandini is entitled to a roll−over. The

first being because there was a CGT event A l within the meaning o f s 104−10 o f the 1997

Act with Ms Ellison becoming the owner o f the MIN Shares enlivening s 126−5 and s 126−15

(Ms Ellison C G T event Al) . The second alternative is on the basis that Ms Ellison wassufficiently involved in Sandini transferring the MIN Shares to Wavefront in respect of which

there was at least one CGT event A l to as to enliven s 126−5 and s 126−15 (Ms Ellison's

involvement).

Ms Ellison C G T event Al

56 Dealing with the first o f these, the Ms Ellison CGT event A l , the applicants argue that either

by reason o f the Family Court Order alone or b y reason o f the steps taken to give effect to it,

by 30 September 2010, Ms Ellison became the owner o f the MIN Shares. Her becoming the

beneficial owner constituted a change in ownership o f those shares attracting the terms of

s 104−10. Further, that change o f ownership occurred because o f the Family Court Order and

thus the terms o f s 126−5 and s 126−15 are satisfied.

57 This construction turns on a notion o f beneficial ownership, which is perhaps the key issue in

dispute in the proceedings. The applicants argue that CGT event A l is concerned with

changes in beneficial ownership o f CGT assets, referring to s 104−10, which spells out that

CGT event A l happens i f you dispose o f a CGT asset, and that such a disposal occurs i f achange o f ownership occurs:

from you to another entity, whether because of some act or event or by operation oflaw. However, a change of ownership does not occur if you stop being the legalowner of the asset but continue to be the beneficial owner.

Note: a change in the trustee of a trust does not constitute a change in the entity thatis the trustee of the trust (see subsection 960−100(2)). This means that CGT event Alwill not happen merely because of a change in the trustee.

58 I f a person who owns an asset in one capacity becomes an owner o f it in another capacity, he

or she is recognised differently by the 1997 Act: see s 960−100(3), which provides asfollows:

960−100 Entities

(3) A legal person can have a number of different capacities in which the persondoes things. In each of those capacities, the person is taken to be a differententity.

− 20 −

Example: In addition to his or her personal capacity, an individual may be:

• sole trustee of one or more trusts; and

• one of a number of trustees of a further trust,

In his or her personal capacity, he or she is one entity. As trustee of each trust, he or she is adifferent entity. The trustees of the further trust are a different entity again, of which theindividual is a member.

59 A change in beneficial ownership without a change in legal ownership can arise in a number

o f ways. However, only one is specifically provided for under the CGT Rules in Pt 3−1 and

Pt 3−3 o f the 1997 Act and that is by CGT event E l , set out in s 104−55, declaring oneself to

be trustee for another. I f a trust relationship is imposed, and it is not the result o f the asset

owner's declaration, then the terms o f s 104−55 are not met.

60 The applicants contend that CGT event A l is not limited to situations where there is a change

in both legal and beneficial ownership o f CGT assets. The applicants argue that the text used

in s 104−10, the context in which those words are used and the evident purpose o f the CGT

Rules do not suggest such a limitation. To the contrary, they argue, the context and purposeo f the CGT Rules suggest that a mere change in beneficial ownership, without a change of

legal ownership, is sufficient.

61 The applicants argue that i f it were not so, events that cause a change in beneficial ownership

o f an asset without legal ownership changing would not fall within subdiv 104−E o f the 1997

Act, For example, a purchaser paying or providing all o f the consideration required under apurchase contract for an asset or a court order vesting an asset in a person might never be

treated as CGT events.

62 It follows, on the applicants' argument, that the CGT Rules focus on ownership. They can be

contrasted with other statutory schemes that, in the context o f shares, focus on shareholdings

and shareholders with an apparent legislative preference to be guided by the certainty that the

share register provides.

63 The basis and focus o f the applicants' primary submission is that on making the Family Court

Order, or on 28 September 2010, being the date at which the order was to be performed,

beneficial ownership in the MIN Shares passed to Ms Ellison. The applicants rely on In the

Marriage o f Michiels (1991) 103 FLR 1 (at 6−7); In the Marriage o f Bourke (1993) 114 FLR

89 (at 94−95); Official Trustee in Bankruptcy v Mateo (2003) 127 FCR 217 and Jones vDaniel (2004) 141 FCR 148 per Hill, Moore and Allsop JJ (as the Chief Justice then was).

The applicants contend that the order altered the interests o f Sandini in the subject matter of

− 21 −

the Family Court Order, namely, the MIN Shares. It does not matter, they say, that the form

o f the Family Court Order was not expressed to have an immediate dispositive effect: seeJones per Moore J (at [8]), with whom Hill and Allsop JJ agreed and per Allsop J (at [20])

with whom Hill J agreed. Whatever interest Sandini had in the MIN Shares vested in

Ms Ellison, the applicants contend. This is not a case where Ms Ellison needed to do

anything or to pay anything to perfect or complete her interest. The applicants argue that in

terms o f s 104−10, as the shares pre−existed the Family Court Order, and Ms Ellison came to

be their owner, she must have acquired them and Sandini must have disposed o f them, such

that the test for the section to become operative was satisfied: see Allina Ply Ltd vCommissioner o f Taxation (1991) 28 FCR 203 per Lockhart, Burchett and Gummow JJ

(at 209−210).

64 The applicants argue that what was done after this time to give effect to the Family Court

Order was a matter for Ms Ellison. By the time the transfer documentation was registered in

accordance with Ms Ellison's directions, the MIN Shares were already hers.

65 The applicants contend that the mis−description o f Sandini in the Family Court Order is

irrelevant. Any interest in the MIN Shares before the Family Court Order was made, or when

it became effective, on whatever basis those interests were held or enjoyed, wereextinguished by reason o f the Family Court Order. Further, the applicants argue, this is not a

case in which there have always been a co−existent legal and beneficial ownership of

property: see, for example, Commissioner o f Stamp Duties v Livingston (1964) 112 CLR 12.

As such, there was not an order impossible o f observance by reason o f mis−description o f anyownership interests to be divested.

66 Essentially, it is argued that all that, was necessary for the roll−over was that the change of

ownership in the MIN Shares be because o f the Family Court Order; but for the order, there

would have not been a CGT event o f any description involving the MIN Shares and the

parties to the dealings in them presently under review.

67 I t is not to the point, the applicants argue, that Sandini owned a larger parcel o f shares in MIN

that included the MIN Shares. There is nothing to prevent a vesting o f ownership o f part o f alarger parcel o f shares in favour o f the new owner. This is what occurred in White v Shortall

(2006) 68 NSWLR 650 per Campbell J, which I consider at length below. If, to the contrary,

the MIN Shares coming from a larger parcel precluded Ms Ellison's beneficial ownership of

the MIN Shares arising upon the making o f the Family Court Order, or the time within which

− 22 −

it needed to be met, then, the applicants argue, there were steps taken in furtherance o f the

Family Court Order which constituted an appropriation o f the MIN Shares to the Family

Court Order and the beneficial ownership fixed upon that appropriation. The applicants

invite a comparison with a goods context, where the focus o f attention is usually the passing

o f property at law, and where an act consistent with the terms o f a bargain or obligation canbe enough to be an appropriation to the contract. Thus, in James v Commonwealth (1939) 62

CLR 339 per Dixon J (at 377) shipping goods in some circumstances was sufficient and in

Akron Tyre Co Pty Ltd v Kittson (1951) 82 CLR 477 per Latham CJ (at 484−485) attaching

tyres to vehicles was sufficient.

68 As with chattels or goods, shares can also be appropriated to an agreement, instrument or

arrangement under which beneficial ownership is intended to pass and thereby pass beneficial

ownership before the passage o f title: Beconwood Securities Pty Ltd v Australia and New

Zealand Banking Group Ltd (2008) 246 ALR 361 per Finkelstein J (at [57]), where his

Honour said:

Put another way, OPS has the freedom to decide how and from whom it will obtainsecurities that answer the description of "Equivalent Securities". Crucially, there isno provision in the SLA restricting OPS from disposing of the lent shares orrequiring OPS to keep on hand at any time specific securities for delivery toBeconwood as Equivalent Securities. In these circumstances, Beconwood cannotobtain a legal or equitable interest in any shares, even if they meet the description ofEquivalent Securities, before shares that satisfy the description are appropriated tothe agreement: Re Goldcorp Exchange Ltd [1995] 1 AC 74. This is no more than anapplication of the rule that until property which is previously unidentified isappropriated to an agreement, neither a legal nor an equitable interest in that propertycan be created by that agreement: Hoare v Dresser (1859) 7 HLC 290 [11 ER 116];Citizens' Bank o f Louisiana v First National Bank o f New Orleans (1873) LR 6 HL352.

69 In the current situation, the applicants argue, M r Ellison, as director o f Sandini, initiated steps

to have a share transfer document prepared to transfer the MIN Shares as contemplated by the

Family Court Order. He sought details o f Ms Ellison's required particulars for the transfer,

instructed that the transfer document be prepared, delivered the transfer document to her,

executed the transfer and delivered it for registration. Each o f those steps was a step

consistent with the terms o f the Family Court Order. Each was an appropriation, i f the

preceding step was not already an appropriation, o f the shares represented by the transfer

document to the Family Court Order and the beneficial ownership consistent with the order

fixed in favour o f Ms Ellison.

− 23 −

70 The applicants also argue that, as an alternative, there was a change o f ownership o f the MIN

Shares to Ms Ellison either by reason o f her constructive receipt o f those shares or by reasono f s 103−10 o f the 1997 Act, which relevantly provides that Pt 3−3 will apply i f you receive

money or other property i f it has been applied for your benefit, including by discharging all

or part o f a debt you owe, or as you direct. Section 103−10(2) provides as follows:

(2) Those Parts apply to you as if you are entitled to receive money or otherproperty:

(a) if you are entitled to have it so applied; or

(b) if:

(i) you will not receive it until a later time; or

(ii) the money is payable by instalments.

71 The intent o f the 1997 Act is that one does not escape the reach and operation o f the Act by

directing vested entitlements to others. The applicants note that historically that philosophy

has found its expression in an income tax context where an amount is derived by receipt orconstructive receipt b y being dealt with as directed by the person entitled to receipt. For

income to be derived, the taxpayer must beneficially own it, free o f restriction. Ownership of

the income, a receipt, a receivable or property entitlement is a threshold feature o f derivation

and assessability. That ownership can be recognised one o f three ways. First, by actual

receipt (or accrual o f an entitlement to receipt) by a taxpayer, second, b y constructive receipt

o f a vested entitlement o f a taxpayer, or third, by force o f statute, namely, s 19 o f the 1936

Act and s 6−5(4) o f the 1997 Act. The applicants point to the fact that the income tax

constructive receipt principles have been replicated in the CGT context both at its inception

by s 160D o f the 1936 Act and in the current CGT Rules by s 103−10 o f the 1997 Act. The

same principles and concepts apply.

72 Reverting then to the words o f s 103−10, the applicants argue that there is no limit in its

operation to determining capital proceeds for a CGT event. Accordingly, the applicants

submit, i f Ms Ellison did not otherwise become the owner o f the MIN Shares, she did so by

reason o f her vested entitlement to them under the Family Court Order and her subsequent

constructive receipt o f them.

− 24 −

73 The Explanatory Memorandum to the Income Tax Assessment Amendment (Capital Gains)

Bill 1986, Income Tax (Rates) Amendment (Capital Gains) Bill 1986 (Cth) provided, in

relation to s 160D:

Section 160D: Money or other property applied for benefit of taxpayer

New sub−section 160D specifies the circumstances in which a taxpayer is to bedeemed to have received or to be entitled to receive money or other property for thepurposes of the new Part. This sub−section is relevant, for example, to the operationof section I6OZD which stipulates what is to be taken into account in determiningwhat consideration has been given or received in respect of a disposal of an asset. Byparagraph 160D(1)(a), a taxpayer will be taken to have received money or otherproperty if the money or other property has been applied for the benefit, or inaccordance with the directions of the taxpayer. By paragraph 160D(1)(b) ataxpayer will be treated as entitled to receive money or other property if the taxpayeris entitled to have the money or other property applied for his or her benefit, or inaccordance with his or her directions. Sub−section 160D(2) stipulates that, withoutlimiting the generality of the expression, the reference in sub−section (1) to theapplication of money or other property for the benefit of a taxpayer is to include areference to the application of money or other property in the discharge in whole orin part, of a debt due by the taxpayer. Proposed sub−section 160D(3) ensures thatnothing in sub−sections 160D(1) and (2) is to imply any writing down of the scope ofsection 19 of the Principal Act. Section 19 is a general rule to the effect that income •or money is deemed to have been derived by a person where it is dealt with asdirected by that person although not actually received by the person.

(emphasis added)

74 The applicants argue that Ms Ellison became the owner o f the MIN Shares on or before

30 September 2010. That change o f ownership was sufficient to constitute a CUT event Al

and the first threshold condition for s 126−5 and s 126−15 roll−over was thus satisfied. It is•

these provisions that create the roll−over entitlement.

75 The applicants' position is that assuming Ms Ellison became the owner o f the MIN Shares,

that ownership arose because o f the Family Court Order. But for the Family Court Order, no

interest in the MIN Shares for Ms Ellison would have arisen and Sandini would not have

transferred the MIN Shares.

