FEDERAL COURT OF AUSTRALIA Australian Securities & Investment Commission v Perpetual Trustee Company (Canberra) Ltd [2000] FCA 1726 CONTRACT – construction of deed of indemnity of trustee TRUSTS – where party is trustee of Trusts A and B whether indemnity taken from beneficiaries of Trust A on assumption of office should have been exercised for the benefit of Trust B in the circumstances of the case Corporations Law s 1324(10) Real Property Ordinance 1925 (ACT) s 138A Stamp Duties and Taxes Act 1987 (ACT) s 4(1) Taxation (Administration) Act 1987 (ACT) ss 26(2), 94 AUSTRALIAN SECURITIES AND INVESTMENT COMMISSION v PERPETUAL TRUSTEE COMPANY (CANBERRA) LIMITED ACN 008 393 806 AG 3003 OF 1997 GYLES J CANBERRA (by videolink) 29 NOVEMBER 2000 IN THE FEDERAL COURT OF AUSTRALIA AUSTRALIAN CAPITAL TERRITORY DISTRICT REGISTRY AG 3003 OF 1997 BETWEEN: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION APPLICANT AND: PERPETUAL TRUSTEE COMPANY (CANBERRA) LIMITED ACN 008 393 806 RESPONDENT AND: PERPETUAL TRUSTEE COMPANY (CANBERRA) LIMITED ACN 008 393 806 CROSS CLAIMANT AND: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION FIRST CROSS RESPONDENT TERRENCE MARK SNOW and GEORGE ROBERT WARWICK SNOW SECOND CROSS RESPONDENTS STIRLING FINANCE CO PTY LIMITED ACN 008 510 558 (Formerly Bass Investments (ACT) Pty Limited) THIRD CROSS RESPONDENT JUDGE: GYLES J DATE OF ORDER: 29 NOVEMBER 2000 WHERE MADE: CANBERRA (by videolink) THE COURT ORDERS THAT: 1. The application and the cross-claims be dismissed. 2. Costs reserved for argument. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA AUSTRALIAN CAPITAL TERRITORY DISTRICT REGISTRY AG 3003 OF 1997 BETWEEN: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION APPLICANT AND: PERPETUAL TRUSTEE COMPANY (CANBERRA) LIMITED ACN 008 393 806 RESPONDENT AND: PERPETUAL TRUSTEE COMPANY (CANBERRA) LIMITED ACN 008 393 806 CROSS CLAIMANT AND: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION FIRST CROSS RESPONDENT TERRENCE MARK SNOW and GEORGE ROBERT WARWICK SNOW SECOND CROSS RESPONDENTS STIRLING FINANCE CO PTY LIMITED ACN 008 510 558 (Formerly Bass Investments (ACT) Pty Limited) THIRD CROSS RESPONDENT JUDGE: GYLES J DATE: 29 NOVEMBER 2000 PLACE: CANBERRA (by videolink) REASONS FOR JUDGMENT 1 This is an application by Australian Securities and Investments Commission ("ASIC") pursuant to s 1324(10) of the Corporations Law for an order that, in substitution for the grant of an injunction, the respondent, Perpetual Trustee Company (Canberra) Limited ("Perpetual") pay damages to the responsible entity or the custodian for the time being of the Mirvac Commercial Trust (formerly known as the Capital Property Trust). Perpetual cross-claims against ASIC, Terrence Mark Snow and George Robert Warwick Snow and Stirling Finance Co Pty Limited (formerly Capital Property Corporation Pty Limited ("CPC")) in the event that the claim against it succeeds. facts 2 This case arises out of transactions concerned with the rearrangement of the affairs of Terrence Mark Snow ("Terry Snow") and George Robert Warwick Snow and their families. Terry and George Snow are brothers, and by 1989 had, through various trusts, built up a very substantial portfolio of investments, including a good deal of Canberra property. This case particularly involves the transfer of the beneficial interest in a valuable parcel of land and development thereon in the commercial centre of Canberra, known as the Advance Bank Centre. I shall set out the facts necessary to appreciate the issues, and which form the matrix of facts necessary to construe the critical documents. I do not here deal with all of the facts going to the special defences. 3 In early 1989, the registered proprietor of the Advance Bank Centre was CPC as trustee of what was known as the T & G Trust, a unit trust with 29,236,612 units issued, all of which were held by CPC as trustee of the Empire Trust. The Empire Trust was a discretionary trust, the beneficiaries of which ultimately included the families of Mr Terry Snow and Mr George Snow. Mr George Snow was a director of CPC. Mr Terry Snow had been a director of CPC, but resigned on 21 September 1988 and was re-appointed in August 1989. At the same time, the Capital Property Trust was a unit trust with units on public issue. Perpetual was trustee of that trust, and Capital Property Management Limited ("CPM") was the manager of the trust. Mr Terry Snow was chief executive and secretary of CPM. As at 30 June 1988, there were over 58 million units on issue, and in April 1989, CPC, as trustee of the T & G Trust, held or was entitled to over 10 million units in the Capital Property Trust. By 14 June 1989, the only asset of the T & G Trust was the Advance Bank Centre. 4 By deed of 14 June 1989 ("the Deed of Appointment"), CPC, as the unit holder in the T & G Trust, removed itself as trustee and appointed Perpetual to be the new trustee in its stead. The parties to that deed were CPC and Perpetual. Clause 5 of the deed was as follows: "5. The Existing Trustee HEREBY INDEMNIFIES the New Trustee in respect of any action claim or demand brought against the New Trustee as a result of the acts or omissions of the Existing Trustee in the performance of its obligations under the Trust Deed SUBJECT ALWAYS to any indemnity the Existing Trustee may have against the assets of the T & G Trust." 5 On the same date, a deed was entered into between the CPC, Terrence Snow and George Snow, and Perpetual ("the Deed of Indemnity"). Because of the importance of it, I set it out (omitting formal parts): "RECITALS: A. By deed made 2nd March 1977 between Patrick Joseph McGlade as Settlor and Capital Property (then called "Stirling Finance Co Pty Limited") (the "Trust Deed") the Settlor settled upon Capital Property the sum of $100 and established the "T & G Trust". B. Capital Property wishes to be removed from the trusts of the T & G Trust and it is proposed that the New Trustee be appointed as substitute Trustee. C. At the request of the Snows the New Trustee is prepared to accept the appointment as Trustee of the T & G Trust subject inter alia to the execution of this deed. OPERATIVE PROVISIONS: 1. Capital Property at the request of the New Trustee warrants to the New Trustee as follows: (a) Capital Property has not committed any breach of the trusts conferred upon it by the Trust Deed. (b) The accounts of the T & G Trust present a true and fair view of the assets and liabilities of the Trust as at the date of the accounts. (c) The financial records of the T & G Trust have been kept in such a manner as to enable them to be conveniently audited. 