FEDERAL COURT OF AUSTRALIA Kelly v Commissioner of Taxation [2012] FCA 423 Citation: Kelly v Commissioner of Taxation [2012] FCA 423 Parties: SEAN KELLY v COMMISSIONER OF TAXATION File number: QUD 571 of 2010 Judge: BESANKO J Date of judgment: 27 April 2012 Catchwords: TAXATION – Appeal against reviewable objection decision under s 14ZZ of Taxation Administration Act 1953 (Cth) – where applicant claimed Commissioner erred in the assessment of his income for year ended 30 June 2009 – where applicant one of seven partners in a law firm – where four prior transactions alleged to involve equitable assignments of partnership interest – whether transactions effective in conferring interest on trusts – whether calculation by Commissioner excessive – onus of proof – requirements to discharge – applicant must prove the correct amount of his assessable income. PARTNERSHIP – TRUSTS – Where applicant claimed retiring partner assigned 20% interest in partnership to partnership trust – where no evidence of consideration provided by trust – where valid assignment of interest to trust only possible via assignment of interest by continuing partners – whether purported assignment effective. Held: there is insufficient evidence to establish that a 20% interest in the partnership was effectively transferred to the partnership trust. PARTNERSHIP – TRUSTS – Where partners purported to transfer 30% interest in partnership to partnership trust – where collective assignment of 30% – whether assignment effective – whether individual partners required to assign individual interests to trust – whether writing requirement in s 11(1)(c) of the Property Law Act 1974 (Qld) satisfied. Held: the assignment of a collective 30% interest was valid in equity due to clear intent of partners and payment of consideration by partnership trust. PARTNERSHIP – TRUSTS – Where partnership interest purportedly transferred to partnership trust – where partners have differing views as to status of trust in partnership – effect of differing views of partners on efficacy of transaction. Held: A misunderstanding as to status of assignee trust did not affect the efficacy of the assignments. Legislation: Conveyancing Act 1919 (NSW) s 23C(1) Duties Act 2001 (Qld) Income Tax Assessment Act 1936 (Cth) s 95 Income Tax Assessment Act 1997 (Cth) ss 290-60, 290-65, 290-70 Federal Court Rules O 52B r 5 Partnership Act 1891 (Qld) Partnership Act 1892 (NSW) s 31 Property Law Act 1974 (Qld) s 11(1)(c) Queensland Law Society Legal Profession (Solicitor) Rules 2007 rr 17.2, 17.3, 17.4 Queensland Law Society Rules 1987 r 78(1)(d) Stamp Act 1894 (Qld) s 54A(2) Superannuation Guarantee (Administration) Act 1992 s 12 Taxation Administration Act 1953 (Cth) ss 14ZY(1), 14ZYA, 14ZZ, 14ZZO Trusts Act 1973 (Qld) s 11 Cases cited: Adamson v Hayes (1973) 130 CLR 276, cited Bakewell v Deputy Federal Commissioner of Taxation (SA) (1937) 58 CLR 743, cited Bolton v Federal Commissioner of Taxation (1964) 9 AITR 385, cited Byrnes v Kendle (2011) 243 CLR 253, cited Collins and Fraser v Collins [1911] QWN 53, cited Commissioner of Stamp Duties (Qld) v Jollife (1920) 28 CLR 178, cited Commissioner of State Taxation (SA) v Cyril Henschke Pty Ltd (2010) 242 CLR 508, cited Danmark Pty Ltd and Forestwood Pty Ltd v Federal Commissioner of Taxation (1944) 2 AITR 517, cited Day v Perisher Blue Pty Ltd (2005) 62 NSWLR 731, cited Executor Trustee and Agency Co of South Australia Ltd v Deputy Federal Commissioner of Taxes (SA) (1939) 62 CLR 545, cited Executor Trustee and Agency Co of South Australia Ltd v Deputy Federal Commissioner of Taxes (SA) (1939) 62 CLR 545, cited Federal Commissioner of Taxation v Dalco (1990) 168 CLR 614, cited Federal Commissioner of Taxation v Everett (1980) 143 CLR 440, cited Federal Commissioner of Taxation v Galland (1986) 162 CLR 408, cited Forster v Hale (1798) 3 Ves. Jun 696, cited Glennon v Federal Commissioner of Taxation (1972) 127 CLR 503, cited Hocking v Western Australian Bank (1909) 9 CLR 738, cited Kauter v Hilton (1953) 90 CLR 86, cited Milroy v Lord (1862) 4 De GF & J 264, cited Norman v Federal Commissioner of Taxation (1963) 109 CLR 9, cited Rochefoucauld v Boustead [1897] 1 Ch. 196, cited Rushton (Qld) Pty Ltd v Rushton (NSW) Pty Ltd [2003] 1 Qd R 320, cited Secretary, Department of Social Security v James (1990) 20 ALD 5, cited Stewart Dawson and Co (Vic) Pty Ltd v Federal Commissioner of Taxation (1933) 48 CLR 683, cited Tailby v Official Receiver (1888) 13 App. Cas. 523, cited The Comptroller of Stamps (Victoria) v Howard-Smith (1936) 54 CLR 614, cited Trautwein v Federal Commissioner of Taxation (1936) 56 CLR 63, cited Date of hearing: 25 July, 18 October 2011 Place: Adelaide via video link with Brisbane Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 206 Counsel for the Applicant: Mr M Robertson Solicitor for the Applicant: Ernst & Young Law Counsel for the Respondent: Mr R Derrington SC with Mr Ballans Solicitor for the Respondent: Australian Government Solicitor IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY GENERAL DIVISION QUD 571 of 2010 BETWEEN: SEAN KELLY Applicant AND: COMMISSIONER OF TAXATION Respondent JUDGE: BESANKO J DATE OF ORDER: 27 APRIL 2012 WHERE MADE: ADELAIDE VIA VIDEO LINK WITH BRISBANE THE COURT ORDERS THAT: 1. The applicant file and serve within 14 days draft minutes of order reflecting the conclusions in these reasons and, if so advised, a short submission on the propriety of the superannuation deduction claimed by the Kelly Family Trust for the year of income ended 30 June 2009. 2. The respondent file and serve within 21 days draft minutes of order reflecting the conclusions in these reasons and, if so advised, a short responding submission to any submission filed and served by the applicant pursuant to order 1 above. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY GENERAL DIVISION QUD 571 of 2010 BETWEEN: SEAN KELLY Applicant AND: COMMISSIONER OF TAXATION Respondent JUDGE: BESANKO J DATE: 27 APRIL 2012 PLACE: ADELAIDE VIA VIDEO LINK WITH BRISBANE REASONS FOR JUDGMENT Introduction 1 This is an appeal by Mr Sean Kelly pursuant to s 14ZZ of the Taxation Administration Act 1953 (Cth) ("TAA Act") against a reviewable objection decision taken to have been made by the Commissioner of Taxation pursuant to the provisions of s 14ZYA of the TAA Act in relation to the year of income ended 30 June 2009. On 14 May 2010, the Commissioner issued a notice of assessment to Mr Kelly for the year of income ended 30 June 2009, in which he assessed Mr Kelly's income in the amount of $228,930. On 16 August 2010, Mr Kelly lodged a notice of objection against the assessment. On 19 October 2010, Mr Kelly gave a written notice to the Commissioner under s 14ZYA(2) of the TAA Act. The Commissioner did not make an objection decision within 60 days after being given the notice and, by reason of s 14ZYA(3) of the TAA Act, he was taken to have made a decision under s 14ZY(1) to disallow the objection. 2 In his notice of objection Mr Kelly claimed that income derived by the Boulton Cleary and Kern Partnership which had been properly allocated by it to the Boulton Cleary and Kern Partnership Trust and to the Sean Kelly BCK Holdings Trust, had been included in his assessable income as if he was liable to be assessed for one seventh of the income of the Boulton Cleary and Kern Partnership. He claimed that the Commissioner had made an incorrect assessment of his taxable income for the year of income ended 30 June 2009. 