76 It follows, the applicants argue, that Mr Ellison is entitled to the roll−over relief asserted.

Ms Ellison's involvement

77 The alternative approach to the applicants' case is to rely upon Ms Ellison's actual

involvement. This approach assumes, contrary to the primary position advanced for the

applicants, that there was no change o f ownership to Ms Ellison. I f that is the case, then the

applicants argue there was sufficient involvement o f Ms Ellison in the change o f ownership

− 25 −

that did occur to enliven s 126−5 and s 126−15 roll−over. The argument rests on the fact that

the words used in s 126−15 do not prescribe or require that the person who is in fact the

transferee o f the CGT asset that is the subject o f the trigger event be a spouse or former

spouse before roll−over relief is available. Rather, what is required is a trigger event and for a

spouse or former spouse to be 'involved' in it. The fundamental argument advanced for the

Commissioner that the transfer must be to a spouse or former spouse is not reflected in the

natural language used in s 126−15 on this limb o f the applicants' argument.

78 The applicants say that in the present matter, on any view, there was a CGT event Al. Also

on any view, Ms Ellison was involved in it. First, her involvement was as the beneficiary of

the Family Court Order and, second, in emailing a direction to secure the registration o f the

MIN Shares in accordance with her preference. That activity was involvement in a CGT

event. Without her direction, the transfer would have been to her personally and her

involvement would have been different, and passive, by way o f being a recipient. Each type

o f activity is involvement in the CGT event. Once again, on either approach, the transfer

would not have happened but for the Family Court Order and, accordingly, roll−over relief is

available.

79 The applicants maintain, and I accept, that an important consideration not to be lost in the

proper construction to be given to s 126−15 is that it is an ameliorating provision that relieves

taxpayers from taxation burdens that would otherwise arise. Accordingly, and consistently

with the text, context and policy o f the statute (per Project Blue Sky Inc v Australian

Broadcasting Authority (1998) 194 CLR 355 (at [69]−[70])), to the extent that there areconstruction options within these parameters, those that allow a liberal and not restrictive

construction ought to be preferred to those that do not: see Burt v Commissioner o f Taxation

(1912) 15 CLR 469, WA Trustee Executor & Agency Co Ltd v Commissioner o f State

Taxation (WA) (1980) 147 CLR 119, being sales tax exemption cases; and see also Shell's

Se l f Service Pty Ltd v Deputy Commissioner o f Taxation (Cth) (1989) 98 ALR 165 per Ryan J

and Bons (t/a Scale Aviation Australia) v Commissioner o f Taxation (Cth) (1994) 28 ATR

239 per Beazley J. The policy o f s 126−15, the applicants stress, is to defer crystallisation of

tax liability that would otherwise arise upon CGT events that follow from division of

property between spouses and former spouses on breakdown o f their relationship. The

construction advanced above is wholly consistent, the applicants say, with this policy and,

further, does not undermine the scheme o f the CGT Rules.

−26 −

80 It will produce a tax liability when the relevant assets pass beyond the family unit in morenormal circumstances, most o f which will be accompanied by a realisation generating

proceeds with which the tax burden will be able to be met.

T H E COMMISSIONER'S POSITION O N ROLL−OVER RELIEF

81 The Commissioner's argument on this point (essentially adopted by Ms Ellison), turns on onefundamental proposition and that is whether there was, at any time, a relevant change of

ownership, even beneficial ownership. The Commissioner says there was not as the Family

Court Order did not have that result.

82 The Commissioner identifies three questions in the issue o f whether Sandini is entitled to

roll−over relief in relation to the disposal o f the MIN Shares:

(1) Did para 3 o f the Family Court Order bring about a 'change o f ownership' that

qualified for roll−over relief under subdiv 126−A?;

(2) In the alternative to (1), did the transfer o f the MIN Shares from Sandini to Wavefront

on 30 September 2010 qualify for roll−over relief under subdiv 126−A?; and

(3) In the alternative to (1) and (2), by reason o f s 103−10 o f the 1997 Act, or an alleged

constructive receipt o f the MIN Shares, did Ms Ellison's direction in relation to the

MIN Shares and the giving o f effect to that direction result in a change o f ownership

within the meaning o f s 104−10 so as to qualify for roll−over relief under subdiv 126−

A?

83 As to (1) above (in [82]), para 3 o f the Family Court Order provided that '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 [MIN Shares]'. The Commissioner says that order did not result in achange o f ownership o f the MIN Shares that qualify for roll−over relief under subdiv 126−A

for two reasons.

84 First, a change o f ownership for the purpose o f s 104−10(2) o f the 1997 Act required a

transfer o f the legal ownership o f the MIN Shares to the transferee. The Family Court Order

did not effect a transfer o f the MIN Shares. It follows there was no change o f ownership for

CGT purposes.

85 Second, even i f the transfer o f beneficial ownership on its own were sufficient for the purposeo f s 104−10(2), on its terms, the Family Court Order did not effect such a transfer.

− 27 −

86 The Commissioner argues that there was no change o f ownership for the purpose of s 104−

10(2) o f the 1997 Act because the subsection, b y its terms, makes clear that a change of legal

ownership, but not o f beneficial ownership, does not result in a change o f ownership for CGT

purposes. This, the Commissioner argues, is further illustrated by the Note to s 104−10(2),

cited above at [57], which explains that CGT event A l will not happen merely because o f achange in trustee, as there is no change in the relevant entity. Looking at the reverse position,

the Commissioner noted that while the question is not covered by any authority so far, the

CCH Australian Federal Income Tax Reporter in relation to the 1997 Act states that:

the above exceptions in relation to a change of ownership make it clear that a merechange in the legal ownership of CGT asset will not cause CGT event Al to happenif the beneficial ownership remains unchanged. Further, a change in the beneficialownership of a CGT asset does not cause CGT event Al to happen if there is nochange in the legal ownership. This means that CGT event Al can only happen ifthere is a change in the legal ownership and the beneficial ownership of a CGT asset

(emphasis supplied).

87 Under CGT event A l , a taxpayer disposes o f a CGT asset i f a change o f ownership occurs.The initial task is to identify the relevant asset. What is required for 'ownership' and a'change in ownership' will depend on the nature o f the CGT asset being considered.

'Ownership' has neither an historical nor a contemporary universal meaning. Its prima facie

meaning is the entire dominion o f the thing said to be owned: see Bellinz Ply Ltd vCommissioner o f Taxation (Cth) (1998) 84 FCR 154 per Hill, Sundberg and Goldberg JJ

(at 161). The Commissioner says that is the sense in which ownership was used in s 104−

10(2) o f the 1997 Act.

88 The Commissioner stresses that the case for the applicants depends on the asseveration, for

which no authority is cited, that CGT event A l is concerned with changes in beneficial

ownership o f CGT assets. The applicants posit that the Family Court Order resulted in

beneficial ownership o f the MIN Shares passing to Ms Ellison. So it would be enough for

s 104−10(2), according to the applicants, i f a vendor and purchaser entered into an executory

contract for the sale o f land. A purchaser under such a contract o f sale, which is specifically

enforceable, obtains a beneficial interest in the land, albeit one conditional on the payment of

the price. The vendor retains the legal interest in the land, however, until that interest is

disposed o f on completion o f the transaction. But Note 1 to the example in s 104−10(3) o f the

1997 Act demonstrates, the Commissioner says, unequivocally that this is not the case. No

change in ownership occurs i f the contract falls through before completion.

− 28 −

89 The Commissioner argues that two other observations flow from the content o f the Note.

First, it is not the case, as the applicants argue, that there is an immediate change in

ownership, for the purpose o f s 104−10 o f the 1997 Act, on execution o f the contract because

the purchaser obtains a beneficial interest according to the general law, but then disposes of

that interest when the contract falls through. Rather, in terms o f the Note 'this event does not

happen because no change in ownership occurs'. There is no change o f ownership at all and

no CGT event. Second, the change in ownership for the purpose o f s 104−10 occurs oncompletion and not before. The Commissioner says that the vendor retains the legal interest

in the land until that legal interest is disposed o f on completion. There is not a relevant

disposal until completion o f the contract. The 'disposal' occurs on completion; the execution

o f the contract does not amount to a disposal o f the CGT asset.

90 The Commissioner also suggests that the error in the applicants' approach is to transpose the

relevant CGT asset that is being disposed of, namely, the MIN Shares with the beneficial

interest in those shares. In reality, the Commissioner says, Sandini retained dominion overthe MIN Shares until execution o f the transfer on 30 September 2010. There was no change

in ownership for the purpose o f s 104−10 until Sandini ceased to enjoy all rights as owner.

91 The Commissioner submits that in considering the proper construction in the context of

s 104−10, the question is not answered by pointing to various cases in which there is anacknowledgement that under the general law there is a concept o f beneficial ownership,

which is self−evident. The question, rather, is whether that concept o f beneficial ownership

and effecting an alteration in beneficial ownership by entering into a contract, or as a result of

a Court order, is sufficient for a change o f ownership (my emphasis) within the meaning of

s 104−10. This is because what is required for ownership must be different and will be

different in terms o f the various statutory contexts. Accordingly, the change in ownership

would be quite different in the context o f examining a transaction under CGT event Bl , such

as a hire purchase contract, compared with the question o f whether beneficial ownership was

transferred b y reason o f the Family Court Order. The Commissioner also relies on Re

Transphere Pty Ltd (1986) 5 NSWLR 309, in which there was an analysis by McLelland J in

the context o f a company receivership o f legal and equitable interests, his Honour saying

(at 311):

Accordingly unless the contrary intention appears, property in the Companies (NewSouth Wales) Code, s 573(1)(h), will include the estate or interest of the relevantperson in property which he holds on trust for other persons. It is important to

− 29 −

recognise the true nature and incidents of legal and equitable estates in propertysubject to a trust. They are clearly and succinctly described in the judgment ofHope JA in DKLR Holding Co (No 2) Pty Ltd v Commissioner o f Stamp Duties[1980] 1 NSWLR 510 at 518−520. (His Honour's analysis is not affected by thedecision of the High Court in that case − see 149 CLR 431.) I would not wish todetract from the value of Hope JA's exposition by. trying to summarise it. But what issignificant for present purposes is the imprecision of the notion that absoluteownership of property can properly be divided up into a legal estate and an equitableestate. An absolute owner holds only the legal estate, with all the rights and incidentsthat attach to that estate. Where a legal owner holds property on trust for another, hehas at law all the rights of an .absolute owner but the beneficiary has the right tocompel him to hold and use those rights which the law gives him in accordance withthe obligations which equity has imposed on him by virtue of the existence of thetrust. Although this right of the beneficiary constitutes an equitable estate in theproperty, it is engrafted onto, not carved out of, the legal estate. Hope JA (at 519)illustrates the point by the following quotation from Maitland − Lectures on Equity2nd ed (1949) at 17: Lectures on Equity (1949) at 17:

"... Equity did not say that the cestui que trust was the owner of the land, itsaid that the trustee was the owner of the land, but added that he was boundto hold the land for the benefit of the cestui que trust. There was no conflicthere."

92 The Commissioner says two points are to be noted from this passage, the first being that, as

an absolute owner, Sandini held only a legal estate. It is wrong in principle, the

Commissioner asserts, to divide up the absolute ownership o f property into a legal estate and

an equitable estate. An absolute owner holds only the legal estate. Where an owner holds on

trust for another, he or she continues to have the rights o f an absolute owner at law; but the

beneficiary has the right to compel the owner to hold and use the rights in accordance with

the obligations imposed by equity. Second, when an equitable interest does arise, the

beneficiary's equitable interest is engrafted onto, not carved out of, the legal estate: DKLR

Holding Co (No 2) Pty Ltd v Commissioner o f Stamp Duties (NSW) [1980] 1 NSWLR 510

per Hope JA (at [16]). In those circumstances, when the equitable interest arises, the personwho is the legal owner has exactly the same ownership interest as before, except that he, she

or it now holds that interest subject to the equitable entitlement o f another. In this passage,McLelland J was following what was said by Hope JA in the New South Wales Court of

Appeal in DKLR. Both this passage and the passage from DKLR were referred to with

approval by the plurality o f the High Court in Federal Commissioner o f Taxation v Linter

Textiles Australia Ltd (in liq) (2005) 220 CLR 592, where the Court (Gleeson CJ, Gummow,

Hayne, Callinan and Haydon JJ said (at [30]) (footnotes omitted):

In so far as their Lordships were proceeding in Oriental Steam upon an assumptionthat the law of property requires the location at all times and in all circumstances ofdistinct legal and beneficial ownership, that assumption since has been exploded byCommissioner o f Stamp Duties (Q) v Livingston. In Franklin's, Menzies J made this

− 30 −

point respecting the significance of Livingston. McLelland J later rightly emphasised"the imprecision of the notion that absolute ownership of property can properly bedivided up into a legal estate and an equitable estate". Hope JA said:

"[A]n absolute owner in fee simple does not hold two estates, a legal estateand an equitable estate. He holds only the legal estate, with all the rights andincidents that attach to that estate."

93 At the most, according to the Commissioner's argument, the Family Court Order had the

effect o f creating a new equitable estate in favour o f the recipient, Ms Ellison, in relation to

the MIN Shares as held by Sandini. But from 21 September 2010 until 30 September 2010,

Sandini continued to hold the very same interest it always had held in relation to the MIN

Shares. There was no change in ownership for the purpose o f s 104−10, and could be no CGT

event A l disposal, unless and until Sandini no longer held dominion over the shares. That

did not occur until the transfer was executed. The Family Court Order therefore did not have

the effect o f transferring the MIN Shares. Accordingly, there was no change o f ownership

for the purpose o f the relevant CGT trigger event, CGT event Al.

94 In short, the Commissioner's primary contention is that an alteration in beneficial ownership

does not constitute a change o f ownership for the purpose o f s 104−10(2).