2. Capital Property and the Snows each warrant and represent to the New Trustee that: (a) The T & G Trust is a valid and subsisting trust constituted by deed dated 2 March 1987 and amended only by deeds dated 10 March 1987 and June 1989. (b) Capital Property as unit holder holds all of the issued units in the T & G Trust and does so in its capacity as trustee of the Empire Trust constituted by deed dated 24 May 1984. 3. The Snows and each of them hereby request the New Trustee to accept the appointment as trustee of the T & G Trust. 4. Capital Property and the Snows jointly and each of them severally covenant with the New Trustee to at all times indemnify the New Trustee: (a) Against all actions preceedings (sic) claims demands costs and expenses whatsoever arising from: (i) Acceptance by the New Trustee of appointment as trustee of the T & G Trust. (ii) In the absence of misconduct by the New Trustee the exercise and purported exercise by the New Trustee of all or any of the powers set out in the Trust Deed and all deeds amending that deed. (iii) In the absence of misconduct by the New Trustee All or any act matter or thing arising as a result of the New Trustee acting or purporting to act as trustee of the T & G Trust. (b) For its fees and expenses in relation to the administration or purported administration by the New Trustee of the T & G Trust. 6.(sic) All stamp duty and other taxes imposts and charges payable on or in respect to this deed and the deed of appointment of new trustee [and any document evidencing or recording the substitution of the New Trustee for Capital Property as trustee of the Trust or the change in the ownership in legal estate in the assets of the Trust] executed contemporaneously with this deed (including penalties) be payable by Capital Property and the Snows." The portion of cl 6 which is contained within the square brackets appears in handwriting on the original deed. 6 On the same day, Perpetual executed a request to the Registrar of Titles to make an entry in the relevant Crown lease of the vesting in Perpetual as new trustee of the leasehold estate, pursuant to s 138A of the Real Property Ordinance 1925 (ACT). That section was as follows: "Appointment of new or additional trustees 138A. (1) Where any land or interest under this Act is held by a trustee, either solely or jointly with other trustees, and - (a) the trustee vacates his or her office and a new trustee is appointed in his or her place or the vacancy is not filled; or ... the Registrar-General, upon receipt of the instrument effecting the vacancy or appointing the new or additional trustee, or of an office copy thereof, or of a copy thereof verified by affidavit, or upon production of such other evidence as the Registrar-General thinks sufficient, and upon being satisfied that the vacation of office or the new or additional appointment, as the case may be, is in accordance with law, shall, subject to this Act, enter in the folio of the Registrar constituted by the grant or certificate of title effected, a memorandum setting forth the fact of the vacation of the office or of the new or additional appointment, as the case may require. (2) Upon the entry being made, the new trustee, the continuing trustees, or the continuing trustees and the new trustee or the additional trustee, as the case may be, shall be deemed to be the registered proprietor or proprietors of the land or interest, and as such to be subject to this Act as if he or she or they were the trustee or trustees originally registered as proprietor or proprietors of the land or interest." 7 On the same day, 14 June 1989, a supplemental deed of trust was executed, which, inter alia, provided for the delegation of management of the T & G Trust properties by the trustee, and a management agreement appointing CPC to manage the properties of the trust on behalf of Perpetual was also executed. A deed between CPC and Canberra Permanent Co-operative Building Society Ltd was also entered into, setting out the terms and conditions under which the latter agreed to the change of trustee in relation to the mortgage charge held by it over the properties of the T & G Trust. 8 It was appreciated by all parties to the arrangements represented by the documents entered into on 14 June 1989 that if, as contemplated might occur, the beneficial interest in the Advance Bank Centre was later transferred from the T & G Trust to the Capital Property Trust by means of a declaration of trust by Perpetual, there was a real risk of the revenue authorities claiming stamp duty on the transfer by reason of the existence of a tax avoidance scheme, although the view of the stamp duty expert at the legal firm of Mallesons Stephen Jaques ("Mallesons") was that such a claim would not succeed. The original Deed of Appointment and the s 138A request were each possible candidates as documents liable for such duty. There had been close consideration of that aspect of the matter by both Mallesons, for the Snow interests, and Sly & Weigall, instructed by Perpetual. The relevant provisions of the Stamp Duties legislation were as follows. 9 The definition section (s 4(1)) of the Stamp Duties and Taxes Act 1987 (ACT) ("the Act") defines: (i) "conveyance" to mean (inter alia): "(a) a lease of land, or a transfer, assignment or grant of a lease of land; (b) an agreement for a transfer, assignment or grant of a lease of land." (ii) "scheme" to mean: "(a) an agreement, arrangement, understanding, promise or undertaking, whether express or implied and whether or not enforceable, or intended to be enforceable, by legal proceedings; or (b) a scheme, plan, proposal, action, course of action or course of conduct, whether unilateral or otherwise." (iii) "tax avoidance scheme" to mean: "'tax avoidance scheme' means a scheme where the person who has, or one or more of the persons who have, entered into or carried out the scheme or a part of the scheme did so for the purpose of securing: (a) that an amount of stamp duty or tax would not be payable by a person, being an amount that would have been, or might reasonably be expected to have been, payable by the person: ... if