3 Mr Kelly was one of seven partners of the Boulton Cleary and Kern Partnership ("BCK Partnership") during the year of income ended 30 June 2009. The Commissioner assessed his income on that basis. His case was that the Commissioner erred in doing so because the Boulton Cleary and Kern Partnership Trust held a 20% interest in the BCK Partnership and the Sean Kelly BCK Holdings Trust held a 7.857% interest in the BCK Partnership. In ignoring those interests, the Commissioner's assessment resulted in the erroneous inclusion in Mr Kelly's assessable income of an amount of $37,951, in relation to the interest held by the Boulton Cleary and Kern Partnership Trust, and an amount of $114,328 in relation to the interest held by the Sean Kelly BCK Holdings Trust. In his notice of objection, Mr Kelly claimed that those interests arose by reason of a number of transactions, the first of which occurred in June 1999. In the proceeding before me, Mr Kelly put an alternative argument to the effect that the interests arose by reason of a result of two transactions in October 2008. That argument was not articulated in his notice of objection and yet in the proceeding before me it became Mr Kelly's primary argument. 4 The BCK Partnership is a partnership of solicitors which, at all material times, has been based in Townsville, Queensland. Prior to 30 June 1999, the partners of the BCK Partnership were Keith Kern, Peter Logan, Paul Sterling, Jeffrey Guy and Reginald McFazdean. Mr McFazdean retired from the partnership on 30 June 1999. Mr Kelly was a solicitor employed by the BCK Partnership between April 1999 and 30 June 2002. On 1 July 2002, he became a partner. At that point, there were five partners. 5 Mark Budd and Ian Conrad were admitted to the partnership on 15 July 2004. They bought into the partnership over a period of 2 years. Mr Kern retired from the partnership in June 2007 and he was replaced by Mr Paul Hick. Mr Sterling retired from the partnership on 15 October 2008, and, on that date, Ms Julia Bligh was admitted to the partnership. For the year of income ended 30 June 2009, there were seven partners being Messrs Logan, Sterling, Guy, Kelly, Budd, Conrad and Hick until 15 October 2008 and Messrs Logan, Guy, Kelly, Budd, Conrad, Hick and Ms Bligh thereafter. Where necessary, I will refer to the natural persons who were members of the BCK Partnership as "the partners". 6 On 30 June 1999, Messrs Kern, Logan, Sterling and Guy established the Boulton Cleary and Kern Partnership Trust. I will refer to the trust as the "BCK Partnership Trust". The trust is a discretionary trust. 7 On 6 June 2005, Mr Kelly established his own trust called the Sean Kelly BCK Holdings Trust. The trust is a discretionary trust. On the same date, the other six partners at that time (Messrs Kern, Logan, Sterling, Guy, Budd and Conrad) each established their own discretionary trusts. Each trust was called by the name of the partner followed by the words "BCK Holdings Trust". On 22 May 2007, Mr Hick established the Paul Hick BCK Holdings Trust and on 29 September 2008, Ms Bligh established the Julia Bligh BCK Holdings Trust. 8 In his notice of objection, Mr Kelly identified four major transactions as giving rise to the interests in the BCK Partnership held by the respective trusts. First, he alleged that on 30 June 1999 the then trustees of the BCK Partnership Trust (i.e., Messrs Kern, Logan, Sterling and Guy) purchased a 20% interest in the BCK Partnership from Mr McFazdean for valuable consideration in an arm's length transaction. Secondly, he alleged that on 25 June 2005 Messrs Kern, Logan, Sterling, Guy, Kelly, Budd and Conrad assigned to the then trustees of the BCK Partnership Trust a 30% interest in the BCK Partnership for a total consideration of $637,500. Thirdly, he alleged that on 29 June 2006 the then trustees of the BCK Partnership Trust for valuable consideration assigned to him to hold in his capacity as trustee of the Sean Kelly BCK Holdings Trust, a 4.737% interest in the BCK Partnership. On Mr Kelly's case, this particular transaction was part of a wider transaction whereby the BCK Partnership Trust transferred interests totalling a 30% interest in the BCK Partnership to the individual Holdings Trusts of the then partners. Fourthly, Mr Kelly alleged that on 29 June 2006 he declared himself trustee for the Sean Kelly BCK Holdings Trust of a 3.120% interest in the BCK Partnership, by means of an assignment of that interest to himself as trustee for valuable consideration. 9 Mr Kelly's alternative argument was that the interests in the respective trusts arose by reason of two deeds he executed in October 2008 when Mr Sterling retired from the partnership and Ms Bligh joined the partnership. Mr Kelly submitted that, if that argument is correct, then it does not matter whether the earlier transactions in June 1999, June 2005 and June 2006 were effective in law. I will need to consider if I should entertain this submission in light of s 14ZZO of the TAA Act. 10 With his notice of objection, Mr Kelly supplied affidavits sworn by himself and Messrs Kern, Logan, Guy, Budd, Conrad, Hick and Ms Bligh. Those affidavits were all sworn on various dates in August 2010. He also provided a schedule of evidence. Most of the documentary evidence was produced by Mr Kern who had been a partner of BCK Partnership since July 1976. Onus of proof 11 Mr Kelly bears the burden of proving that the assessment is excessive: s 14ZZO of the TAA Act. In Federal Commissioner of Taxation v Dalco (1990) 168 CLR 614, Brennan J (as his Honour then was) (with whom Mason CJ, Gaudron and McHugh JJ agreed) made the point (at 621) that the taxpayer must show that the assessment is excessive and he or she does not necessarily do that by showing that the Commissioner erred in some way. In the ordinary case, to prove an assessment is excessive means the taxpayer must prove what the correct assessment should be. Unless the parties have agreed to confine the issues to a particular point of fact or law, the Commissioner is entitled to put the taxpayer to proof and to rely on any deficiency in proof in the taxpayer's case (see Brennan J at 624). In considering whether a taxpayer has discharged the burden of proving that the assessment is excessive, it is relevant to note that often (as in the present case) the facts are peculiarly within the knowledge of one party (i.e. the taxpayer) and to note that a taxpayer cannot take advantage of the inadequacies of his or her own record keeping: Trautwein v Federal Commissioner of Taxation (1936) 56 CLR 63 at 87 per Latham CJ. In this case, the Commissioner has put Mr Kelly on notice that he is put to proof on all issues and all facts except where facts are expressly agreed or admitted in writing. 12 Mr Kelly submits, correctly in my opinion, that even though the present dispute is between him and the Commissioner of Taxation, the dispute is to be resolved by applying the same rules that would be applied in determining the existence or non-existence of a trust or valid equitable assignment by a Court exercising equitable jurisdiction: Stewart Dawson and Co (Vic) Pty Ltd v Federal Commissioner of Taxation (1933) 48 CLR 683 at 691 per Dixon J (as his Honour then was); Executor Trustee and Agency Co of South Australia Ltd v Deputy Federal Commissioner of Taxes (SA) (1939) 62 CLR 545 at 570 per Dixon J; Danmark Pty Ltd and Forestwood Pty Ltd v Federal Commissioner of Taxation (1944) 2 AITR 517 at 564 and 567 per Williams J. Witnesses 13 Mr Kelly gave evidence at the trial and he called as witnesses, Messrs, Guy, Kern, Conrad, Ms Bligh and Messrs Logan, Hick and Budd. He also tendered a number of documents. The Commissioner did not call any witnesses, but he did tender a number of documents. 