95 However, even i f this is wrong, the Commissioner says the Family Court Order did not effect

such an alteration in the beneficial ownership o f the MIN Shares. The Commissioner accepts

that a transfer order made under s 79 o f the Family Law Act may create or transfer anequitable interest in property that is the subject o f the order, but whether or not it has such

effect depends on the terms o f the order. In this case, the Family Court Order required

Sandini, within 7 days, to 'do all acts and things and sign all documents necessary to transfer'

the MIN Shares to Ms Ellison.

96 The Commissioner argues that the following factors support the conclusion that the effect of

the Family Court Order was not to transfer an equitable interest o f the MIN Shares to

Ms Ellison:

(1) Rather than ordering the 'transfer' o f the MIN Shares, the Family Court Order

required Sandini to 'do all acts and things and sign all documents necessary to

transfer' the MIN Shares. In other words, the Family Court Order was directed at the

doing o f the acts and things and the signing o f the documents as opposed to

transferring the MIN Shares. The Family Court Order was not immediately

−31 −

dispositive. In this sense, the Commissioner argues, it is distinguishable from those

authorities relied upon by the applicants, such as In the Marriage o f Michiels.

(2) The property the subject o f the Family Court Order was a number o f MIN Shares, asopposed to readily identifiable real or personal property, thus preventing identification

o f the property in respect o f which the equitable interest was created. At best,

Ms Ellison could have a beneficial interest in 2,115,000 MIN Shares from within the

much larger parcel o f MIN Shares held by Sandini, or possibly an interest in respect

o f the entire mass o f those shares.

97 The authorities relied upon by the applicants, the Commissioner points out, were concerned

with the rights o f the intended transferee as against the trustee in bankruptcy of the

transferor's estate. The question here, however, is raised in a different context and for adifferent purpose, namely, whether from a taxation perspective, ownership o f the MIN Shares

has changed.

98 The Commissioner says it is not clear from the authorities whether such transfer o f beneficial

ownership for the purpose o f s 79 o f the Family Law Act amounts to absolute entitlement

(including, for example, an entitlement to any income received in respect o f the asset between

the date o f the order and the date o f the transfer o f legal ownership). However, from ataxation perspective, any beneficial ownership transferred to Ms Ellison as a result o f the

Family Court Order was insufficient to constitute a 'change o f ownership' for the purpose of

s 104−10(2) o f the 1997 Act. As para 3 o f the Family Court Order did not result in a change

o f ownership for the purpose o f s 104−10(2) o f the 1997 Act, it follows, the Commissioner

argues, that nothing happened that could qualify for roll−over relief under subdiv 126−A.

99 As to (2) above (in [82]), the Commissioner also contends that the transfer o f the MIN Shares

from Sandini to Wavefront on 30 September 2010 did not qualify for roll−over relief under

subdiv 126−A. In order for the transfer o f the MIN Shares from Sandini to Wavefront on 30

September 2010 to qualify for roll−over relief under subdiv 126−A, the trigger event must

involve a company or a trustee as transferor and a spouse or former spouse as transferee. A

spouse is defined in s 995−1 as an 'individual' regardless o f whether the same or different

sex, and whether married or living together as a couple on a genuine domestic basis.

100 The transfer o f the MIN Shares from Sandini to Wavefront on 30 September 2010, the

Commissioner says, did not qualify for roll−over relief under subdiv 126−A as the transferee

was Wavefront and not a 'spouse or former spouse'. Section 126−15 should not be given the

− 32 −

broad construction contended for by the applicants, the Commissioner argues. The process of

statutory construction must always begin with the examination of the text of the relevant

provisions. So it must end. The enquiry is directed to the text, context and purpose of the

provision, identification of the relevant constructional choices, and the determination of the

construction that best achieves the statutory purpose. It is important that s 126−15 expressly

provides for the transferor of the asset to be either an associated company or trust, yetexpressly stipulates that the transferee must be the 'spouse or former spouse'. The

Commissioner argues that provision could have been made in the legislation for the

transferee to be an associated company or trust of a spouse or former spouse. It was not. To

construe s 126−15 as extending to transfers to companies or trusts associated with a spouse orformer spouse is to give the provision a meaning that is not supported by the text.

101 Although the Commissioner accepts that meaning needs to be given to the term 'involves', in

this instance, the Commissioner argues, the relevant involvement of the spouse or former

spouse is specifically prescribed as being the recipient of the relevant CGT asset. The

Commissioner submits that it is relevant that s 126−15(1) of the 1997 Act is a rewrite of

s 160ZZMA(1) of the 1936 Act pursuant to which roll−over relief was available, if an asset

was transferred from a company or a trustee to a spouse or former spouse. Although

s 160ZZMA(1) did not include the word 'involves', the Explanatory Memorandum set outabove explains the changes that were made in Div 126, but does not refer to any change made

as a result of the inclusion of the word 'involves', indicating, the Commissioner contends,

that the scope of the roll−over did not change. Consistently with this, s 1−3 of the 1997 Act

provides that if the former statutory provision expressed an idea in a particular form of words

and the 1997 Act appears to have expressed the same idea in a different form of words in

order to use a clearer or simpler style, then the ideas themselves are not taken to be different

just because different words are used.

102 As to (3) above (in [82]), in relation to s 103−10 of the 1997 Act, the Commissioner rejects

the alternative argument advanced by the applicants to the effect that, by reason of s 103−10

of the 1997 Act or the alleged constructive receipt of the MIN Shares, Ms Ellison's direction

in relation to the MIN Shares and the giving of effect to that direction resulted in a change of

ownership within the meaning of s 104−10. Section 103−10 does not operate to broaden the

scope of subdiv 126−A, not only would such an outcome be inconsistent with the text of the

relevant roll−over provisions (which are expressly limited to transfers to a spouse or former

spouse and include no reference to the application of property for a spouse's benefit or at a

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spouse's direction), it would have the effect o f setting the costs base for Ms Ellison in respect

o f an asset that she did not hold. Further, the Commissioner argues, were s 103.−10 to operate

in the manner contended for the applicants, the tax position o f the actual recipient of the asset

would be manifestly uncertain.

M S ELLISON'S POSITION O N ROLL−OVER RELIEF

103 Ms Ellison has largely adopted the position as advanced for the Commissioner and, in

particular, accepts the Commissioner's contention that the case can be determined without the

necessity for findings in relation to whether Ms Ellison sent the 29 September Email and, if

so, in what capacity. I have found that Ms Ellison sent the relevant email and she sent it in

the capacity in which she was invited to send it, namely, as the respondent to the Family

Court Order and as the person invited to indicate the method o f compliance with those orders.

As she directed the transfer to be to Wavefront, she did so also on its behalf as the sole

director and guiding mind of Wavefront. I can accept that she has no recollection of sending

the brief email, but no other plausible explanation is advanced or apparent.

104 The CGT event occurs at the time when the transferor disposes o f the asset in accordance

with the order, being a time when change o f ownership occurs, Ms Ellison says. Transfers

made pursuant to a court order are not made under a contract. In this case, the change of

ownership occurred only after Sandini, as trustee for the KRUT as transferor, executed the

Standard Transfer Form on 30 September 2010 to transfer ownership o f the MIN Shares from

it to Wavefront as transferee.

105 Ms Ellison rejects the applicants' primary contention that she acquired beneficial ownership

o f the MIN Shares by operation o f law based on the Family Court Order made on21 September 2010 or on 28 September 2010, being the date by which the orders needed to

be performed. Ms Ellison also rejects the applicants' argument that Sandini held the MIN

Shares b y virtue o f the Family Court Order in trust for Ms Ellison and, subject to her

direction, Ms Ellison could have restrained any transfer o f shares by Sandini to a third party.

She equally rejects the submissions for the applicants that she held beneficial ownership of

the MIN Shares at the time o f the Family Court Order, dated 21 September 2010, by virtue of

constructive receipt under s 103−10 o f the 1997 Act.

106 Regardless o f whether or not she obtained some form o f equitable interest in the MIN Shares

due to the Family Court Order (which she denies), Ms Ellison argues that Sandini is not

entitled to relief because an essential condition is that the trigger event CGT event A l occurs.

− 34 −

Ms Ellison rejects the argument that the Family Court Order constituted CGT event Al

because o f the absence o f transfer o f legal ownership. It is only a change o f legal ownership

which can constitute CGT event A l . Further, she argues that it is clear that the transfer o f the

MIN Shares to Wavefront was as a consequence o f email communication initiated by

Mr Ellison and between Mr Ellison and Ms Ellison in a capacity as a director or Wavefront;

not because o f the 21 September 2010 Family Court Order. In my view, this contention is

not realistic. There was no prospect o f such a transfer occurring were it not for the Family

Court Order,

107 Ms Ellison suggests that under CGT event A l , a disposal o f a CGT asset takes place i f achange o f ownership occurs. However, Ms Ellison submits, a change in beneficial ownership

is not enough to give rise to CGT event A l , even i f there is a beneficial interest arising by

virtue o f orders under s 79 o f the Family Law Act, as this is not sufficient to amount to anabsolute entitlement. In any event, Ms Ellison contends that, in fact, no part o f the beneficial

interest in the MIN Shares passed to her prior to 30 September 2010, or indeed at all. That is

explained on the basis that, properly construed, s 104−10 o f the 1997 Act lends support to the

view that CGT event A l is limited to situations where both the legal and equitable interests

must be disposed o f before a change in ownership occurs for the purpose o f CGT event Al.

108 I t is further argued that as the Family Court Order was incapable o f being performed

according to their terms, roll−over relief cannot be obtained. The transfer that did occur was

not a transfer pursuant to the Family Court Order.

109 An additional problem to which Ms Ellison points is that she had no entitlement to anyparticular identifiable MIN Shares before 30 September 2010. It is submitted, therefore, that

the Family Court Order did not satisfy the test o f certainty o f 'subject' because it did not

specify that a particular and identifiable parcel, comprising a particular 2,115,000 MIN

Shares then owned by Sandini, had to be set aside and specifically applied for the purpose of

compliance with the Family Court Order. Rather, the Family Court was not informed and

had no knowledge o f whether Sandini held what became the MIN Shares at 31 September

2010 or, i f so, whether Sandini intended to trade them or acquire other shares in MIN to

transfer to Ms Ellison within the following 7 days. Sandini was obliged only to transfer aparcel o f shares in MIN by 28 September 2010 amounting in total to 2,115,000 in number.

The terms o f the Family Court Order did not require Sandini to hold, identify, separate orappropriate any particular and identifiable parcels o f shares in MIN. Nor did Sandini ever

− 35 −

seek to do so. Immediately before the 2,115,000 MIN Shares were transferred, Sandini held

35,804,065 shares in MIN.

110 Accordingly and, with respect, plausibly, Ms Ellison argues that no equitable interest wascreated in the specific MIN Shares which were transferred. Ms Ellison says the only equity

that she had by virtue o f the Family Court Order was the right to call upon Sandini, i f the

orders were capable o f being enforced, to do all things necessary to deliver up the MIN

Shares. Sandini could deal without restriction in the MIN Shares and dispose o f all o f its

shares i f it wished prior to the transfer as long as it did acquire and transfer 2,115,000 shares

in MIN pursuant to the Family Court Order on the day the transfer was required. Ms Ellison

says no proprietary interest in the 2,115,000 MIN Shares was capable o f passing at law or in

equity until such time as the particular parcel had been identified, put into a deliverable state

and unconditionally appropriated to the transfer. This did not occur before the time at which

the Standard Transfer Form was executed by both parties and probably took place at the time

when the transaction was processed.

111 Ms Ellison also argues that, as a matter o f law (apart from questions o f discretion), the MIN

Shares were not transferred 'because of' the Family Court Order, but rather, because o f the

directions given by virtue o f the emails. I do not accept this submission for reasons given

above. It is also submitted that the beneficial ownership in the MIN Shares did not pass to

Ms Ellison 'consequent upon' the Family Court Order. No beneficial interest passed as a

result o f the steps taken after 28 September 2010. The legal and any beneficial interest in the

MIN Shares passed at the same time on 30 September 2010 when the Share Transfer Form

was fully executed.

112 Further, Ms Ellison says there was a failure to comply with the Family Court Order saying

that the shares • were not transferred to her as ordered, but to a 'third party', namely,

Wavefront as the trustee for the FFT. This submission starkly ignores the reality that it was

at Ms Ellison's direction that the transfer was to Wavefront and was in response to the email

to her from M r Ellison o f 28 September 2010 in which he said 'can you please send me the

details o f where you want the [MIN Shares] transferred to'. There is no doubt that request

was made because o f the Family Court Order and would not have been made other than

because o f the Family Court Order. It was intended to be in complete compliance with the

Family Court Order, albeit that strictly the shares could simply have been transferred directly

− 36 −

to Ms Ellison, as the Order required. It is unrealistic, in my view, for Ms Ellison now tocomplain about failure to comply with the Family Court Order.

113 Ms Ellison also complains about non−compliance with the transferee spouse requirement. Bythis she means that Sandini as trustee for the KRUT failed to comply with the requirement set

out in s 126−15(1) of the 1997 Act, which makes it clear that in relation to any assetstransferred under the provision, the transferee has to be to the spouse or former spouse asdefined in subs 995−1(1) as an 'individual'. Sandini did not transfer the MIN Shares to anindividual, but rather to Wavefront.