the scheme had not been entered into or carried out, or for purposes of which that purpose was the dominant purpose." Section 17 of the Act prescribes the instruments subject to stamp duty. Sub-section (1) provides (inter alia): "17(1) The determined amount of stamp duty is payable on the following instruments: (a) a transfer, or an agreement for a transfer, of an estate in fee simple; (b) a Crown lease (not being a lease referred to in paragraph (ca)), or a transfer or an agreement for a transfer of a Crown lease." Section 18 provided at the relevant time that: "18. Stamp duty is not payable on an instrument in respect of a conveyance of a kind specified in Schedule 1." Section 22 prescribes the person liable to pay stamp duty. It provides: "22. The stamp duty payable on: (a) a transfer of an estate in fee simple or a lease of land, or an agreement for such a transfer; (b) an assignment of a lease of land, or an agreement for such an assignment; (c) a lease of land other than a Crown lease; (d) a Crown lease; is payable by the transferee, assignee, lessor or lessee respectively." Schedule I (ie that referred to in s 18) declared at the time that certain conveyances were "Exempt Conveyances". One such was: "A conveyance: ... (f) by way of a transfer or assignment of an estate in fee simple or a lease of land, being an estate or lease held on trust, where the transfer or assignment: (i) is made in consequence of the appointment or retirement of a trustee, or other change in the trustees, in order to vest the estate or lease, as the case may be, in the trustees for the time being entitled to hold it; and (ii) is not made in connection with a tax avoidance scheme." (emphasis added) Of the provisions of the Taxation (Administration) Act 1987 (ACT) I need merely note that s 30(1) provides: "30(1) A person who fails: (a) to lodge a return, or to give any information, in relation to a matter or thing; (aa) to make an application for the renewal of a licence; (b) to lodge an instrument for assessment; or (c) to cause an instrument to be duly stamped. as required by a tax law, is liable to pay, as a penalty, an additional amount equal to double the amount of tax, licence fee or duty payable in respect of the matter, thing, renewal or instrument, as the case requires." 10 On 15 June 1989, the s 138A application and the Deed of Appointment of new trustee were produced to the ACT Revenue Office for the assessment of stamp duty, and were assessed as exempt from stamp duty and appropriately stamped. 11 On 28 June 1989, what has been described as a draft investment proposal from CPM was delivered to Perpetual, which proposed that the Capital Property Trust acquire the Advance Bank Centre from the T & G Trust and one of the terms of the acquisition was as follows: "6. Indemnities: CPT is to pay all stamp duty and related costs in respect of the acquisition and is to indemnify the T & G Trust against any stamp duty, not exceeding the ad valorum duty on the acquisition cost of $49,750,000, if so levied against it at any time in the future." 12 On 14 July 1989, Perpetual, in its capacity as trustee of the Capital Property Trust, received a revised investment proposal from CPM for approval by it as an authorised investment of the Capital Property Trust under cl 24 of the relevant trust deed. Conditions 6 and 11 of the proposal were as follows: "6. Indemnities: CPT is to pay all stamp duty and related costs in respect of the acquisition and is to indemnify the T & G Trust against any such costs and/or stamp duties excluding any penalties arising from the appointment of your Company as trustee of the T & G Trust, if so levied against it at any time in the future. … 11. Title to the Property: Title will pass upon execution by your Company, as trustee of the T & G Trust, of a declaration of trust that your Company now holds the property for CPT." The acquisition was subject to approval by the unit holders of Capital Property Trust by ordinary resolution. 13 By letter of 18 July 1989, Perpetual accepted the proposal, inter alia, on the basis that: "…the indemnity in clause 6 of the proposal will be limited to a sum not exceeding ad valorem stamp duty on the acquisition price of $49,750,000 (ie, excluding penalties); …" 14 On 21 July 1989, Perpetual wrote to CPM revising that condition of the acceptance to read as follows: "The indemnity in Clause 6 of the proposal will be limited to a sum not exceeding ad valorem stamp duty on the acquisition price of $49,750,000 (ie, excluding penalties) other than penalties incurred by Capital Property Trust not paying an assessment promptly when issues [sic]." 15 On 24 July 1989, CPM sent a revised proposal to Perpetual. Condition 6 was as follows: "6. Indemnities: CPT is to pay all stamp duty and related costs in respect of the acquisition and is to indemnify the T & G Trust against any stamp duty, not exceeding the ad valorum duty on the acquisition cost of $49,750,000, if so levied against it at any time in the future." 16 On 28 July 1989, there was a meeting between officers of Perpetual, Mr Terry Snow, Mr Tilley, who was a director and secretary of both CPM and CPT, and Mr Russell Miller, solicitor, of Sly & Weigall, who was acting for Perpetual. There was some heated discussion at that meeting, particularly from Mr Terry Snow, who had returned from overseas and saw no reason for any concessions by the T & G Trust in relation to stamp duty. Perpetual held firm to the proposal, and Mr Snow conceded the point. Although, naturally, memories as to the detail of this meeting are not sharp, I am satisfied that the discussion related to the indemnity as to stamp duty in the investment proposal then current, and not the Deed of Indemnity. There were further discussions on that day about the precise wording of condition 6 of the approval. In the event, CPM prepared a fresh investment proposal, dated 19 July, which was sent to and received by Perpetual on 28 July. Condition 6 was as follows: "6. Indemnities: CPT is to pay all stamp duty and related costs in respect of the acquisition, or indemnify the T & G Trust against any stamp duty, not exceeding the ad valorum duty on the acquisition cost of $49,750,000, if so levied against it at any time in the future." On 31 July 1989, Perpetual accepted that proposal. On 16 August 1989, a meeting of the unit holders of the Capital Property Trust was held and resolved to approve the acquisition of the Advance Bank Centre. 