14 The Commissioner did not allege that any of the relevant transactions were a sham in the sense of purporting to be one type of transaction but in reality being another type of transaction. In Bolton v Federal Commissioner of Taxation (1964) 9 AITR 385 (at 386), Windeyer J described a sham in the following terms: A transaction having apparent legal consequences, but not intended by the parties to operate according to its tenor – something set up merely to dissemble. 15 The Commissioner's submission was that the documents did not have the effect in law which Mr Kelly's claims or are so inconsistent with each other that no firm findings can be made. He contends that insofar as Mr Kelly relies on his oral and written evidence and the oral and written evidence of his witnesses, that evidence should be rejected. It is important to remember that on the evidence in this case there are two issues being what happened and when on the one hand, and what were the intentions of the parties at relevant times on the other. In relation to the second issue, there is a legal issue as to the relevance as a matter of law of whatever findings I make. I will address that issue later in these reasons. 16 The Commissioner's attack on the credibility and reliability of Mr Kelly and his witnesses was based on three broad grounds. First, he submitted that the evidence could not be relied on because of the interest that Mr Kelly and the witnesses have in the outcome of this proceeding and the way in which each witness prepared to give evidence in the proceeding. 17 The Commissioner commenced an audit of the taxation affairs of the BCK Partnership on 10 December 2008. As a result of that audit, the Commissioner issued an amended assessment to Mr Kelly dated 26 November 2010 for the income years ended 30 June 2005 to 30 June 2008 inclusive. Mr Kelly has lodged objections in respect of the amended assessment issued by the Commissioner for those income years, but the Commissioner had not yet determined those objections. Other partners who gave evidence as part of Mr Kelly's case also have objections for assessments issued in respect of two or more of those years. 18 Mr Kelly admitted under cross-examination that because of the audit undertaken by the Commissioner, the proceeding was of "great importance" to the BCK Partnership. There had been many discussions about the issues in the proceeding. Mr Kelly agreed that he had discussed the factual issues arising out of his submissions in the proceeding with other witnesses because the BCK Partnership had been "under audit" for three years. Messrs Guy, Kern, Logan and Budd acknowledged that the proceeding was important to them, or that they had an interest in the outcome of the proceeding. I have taken into account in assessing the witnesses the substantial financial interest a number of them have in the outcome of this proceeding. Findings about the efficacy of the transactions referred to in Mr Kelly's notice of objection are likely to be relevant to existing disputes with the Commissioner. 19 In terms of the way in which the witnesses prepared to give evidence, the Commissioner pointed to two matters. First, he said that a number of the witnesses had read either Mr Kelly's submissions or the Commissioner's submissions or both before giving evidence. Therefore, they had a detailed understanding of the issues of fact and what the Commissioner contended were deficiencies in Mr Kelly's case. Messrs Guy, Kern and Logan read the submissions of both parties before giving evidence. The Commissioner referred to the perils of, and the safeguards against, witness coaching: Queensland Law Society Legal Profession (Solicitor) Rules 2007, Rule 17.2, 17.3 and 17.4; Day v Perisher Blue Pty Ltd (2005) 62 NSWLR 731 at [30] per Sheller JA (with whom McColl JA and Windeyer AJ agreed). Secondly, the Commissioner said that there were witnesses who did not prepare their own affidavit or had no, or little, or only some input, into the preparation of their affidavits. The evidence is not entirely clear but it seems that Messrs Guy, Logan, Hick and Budd fall into that category, whereas it seems that Messrs Kelly, Kern and Conrad took the lead in case preparation. 20 I do not accept the Commissioner's submission that the fact that Mr Kelly and a number of his witnesses were aware of the factual findings sought by Mr Kelly of itself makes their evidence unreliable. It seems to me that it must depend on all the circumstances. 21 Mr Kelly and the witnesses he called gave their evidence-in-chief by affidavit. So far as I can see, the affidavits tendered as the evidence-in-chief of the various witnesses were very similar in content to the affidavits sworn by each of them in early August 2010 and supplied to the Commissioner by Mr Kelly with his notice of objection. It is clear that Mr Kelly and his witnesses were alive to most of the key issues before August 2010 and well before they swore their affidavits in this proceeding. Put another way, Mr Kelly and his witnesses were alive to what the Commissioner asserted were deficiencies in Mr Kelly's case and in their evidence. I have taken into account the matters identified by the Commissioner and the matters identified in this paragraph. I have also taken into account the fact that a number of statements in the affidavits were of a formulary nature. 22 The second major ground upon which the Commissioner attacked the credibility and reliability of Mr Kelly and a number of his witnesses was what he called the "trust/partner farce" and the evidence with respect to s 11 of the Trusts Act 1973 (Qld) ("Trusts Act"). I will deal with these issues in the course of setting out the facts in chronological order, but it is convenient to describe the submissions at this point. 23 Among other rights, a partner has a chose in action which entitles him or her to a share of the partnership income and a share of the net assets of the partnership on a dissolution and winding up. The authorities establish that the interest is capable of being the subject of a declaration of trust or an equitable assignment. However, in the case of a partnership interest, the assignor remains a trustee of the chose in action and the assignee does not become a partner. The interest of the assignee is the chose in action and he has no rights to participate in the management of the partnership or the other rights vested in a partner. The Commissioner submits that at the time of the relevant transactions and for a considerable period thereafter, the partners intended and believed that the various transactions resulted in the trusts (i.e., the BCK Partnership Trust and the various Holdings Trusts) becoming partners. It is no part of Mr Kelly's case that, as a result of the transactions, the respective trusts became partners, because he says that would be a legal impossibility, a trust being a legal relationship and not a legal entity. The Commissioner accepts, correctly in my opinion, that the fact that the partners considered the trusts to be partners (if that be the correct finding) does not of itself mean that the transaction could not be effective to the extent of the transfer or assignment of an equitable chose in action. However, he does submit that, taken with other errors and misunderstandings, it does mean that the transactions do not have that effect in this case. Further, or in the alternative, he submits that a finding that the partners intended to constitute the trusts as partners reflects adversely on their credit because they have denied that that was their intention. A good deal of the cross-examination of the witnesses by the Commissioner was directed to this issue. 