114 The applicants response to this is that it is sufficient that the spouse 'is involved' in the

transaction, saying that Ms Ellison was involved 'as the beneficiary of the Court order' and

'in directing the traffic to secure the registration of the shares in accordance with her

preference'. Ms Ellison complains that 'no authority is cited for this proposition'.,

115 Ms Ellison contends that s 103−10 of the 1997 Act has no relevance at all as it only applies toCGT assets being disposed of by a transferor in order to assist them in working out anycapital gain or capital loss in respect of that disposal. It is only relevant, it is submitted, when

considering how the CGT provisions in Pt 3−1 and Pt 3−3 apply to a transferor, for example,

in determining a taxpayer's capital proceeds from a CGT event. Section 103−10, Ms Ellison

says, does not apply to deem a disposal of a change of ownership to have occurred to

Ms Ellison to allow Sandini to claim roll−over relief under subdiv 126−A. Rather, s 103−10 is

simply a guidance provision, setting out 'general rules that apply to the provisions dealing

with capital gains and capital losses'. Ms Ellison says it is a provision which modifies the

general rules about capital proceeds set out in s 116−20. It is not referred to in Div 109 which

outlines specific rules, rather than general rules, relating to when CGT assets are acquired by

an entity. The provision is intended to capture certain entitlement as receipts, but is notintended to otherwise modify the operative effects of the other CGT provisions. This

position is supported on the basis that it would be inconsistent with the scheme of the 1997

Act and would lead to ambiguous and uncertain outcomes outside the legislative intent if

s 103−10 were to be interpreted in the manner proposed by the applicants. Section 103−10 is

framed as applying to 'you', it sets out when 'you' are treated as having received, or if 'you'

are entitled to receive, money or other property for the purpose of Pt 3−1 and Pt 3−3.

Section 103−10 deals with how the provisions in Pt 3−1 and Pt 3−3 will be applied to the

relevant taxpayer in receipt of an entitlement. Ms Ellison says it does not, however, address

−37 −

the consequences for other entities, such as the actual recipient. Ms Ellison adopts the

Commissioner's submissions that i f s 103−10 were to operate such that the roll−over

provisions applied to her 'as i f Ms Ellison had received property, the provisions would apply

to set the cost base o f her in respect o f an asset she does not hold and Ms Ellison says this

would be a 'manifestly absurd' outcome. Section 103−10 could not be applied so as to treat

another taxpayer who actually received the property as i f it were Ms Ellison.

116 Finally, Ms Ellison challenges the question o f whether she gave a 'direction' for the purposeo f s 103−10 o f the 1997 Act. Ms Ellison says there was an intention on Mr Ellison's part to

not be bound by the Family Court Order which required the MIN Shares to be transferred 'to

the wife'. In effect, Mr Ellison and Ms Ellison made their own arrangements outside the

terms o f the Family Court Order. The 29 September Email, it is argued, would appear to be

in response to Mr Ellison's email o f 28 September 2010 (I find it is undoubtedly so). The

language used in the 29 September Email, it is said, is in the nature o f a polite request by wayo f response to Mr Ellison to transfer the MIN Shares and, Ms Ellison submits, not in the

nature o f an explicit instruction or order. It is not the language o f a direction. At best, the

result was that the Family Court Order was ignored and Mr Ellison initiated and Ms Ellison

cooperated with the new regime. Ms Ellison submits that it is unclear who the author o f the

29 September Email was, but it is unlikely to have been her. I do not accept this submission.

It may well have been that she received some input into the terminology or adopted it from

other documentation, but there is no evidence whatsoever to suggest that the email was sent

by anybody else from her email address and it is plainly in response to a specific query.

117 I do not accept that the content o f the response did not constitute a direction for the purposeso f where that word is used in s 103−10 o f the 1997 Act.

CONSIDERATION

118 The Commissioner was unable to identify a compelling policy or objective reason why afamily trust would be excluded from the same benefit that the former spouse would get, other

than to indicate that there would be more possibility for mischief i f the disposal was to afamily trust rather than directly to a spouse because the family trust may have further objects

or beneficiaries in the case o f a discretionary trust. I f one looks at the objective o f a roll−over,

it is to defer the time at which there will be imposition o f CGT. While this is understandable

in the context o f marital breakup and property rearrangements to spouses, there is no reason

− 38 −

why that should have been extended further to a family trust, it is said. Nothing in the

explanatory memorandum suggests there was any change in terms of legislative choice.

119 In fairness to the Commissioner, it was not part of his case that a policy objective would be

defeated and not achieved. Rather it was at my inquiry that the response was proffered. At

least in the context of this case when the spouse alone directs the proceeds and the spouse is

the primary beneficiary, it is difficult to detect any objective being defeated. This perhaps

underscores the sense in starting and finishing with the words or text of the statute.

120 The applicants put their argument in different ways. The primary argument is that the

making of the Family Court Order itself constituted CGT event Al because there was adisposition by operation of law of the MIN Shares to Ms Ellison. The applicants say (and in

this situation I agree), that the mis−description of the transferor's capacity does not preclude

that conclusion, nor does the failure to complete the transfer within the specified seven days.

The applicants argue that the trust property, that is, the trust created by reason of the Family

Court Order, was not simply the number of shares actually transferred, but all of the shares

held by Sandini in MIN so that there was sufficient certainty of the subject matter of the trust.

121 The alternative argument is that there was constructive receipt of the MIN Shares by

Ms Ellison for the purposes of s 103−10. Ms Ellison, obtained, by reason of the terms of the

Family Court Order, a dispositive power over the MIN Shares. The fact that the shares werenot transferred to Ms Ellison personally does not affect the operation of the section because

she held the dispositive power over the MIN Shares.

122 The further alternative argument is that it was not a necessary ingredient of the roll−over

relief that Ms Ellison, as the former wife be the actual transferee of the shares so long as she

was sufficiently involved in the transfer.

The effect of the Family Court Order

123 With the making of a court order such as the Family Court Order, there are two roll−over

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 amarital 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

− 39..

gain, but rather in this instance, necessary compliance with a court order. There is no doubt

in this instance that there was a transfer o f shares in purported compliance o f a court order.

124 Nothing in the provision requires that the court order be valid or efficacious, but rather,

requires the making o f an order in such a manner that an order with a minor defect, but the

substance and effect o f which is nonetheless clear, would still be an order which satisfies the

requirements o f s 126−15. The fact that the Family Court Order is a consent order has nobearing on whether the Family Court Order is such an order for the purpose o f s 126−15: seeKinch v Walcott [1929] AC 482 (at 493), where the Privy Council noted that a consent order

was as effective as any other order o f the court and binding on the parties unless it is set aside

in proceedings duly constituted for that purpose. Moreover, for present purposes, there is nooccasion to inquire into the legal or factual correctness o f the orders: see Coshott vWoollahra Municipal Council [2008] NSWCA 176 per Handley J.

125 I t is a requirement o f the section that the CGT event must happen 'because of' the relevant

order and I find that was expressly so here. It is clear on the facts that the transfer would not

have occurred were it not for the Family Court Order and did occur 'because o f the Family

Court Order. As noted by Lockhart J (at 321−322) in Human Rights and Equal Opportunity

Commission v Mount Isa Mines Pty Ltd (1993) 46 FCR 301, this expression simply implies arelationship o f cause and effect. The section does not use a more confining expression such

as 'pursuant to the specific terms o f the order'. Rather, it seeks to rely upon broader and less

technical concepts inherent in a mere cause and effect relationship. Inquiry is not invited

beyond the conclusion that a transfer occurs as a result o f a court order in a commonsense

cause and effect sense. Further inquiry as to whether there is exact compliance with the

precise terms o f the court order is not stipulated or implied in the section.

126 There is also a fourth requirement under s 126−15 that the event must 'involve' a transferor,

which for s 126−15 includes a trustee, and a transferee who is a spouse or a former spouse of

another individual. The case for the applicants is that, i f the transferee must be the spouse or

a former spouse, it was the former wife, Ms Ellison, who was the transferee o f the shares. So

s 126−15 extends the roll−over consequences o f s 126−5 where the trigger event involves a

company or trustee as transferor and a spouse or former spouse because o f an order. What

those consequences are is determined by the operative provision s 102−5 which spells out that

assessable income includes net capital gain, i f any, for the income year. The effect o f the

provision is that a taxpayer aggregates capital gains and capital losses. Division 103, which

−40 −

in turn is part of Ch 3, Specialist Liability Rules, and Pt 3−1, Capital Gains and Losses−

General Topics, sets out some general rules that apply to the provisions dealing with capital

gains and capital losses. At s 103−10, it is provided that Pt 3−1, in which s 103 is contained,

applies to the taxpayer as if the taxpayer had received money or other property if it had been

applied for the taxpayer's benefit, including by discharging all or part of a debt owed by the

taxpayer, or as the taxpayer directs. So the Part applies where moneys are received for the

benefit of a taxpayer in accordance with directions given.

127 Division 104 spells out CGT events. Specifically, the relevant CGT event is contained under

Div 104−A, Disposals, and s 104−10, disposal of a CGT asset: CGT Event Al. By subs (1), it

is provided that CGT event Al happens if you disp.ose of a CGT asset. By subs (2) it is made

clear that you dispose of a CGT asset if a change of ownership occurs from 'you' to 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. There is no doubt in the present circumstances the disposal was by

operation of law and the debate arises around the words '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'. The respondents' position is that this event cannot take place unless there is achange in both the legal and beneficial ownership of the asset.

128 In my view, this is not necessarily so. It is certainly not what is expressly provided for in the

section. Rather, the section turns on the expression 'a change of ownership'. It is true that in

the second sentence there is express reference to the concept of a legal owner and beneficial

owner.

129 However, what the statute did expressly prescribe is that• the event is not triggered if youcontinue to be the beneficial owner. It is certainly clear that the statute expressly recognises

that for its purposes, there will be no change of ownership if the taxpayer ceases being the

legal owner, but continues to be its beneficial owner. This tends to emphasise the importance

of beneficial ownership. If the effect of the Family Court Order was to give beneficial

ownership to Ms Ellison, the question is whether the transfer of the beneficial ownership wasalso sufficient, a concept not apparently expressly catered for, one way or another, in specific

terms in the statutory provisions.

130 The applicants' position is that this is important because the CGT Rules are all directed to

dealings in beneficial ownership. While they may also concern dealings in legal ownership,

− 41 −

where beneficial ownership also moves, unless the legal ownership also moves the beneficial

ownership, there will not be a CGT event.

131 An example reflecting this is s 106−50, dealing with absolutely entitled beneficiaries, which

provides that i f the taxpayer is absolutely entitled to a CGT asset as against the trustee o f a

trust (disregarding any legal disability), Pt 3−1 and Pt 3−3 apply to an act done by the trustee

in relation to the asset as i f the taxpayer had done the act.

132 The 1997 Act pays close regard to CGT events involving trusts, which would tend to

demonstrate that Pt 3−1 is focussed on dispositions o f beneficial ownership, rather than legal

ownership. This, it is said, is expressly reflected again in the second sentence to s 104−10(2).

133 The focus on the beneficial interest is arguably consistent with recognition that the personwho enjoys the fruits o f the property should be the person liable as the taxpayer i f tax is

payable.

134 The various CGT events involving trusts attract liability only in circumstances o f beneficial

ownership. So for example, s 104−55, creating a trust over a CGT asset by a declaration orsettlement, does not apply by virtue o f the exceptions specified in subs (5).

135 The focus in this and other trust CGT events, including CGT event ES and E9, make it clear

that the CGT event does not 'happen' i f the taxpayer remains the beneficial owner. In the

circumstances o f CGT events concerning trusts, the focus again is on beneficial ownership.

136 There is support for the position advanced for the applicants, namely, that in the present

circumstances equitable ownership o f the shares appears on the authorities to have been

acquired by Ms Ellison as a result o f the terms o f the Family Court Order. In Jones, orders

had been made pursuant to s 79 o f the Family Law Act in December 2003 and on the

following day the husband became bankrupt. During the next month, the wife and the trustee

in bankruptcy became registered owners o f the land which had been transferred pursuant to

the court orders. In February, the husband executed a deed transferring the whole o f his

interest in the land to the former wife. The terms o f the order were similar to those in the

current proceedings. Moore J, in the Full Court, noted that central to the reasoning o f the

primary judge had been the judgment o f the Full Court in Mateo.

137 In Jones, Moore J (with whom Hill J and Allsop J (as his Honour then was) agreed) said

(at [14]):

− 42 −

The members of the Full Court in Mateo did conclude that when an order (of the typepresently under consideration) is made under s 79 ordering that a person presentlyholding a legal interest in the property transfer that interest to another person, abeneficial interest is thereby vested in the other person. Wilcox J described theorder as vesting an equitable interest (at [62]) and Merkel J as transferring anequitable estate or interest (at [136]). Branson J expressed her conclusion inqualified terms (at [102]) when she spoke of it being "probably implicit in the termsof the order that the interest of the parties to the marriage in the [property] werealtered by operation of the order" (emphasis added) vesting in the wife all thehusband's beneficial interest in the property. It appears Branson J viewed that asthe preferable construction of the order and its affect. In any event the views of amajority were clear and an equitable interest was, by the order, transferred. Atrust was created for the benefit of the other person.

(emphasis added)

138 Allsop J (as the Chief Justice then was) also noted the following (at [20]):

Section 79 of the Family Law Act 1975 (Cth) deals, as the High Court said inMullane v Mullane (1983) 158 CLR 436 at 445, with orders which work an alterationof the legal or equitable interests in parties or either of them. Thus, an express andimmediate vesting order could be made. There was nothing to suggest in the reasonsfor judgment of Coleman J in the Family Court (or of the Family Court in Mateo, asfar as can be gleaned from the judgment of the Full Court in Mateo) that anysuspension of effect of the orders made was intended. It would perhaps have beenclearer if the immediately dispositive effect of the orders here had been identifiedexpressly. Nevertheless, the orders here, though not expressly dispositive, madeas they were against the background of s 79 and in light of the reasoning inMateo, should be taken to have the effect found by the primary judge.