17 On 30 August 1989, CPC requested that Perpetual execute a declaration of trust in respect of that Centre, noting that "we" had disposed of its interest in the Centre in favour of the Capital Property Trust. This was presumably written on behalf of the beneficiaries of the T & G Trust. By deed made 31 August 1989, Perpetual declared that it held the Advance Bank Centre in its capacity as trustee of the Capital Property Trust. 18 On 31 May 1990, Perpetual advised CPC that it had resolved to terminate the T & G Trust, and gave notice that it was proposed to distribute the assets of the trust on the expiration of one month from that date. On the same day, a deed was entered into between Perpetual, CPC, and Terry and George Snow. The operative provisions were as follows: "1. Pursuant to the powers conferred upon it by this deed the Trustee at the request of the Unitholder determines that the Vesting Day of the Trust is 31 May 1990. 2. The Unitholder warrants that it is the sole unitholder of the Trust. 3. The Unitholder and the Snows jointly and each of them severally covenant with the Trustee in the absence of misconduct by the Trustee to at all times indemnify the Trustee against all actions, proceedings, claims, demands, costs and expenses whatever arising from: (a) the exercise and purported exercise by the Trustee of all or any of the powers set out in the Trust Deed and all deeds amending that deed; (b) all or any act, matter or thing arising as a result of the Trustee acting or purporting to act as trustee of the Trust. 4. The Unitholder acknowledges the Trustee's entitlement to fees as set out in its letter of 14 June 1989 and that it may deduct those fees prior to any distribution arising from the vesting of the trust. 5. The parties acknowledge that the indemnities contained in the Deed dated 14 June 1989 between the Unitholder, the Snows and the Trustee and the Deed of the same date between the Unitholder and the Trustee ("the Deeds") are continuing indemnities notwithstanding the determination of the vesting date and the proposed distribution of the assets of the Trust and that the indemnities contained in this deed are not in derogation of the indemnities contained in the Deeds." 19 On 9 June 1992, the ACT Revenue Office forwarded a notice of assessment for stamp duty to Perpetual, the operative part of which was as follows: "I wish to advise that the following assessment has been made in relation to the acquisition of Block 19 Section 23 City by the Perpetual Trustee Company (Canberra) Limited, as trustee for the Capital Property Trust Value Assessed $ 49,750,000-00 Stamp Duty Assessed $ 2,721,765-00 Penalty Tax $ 3,130,029-75 TOTAL AMOUNT PAYABLE $ 5,851,794-75" 20 On 24 June 1992, the Australian Capital Territory Government Solicitor wrote to the solicitors for Perpetual as follows: "RE: NOTICE OF ASSESSMENT – STAMP DUTY BLOCK 19 SECTION 23 DIVISION OF CITY – CAPITAL PROPERTY TRUST We write with reference to the above assessment of stamp duty. As already advised this office acts for the Commissioner for ACT Revenue in relation to this assessment. I refer to our recent conference on 17 June attended by Messrs Lennox and Kemp of your firm and Mr Crawford of the Revenue Office. I refer also to your letter of 18 June 1992 to my client, in relation to the above matter as well. I am instructed to confirm our verbal advice to you at the conference, that the assessment of stamp duty is based on the Deed of Appointment dated 14 June 1989. We trust that the provision of this information will result in the abandonment of your proposed course of action in the Supreme Court concerning the structure of the notice of assessment. Your confirmation of this situation is sought. I am also instructed by my client to advise you, after consideration of your letter of 18 June 1992, the following situation is proposed: 1. Payment of the primary duty of $2,721,765-00 should be made as stated in the notice of assessment; 2. Payment of the penalty tax assessed will not be pursued without written notification to you of my client's intent to do so. 3. Interest will continue to accrue on any outstanding amount at the relevant rate. I also advise that this letter does not constitute acceptance of any or all claims made by you in your letter to my client of 18 June 1992. I await your written response on these matters." 21 On 7 July 1992, the amount of $2,721,765 was paid to the ACT Revenue Office from the assets of the Capital Property Trust. 22 On 18 December 1992, Perpetual's objection to stamp duty was disallowed, and that disallowance was upheld by the Australian Capital Territory Administrative Appeals Tribunal on 31 May 1993. On 26 November 1993, that decision was reversed by the Australian Capital Territory Supreme Court, but, in turn, that decision was reversed by the Full Federal Court on 9 June 1994, and the matter remitted to the Australian Capital Territory Administrative Appeals Tribunal for rehearing. On 16 June 1995, the Australian Capital Territory Administrative Appeals Tribunal again decided in favour of Revenue that the Deed of Appointment was liable to stamp duty. This, in turn, was reversed by the Australian Capital Territory Supreme Court on 9 August 1996. 23 On 19 September 1996, a settlement agreement was entered into between Perpetual and the ACT Revenue Office, pursuant to which the stamp duty which had been paid was repaid, together with $350,000 interest. Perpetual had by then paid more than $500,000 out of the assets of the Capital Property Trust for costs in relation to the proceedings to challenge the stamp duty assessment. claims of parties 24 The principal claim of the applicant, in short, is that because of cl 6 of the Deed of Indemnity, duty should not have been paid on any basis out of the assets of the Capital Property Trust, and that the costs of contesting the assessment should never have been charged to that trust. If this is correct, then Perpetual would be liable to restore to the trust the amount of legal costs paid out, together with the amount of interest forborne upon the amount of duty paid insofar as it is in excess of the $350,000 recouped from the ACT Revenue Office, plus interest on the legal costs wrongly paid out. 25 Perpetual denies that the effect of the Deed of Indemnity