24 Section 11 of the Trusts Act provides that there is to be no more than four trustees of a trust and if there are more than four, the first four alone shall be trustees. The Commissioner contends that after July 2002, the BCK Partnership Trust purported to operate with more than four trustees. He did not contend that that fact affected the legality of the decisions made by the trustees insofar as they are found to have made decisions. The evidence was that the decisions of the trustees were unanimous. Nevertheless, his submission was that this was another example of a fundamental misunderstanding by the partners of what they were doing. Alternatively, they knew or ought to have known of the limitation, and in either case, their conduct reflects adversely on their credit. 25 The third major ground upon which the Commissioner attacked the credibility and reliability of Mr Kelly and a number of his witnesses was that their evidence was inconsistent with contemporaneous documentary evidence. Again, it is convenient deal with this issue in the course of setting out the facts in chronological order. It may be said at this point, however, that on any view there were significant deficiencies in the records. 26 In terms of the credibility and reliability of Mr Kelly and the witnesses he called, demeanour has not played a substantial part in my conclusions. I did note at the time that Mr Kelly seemed to be direct and straightforward in giving his answers and he admitted that there were a number of errors and inconsistencies in the documents. Ms Bligh was barely challenged in her cross-examination and Mr Budd was frank in giving his answers. As far as the other witnesses were concerned, nothing was to be gleaned from demeanour, other than that I did not think there was an obvious attempt by any of them to mislead me with respect to any particular item of evidence. 27 I have considered all of the evidence carefully, including the evidence set out in my statement of facts. Plainly, there are a number of errors and inconsistencies in the documents. Nevertheless, I accept Mr Kelly's evidence because I think it was supported by important contemporaneous evidence and by other evidence in the case which I had no difficulty in accepting, for example, the evidence of Mr Budd. I also accept the substance of the evidence of Messrs Guy, Kern, Conrad, Logan and Hick although, for reasons I will give, I do not think that Mr Kelly has established that the BCK Partnership Trust paid for the interest it was said to have acquired from Mr McFazdean. the facts 28 It is convenient to set out the facts in chronological order and I will do so by reference to financial years. Where there is a slight overlap I will deal with the whole transaction or event at that point. In the following section I will address what happened and when. Later, I will address the various arguments addressed to the efficacy of the transactions. Year ended 30 June 1999 29 As I have said, before 30 June 1999, the partners of the BCK Partnership were Messrs Kern, Logan, Sterling, Guy and McFazdean. There was no written partnership agreement at that time. The partners had discussed a draft partnership agreement at a meeting held on 10 June 1999. Mr McFazdean had an equal interest in the partnership, namely a 20% interest. 30 The BCK Partnership Trust was established by a deed of settlement dated 30 June 1999 and the payment of $10 to the trustees. The trustees were Messrs Kern, Logan, Sterling and Guy. Clause 7.9 of the deed provided that if a trustee (or beneficiary or appointor) ceased to be an equity partner of the partnership then he or she, without further action or documentation, automatically ceased to be a trustee (or beneficiary or appointor). If a person was admitted to the partnership as an equity partner, then that person shall at the same time be deemed to become a trustee (and beneficiary and appointor). Clause 7.4 provided that where a trustee was appointed the trust fund at the time vested in the person, or jointly in the persons, "who thereupon becomes the trustee without the necessity for any vesting, declaration, transfer, conveyance or other assurance". 31 The principal beneficiaries and appointors of the BCK Partnership Trust were described in the deed of settlement as follows: Such persons who are from time to time equity partners of Boulton Cleary and Kern. 32 The deed of settlement did not name any further beneficiaries. The trustees were given the power to appoint additional beneficiaries. 33 On 30 June 1999, the following parties entered into a deed of agreement. The parties were described in the following way (omitting irrelevant details): PARTIES DESCRIPTION Kern, Logan, Sterling and Guy as trustees for "Purchasers" the "Boulton Cleary and Kern Partnership Trust" Kern, Logan, Sterling and Guy "Remaining Partners" McFazdean "Vendor" Murrumba Developments Pty Ltd "Company" 34 Murrumba Developments Pty Ltd ("Murrumba") was a company associated with Mr McFazdean. 35 Each of Messrs Kern, Logan, Sterling and Guy executed the deed in their personal capacity and in their capacity as trustee of the BCK Partnership Trust. I will refer to the deed as the "McFazdean Retirement Deed". 36 Clause 1 of the McFazdean Retirement Deed provided that Mr McFazdean and Murrumba sold, transferred and assigned their respective interests in the BCK Partnership effective 30 June 1999. Clause 2 provided that the amount payable to them was $140,000 to be paid on 30 June 1999. There was no express statement in clauses 1 or 2 or elsewhere in the McFazdean Retirement Deed of the precise extent of Mr McFazdean's interest, or identifying the transferee of the interest, or the entity which was to pay the purchase price. Clause 10 provided for mutual releases by the Purchasers and the Remaining Partners on the one hand, and Mr McFazdean and Murrumba on the other. A further release was given by Mr McFazdean and Murrumba by Clause 17.4. 37 Clause 7 gave the Purchasers a very wide power to get in assets. It is in the following terms: The purchasers shall have full right and liberty, at their own cost, to collect all the assets of the partnership and ask, demand, sue for, recover and receive and assign and give full and effectual receipts and discharges for all and singular the debts, estate and effects of or due or owing or in any way belonging to the said partnership and to settle all accounts, reckonings, matters and things whatsoever relative to the said business with all and every or any person or persons whomsoever and to compound for or release all or any of the debts or claims belonging thereto and to institute any actions or other proceedings for compelling payment or delivery thereof and for the purpose aforesaid or any of them to use the name of the vendor. 38 Mr Kelly's case is that Mr McFazdean sold his 20% interest in the BCK Partnership to the BCK Partnership Trust. In addition to the above documents, Mr Kern produced documents which were also said to support that contention. 