(emphasis added)

139 Applying Jones and Mateo, in m y view, as a result o f the Family Court Order Ms Ellison

became the equitable or 'beneficial owner', to use the expression appearing in COT event Al,

o f the MIN Shares.

140 O f course the position for the respondents is that the COT event must involve disposal of

both legal and beneficial ownership. As is made clear from the Full Court decision of Kent v

Vessel "Maria Luisa" (No 2) (2003) 130 FCR 12, there are forms o f ownership o f assets in

equity such that the concept o f a beneficial owner can be contrasted with a person who has a

lesser equitable interest such as a mere equity. In Kent v Vessel "Maria Luisa" (No 2), the

issue was whether someone who individually owned all o f the units in a unit trust, which in

turn owned the ship, was the owner for the purposes o f the Acts Interpretation Act 1991

(Cth). In the joint judgment o f Tamberlin and Hely JJ (at [61]) their Honours said:

The word "owner" cannot be given any general description. But ordinarily theincidents of ownership of a chattel include the right to make physical use of thechattel, the right to the income from it, the power of management, and the right ofalienation: Lawson & Rudden, at p 8. In the Iron Shortland (at 544) Sheppard J

− 43 −

quoted from the decision o f the Singapore Court o f Appeal in The Ohm Mariana; ExPeony [1993] 2 SLR 698 t h a t the te rm "owner" means any person who is vestedwith such ownership as to have the right to sell, dispose o f o r alienate the ship,a n d tha t a beneficial owner o f the ship comes within tha t term. See also to similareffect The Permina 3001 [1979] 1 Lloyd's Rep 327 at 329.

141 Their Honours made clear that ownership, whether legal or equitable, involves something

greater than beneficial interest. At [66] their Honours said:

Ownership, whether legal o r equitable, therefore involves something greatert h a n beneficial interest. Equitable ownership o f proper ty is commensurate withthe right to relief in a Cour t of Equity: In Will o f MacGregor; Trustees, Executorsand Agency Co Ltd v Acting Commissioner o f Taxation (Cth) (1917) 23 CLR 576 at583; Meagher, Heydon and Leeming, Meagher, Gummow & Lehane's EquityDoctrines & Remedies (4th ed, 2002) at [4−120]. I f a person has contractual rightsin relation to a ship which, i f performed will result in the person becoming theowner of the ship, then the person will b e regarded as the equitable owner o f theship provided tha t specific performance o f the contract would be decreed: KLDEPly Ltd v Commissioner o f Stamp Duties (Qld) (1984) 155 CLR 288. Thusentitlement to a vesting order or equivalent relief would be necessary before APEcould be regarded as the equitable owner o f the ship as at the relevant date: Stern vMcArthur (1988) 165 CLR 489; Chan v Cresdon Pty Ltd (1989) 168 CLR 242. Butthat does not mean that APE does not have an interest in the trust property, includingthe ship, which equity would protect regardless o f whether APE could be called theequitable owner.

(emphasis added)

142 As noted in Lysaght v Edwards (1876) 2 Ch D 499, a right to specific performance to compel

the transfer o f 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 o f the Family Court for the transfer o f the shares within seven days.

143 In my view, the Family Court Order vested beneficial ownership in Ms Ellison, which in turn

satisfied the change o f ownership concept in CGT event A l . It might be anticipated that

s 104−10(2) would be drafted differently in circumstances where express reference is made to

the expressions 'beneficial owner' and 'legal owner' in the second sentence which

emphasises that a change o f legal ownership alone would not trigger CGT event A l without achange in beneficial ownership. The fact that the provision did not specify that a change of

beneficial ownership without a change in legal ownership would not trigger CGT event Al,

taken in context, is consistent with the notion that CGT event A l would be triggered where

there was a change o f beneficial ownership. I am not persuaded that there is anything in the

description o f CGT event A l which would limit it to cases only o f both legal and beneficial

ownership change. That the key is the change in beneficial ownership is supported by the

text and substance o f the provisions which have been examined.

− 44 −

144 In my view, this would also appear to be consistent with the legislative purpose because,

were it otherwise, whenever there was disposition o f equitable ownership without legal

ownership, not expressly directed by one o f the CGT events, such as E l , there would be noliability for CGT. So, for example, in the case o f a constructive trust (eg, Baumgartner vBaumgartner (1987) 164 CLR 137) CGT would be wholly avoided. So also in other cases of

constructive trust (see, for example, Chang v Registrar o f Titles (1976) 137 CLR 177

(at 185)). That this would be intended seems unlikely.

145 The applicants draw on two decisions to support the contention that beneficial ownership will •suffice. The first o f those cases is a Full Court decision and, with respect, not particularly

supportive to the applicants' position. In Taras Nominees Ply L td v Federal Commissioner of

Taxation (2015) 228 FCR 418, the Full Court (Perram, Robertson and Pagone JJ) (at [10])

said:

10 The reasons for concluding that CGT event El happened also require theconclusion that CGT event Al happened. Event Al occurred because there was achange of ownership by transfer of the Taras land from Taras to the trustee. Theevent would not have occurred if Taras continued to be the beneficial owner of theland but the analysis above also requires the conclusion that Taras was no longer thesole beneficial owner of the Taras land upon its transfer to the trustee for it to be heldupon the terms of the trust deed and the joint venture agreement. Her Honourcorrectly concluded at [138]:

"Prior to 20 August 1998, Tams had ownership of the Taras land and itdisposed of that land, for the purposes of s 104−10, when it transferred theland to the Land Trustee. There was a disposal of the Taras land for thesepurposes because the combined effect of the WA, the Trust Deed and thetransfer was that Taras ceased to be the owner of the Taras land and becamean equitable tenant in common with the other beneficiaries under the trust,namely, SDA and the Marpine Trustee. In so concluding, I adopt thereasoning of Batt JA in Victoria Gardens (Court of Appeal), which isdiscussed at [103]−[115] above. For the reasons stated above, Booth v Ellarddoes not support Taras' submission that it retained beneficial ownership inthe Taras land: see [124]−[128] above."

The combined effect of the trust deed and the joint venture agreement was that upontransfer of the land by Taras to the trustee, Taras ceased to be the only beneficialowner of the land. Its interest was thereafter made "subject to" the rights of the otherbeneficiaries to the land. Taras became, as her Honour held at [138], an equitabletenant in common of the Taras land with the other beneficiaries under the trust.

146 The applicants rely upon these passages because o f the emphasis on the significance of

beneficial ownership, but it must be noted that in that case there was a transfer o f beneficial

ownership as well as legal ownership to the trustee. When the various owners o f contiguous

parcels o f land decided to sell their land to a trustee, he would then develop the enlarged land.

− 45 −

That transaction was held by the Full Court to be taxable either as CGT event E l , asettlement o f a trust, or CGT event Al.

147 Another case contains a much more direct indication o f the significance o f beneficial

ownership, when considering this part o f the tax legislation. In Brooks v Commissioner of

Taxation (Cth) (2000) 100 FCR 117, the Full Court (Hill, RD Nicholson and Sundberg JJ)

were considering a circumstance in which the taxpayers were the vendors in an investment

property under a contract for sale o f land. The purchasers did not complete the purchase and

the taxpayers terminated the contract for breach. A deposit paid by the purchasers to the

taxpayers was forfeited. The taxpayers then applied to the Administrative Appeals Tribunal

to review an 'objection decision made by the Commissioner against them in respect o f the

forfeited deposit. The Tribunal stated a special case for determination o f questions o f law by

the Court on the basis that a contention was made that the decision o f the Full Court in

Commissioner o f Taxation v Guy (1996) 67 FCR 68 was plainly wrong. The Full Court

declined to follow Guy in its application o f s 160ZZC(12) o f the 1936 Act, in the course of

which the Court said (at [13]):

The key concepts of acquisition and disposal are defined, or expanded upon in s160M of the Act. It is not necessary here to consider whether s 160M contains aconclusive code of what constitutes acquisition and disposal. That it does wasconceded by counsel for the Commissioner. What s 160M(1) makes clear is that bothwords are not to be given a narrow interpretation. Anything which involves achange in the beneficial ownership of an asset is treated as a disposal and asgiving rise to an acquisition. Further, it is irrelevant how that change inownership is brought about: s 160M(2), whether it be by a transaction, by aninstrument, by operation of law, by the doing of some act or thing, or theoccurrence of an event. Section 160M(3) expands upon the circumstances that areto be taken to give rise to a change in ownership. Relevant to the facts of the presentcase is par (b) which provides that a change shall be taken to have occurred inownership of an asset by:

"(b) in the case of an asset being a debt, a chose in action or any other right, or aninterest or right in or over property − the cancellation, release, discharge,satisfaction, surrender, forfeiture, expiry or abandonment, at law or in equity,of the asset."

(emphasis added)

148 The key words in that paragraph are that lalnything which involves a change in the

beneficial ownership o f an asset is treated as a disposal and as giving rise to an acquisition'.

The relevant words in s 160M(1) o f the 1936 Act, 'subject to this Part, where a change has

occurred in the ownership o f an asset, the change shall be deemed to have effected the

disposal o f the asset by the person who owned it immediately before the change and an

− 46 −

acquisition by the person who owned it immediately after', reflect the terminology used in

CGT event Al.

149 The Commissioner accepts that the Full Court authority in Brooks is against the

Commissioner's submission, but says that it is a Full Court authority in the context of the

predecessor to s 104−10(2), namely, s 160M(1) o f the 1936 Act. There is no textual change in

the words which would require any difference in the meaning. The Commissioner makes the

point that in Brooks the Full Court provided no reasoning for the introduction of the word

'beneficial'. The Commissioner also makes the point that it was not an issue in Brooks

whether or not the simple change o f beneficial ownership was enough for a disposition in

terms o f s 160M(1).

150 It may be that the Full Court did not explain why the word 'beneficial' was used. But

certainly there is an explanation in this proceeding and that explanation together with the Full

Court's observations in Brooks is, at the very least, persuasive, i f not binding. The

Commissioner also points to [17], which is in the following terms:

Prima facie, therefore, where a taxpayer owning land enters into a contract to sell thatland, at the time the contract is entered into, that taxpayer creates a right in thepurchaser to have the contract performed upon payment of the consideration underthat contract. The vendor under the contract is thus treated as having disposed of thisright, being a right which the taxpayer is deemed to have owned immediately prior tothe creation of it. Conversely, the purchaser is deemed to have acquired the rightpursuant to the disposition.

151 The Commissioner proposed that the Full Court was implying that there was a CGT event by

virtue o f the creation o f an interest immediately upon entry into the contract, rather than

being a disposal at the point o f completion. Similarly, the Commissioner suggests that the

following passage at [61] indicates that the Full Court was looking more at the question of

forfeiture o f the deposit, rather than looking discretely at the question o f when a disposal

might occur. The Full Court acknowledged that a purchase o f land is not completed until the

purchase money is paid and an executed transfer handed over:

The dictionary meaning of "prospective" quoted (the quotation is from the MacquarieDictionary (2nd ed, 1991)) is "potential, likely expected". The first meaning given inthat dictionary is not inconsistent with that quoted by the Full Court, which was "inthe future". But the meaning of the phrase "prospective purchase" falls to bedetermined, not merely by reference to the word "prospective", but by reference tothe complete phrase and in particular the word "purchase". No doubt it is correct torefer to a precontract contract as a contract prior in time to a purchase in the futureand thus as a prospective purchase. However, the real question is whether it is corrector incorrect to refer to a contract which calls for completion in the future as aprospective purchase. We do not find the same difficulty as the Full Court in Guy

− 47 −

did. A purchase of land is not completed until the purchase money is paid and anexecuted transfer handed over. That is when the sale actually takes place. Untilcompletion, it is not inaccurate to treat the purchase as being in the future. Once thepurchase money is paid the payer becomes a bona fide purchaser for value, but notbefore.

152 In the present arguments, the respondents have also relied upon the wording which appears in

an example and Note 1 under s 104−10(3) to support an argument that they say demonstrates

that CGT event A l is concerned only with dispositions o f both legal and equitable ownership.

In m y view, this may make too much o f the Note. What is unknown from the description in

the Note is whether, at the time the contract failed, only the deposit had been paid. If it is

only a deposit that has been paid, the suggestion from Lysaght v Edwards is that the

purchaser does not have fall equitable ownership for the land, but rather, sufficient equity in

order to support an action for specific performance: see Tanwar Enterprises Pty Ltd vCauchi (2003) 217 CLR 315 (at [53]). So i f Note 1 is intended to illustrate a circumstance in

which merely a deposit has been paid, then it would be accurate because beneficial ownership

did not change. But i f it should be read in some other way, then it would not be particularly

helpful and perhaps not correct. The fact that an example given in legislation may be

unhelpful or inaccurate is o f no moment to construing the legislation as is evident from the

discussion in the decision o f Brooks (at [65]−[66]).

153 The way in which the Family Court Order is crafted is that Sandini is required to do all acts

and things necessary to transfer the shares within seven days to Ms Ellison. In m y view, this

gave Ms Ellison an absolute right vested in possession to be owner o f the shares within sevendays. This flows from the discussion in Jones referred to above. In those circumstances

there is no equitable interest retained in that number o f shares by Sandini. All that Sandini

can own in that number o f shares is the bare legal title.

154 From a practical perspective, this is demonstrated by the fact that the only activity remaining

at the time o f the making o f the Family Court Order was execution o f the Share Transfer

Form and presentation o f it to MIN so that MIN could amend the Register in favour o f the

transferee. These steps involved changes to the legal, rather than the equitable title. None of

those remaining steps enlarged in any sense the already absolute beneficial ownership o f the

shares held by Ms Ellison upon the making o f the Family Court Order.