was as claimed, and, alternatively, says that there was a subsequent agreement which varied the indemnity, that it had the benefit of estoppels, and that in any event it ought to be excused. If unsuccessful, it cross-claims against Messrs Terry and George Snow and CPC by its current name. separate question 26 Finn J made an order under O 29 r 2 of the Federal Court Rules that a separate preliminary issue be determined, namely: "Whether on the true construction of the Deed of Indemnity dated 14 June 1989 and in the events which happened the Respondent in its capacity as trustee of the Capital Property Trust was entitled under clause 6 of the Deed of Indemnity to enforce any obligation on the part of Terrence Mark Snow and George Robert Warwick Snow and Capital Property Corporation Pty Limited to pay the stamp duty imposed upon the Respondent by notice of assessment dated 9 June 1992." His Honour, on 15 May 1998, answered that question: no ([1998] FCA 530). The essence of his Honour's reasoning was as follows: "For my own part I would have to say that I consider the construction of clause 6 as free from difficulty. Though, as counsel for the Snows rightly identifies and all parties accept, it contains an implicit promise in the setting of the Deed itself, that promise is to Perpetual as trustee of the T & G Trust. The Deed was the condition of acceptance of that Trust; the covenants expressly creating obligations relate to Perpetual in virtue of that trusteeship; and clause 6, in the instruments to which it refers, likewise is related to the process of the appointment of, the evidencing of, and any change of legal ownership of T & G Trust assets consequent upon the appointment of, Perpetual as trustee of the T & G Trust. The Deed is silent in order to the CP Trust of which Perpetual was already trustee. It is inappropriate, given the declared condition the Deed satisfied, for the "implicit promise" of clause 6 to extend to Perpetual's trusteeship of that trust and in respect of transactions (even if part of a scheme) that were to occur subsequent to the limited set of events which the instruments in clause 6 were intended to evidence. For this reason I would answer the preliminary question: "No". The indemnity did not extend to a liability incurred by Perpetual in its capacity as trustee of the CP Trust." 27 On 16 June 1998, following the preliminary determination, Finn J ordered that there be judgment for Perpetual on the application and that there be judgment in favour of the cross-respondents on the cross-claims brought by Perpetual. 28 There was an appeal from this decision to the Full Court which, on 25 March 1999 ([1999] FCA 250), ordered: "1. The appeal be allowed. 2. The orders of the Court made on 16 June 1998 be set aside. 3. The question set for separate determination not be answered. 4. The matter be remitted to the primary judge for further hearing and determination. 5. The respondents pay the Commission's costs of the appeal and of the hearing, before the primary judge, of the question set for separate determination." 29 There is a sharp disagreement between the parties as to what, if anything, was decided by these judgments for the purposes of this hearing, which is the remitted hearing. ASIC contends that the Full Court decided the most important aspect of the case, namely, the application of cl 6 of the Deed of Indemnity, unfavourably to Perpetual and in a fashion which requires that issue to be determined against it here. The other parties contend that if anything was decided in a way which now binds the parties, it did not decide the principal question arising in the case. The gist of the Full Court decision was as follows (at par 20): "… we do not agree that clause 6 unambiguously limits itself to duty etc. payable by Perpetual in its capacity as trustee of the T & G Trust (that is, duty etc. for which it would be entitled to an indemnity out of the property of that Trust). The drafting of the clause reflects, no doubt, a degree of haste in its composition. The word "shall" has been omitted in the phrase intended to be "shall be payable" (but the phrase should be read as if "shall" were included); and the clause is not expressly cast in the form of a promise to Perpetual by CP Co and the Snows, though it should be read (and there was no dispute about this) as if that were its form. The effect of the clause, read in that way, was that CP Co and the Snows undertook to pay the duty, taxes, imposts and charges referred to so that Perpetual would be relieved of their burden. The clause is not limited, however, by reference to the circumstances which might cause any of the documents to attract duty or tax or by reference to any alternative source of indemnity or recoupment that might be available to Perpetual. It is, we think, to cloud the issue to speak of the capacity in which Perpetual acted when it obtained the benefit of the promise in clause 6 of the deed of indemnity. If any of the documents were dutiable, all parties accepted in argument that that could be so only if it were properly to be regarded as a transfer or assignment of (or an agreement to transfer or assign) a lease. If it had that character, and was dutiable, then Perpetual was liable to pay the duty. The effect of the Stamp Duties Act does not depend on the capacity in which a transferee or assignee acts: it imposes liability on the transferee or assignee regardless of capacity. (The notice of assessment of 9 June 1992 purported to assess Perpetual "as trustee for the Capital Property Trust"; but the quoted phrase must be regarded as surplusage). Once that is seen, the real question, it seems to us, is whether clause 6 applies only in circumstances where Perpetual has no recourse, in respect of the duty, taxes and imposts, to any persons or funds other than the beneficiaries of the T & G Trust or the property held as trustee of that trust. For that reason, we are inclined to think that it might have been better not to include in the question for separate determination the words "in its capacity as trustee of the Capital Property Trust". The letter of 24 June 1992 from the Government Solicitor makes it clear that the assessment of 9 June 1992 was issued on the basis that duty was payable on the deed of appointment of 14 June 1989. The effect of that assessment was that the duty was payable by Perpetual. If in