39 In 1999 there were a number of entities and trusts associated with the BCK Partnership. They, together with the BCK Partnership, were part of what I will call the BCK Partnership group. One trust in the group was the BCK Secretarial Unit Trust. The documents produced by Mr Kern establish that Mr McFazdean was paid an amount of $206,000 by two National Bank Australia Ltd ("National Bank") cheques dated 30 June 1999 for amounts of $36,000 and $170,000 respectively. The evidence does not explain in a clear way the difference between that amount and the consideration referred to in the McFazdean Retirement Deed. The funds were obtained by the BCK Partnership group as part of a loan from the National Australia Bank Limited ("National Bank") of $1.1 million. The BCK Partnership wrote to the National Bank on two occasions in June 1999 as part of their negotiations to obtain the loan. In a letter dated 21 June 1999, the partnership advised the bank of a proposal whereby a discretionary trust would acquire Mr McFazdean's interests and, over time, the interests of retiring partners so that eventually, "the partnership would cease to exist and the trading entity from that time forward would be the discretionary trust". The same procedure would be adopted in relation to Mr McFazdean's interest in the BCK Secretarial Unit Trust. In relation to what were said in the letter to be future finance arrangements, the partnership advised the bank that the proposal was that there would be a restructure whereby the borrowing entity would be the BCK Secretarial Unit Trust rather than the BCK Partnership. By letter dated 22 June 1999, the BCK Partnership made its finance application to the bank. 40 Mr Kern produced only one internal financial record of the BCK Partnership group. It is a general ledger card of the BCK Secretarial Unit Trust showing the sum of $1.1 million passing through its account, and two payments to Mr McFazdean of $170,000 and $36,000 respectively. 41 In a memorandum dated 13 May 2009, and prepared after the audit had commenced, Mr Kern advised Messrs Kelly and Conrad that the borrowings were procured by the BCK Secretarial Unit Trust. He advised that although not stated on the ledger card, the funds were provided "at the request and directions of BCK Partnership Trust i.e., account BCK Partnership". 42 On 31 July 1999, Mr Kern signed an affidavit and statement pursuant to s 54A(2) of the Stamp Act 1894 (Qld) ("Stamp Act"), relating to the acquisition of an interest in a business. Of present significance is a reference to an acquisition on 1 July 1999 of a 20% interest in a legal practice from Mr McFazdean, by Messrs Kern, Logan, Sterling and Guy as trustees of the BCK Partnership Trust. 43 In cross-examination, Mr Kern was asked a number of questions about the transaction which was the subject of the McFazdean Retirement Deed. It was pointed out to him that in his evidence-in-chief he had said that the transaction occurred on 30 June 1999, whereas in his affidavit of 31 July 1999, he said that it occurred on 1 July 1999. He said he believed it probably occurred on 30 June 1999. I think this difference resulted from a lack of attention to detail rather than an attempt to avoid the payment of penalty with respect to stamp duty. He could not explain why the ledger card of the BCK Secretarial Unit Trust referred to a contribution by unitholders of $1.1 million. It seemed strange to him. He said that the money paid to Mr McFazdean by the BCK Secretarial Unit Trust was paid at the direction of the BCK Partnership Trust. He agreed that he did not have any document saying that that was the basis upon which the money was paid. He agreed that there was an error in the BCK Partnership's letter to the National Bank dated 21 June 1999. In the course of being questioned on this topic Mr Kern said that a number of files had been destroyed. 44 In cross-examination, Mr Guy was asked about the transaction involving Mr McFazdean, but he did not have any knowledge of the details and said that he was not in charge of such things. 45 It is clear from the documents that Mr McFazdean retired from the BCK Partnership on or about 30 June 1999, and at about that time, he was paid the sum of $206,000 for his interest in the partnership. He was paid by an entity or trust associated with the BCK Partnership. 46 There was no distribution of income by the BCK Partnership to the BCK Partnership Trust in the year of income ended 30 June 1999. Year ended 30 June 2000 47 The BCK Partnership taxation return for the year of income ended 30 June 2000 showed distributions to Messrs Kern, Logan, Sterling and Guy but it does not show any distributions to the BCK Partnership Trust. Mr Kern said that was not how the partnership distributed its income and that the document was wrong. That was the extent of the evidence on the point. Year ended 30 June 2001 48 The BCK Partnership taxation return for the year of income ended 30 June 2001, or at least that part of it which was put in evidence, does not show distributions for that year. The BCK Partnership taxation return for the year of income ended 30 June 2002 shows distributions for the previous year. Income was distributed equally to Messrs Kern, Logan, Sterling, Guy and the BCK Partnership Trust. Year ended 30 June 2002 49 The BCK Partnership taxation return for the year of income ended 30 June 2002 shows equal distributions of income to each of Messrs Kern, Logan, Sterling, Guy and the BCK Partnership Trust. The distribution by the BCK Partnership to the BCK Partnership Trust is shown in the trust's taxation return. 50 On 28 February 2002, a partnership deed was signed by Messrs Kern, Logan, Sterling and Guy in their personal capacities and, separately, as trustees of the BCK Partnership Trust. The parties to the deed were Messrs Kern, Logan, Sterling and Guy ("Partners"), those persons described as trustees of the BCK Partnership Trust ("Partnership Trust") and associated companies. The recitals in the deed stated that the Partners were equal partners in the partnership and that the Partnership Trust "also holds an interest in the partnership". Mr Kern gave evidence of the reasons the partners wished to have a partnership agreement and the matters dealt with in the agreement which was eventually signed. It is not necessary for me to set out the details. 51 Sometime in the first half of 2002, Messrs Kern, Logan, Sterling and Guy decided that they wished to distribute those profits earned by the BCK Partnership and distributed to the BCK Partnership Trust to entities associated with themselves through interposed trusts. They considered that they needed the approval of the Queensland Law Society to do that. They made applications under rule 78(1)(d) of the Queensland Law Society Rules 1987 to share receipts with unqualified persons. In the case of each partner, those applications consisted of a signed application form and a signed undertaking. In those documents a statement appears to the effect that the BCK Partnership Trust was an equity partner of the BCK Partnership. The Commissioner put these and various other documents to a number of partners and suggested that this was the belief of the partners until recent times, and that statements by them that they did not believe that the BCK Partnership Trust (and later their various Holding Trusts when they had acquired interests in the BCK Partnership) was an equity partner were recent reconstructions which should not be accepted. 