155 The analysis in Mateo by Wilcox J, after discussing a decision o f Craven v Official Trustee in

Bankruptcy (unreported, Supreme Court o f New South Wales, per Needham AJ, 26 July

1991), is pertinent (at [57]):

− 48 −

Craven provides support for the view, advanced by counsel for the respondents, thatthe effect of a transfer order under s 79 of the Family Law Act is to vest in thebeneficiary of the order an equitable estate in the property interest that is the subjectof the order. If that is so, what remains, after the order, in the hands of the personwho is bound to effect the transfer is a bare legal interest, the market value of whichmust be nil. It would follow that a transfer giving effect to such an order could neverbe void against the trustee of the transferor's bankrupt estate; the market value of theproperty (nil) would never be greater than the consideration given for the transfer(also nil).

156 Wilcox J continued (at [62]):

On this analysis, in the present case there were two vesting events; but only thesecond of them was a "transfer of property by a person who later becomes abankrupt". The first event took place on 22 June 2000, when the Family Court madeorders requiring, amongst other things, Mr Mateo to transfer to his wife all his right,title and interest in the home. The effect of that order was to vest in Mrs Mateoan equitable interest in the one−half legal estate that continued to be held by MrMateo, but which, thereafter, had only a nominal market value. The secondevent was the transfer of the legal estate that was effected by the registration ofa transfer document on or about 10 August 2000.

(emphasis added)

157 As indicated above, similarly in this instance, there were two vesting events. The first wasthe vesting beneficial ownership b y reason o f the Family Court Order and then the second

event by which the transfer o f the legal estate and the beneficial estate was made to the

family trust. The first event is sufficient for CGT purposes.

158 In the judgment o f Branson J in Mateo, her Honour's approach on that aspect o f the matter

gave rise to a similar conclusion when her Honour said (at [102]):

Secondly, s 79 of the Family Law Act authorises the making of an order "alteringthe interests of the parties in ... property". That is, the section is concerned toempower the Family Court directly to alter the interests of the parties to amarriage in property, not merely to make an order requiring the parties or oneof them to take steps which will result in their property interests being altered.An alteration of the interests of the parties to a marriage in property by court orderdoes not, in my view, constitute "[a] transfer of property by a person ... to anotherperson" within the meaning of s 121(1) of the Act (Kizon v Palmer (1997) 72 FCR409 at 430−431; 142 ALR 488 at 505−506 per Lindgren J with whom Jenkinson andKiefel JJ agreed). Turning to the actual order made by the Family Court in this case(see [83] above), it seems to me that it is probably implicit in the terms of the orderthat the interests of the parties to the marriage in their matrimonial home were alteredby operation of the order. That is, that the order itself vested in the wife all of thehusband's beneficial interest in the matrimonial home (see Harris v Walker(1969) 14 FLR 167). On this view of the order, the transfer which par 1 of theorder required the husband to effect was necessary only to perfect the wife'sinterest by the transfer to her of the husband's legal interest in the matrimonialhome. The transfer of the husband's beneficial interest in the matrimonial home tothe wife was not on this view "[a] transfer of property by a person who later becomesa bankrupt" within the meaning of s 121(1) of the Act; it was a transfer of property

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by court order.

(emphasis added)

159 Merkel J reached a similar conclusion when his Honour said (at [127]−[130]):

127 At the outset it is appropriate to identify certain features of an order under s79 of the Family Law Act. First, the order is a final order, subject to the limitedjurisdiction to set aside or vary such an order by appeal or under s 79A of the FamilyLaw Act: see Mullane v Mullane (1983) 158 CLR 436 at 442−443. The order mayalso be set aside on the ground of jurisdictional error in an application for prerogativerelief under s 75(v) of the Constitution.

128 Secondly, a court order settling property between husband and wife,including a requirement that there be a transfer of one party's interest to the other, hasgenerally been regarded as vesting in the transferee an equitable estate orinterest in the property pending the transfer of the legal estate or interest: seeHarris v Walker (1968) 14 FLR 167 at 176.

129 In Mullane at 445 the Court stated:

" s 79 on its proper construction refers only to orders which work analteration of the legal or equitable interests in the property of the partiesor either of them. An interest in property is a right of a proprietarynature, not a mere personal right"

130 In Craven v Official Trustee in Bankruptcy (unreported, Supreme Court,NSW, Needham AJ, No 2712 of 1991, 26 July 1991) Needham AJ, in reliance onMullane, concluded that an order altering property interests under s 79 "createsan equitable interest in the land which could be enforced just as a contract ofsale could be enforced".

(emphasis added)

160 Those consistent observations by members o f the Full Court lead to a conclusion which binds

me to the effect that Family Court orders under s 79 o f the Family Court Act transfer full

beneficial ownership on the making o f the order. It is clear that, as at 21 September, Ms

Ellison could have compelled the transfer o f the shares because she was armed with the

Family Court Order.

Defects

161 Although there are said to be two defects in the Family Court Ordef, in m y view, this does

not affect the position.

162 The first o f the alleged defects is the fact that Sandini is described in the first o f the orders asacting in its capacity as trustee o f the EFT. In fact it was not the trustee, it was the owner of

the shares, but as trustee for the KRUT.

163 The second o f the alleged defects is that the transfer did not occur within seven days.

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164 In relation to the description o f the capacity on which Sandini was the subject o f the Family

Court Order, Ms Ellison (specifically not the Commissioner) has said, as I have noted, that it

was impossible to comply with the orders because o f these defects and, secondly, there was

no compliance with the orders.

165 It is true that the capacity in which the transfer was to be effected is mis−described, but

Sandini, nonetheless, was the correct legal entity. All that was required in fact for the

purpose o f making fully effective orders was that Sandini effect the transfer. The capacity in

which it was making the transfer was irrelevant to the legal and beneficial effect o f the

orders. The practical reality was that the parties knew that Sandini owned the MIN Shares

and was, therefore, the correct legal entity to be the vendor o f the shares. I f nothing had been

said about the trust capacity, it would have made no difference. It is also apparent that this is

a defect which has been identified well after the event. The practical reality again is that the

parties had no difficulty whatsoever in performing the orders and the error in the capacity in

which Sandini acted had no effect on the binding nature o f the orders on Sandini. As I have

previously noted, I apprehend that Mr Ellison would have faced considerable difficulty if, on

behalf o f Sandini, he advanced an argument that the Family Court Order was not binding

because the shares were held on behalf o f a different trust than the trust identified in the

Family Court Order. O f course, he did not seek to do that.

166 Finally, and only in addition to. these points, it is well established that a mis−description o f a

person in an instrument does not invalidate the instrument so long as it is otherwise expressed

with sufficient certainty to enable it to be performed: BHP Petroleum (Timor Sea) Ply L td v

Minister f o r Resources (1994) 49 FCR 155 per Beaumont J (at 172). In Wingadee Shire

Council v Willis (1910) 11 CLR 123 a rates notice served on 26 September provided that the

relevant rates would be payable within 30 days o f service, but then went on to mistakenly

calculate that date as being 28 October. It was argued that the rates notice was therefore

invalid. That was rejected. Barton J said (at 139−140):

Finally, there is the point raised under the 4th plea, that the shire did not cause theprescribed notices to be served on the respondent. The notice of valuation and ratestates correctly enough that the specified amount of the rates will be due and payable"at the expiration of thirty days from service" of the notice. The notice was served on28th of September as it sets forth. But it goes on to say, "the day on which rates willbe due will therefore be 28th October 1907." It is argued that this amounts to a noticeto pay on 28th October, a date at which thirty days from the date of service had notexpired. The material sections are 144 (3) and 146 (1)(c). I am clearly of opinion thatthe evident error in inserting 28th October does not make the notice void. Utile perinutile non vitiatur. The mention of the 28th is a mere videlicet, heralded by the word

−51 −

"therefore." It is a mere statement of a computation made by the officer, palpably inerror, as is demonstrated by the prior part of the notice. It is obvious that a failure topay on the actual expiration of the thirty days from service cannot be justified onsuch a ground. The express mention of the time available to the ratepayer governs thenotice and counteracts what is plain to any observer as a mere slip in counting thedays. It might and would have been another matter if the thirty days had not beenspecified and the "therefore" had been omitted. The principle is in effect that statedby Bacon in his maxim, "prcesentia corporis tollit errorem nonimis."

167 In the same decision, Isaacs J, in dealing with the argument, said (at 144):

I think the notice given was substantially accurate. The reference to 28th October wasself−explanatory as a mere calculation which, though perhaps one day short ofaccuracy, did not vitiate the main and mandatory portion of the notice. The mistakewas evident, and could safely be ignored and corrected by the recipient. As in theanalogous rating cases of Ormerod v Chadwick and R. v. Stretfield, in which verysimilar questions were raised, it is a case offalsa demonstratio quae non nocet.

168 Higgins J said (at 147−148):

As for the point that the amount of the rates is not due because the notice did not fix aday for payment more than 30 days after service, I am of opinion that the notice diderr in saying "The day on which such rates will be due will therefore be the 28thOctober 1907." For the notice was served on the 28th September; and the rate did notbecome due under the Act until the 29th October, after 30 days from the day ofservice (sec. 144 (3)). But the notice said truly that "on the expiration of 30 daysfrom service of this notice" the amount will be due; and the statement as to the 28thOctober was a mere videlicet; and even if the videlicet is wrong, the statement isright. The prescribed notice has been duly given to pay—the notice in the form andwith the particulars prescribed (see sec. 146 (1)). Errors such as this are not fatal tothe rights of the Council. The maxims utile per inutile non vitiatur, falsademonstratio non nocet, quic quid demonstratae rei additur satis demonstrataefrustra est (see Broom's Legal Maxims, 7th ed., pp. 468, 470, 471), all seem to apply.The error is such as the ratepayer could detect by an examination of the Act, or of thenotice itself. Probably, if an action had been brought on 28th October, the plaintiffcould not have shown that any rate was due on that date; but in this case the writ wasissued on 30th July 1908.

169 The last citation from Broom's' Legal Maxims, 7th ed effectively translated means that that

which is useful is not rendered useless b y that which is useless. Put another way, otiose

words added to the description o f a thing which is sufficiently clearly described have noeffect. Descriptions so added under this Rule may be rejected and not allowed to vitiate orrender useless the clarity, certainty and enforceability o f the instrument in which they are sointroduced. The addition o f the trustee capacity in which Sandini acted was otiose.

170 As to the delay o f a day, such a delay was never acted upon or relied upon in any way at the

time. Ms Ellison was content with the transfer, which was made in accordance with her

direction. In Oliver v Malanos (2011) 199 FCR 136, Cowdroy J, after discussing Jones and

Mateo, said (at [60]−[62]):

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60 The Court considers that the principle recognised in Craven, Mateo andJones v Daniel is directly applicable to the present circumstances. Orders 5 and 6 ofthe consent orders were effective to create a beneficial interest of Ms Fung's$200,000 equity for the benefit of the children. As stated by Needham AJ in Cravensuch orders created an equitable interest in the fund which could be enforced by thebeneficiaries of the fund.

61 The respondent asserts that orders 5 and 6 could not "carve out" the $400,000from the fund, as the joint account did not exist at the time of the making of theorders. However, while neither the joint account nor the new account existed atthat time, neither did the fund of money that was ordered to be provided in bothMateo and Jones v Daniel. It is clear from the authorities that orders under s79(1) of the FLA have an immediate dispositive effect and one cannot evade theconsequences of such orders by failing to comply strictly with the formalities ofthe orders or by simply not carrying them into effect.

62 As considered above, s 59A of the Bankruptcy Act gives paramountcy toFamily Court orders made under s 79(1) over the vesting provisions of s 58 of theBankruptcy Act. The Court notes the appellant's submission that s 59A (which wasintroduced by the amending act in 2005) may have been enacted to give statutoryeffect to the reasoning in Craven and Mateo.

(emphasis added)

171 While some authorities on this point pertain to the Bankruptcy Act 1966 (Cth) context, there

is no evident distinction in the application o f principles between the effect of such orders for

bankruptcy purposes or tax purposes. The objective is always to identify the relevant

ownership against which the machinery provisions o f the legislation are to take effect.

Certainty

172 A further point advanced for the respondents was insufficient certainty in the subject matter

o f the trust. The argument is that as at 21 September it was not possible to identify which

particular 2,115,000 shares were to be the subject o f the trust. The evidence from an affidavit

o f Mr Goulds is that none o f the shares in MIN were actually numbered and they were non−certificated. The shares transferred were ordinary shares. Registration for the company is

electronic so shareholders are simply sent statements o f balances from time to time. As

explained by M r Goulds, shares may be either issuer−sponsored or broker−sponsored. All

shares held by Sandini, including the M N Shares, were issuer−sponsored. Prior to the key

date, being 21 September, Sandini owned 35,804,065 MIN Shares.

173 The instinctive response to the assertion as to lack o f certainty o f the specific shares may be

that the trust created b y the Family Court Order extended at least to (that is to no fewer than)

the specified number within the Family Court Order o f MIN Shares existing as at the time of

the Family Court Order. However, another approach is apparent on the authorities. At least

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in Australia as distinct from England, there is persuasive single judge authority that the

subject matter o f the trust will be not, in this case, just the 2,115,000 shares referred to in the

Family Court Order, but all o f the MIN shares held, in this case, by Sandini.

174 In White, the question was closely examined by Campbell J. The relevant circumstances

were that, after a de facto couple had fallen out, as a means o f settling property arrangements,

the defendant wrote the plaintiff a letter saying:

'THIS LETTER IS TO CONFIRM THAT I A M HOLDING IN TRUST FOR YOU222,000 UNITRACT SHARES. THESE SHARES WILL BE TRANSFERRED TOYOUR NAME AND CONTROL, AT ANY TIME THAT YOU REQUEST, AFTER1/AUGUST/2003.