clause 6 "payable on or in respect to" includes circumstances where duty is payable by reason of an assessment (whether correctly made or not) of duty on the deed of appointment ‑ and that is a question on which the argument did not touch – then the duty assessed by the Commissioner for ACT Revenue fell within the literal terms of the provision. If clause 6 is to be construed – without regard to surrounding circumstances – so as to exclude it, that is so, we think, not by reason of the capacity in which Perpetual did things but because clause 6 is properly to be viewed as not extending to duty charged on one of the documents to which it refers where the charge to duty arises not merely because of the execution of the document upon Perpetual's appointment as trustee, but because of later events or transactions not necessarily consequential on the particular transactions with which the deed was immediately concerned. In our view, and with respect, the clause is not unambiguous in the sense that, construed by reference only to its context within the deed, it must be read as subject to that limitation. Indeed, in our opinion, there is much to be said for the view that the clause unambiguously means what literally it says." 30 What the Full Court decision actually does is to set aside the primary judge's answer to the separate question and, effectively, does away with the separate question. The hearing thus proceeds as if the separate question had never been posed nor answered. I doubt whether this creates any res judicata or issue estoppel at all. I am hearing the matter de novo on a different body of evidence from that which was before the primary judge and, so, the Full Court. Nonetheless, whether bound or not, it would be appropriate to follow any concluded view of the Full Court on an issue which falls for determination now. 31 In my view, the essence of the decision of the Full Court was that, as between Perpetual, on the one hand, and the Snow interests, on the other, the Deed of Indemnity was not conditioned upon the capacity in which Perpetual would be entitled to call upon the indemnity. In other words, if Perpetual sued the Snow interests under the indemnity for reimbursement of duty paid which answered the description in the deed, the Snow interests could not defend that case upon the basis that Perpetual was entitled to an indemnity from the assets of the Capital Property Trust. I will follow that finding. I am satisfied, however, that the Full Court did not deal with the issue as to whether, in the events which have happened, Perpetual had an obligation to the beneficiaries of Capital Property Trust to sue on the deed of indemnity rather than seek recourse from the assets of the Capital Property Trust. I can see no indication in the reasons of the Full Court that it had construed the separate question as appropriate to raise that issue. Furthermore, the portions of the transcript of hearings before the primary judge in relation to the question posed, relied upon by counsel for the Snow interests, make it reasonably clear that Finn J did not regard the separate question as encompassing that issue. decision 32 It is not entirely clear to me how it is said that an obligation for Perpetual to sue on the indemnity arises. The mere fact that Perpetual happened to be the trustee of the Capital Property Trust could not be sufficient. A trustee is entitled to act in more than one trust at a time, and is entitled to look after its own interests in that respect. It may be theoretically possible that the benefit of a covenant such as cl 6 of the Deed of Indemnity could be held on behalf of the beneficiaries of the Capital Property Trust notwithstanding that the deed itself does not so provide. I will also assume, for the purposes of the exercise, that this result could follow from circumstances in the absence of any formal declaration of trust. That aspect of the matter was not explored in any depth in the argument. No comparable case was cited. 33 The obligation does not expressly appear in the Deed of Indemnity. It is tolerably clear from the terms of the Deed of Indemnity itself that it had nothing to do with the Capital Property Trust. Whilst Perpetual was (and had, for some time, been) the trustee of that trust, there is no hint in the language of the deed, and in particular in the recitals, that Perpetual was taking the benefit of the indemnity in its capacity as trustee of the Capital Property Trust or on behalf of the beneficiaries in the Capital Property Trust. This is hardly surprising, because at the time when the deed was entered into there was no relevant transaction between either the Snow interests or the T & G Trust, on the one hand, and the Capital Property Trust, on the other. 34 The fact that such a transaction was contemplated with a high degree of confidence is not to the point in relation to this issue. Indeed, the fact that what was contemplated would involve the sale of the only remaining asset of the T & G Trust and ultimately the distribution of the assets of the trust was an excellent reason for Perpetual to look carefully to its own position, as it could not be assumed that any indemnity could be enforced against the assets of the T & G Trust. Perpetual was taking on a new trusteeship. In those circumstances, the taking of an indemnity from the beneficiaries as well as the old trustee is conventional enough. Clauses of the kind in this Deed of Indemnity will often be found in a deed of appointment of a new trustee. Although no particular questions were directed to the issue, I would infer that the separate deed was entered into for tactical reasons concerned with the contemplated dealings with the revenue authorities. The recitals make clear, however, that the Deed of Indemnity must be construed together with the Deed of Appointment. I would conclude from the terms of cl 6 of the former that the parties had turned their minds to a particular potential liability to which it would be prudent to refer, rather than rely upon the general form of indemnity in cl 4. In this connection, as noted by Finn J and the Full Court, cl 6 is not self-contained and is elliptical. In my opinion, it is properly to be seen as a subdivision of cl 4. 