52 Another example is a more recent document written in the course of the audit by Ernst and Young who were acting for the BCK Partnership. It is a letter to the Australian Taxation Office dated 25 May 2009 and it became exhibit R1. The letter contained a number of annexures. In annexure 1, it is said that the BCK Partnership Trust has, since 30 June 1999, been a partner of the BCK Partnership and entitled to take part in the management of the partnership (paragraph 21). A little later it is said that all the trusts, including the various Holdings Trusts, are partners and have been held out to be partners (paragraph 25). In annexure 2, similar statements are made: in the case of the statement in paragraph 21 in annexure 1, at paragraph 2, and, in the case of the statement in paragraph 25 in annexure 1, at paragraph 10. Furthermore, in annexure 2, paragraph 7(c) states that step three in the transaction which occurred in late June 2005 involved gifts by the partners to themselves in their capacities as trustees of the seven Holdings Trusts. The significance of this is addressed below. Ernst and Young, on behalf of the BCK Partnership, wrote to the Australian Taxation Office by letter dated 24 June 2009 (exhibit A9). The letter corrects, but only corrects, the misstatement concerning step 3 by stating that the monies were lent to the partners' family trusts. Ernst and Young, on behalf of the BCK Partnership, made a further submission to the Australian Taxation Office, dated 9 October 2009 (exhibit A10). There is a statement in that submission that the trusts were not partners. 53 It is convenient to deal with this topic in its entirety at this point. The distinction being drawn is between what is often referred to as an equity or full partner who has an interest in the partnership and rights to participate in its management on the one hand, and the limited rights of the holder of an interest in a partnership under a trust or by reason of an assignment on the other. The distinction is somewhat blurred in a case such as the present where the trustees of the various trusts were also the equity partners of the partnership. 54 The following schedule sets out the relevant documents and the statements contained within them. The Commissioner cross-examined the witnesses on the statements in the documents. Document Statement 1. Schedule to application to Law BCK Partnership Trust in its capacity as Society dated 23 May 2002. partner of the BCK Partnership. 2. Undertaking dated 23 May 2002. BCK Partnership Trust is an equity partner of the BCK Partnership. 3. BCK Partnership taxation return for BCK Partnership Trust appears in the year of income ended 30 June 2002. names of partners in the distribution schedule and as having funds distributed to it as a partner. BCK Partnership balance sheet shows the BCK Partnership Trust as having an interest in the partnership funds and as having made capital contributions. 4. BCK Partnership taxation return for Name of partnership includes BCK year of income ended 30 June 2003. Partnership Trust and the matters referred to in the previous entry. 5. BCK Partnership taxation return for Name of partnership and distribution year of income ended 30 June 2004. schedule. 6. Letter from BCK Partnership to the BCK Partnership comprised of, among Law Society dated 10 June 2005. others, BCK Partnership Trust. 7. Certificate of the registration of a Each partner in his own capacity and in business name dated 25 July 2006. his capacity as trustee of the BCK Partnership Trust and in his capacity as trustee of his Holdings Trust shown as a proprietor of Boulton Cleary and Kern. 8. Sterling Retirement Deed dated Partners as trustee of their respective 15 October 2008. Holdings Trusts and the BCK Partnership Trust among others referred to as continuing partners and equity partners. 9. Letter from Ernst and Young to the BCK Partnership Trust as a partner Australian Taxation Office dated entitled to take part in the management 25 May 2009 (exhibit R1). of the partnership and its assets. 55 For reasons I will give, I do not think that the legal efficacy of the transactions is affected even if the correct finding is that the partners from time to time intended to constitute the various trusts as partners. However, a number of them contended that they never considered the trusts to be partners, and, having regard to the above documents, this issue is relevant to credit. 56 Mr Kelly said that he did not believe that the BCK Partnership Trust was a partner and that when he was admitted to the partnership on 1 July 2002, he believed that the persons he was going into partnership with were Messrs Kern, Logan, Sterling and Guy. He said he held a similar view in relation to the Sean Kelly BCK Holdings Trust. He maintained this view in cross-examination and he said that he had always believed a trust could not be a partner because it was not a legal entity and it did not hold a practising certificate. However, he said that the practice of the partners was to refer to the trust as a partner. He said that he used the term "partner" as meaning an owner or part-owner of a partnership. I think Mr Kelly probably did not see a need to draw the clear distinction now put to him. I accept his evidence on this topic. 57 Mr Kern's evidence was broadly similar to that of Mr Kelly. He said that he had a practice of referring to the interest he held on trust as trustee of the BCK Partnership Trust as "a partner" in a generic sense. He gave his reasons for doing that. In cross-examination Mr Kern drew a distinction between a partner as defined in the Partnership Act 1891 (Qld) ("Partnership Act"), and a partner as known commercially: We were describing ownership rather than the niceties of the Partnership Act. 58 Mr Kern did say that trustees of a trust would have a right to play a part in the management in their capacity as trustees. He said that he agreed that the partners had referred to the trusts in correspondence as partners and he stated that, in a "colloquial sense", they were treated as partners. 59 Mr Kern said that a person who owned an interest in a partnership, not just a partner, could contribute capital to the operation of a partnership. He said that he did not recall the BCK Partnership Trust ever introducing capital into the partnership and the reference to it doing so in the BCK Partnership taxation return for the year of income ended 30 June 2002 was "some sort of accounting issue". Mr Kern said that he personally did not contribute capital of over $350,000 as shown in the BCK Partnership balance sheet for the year ended 30 June 2002. Mr Kern agreed that there were a number of documents which referred to the trusts and he said that, "commercially", he always referred to them as partners. 60 I do not think Mr Kern was concerned to draw a distinction between partners and co-owning trusts where the trustees were also equity partners. I do not think that he was trying to mislead me with respect to this topic. 61 Mr Guy drew a distinction between a partner in a commercial sense, but not a "full partner in a legal sense". When he was taken to the second document referred to in the above schedule he said: Well, yes, in a sense, but in a sense that the trustees were already partners of the trust. It might be a bit woolly. 