175 As in the present situation, the defendant owned more than the number o f shares nominated.

Campbell J addressed an argument by which it was submitted for the defendant that the trust

property had not been adequately identified by saying that it was 222,000 o f the 1.5 million

shares that the defendant held. Campbell J considered the English Court o f Appeal decision

in Hunter v Moss [1994] 1 WLR 452 (in White (at [153]−[209]) and concluded that a trust of

the kind under examination in White is not analogous to a simple trust where a single and

discrete item o f property is held on a bare trust for a single beneficiary. Rather, his Honour

held (at [212]):

it is trust o f a fund (the entire shareholding o f 1.5 million shares) for two differentbeneficiaries (the plaintiff and the defendant himself), where powers o f managementare necessarily involved in the trust (to sell or encumber, within limits that suchdealings to not impinge o f the plaintiff's [in this instance Ms Ellison] rights), andwhere duties on the trust would arise as a matter o f law (for example, to deal withany dividends and capital distributions by distributing them in the appropriateproportions). It is because the trust is construed as being o f the entire shareholding,that it is not necessary for the plaintiff to be able to point to some particular share andbe able to say 'That share is mine'.

176 His Honour continued (at [212]):

given the nature o f shares in a company, it is perfectly sensible to talk about anindividual having a beneficial interest in 222,000 shares out o f a parcel o f 1.5million, even i f it is not possible to identify individual shares that are held on trust.

177 His Honour discussed numerous academic views about Hunter (at [155]−[164]) and noted the

absence o f Australian authority on the point. His Honour also cited and considered George

Attenborough & Son v Solomon [1913] A C 76 (at 82−83) per Viscount Haldane LC; Wise vWhitburn [1924] 1 Ch 460 (at 468−469); Easterbrook v Young (1977) 136 C L R 308 (at 320);

Re Rose [1952] Ch 499 (referred to in Hunter); Corin v Patton (1990) 169 CLR 540; An. ning

v Arming (1907) 4 CLR 1049; Re London Wine Co (Shippers) Ltd [1986] PCC 121 (also

− 54 −

considered in Hunter); and other cases considered in Hunter before saying (at [191]) that he

did not find the reasoning in Hunter to be sufficiently persuasive to simply adopt it as the

solution to the present problem. His Honour went on to consider the rights of a shareholder

(at [193]4200D before considering the failure to identify shares by individual numbers. His

Honour (at [20414209]) said:

204 But even when shares were held in numbered, certificated form, there weresome purposes for which the identification of the shares by number was unimportant.If a shareholder executed a transfer of the same number of shares that he owned in acompany, the transfer was valid even if the identifying numbers of the shares wereinserted only after the transfer was executed (Re Barned's Banking Co; Ex parte TheContract Corporation (1867) LR 3 Ch App 105 at 115416; Re Financial InsuranceCo; Bishops case (1869) LR 7 Ch App 296n) or never inserted at all (Re Letheby &Christopher Ltd [1904] 1 Ch 815).

205 It can also be unimportant that the wrong identifying numbers are inserted inthe transfer. In Re International Contract Co; I d ' s case (1872) 7 Ch App 485, A hadtransferred to B 50 shares, numbered 11,105 to 11,154, in a particular company. Infact someone other than A owned the shares with those numbers, but at the time ofthe transfer A owned more than 50 shares in the company, and some of his shareswere numbered 11,005 to 11,054. When the company was wound up, B alleged thathe was not a contributory. He failed. Sir WM James LI− said (at 486−487):

"If the creditors find a man on the list for fifty shares they do not look at theparticular numbers; all that concerns them is that he is on the list ofshareholders for fifty shares ... I cannot think that he should be allowed tosay that there was some mistake about the figures in the transfer — a mistakewhich was very easily made, for it appears that the numbers ought to be from11,005 to 11,054 instead of from 11,105 to 11,154. The substance of thetransaction was that he meant to be on the list for fifty shares; he was on thelist for fifty shares, and the creditors and other persons interested have a rightto hold him to that."

206 Sir G Mellish LJ said (at 487):

"I think the numbers of the shares are simply directory for the purposes ofenabling the title of particular persons to be traced; but that one share, anincorp oral right to a certain portion of the profits of the company, is the sameas another, and that share No 1 is not distinguishable from share No 2 in thesame way as a grey horse is distinguishable from a black horse. If, therefore,a holder of shares has the same number of shares which he professes totransfer, or a larger number, and by mistake the wrong distinguishingnumbers are put in the transfer, that will not prevent the fifty shares whichbelonged to him passing to the transferee. The figures might afterwards berectified. I think the substance of the matter is that Mr Ind has agreed to takefifty shares as between him and the creditors of the company; he has beenregistered with his own consent as to these shares, and therefore he isproperly on the list. (Emphasis added)"

207,

It is part of the reasoning of Sir G Mellish LJ that statement of the identifyingnumbers of the shares being transferred is unimportant for the validity of the transfer.

208 The law of the United States similarly regards the numbers allotted toindividual shares as unimportant for some purposes. Richardson, Trustee in

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Bankruptcy v Shaw 209 US 365 (1908), a decision of the United States SupremeCourt, considered a situation where a sharebroker had received share certificates assecurity for a client's margin trading, and, at a time when the broker was approachingbankruptcy, had returned to the client, upon the client's demand, certificates relatingto an equal number of shares to those lodged. The question at issue was whether theclient had thereby received a preference. It was argued that there was a preferencebecause, by a custom of the market: "... the broker was not obliged to return the verystocks pledged, but might substitute other certificates for those received by him, andthat this is inconsistent with ownership on the part of the customer, and shows aproprietary interest of the broker in the shares."

209 The Court rejected that argument, saying at 378−379):

"... this contention loses sight of the fact that the certificate of shares of stockis not the property itself, it is but the evidence of property in the shares. Thecertificate, as the name implies, but certifies the ownership of the propertyand rights in the corporation represented by the number of shares named.

A certificate of the same number of shares, although printed upon differentpaper and bearing a different number, represents precisely the same kind andvalue of property as does another certificate for a like number of shares ofstock in the same corporation. It is a misconception of the nature of thecertificate to say that a return of a different certificate or the right tosubstitute one certificate for another is a material change in the property rightheld by the broker for the customer [citations omitted]. As was said by theCourt of Appeals of New York in Caswell v Putnam 120 NY 153 at 157,'one share of stock is not different in kind or value from every other share ofthe same issue and company. They are unlike different articles of personalproperty which differ in kind and value, such as a horse, wagon or harness.The stock has no earmark which distinguishes one share from another, so asto give it any additional value or importance; like grain of a uniform quality,one bushel is of the same kind and value as another'."

178 As his Honour noted, the test o f validity o f a trust is not dependant on a beneficiary being

able to identify a particular piece o f property that is held on trust for him or her. In many

discretionary trusts, the only interest that a particular beneficiary can claim to have at aparticular time is the vested interest.

179 It is not apparent that the process o f reasoning applied in Hunter v Moss by the Court of

Appeal has been applied outside o f the United Kingdom. White was unsuccessfully appealed

to the New South Wales Court o f Appeal (Shortall v White [2007] NSWCA 372). The

particular point under consideration at present does not appear to have been the subject o f anychallenge. The decision has been followed on a number o f occasions and cited on a number

o f occasions, but not on this point other than in a Full Court decision o f this Court in Federal

Commissioner o f Taxation v ElecNet (Aust) Pty Ltd (2015) 239 FCR 359 per Jessup, Pagone

and Edelman JJ, in the joint judgment o f Pagone and Edelman JJ, with whom Jessup J

essentially agreed. In that decision (at [73]−[93], and particularly at [80]−[87]) their Honours

said:

80 The same submission was made by Senior Counsel for the Commissioner onthis appeal. He submitted that the difference between a fixed trust and a unit trust wasthat a fixed trust gives the beneficiary an interest in a "particular part ... as comparedwith an interest in the trust property as a whole". He submitted that a unit trust was aspecies of fixed trust where there was no discretion involved and where the "unit"was measured as a percentage or proportion of the whole of the trust assets: ts 17−18,20−21.

81 The Commissioner's approach to fixed trusts is not wholly without authority.A decision which supports the Commissioner's approach is the ex tempore decisionof the English Court of Appeal in Hunter v Moss [1994] 1 WLR 452. In that case, theCourt of Appeal considered whether there was certainty of subject matter of a trustwhich, the trial judge had found to be created by a defendant's declaration that heheld 50 of his 950 issued shares in a company on trust for the plaintiff. The Court ofAppeal considered that the subject matter was sufficiently certain although the Courtaccepted that the subject matter would not have been certain if the declaration hadbeen of a trust over 50 out of 950 bottles of wine: see Re London Wine Company(Shippers) Ltd [1986] PCC 121.

82 The reasoning in the ex tempore decision in Hunter v Moss was verycontroversial. I t was described by Heydon and Leeming as a "strongly criticiseddecision": Jacobs' Law of Trusts (7th ed, 2006) p 68 [523]. It was the subject ofwithering criticism by Professor (now Justice) Hayton who described thedecision as having been given "perilously close to the vacation". As Haytonargued, the trust could easily have been created by Moss declaring himself thetrustee of one nineteenth (ie 50/950) of all his shares in favour of Hunter. But theobvious problem of creating a trust of 50 of the 950 shares was that there was"no certainty as to which 50 of the 950 shares the trust relates": D Hayton,"Uncertainty of subject matter of trusts" (1994) 110 Law Quarterly Review 335at 336.

83 The reasoning in Hunter v Moss was rejected by Campbell J in White vShortall (2006) 68 NSWLR 650 at [190] where his Honour said that thereasoning "simply assumes, or asserts, that it is possible for a person to declarehimself trustee of a particular number of the shares he holds in a particularcompany". An appeal from this decision was dismissed: Shortall v White [2008]DEC 95−411. And even before Hunter v Moss had been rejected in White, it wasconsidered in England at first instance by Neuberger J who, although bound toapply it, recognised the force of the criticisms of the decision and acknowledgedthat English law had departed from Australian law: Re Harvard Securities Ltd(in lig) [1997] 2 BCLC 369 at 381, 385.

85 A description of a fixed trust of intangible rights as involving a percentageinterest of the beneficiaries in the trust rights also involves some imprecision. Abeneficiary of a trust has an interest in the rights which are the subject of thetrust but only in a derivative sense. The interest of the beneficiary derivesthrough the interest of the trustee because it involves duties engrafted upon thetrustee's rights. As Dr Whitley Stokes put it in 1882 on the Indian Trusts Act 1882 s3, a trust "is an obligation annexed to the ownership of property, and arising out of aconfidence reposed in and accepted by the owner". Maitland made the same point inhis Cambridge lectures when he said that equity "did not say that the cestui que trustwas the owner of the land, it said that the trustee was the owner of the land, but addedthat he was bound to hold the land for the benefit of the cestui que trust": FWMaitland, Equity also the Forms of Action at Common Law (Cambridge University

− 57 −

Press, 1910) pp 17−18.

86 The same point has been iterated and reiterated in Australia. In DKLRHolding Company (No 2) Pty Ltd v Commissioner o f Stamp Duties (NSW) [1980] 1NSWLR 510 at 518−520, in a passage quoted in part by the High Court in FederalCommissioner o f Taxation v Linter Textiles Australia Ltd (in liq) (2005) 220 CLR592 at [30], Hope JA explained that

"although the equitable estate is an interest in property, its essential characterstill bears the stamp which its origin placed upon it. Where the trustee is theowner of the legal fee simple, the right of the beneficiary, althoughannexed to the land, is a right to compel the legal owner to hold and usethe rights which the law gives him in accordance with the obligationswhich equity has imposed upon him."

87 Similarly, in Re Transphere Pty Ltd (1986) 5 NSWLR 309 at 311, McLellandJ emphasised that a trustee who had legal ownership has all of the rights at law of theabsolute owner but the beneficiary "has the right to compel him to hold and use thoserights which the law gives him in accordance with the obligations which equity hasimposed on him by virtue of the existence of the trust". His Honour continued,adding that the right of the beneficiary "is engrafted onto, not carved out of, the legalestate".

(emphasis added)

180 I prefer the analysis by Campbell J for the reasons his Honour gives and for its apparent

approval by the Full Court o f this Court. That said, for the purpose o f this case, it does not

seem to me that the distinction in the two approaches particularly matters. In either event, the

interest in the beneficial interest was created by reason o f the Family Court Order either in

any shares o f that number to adopt the Hunter approach, or in respect o f all o f Sandini's

shares (sharing along with other rights), to adopt the White approach. In either event, the

argument seems somewhat academic because Sandini transferred shares as directed by Ms

Ellison in accordance with the terms o f the Family Court Order, but for the fact that they

were transferred to the trust as directed by her, rather than directly to her. In my view, it

would have been a clear breach o f the Family Court Order and a breach o f the trust created by

the Family Court Order were Sandini to put itself in a position (by share disposal) when it

could not comply with the terms o f the Federal Court Order. O f course, it did no such thing.

181 One other argument which was not developed but was advanced on written submissions for

Ms Ellison was that the beneficial interest principle could be invoked only with respect to

interest in land and not to intangible objects such as shares. No authority was cited in support

o f that proposition, nor reasoning advanced. In my respectful view, it is not shown to correct.

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182 If I am correct on the first point, the alternative case advanced for the applicants does not

need to be considered. For completeness I will consider it, lest a different view be taken onthe primary argument.