35 I conclude from my examination of the circumstances that, in point of fact, the covenant was not taken for the benefit of the beneficiaries of the Capital Property Trust. Such a result could only follow from a consensual arrangement between Perpetual, on the one hand, and Messrs Terry and George Snow and CPC, on the other, as the consequence would be to make the other parties liable to suit on behalf of third parties. I can find no evidence to suggest that this was agreed by those parties dehors the Deed of Indemnity. There is no suggestion in any of the documents leading up to 14 June or in the oral evidence that it had been agreed, or proposed, that the "vendor" (the Empire Trust) would bear stamp duty on the transfer of the beneficial interest rather than the "purchaser"(the beneficiaries of the Capital Property Trust) in the event that the transfer of beneficial ownership eventuated. 36 It is also relevant to note that all parties were very much alive to the risk that the transactions would be classed as a scheme. If cl 6 of the Deed of Indemnity had the effect contended for, it would have assisted an argument by the ACT Revenue Office that the transactions were a scheme. This would be unlikely in such a carefully crafted set of arrangements. It is also of significance in this regard that the "purchase" was always to be conditional upon approval by a meeting of the unit holders of the Capital Property Trust, with the Snow interests not voting, by reason of Rule 3J(3) of the Australian Stock Exchange listing rules. 37 I also regard the various versions of the investment proposal which post-dated the Deed of Indemnity as inconsistent with the argument of ASIC. Condition 6 dealt specifically with the very topic said to have been dealt with in cl 6 of the deed, and in a manner inconsistent with it. The apparently heated discussion of 28 July 1989 related to condition 6 of the investment proposal rather than cl 6 of the Deed of Indemnity. It was during this period that the stamp duty issue was first negotiated between "vendor" and "purchaser". 38 There is also much to be said for the view expressed by Mr Terry Snow in evidence that the valuations upon which the parties assessed the transaction were calculated on the usual basis that the purchaser rather than the vendor would pay any stamp duty. If, contrary to the usual practice, stamp duty were payable by the vendor, then the valuation would have been increased accordingly. The reality was that if Mallesons were correct, and no stamp duty was payable, then the beneficiaries of the Capital Property Trust (including the Snow interests) rather than the Empire Trust received a bonus. On this basis, it was sensible for the Snows to agree to a limited exposure in relation to the stamp duty issue – the transaction assisted the reconstruction of the family affairs, and they would share in any bonus – but to accept total responsibility would not be in accordance with commercial reality. 39 The express preservation of the indemnities by the 1990 vesting deed is consistent with the Deed of Indemnity protecting Perpetual. 40 Indeed, with three exceptions, I can find little in the evidence, either reflected in the contemporaneous documents or in the oral evidence, which would support the principal contention of ASIC. The first exception is a query recorded as being raised by Mr Miller at the time of assessment of duty in 1992. The cryptic contemporaneous notes have not been expanded upon or explained in evidence. In my view, the most likely explanation is that Mr Miller had some recollection of the events several years before in 1989 which involved issues as to payment of duty, and was raising the issue as one to be considered. In his letter of advice to Perpetual of 4 July 1989 reporting on the events of 14 June, Mr Miller said: "In our opinion if any problems are experienced in relation to the stamp duty aspects of this transaction, they will arise upon the sale of the Advance Bank Centre to the Capital Property Trust. We note that Capital Property Corporation Pty Limited has indicated that if stamp duty is levied on an ad valorem basis that such duty will be paid. We note that Perpetual has considered the risks involved with the imposition of duty and have satisfied itself as to the ability of the Trust to meet any liability which is incurred." The reference to the trust in the last line is obviously to the Capital Property Trust. This is inconsistent with the case propounded by ASIC. In any event, what Mr Miller thought in 1992 could not bind Perpetual to a trust obligation created in 1989. He could not make any admissions on behalf of Perpetual. 41 The second piece of evidence to be considered is that of Mr Banyard, when he accepted the proposition put to him in cross-examination that the deed was taken in order to protect the interests of the beneficiaries of the Capital Property Trust. Naturally, counsel for ASIC placed considerable importance upon these answers. My impression when the evidence was given was that skilful cross-examination had placed Mr Banyard in a position where he felt that he ought to assent to the proposition put to him or appear to be recreant to the interests of the Capital Property Trust beneficiaries. My later consideration of the evidence rather confirms this impression. It must also be kept steadily in mind that the relevant events took place over eleven years ago, and that Mr Banyard has not been employed by Perpetual for some years. He was not involved in the negotiations at the crucial time in June 1989, including 14 June. The answers given differed from earlier oral evidence he had given and from his affidavit. He is not, of course, authorised to make admissions on behalf of Perpetual, and the matter agreed to is, in reality, a conclusion of mixed fact and law. He was not taken to any primary evidence from which the conclusion could have been drawn. Mr Papa, who deputised for Mr Banyard at the relevant time, gave no such evidence. None of the directors of Perpetual who were called gave any such evidence. 