62 When taken to other documents where it was stated that the BCK Partnership Trust was a partner of the BCK Partnership, the following exchange occurred: So am I right in understanding your answer is that you say you did not intend to allow trustees of the various trusts to exercise partnership powers in their capacity as trustees? - - I find your question, the way you put it, to be difficult. I will try to give you as clear an answer as I can. I'm saying that when I'm exercising my rights as a partner, I do so on my own - I'm not sure what point you were just talking about, but let's say in 2002 or 2005, I'm doing so on my own behalf, and on behalf - as a trustee of the BCK Partnership Trust. A little later the following was said: All right. But you may be a trustee of various trusts, but the question is in your capacity as a trustee do you carry on a business of the partnership? - - Yes. As well as in my own right as a partners. 63 I think Mr Guy's answers were truthful. I do not think he drew a clear distinction between a full partner and co-owners, particularly where the trustees of the co-owners were equity partners, in the sense now being considered. I do not think he had any real knowledge of the relevant principles of partnership law. 64 I make the same observations about Mr Conrad's evidence. In response to a suggestion that he regarded the trusts as partners he said: Well, use that as a short term of phrase. They're not actually entities. They're not legal entities. They're not partners as such, but we have certainly referred to trusts as being partners as a legal shorthand. 65 Mr Conrad said that he did not think a partner's management rights in the partnership as partner and as a trustee were divisible. He said that he did not believe that trustees of various trusts in their capacity as such had a proprietary right in the assets of the partnership. I think Mr Conrad's evidence was truthful. 66 Mr Logan said that the "equity" partners in the BCK Partnership were the natural persons and did not include the BCK Partnership Trust. When taken to the second document in the above schedule, he referred to the statement as a misdescription: I may have taken less care than was necessary to read the document before I signed it. 67 Mr Logan said that equity partners participate in the management of the partnership. He seemed to draw a distinction between an equity partner on the one hand, and an entity which was part of the partnership on the other. He knew nothing of the suggestion that the BCK Partnership Trust made capital contributions to the BCK Partnership in the year of income ended 30 June 2002. He left the preparation of the accounts to the experts who acted on behalf of the partnership. Mr Logan's view seems to have been broadly similar to that of Messrs Guy and Conrad. While Mr Logan may have been careless, as he himself admitted, I do not think he was being dishonest on this topic. 68 Mr Budd said that he did not provide any instruction to Ernst and Young as that was left to Messrs Kelly, Kern and Conrad. He said that he treated the BCK Partnership Trust and various Holdings Trusts as partners of the BCK Partnership. 69 Mr Kelly's evidence on this topic was straightforward and I accept it. I also accept the evidence of the other witnesses on this topic. I did not think any of them were expressing views which were not honestly held. They might have been mistaken in their views as to the rights of a partner as distinct from an equitable assignee, but I do not find that a reason to reject their evidence. Nor do I find their differing views a reason to hold the transactions in June 1999, June 2005 and June and July 2006 ineffective in law. I find the transaction in June 1999 ineffective for other reasons which are set out below. As to the transactions in June 2005 and June and July 2006, the partners as partners and trustees plainly intended to transfer interests in the partnership and if the requirements for valid equitable assignments are met then those transactions should be given effect according to their terms (see Collins and Fraser v Collins [1911] QWN 53). 70 An amended partnership deed was signed on 28 June 2002. The major difference between this deed and the deed signed on 28 February 2002 was that in anticipation of Mr Kelly's admission as a partner, effective 1 July 2002, Mr Kelly and the trustee of his family trust were added as parties to the deed. Year ended 30 June 2003 71 Mr Kelly was admitted as an equity partner of the BCK Partnership on 1 July 2002. The deed of settlement for the BCK Partnership Trust provided that on becoming an equity partner he became a trustee of the trust. However, s 11 of the Trusts Act prevented him from becoming a trustee because there were already four trustees. He may have become a trustee when he became the fourth most senior partner on the retirement of Mr Kern from the partnership in June 2007. 72 It was submitted by the Commissioner that it reflected poorly on the credit of the partners that they were prepared to hold out Mr Kelly and subsequent equity partners as trustees of the BCK Partnership Trust when they were not. It is convenient to deal with this topic in its entirety at this point. 73 It seems that at all relevant times neither Mr Kelly nor Mr Guy were aware of any limitation on the number of trustees of a trust. 74 Mr Kern said that in 2002 he was aware of the limitation of four trustees. He said, however, that it was not a problem, because "Between us, we regarded him as one". 75 It was put to Mr Kern that he did not know of the limitation, and this circumstance explained the fact that in the BCK Partnership's letter to the Law Society dated 16 June 2005, the partnership stated that it was intending to appoint Messrs Kelly, Budd and Conrad as trustees. Mr Kern denied this suggestion and said that he did not write the letter. 76 Mr Conrad's evidence was quite vague on this point. He said that at a point in time the partners became aware of the limitation and simply took the view that, between them, they were all trustees. When asked when the partners became aware of the limitation he said: Again, I don't recall the specific year but it was around – it would have been '07 '08 – somewhere around there. Wait a sec. Sorry. No. Probably earlier than that. 77 When asked why he would hold himself out as a trustee of the BCK Partnership Trust when he knew he was not a trustee, he said: I saw no – no negative. We were – we were not trying to gain any advantage by doing so. It never occurred to me that I should not do so. 78 A little later he said: Well, I consider that as between my partners, we treat ourselves as co-trustees … 79 Mr Logan said he was not aware that in Queensland a trust could have no more than four trustees. He said that he would be concerned about the proprietary of the partnership holding out persons as trustees when they knew they were not trustees. 80 Mr Budd was asked about the transactions in June and July 2006, and in the course of that line of questioning, he said he was not aware at that time that there was a limit on the number of trustees of a trust in Queensland. 