183 The alternative case advanced for the applicants refers to s 103−10 which specifies that Pt 3−1

and Pt 3−3 apply to the taxpayer as i f the taxpayer had received money or other property

when it has been applied for the taxpayer's benefit or as the taxpayer directs. The

respondents suggest that despite the width o f the wording in s 103−10, it has a more limited

operation, namely, it is limited to a determination o f what capital proceeds are obtained uponthe happening o f a CGT event. That is because Div 110 deals with capital proceeds. It does

not, according to the respondents, operate in relation to any o f the CGT events. I doubt, with

respect, that this submission is supported by the plain words o f the provision under analysis.

There are no such words o f limitation. For example, s 103−10 is not preceded by words that

say 'for the purposes o f Div 116' (which relates to capital proceeds). Section 103−1 is

contained in Div 103, described as 'General rules'. It is said that the Division sets out somegeneral rules that apply to the provisions dealing with capital gains and capital losses. Again,

there are no words o f limitation apparent.

184 It seems difficult to argue against the assertion that the shares were applied for Ms Ellison's

benefit as they were transferred to the family trust she controlled at her request, the FFT. The

relevant trust deed was in evidence. As mentioned, Ms Ellison is the sole director and

secretary o f the trustee, Wavefront. She is named as the specific beneficiary in the schedule

o f beneficiaries. In the trust deed, the definition o f 'General Beneficiary' includes the

specified beneficiary and the children and grandchildren thereof. Ms Ellison was both the

guardian and appointor o f the trust. As the sole shareholder, sole director, as appointor and

guardian and as beneficiary, she was the effective controller o f the trust. She could make all

necessary decisions, subject o f course to fiduciary duties as to the distribution o f income and

capital. The transfer then o f the MIN Shares to the discretionary family trust at her request

can be described as being for the benefit o f Ms Ellison. If authority is necessary for this

proposition, reference may be made to Vasudevan v Becon Constructions (Australia) Ply Ltd

(2014) 41 V R 445 per Nettle JA, with whom Beech and McMillan JA agreed (at [23] and

[26]).

185 Equally, there is no doubt that there was the requisite direction for the purposes o f s 103−10.

As already indicated, the evidence in substance is that Mr Ellison emailed Ms Ellison at

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10.27 am on 28 September with an email saying 'can you please send me the full details of

where you want the [MIN Shares] transferred to'. The following day, at 10.39 am there was

a reply to that email from the same email address (which I find to be the address of

Ms Ellison, the 29 September Email). There was no dispute that an email from that address

(the 29 September Email) was received by Mr Ellison in response. Mr Ellison swore to

receiving it. The 29 September Email states:

Can you please transfer the [MIN Shares] I don't have the SRN as Wavefront hasnever brought shares only property, the name of the company is Wavefront Asset PtyLtd ATF Felstead family trust, the ABN is 61 535 574 469.

186 Entirely consistent with this exchange, the response from Ms Ellison was forwarded to

Mr Goulds, the MIN company secretary, who then completed a standard transfer form

naming Wavefront as the transferee and gave it to Mr Ellison. Mr Ellison gave him the

transfer back duly signed by each o f Mr Ellison and Ms Ellison. Ms Ellison signed on behalf

o f Wavefront, together with the words 'as the sole director I am authorised by the company to

complete this form'. There is absolutely no doubt that the transfer was to the trustee as aresult o f direction or instruction from Ms Ellison.

187 The Commissioner also says that putting aside the direction question, the transfer to the trust

is not for the benefit o f the spouse transferee. I unable to see why this would be so,particularly in this case where the transferee is a sole controller o f the discretionary trust of

which she is a beneficiary. 'Benefit' is intended legislatively to capture a broad concept, not

some limited legal concept. In m y opinion, under the s 103−10 point, there are no words of

limitation. I f it is necessary for Ms Ellison to have had the asset, she has had the benefit of

the Family Court Order. Ms Ellison has had the beneficial ownership in the MIN Shares.

Secondly, the effect o f the deeming or benefits section is that it was unnecessary for her to

have been a transferee personally. Her deemed receipt o f the shares by reason o f s 103−10,

either by deriving the benefit or making the direction, satisfies the requirement. Any further

transfer o f beneficial ownership to another entity (which she happened to totally control) was

a matter for her. I f s 103−10 is intended to be limited to receipts, as the respondents contend,

in the present context Ms Ellison is deemed to have received something. This is so, albeit

that the actual transfer was to the FFT at her direction.

The effect o f Ms Ellison's involvement

188 The second alternative argument, which was not addressed orally for Mr Ellison was whether

the transfer to Wavefront as trustee was a transfer in which Ms Ellison as a former spouse

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was involved for the purpose of s 126−15. As to the second alternative argument that, in

terms of s 126−15, Ms Ellison is still involved in the trigger event, the Commissioner arguesthat the spouse or former spouse must be involved in the trigger event as transferee. It canonly apply where a natural person's spouse or former spouse is the transferee. According tothe Commissioner, that does not mean simply participating in, but actually being involved as

a transferee. Reading s 126−15 in the context of, and combination with, s 126−5, it is clear

that the transferee is to be the acquirer and the only nominated transferee in terms of s 126−15

is the spouse or former spouse. Further, the Commissioner says that the construction that the

natural person only is involved is consistent with the previous s 160ZZMA. For the reasons'discussed at [185]−[186], by directing the disposition of the MIN Shares, I consider that she

was sufficiently involved for the purposes of s 126−15.

A final point

189 The respondents also make the point that the other natural corollary of the applicants'

argument is that it would have the effect of providing that the so−called directing spouse, in

this case Ms Ellison, would have a cost base in respect of an asset that she does not 'own'.

That is because s 126−15 says that where there is a roll−over event, then the cOnsequences are

as in s 126−5. In s 126−5, one of the consequences is to provide for the cost base in the hands

of the transferee. That makes sense where the transferee is the spouse or former spouse who

receives the CGT asset, but it 'makes no sense', the Commissioner argues, where the personwho, in this case is Ms Ellison, is said to have, in the terms of 's 103−10, property applied to

her benefit or as she directs. In that case, she does not have the assets. The Commissioner

says it does not make sense to suggest that there should be a cost base in respect of her for anasset she does not 'hold'. As a policy consequence, I am not certain that this is necessarily

correct. The objective of the provisions discussed is to defer CGT liability in special

circumstances of what is, in effect, a non−voluntary transfer. If the analysis of the text and

context of the statute is correct, this objective is still achieved. The only factor which

distinguishes this case from every other roll−over case under these provisions is that the

transfer was made pursuant to a Family Court order at the direction of the receiving spouse to

a family trust controlled by the spouse. If there is difficulty in making sense of the purposeof the provisions in this instance, (which is not readily apparent to me), then it is a general

difficulty. There is nothing particular about this case beyond the distinction to which I have

just mentioned. More importantly, if inequities or unexpected adverse outcomes areexperienced as a result of application of the provisions, they may be something to take into

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account in the determination o f the terms o f Family Court orders dealing with property

adjustments. The fact that a transfer is to a family trust rather than a particular spouse does

not appear to create the unexpected outcome to which the respondents point.

CONCLUSION

190 In m y view, the Family Court Order did cause a CGT event A l to happen. All that is

required pursuant to s 104−10 o f the 1997 Act is a change o f beneficial ownership of CGT

assets and a Family Court order. This is consistent with the decisions in Jones and Mateo.

The result o f the Family Court Order was that Ms Ellison became the equitable owner o f the

MIN Shares specified in the Family Court Order.

191 As to the question o f whether changes in equitable ownership alone are sufficient for a CGT

event A l to occur, by way o f summary, I prefer the applicants' argument on the following

basis.

192 First, one can be an owner o f property which is a CGT asset with equitable title only. This is

evident, for example, in Kent v Vessel "Maria Luisa" (No 2) per Tamberlin and Hely JJ

(at [61] and [66]) cited above.

193 Secondly, a consequence o f the position advanced for the respondents (that it is necessary for

legal as well as beneficial ownership to pass for a CGT event A l to happen) would be that

whenever there is a disposition o f equitable ownership without legal ownership (that is, not

by way o f a declaration or settlement, which is a CGT event El) , there are no taxable gains

arising and, as a consequence, no CGT would ever be assessable.

194 Thirdly, the statutory context o f s 104−10 o f the 1997 Act and its incorporation o f s 106−50,

dictates a construction focussed on beneficial ownership: see the discussion in Turas

(at [10]) cited above.

195 Fourthly, the content o f Note 1 under s 104−10(3), or the example given, should not be treated

as being decisive in this regard: see the observations concerning this in Brooks (at [65]−[66]).

Notes and examples may be incorrect. In relation to the predecessor o f CGT event Al,

s 160M(1) and (2) o f the 1936 Act, in the discussion in Brooks, the Court said that anything

which involved a change in the beneficial ownership o f an asset was treated as being adisposal and as giving rise to an acquisition. Further, it is irrelevant, the Court said, how that

change in ownership is brought about b y virtue o f s 160M(2) o f the 1936 Act, whether it be

b y way o f a transaction and instrument or by operation o f law or the doing o f some act or

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thing or the occurrence o f an event: see the discussion in Brooks (at [13]) cited above.

(Brooks is binding on me.)

196 Fifthly, Ms Ellison's further argument that in any event the Family Court Order, because of

its error, did not confer full beneficial ownership, in my view, should not be accepted. Albeit

that there was an error in one aspect o f the Family Court Order, it is clear that:

(a) the Orders were absolute and unqualified in their terms. All that was required

to execute the document to transfer registration was stipulated: see the

discussion in Mateo (at 234, 248 and 254);

(b) the defects in the Orders do not change their effect: see the discussion in BHP

Petroleum (at 172). It would be a challenging argument for Mr Ellison to seek

to advance that he was not required to comply with the terms o f the Family

Court Order because o f the technical defect that both parties had made in

consenting to the Order. There is no doubt as to what the substance o f the

Family Court Order required and there is no doubt that (but for the transfer to

Wavefront, which is another issue), the Family Court Order was performed;

(c) the timing o f the transfer o f the registration document is irrelevant; and

(d) finally, there was sufficient certainty o f subject matter for beneficial

ownership to pass within the parameters discussed in cases such as White

(at [230]−[234]), where the decision o f Herdegen v Commissioner o f Taxation

(Cth) (1988) 84 ALR 271 is discussed and explained.

197 I f this analysis is not correct, then there is, in my view, substance in the alternative casesadvanced by the applicants. There is nothing in the words o f s 103−10 o f the 1997 Act which

limit its operation to deeming receipt o f capital proceeds, Constructive receipt arises under

that provision where the money or property is applied for the benefit o f the taxpayer. A

transfer o f shares to a trust controlled b y a person with dispositive power over those shares is

clearly an application o f property for that person's benefit: see the discussion in Vasudevan

per Nettle JA, Beach JA and McMillan AJA (at [23] and [26]) where their Honours said

(footnotes omitted):

23 Secondly, the natural and ordinary meaning of a requirement that somethingbe for "for the benefit of ' a person is that it be "for the advantage, profit or good" of

• the person. So, in this context, just as moneys paid by A to B to discharge C'sindebtedness to B would ordinarily be conceived of as paid to B for the benefit of C,so too the incurrence by A of obligations to B in order pro tanto to relieve C of his

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obligations to B would naturally and ordinarily be conceived of as being for thebenefit of C.

26 With respect, however, I disagree. As I see it, the close associate provisionsare designed to catch a benefit flowing to a close associate whether or not the benefithas the effect of legally or financially advantaging the director in question. Incontrast, the natural and ordinary meaning of "for the benefit of" in s 588FDA iscalculated to catch a benefit which legally or financially advantages the directorin question regardless of whether it is paid or directed to a close associate of thedirector. Since the two regimes are aimed at different albeit potentially intersectingsets of possibilities, it would run counter to the evident intention of the legislation toread down either to the point of mutual exclusion.

(emphasis added)

198 Because the transfer o f the shares to the FFT was for Ms Ellison's benefit, in m y view, the

provision is satisfied. I am also satisfied that there is no doubt that Ms Ellison gave the

requisite direction for the purpose o f s 103−10 o f the 1997 Act. As previously noted, there is

no doubt that this transfer would not have occurred had she not done so. Ms Ellison directing

the disposition was sufficient involvement in whatever CGT event A l happened. The words

o f the section did not require her to be the transferee and the use o f that term in s 126−15 of

the 1997 Act is to identify a person, not to prescribe a necessary capacity o f that person.

199 For all these reasons, I consider that the applicants are entitled to the declaration in the

alternative form posited by the Commissioner which I accept is the preferable form. I will

make no order on costs as requested b y the Commissioner. Unless the parties wish to be

heard, (in which case I will do so), costs will be dealt with on the papers.

The Court declares that:

(1) For the income year 30 June 2011, the first applicant is entitled to the roll−over

consequences in s 126−5 o f the Income Tax Assessment Act 1997 (Cth), due to the

operation o f s 126−15(1)(a) o f the Income Tax Assessment Act 1997 (Cth) in relation

to its disposal o f the 2,115,000 Shares in Mineral Resources Limited as processed in

4 October 2010.

The Court orders that:

(2) The parties are to file submissions on costs to be dealt with on the papers, unless any

party wishes to be heard on costs.

I certify that the preceding one

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hundred and ninety−nine (199)numbered paragraphs are a true copyo f the Reasons for Judgment hereino f the Honourable JusticeMcKerracher.

Associate:

Dated: 22 March 2017

Applicants

Fourth Applicant:

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SCHEDULE O F PARTIES

WAD 754 of 2015

ELLISON (WA) PTY LTD (ACN 135 966 773)