42 The third piece of evidence to be considered is a letter written on behalf of Perpetual to ASIC on 4 November 1996 by Mr Cowper, the National Manager Property Trusts. The letter (so far as is relevant) said: "The transaction under which the Advance Bank Centre became part of this Trust was structured to provide the unit holders with significant benefits. There was also considerable legal advice taken at the time which confirmed that the relevant transactions were not liable to stamp duty. However for reasons of abundant caution and prudence we required that the indemnity be put in place so as to ensure that unit holders did not lose those benefits and were not at risk. At all times, following the commencement of the Court action, unit holders were aware of the availability of the indemnity and the way in which the payment of the duty had been provided. Consequently we do not believe that there is any lack of credibility in the market for CPT units. During this time we continued to receive the consistent legal advice that the action taken by the ACT duty authorities was flawed and a decision in favour of the Trust would be forthcoming. The position was reached on 19 June 1996 when orders were issued in the Federal Court (see copy attached) essentially reflecting settlement of the action in favour of the Trust and under which the Trust received an amount which represents the amount of duty which had been assessed and paid and an amount representing interests and costs. We believe this settlement represented a prudent commercial compromise in the best interests of the Trust. Your letter is based on the premise that Perpetual had an absolute right to indemnity in respect of the $2.7 million duty assessment. You refer to Clause 6 of the Deed of 14 June 1989 in support of this proposition. Perpetual does not agree with your view on this issue. It is not clear that Perpetual has any right to indemnity of the type you describe arising from the (invalid) assessment of duty or the action commenced against it. The claim by the Commissioner for ACT Revenue against Perpetual involved complex arguments. These arguments ultimately could not be sustained. The legal advice to Perpetual, in the end, was proved to be correct. The real difficulty for Perpetual arose from the vigorous pursuit against it of claims which it was forced to defend, notwithstanding its belief that they were baseless. At no time did Perpetual act imprudently or in breach of trust in relation to this matter. On the contrary we have acted to ensure that unit holders did not suffer any detriment as a result of an invalid assessment of stamp duty. Our actions were taken with the benefit of and on the basis of competent legal advice. The Federal Court orders are clear confirmation of this. We advise that the Board of Perpetual Trustee Company (Canberra) Ltd has considered and approved the terms of this response." (emphasis added) Counsel for ASIC place particular reliance upon the highlighted portion. 43 I admitted this letter against Perpetual (but not the cross-respondents) over objection as it is capable of being construed as an admission. Considering it against the backdrop of the events of 1989, I do not read it as an unequivocal admission that the Deed of Indemnity was entered into by Perpetual on behalf of the Capital Property Trust. Indeed, it is in terms a denial of liability. Such support as ASIC obtains from it is, at best, indirect, and does not override the evidence of those concerned in the actual events and the contemporaneous documents. 44 It is argued on behalf of Perpetual that, in any event, cl 6 of the Deed of Indemnity only includes duty "payable", meaning duty properly payable, not merely assessed and, in the events which happened, no duty was paid or payable according to the settlement agreement. Counsel for ASIC point to the terms of ss 26(2) and 94 of the Taxation (Administration) Act 1987 (ACT) and submit that duty was payable upon assessment notwithstanding that any review of the assessment was pending. In view of my decision on the principal claim, it is unnecessary to resolve this issue. 45 ASIC also pleads that: "(e) From approximately 1997 to date, (Perpetual) permitted payments to be made from the assets of the CPT to Minter Ellison for costs and disbursements in connection with this proceeding and the demands made by ASIC prior thereto, which would not have been incurred but for the negligence or default of Perpetual." I cannot see any basis for this claim if Perpetual was entitled to indemnity from the Capital Property Trust for stamp duty and other expenses in relation to the acquisition. The costs were expended to eliminate or minimise the liability for duty to the advantage of the party ultimately responsible for payment of it. In my opinion, that party was the Capital Property Trust. Perpetual was entitled to indemnity from the assets of that trust for the legal costs incurred. There is no separate covenant in the Deed of Indemnity which relates to costs. I take into account that both Messrs Banyard and Papa seemed to accept that the Capital Property Trust should not have borne these expenses. That must have been as a result of their belief as to the effect of the indemnity in the investment proposal. Whether this is a correct understanding of that indemnity does not fall for decision here, as that basis is not pleaded. 46 For the sake of completeness, I do not see any substance in the claims pleaded in relation to not obtaining advice once the principal point is decided against the applicant. conclusion 47 I have rejected all bases for the relief claimed. There is, therefore, no occasion to consider the various defences put forward by Perpetual or the cross-claims. It will be apparent, however, from these reasons, that I do not consider that the events of and surrounding 28 July 1989 had anything to do with the separate issue of the indemnity granted on 14 June 1989. 48 The application and the cross-claims will be dismissed. Subject to any further argument, I would order that Perpetual pay the costs of the cross-respondents, and that ASIC pay the costs of Perpetual, including its costs of the cross-claim and the costs it is to pay the cross-respondents. I certify that the preceding forty-eight (48) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gyles. Associate: Dated: 29 November 2000 Counsel for the Applicant: MA Pembroke SC and MJ Lawler Solicitor for the Applicant: Australian Securities and Investment Commission Counsel for the Respondent: GA Palmer QC and MR Speakman Solicitor for the Respondent: Minter Ellison Counsel for the Second and Third Cross Respondents: AJ Meagher SC Solicitors for the Second and Third Cross Respondents: Corrs Chambers Westgarth Date of Hearing: 23-27 October, 30-31 October 2000 Date of Judgment: 29 November 2000