81 I find that in 2002 Mr Kern knew that there was a limitation on the number of trustees of a trust. He said that although he did not deal with trusts regularly, he did deal with them in the course of his business. Mr Conrad may have been the next to know. Other partners either were told and put it out of their minds, or were not advised and did not inquire because they left such matters to other partners and the staff of the partnership. At some point, a number of the partners did know but did not consider the matter of any significance, perhaps because the BCK Partnership Trust was a private trust involving only the partners, their families and associated entities. Although this conduct seems casual in terms of the legal requirements of a trust, I accept that the partners were not trying to gain an advantage and that they genuinely proceeded in the way in which they did for the reasons they gave. 82 Mr Kelly said that in the first half of 2002, and before he joined the partnership, he had discussions with Mr Logan. Mr Logan told him he could join the partnership for consideration of $200,000 and in return he would be a one-fifth equal partner. Certain provisions of the Partnership Deed were explained to him as well as the background to those provisions. He was told about BCK Partnership Trust's purchase of Mr McFazdean's interest and that all the current partners were trustees of the Trust. He was told that the BCK Partnership Trust would continue to purchase the interests of retiring partners. In the course of the discussions, he was told that the BCK Partnership Trust owned a 20% interest in the BCK Partnership. He signed the partnership deed on or about 28 June 2002, and that document refers to the BCK Partnership Trust holding an interest in the BCK Partnership. I accept Mr Kelly's evidence on these matters. 83 The Commissioner pointed to a document completed by Mr Kelly on his admission to the partnership. It is a Form 2.2 completed under the Duties Act 2001 (Qld) ("Duties Act"). The Form 2.2 refers to the type of dutiable transaction as "partnership acquisition" and the description of the property is as follows: One sixth interest in the partnership trading as "Boulton Cleary and Kern". 84 The interest acquired is said to be "16.6%" and the date of the transaction is said to be 1 July 2002. The parties are Messrs Kern, Logan, Sterling and Guy on the one hand, and Mr Kelly on the other. The consideration is said to be $200,000 and the transaction is not said to be part of an arrangement which included other dutiable transactions. The Form 2.2 was signed by Mr Kelly on 5 September 2002. 85 Mr Kelly and a number of the other witnesses were cross-examined about the Form 2.2. On his case, he became the fifth partner and the sixth co-owner in the BCK Partnership. On his case, the BCK Partnership Trust was to continue to hold a 20% interest in the partnership. No submissions were made by the parties about the operation of the Duties Act. Either way, the Form 2.2 appears to be inaccurate. Mr Kelly was either required to pay duty on his trust and beneficial interest totalling 20% or only on his beneficial interest of 16%. 86 Mr Kelly said that he thought what he had done on his admission to the partnership was to assign one fifth of his one fifth interest in the BCK Partnership to the BCK Partnership Trust. There is no written document recording the assignment and he had no recollection of paying duty on an assignment to a trust. He agreed that he had not referred to the assignment in his notice of objection dated 16 August 2010. He explained what he meant by assignment in the following exchange in cross-examination: And then you assigned 4% to the trust? - - When I say assignment, that's how I bought it, some in my own name, some as the trustee of the trust. That's how it was going to be held. Ok. Who did you buy the interest from? - - The partners at the time and I imagine the partnership trust. Ok? - - All mixed in to give me my 20% which was the same way the other partners held - we all hold in an identical way. 87 Later, the following exchange occurred: Well, you say there was some other transaction that you entered into? - - No, I just bought in as a one fifth partner and I held some interest on trust and the rest I held personally. No document showing that you declared a trust of your interest at that date, Mr Kelly? - - Unless the partnership deed I signed shows that the partnership trust had an interest in the firm, it doesn't refer to specific amounts. 88 Mr Kelly agreed that he had completed the Form 2.2 in such a way as to indicate that there were no related dutiable transactions and he agreed that this was an "imprecision" or an "oversight". He said that he thought at the time that he would be a "one fifth equal partner with part of my interest held on trust". 89 Mr Guy's understanding of the circumstances surrounding Mr Kelly's admission to the BCK Partnership was that he became a trustee of the BCK Partnership Trust and acquired a one fifth interest in the balance, that is to say, the 80% interest held by Messrs Kern, Logan, Sterling and himself. 90 Mr Kern said the Form 2.2 was inaccurate because it referred to Mr Kelly acquiring a one sixth interest, whereas he acquired an interest in his own right and he also became a beneficiary under the BCK Partnership Trust. 91 The only evidence Mr Logan gave about this topic was that he thought the one sixth interest was worked out on the basis that he was the sixth person to obtain an interest in the BCK Partnership. 92 While I accept Mr Kelly's evidence on this topic, I also accept the evidence of the other partners and it is to be noted they all put in a slightly different way how Mr Kelly obtained his interest in the BCK Partnership. 93 The BCK Partnership taxation return for the year of income ended 30 June 2003 shows an equal distribution of partnership income to Messrs Logan, Sterling, Guy, Kelly and the BCK Partnership Trust. Mr Kern received a lesser amount apparently for reasons connected with his superannuation. The distribution to the BCK Partnership Trust by the BCK Partnership is confirmed in the former's taxation return. Year ended 30 June 2004 94 The BCK Partnership taxation return for the year of income ended 30 June 2004 shows unequal distributions to Messrs Kern, Logan, Sterling, Guy, Kelly and the BCK Partnership. Two of the partners were allocated what appear to be losses (Messrs Kern and Guy). The allocation to the BCK Partnership Trust appears to be about 51% of the income of the BCK Partnership. Year ended 30 June 2005 95 Messrs Budd and Conrad were admitted to the partnership on 15 July 2004. The agreement of the partners to their admission to the partnership was reached on 24 May 2004. The consideration each of them agreed to pay was $300,000, which was to be paid in three instalments of $100,000 each on 1 July 2004, 1 July 2005 and 1 July 2006. 96 A statement of dutiable transaction under the Duties Act was completed by Mr Budd on 3 August 2004. The date of the transaction was given as 1 July 2004. It described the details of the transaction as a partnership acquisition. The property was described as follows: A 1/21st share of the business known as 'Boulton Cleary and Kern'. 97 The parties to the transaction were Messrs Kern, Logan, Sterling, Guy and Kelly on the one hand, and Mr Budd on the other. The consideration was stated to be $100,000 and it was said that there were no related dutiable transactions. Mr Conrad completed a statement which was similar in material respects. 98 The acquisition of a one twenty first interest on 1 July 2004 suggests the acquisition of a one seventh interest by 1 July 2006 and that Messrs Budd and Conrad were acquiring an equal interest in the BCK Partnership with Messrs Kern, Logan, Sterling, Guy and Kelly. 99 Mr Budd said the statement he completed was wrong and that he paid more duty than he should have. He said that because of the interest of the BCK Partnership Trust, it meant that he in fact purchased 80% of one twenty first. He never reached any agreement with the partners whereby his interest was converted to one seventeenth as shown in one of the schedules produced at the trial by Mr Kern (see [101] below). Mr Conrad said that he paid duty on the acquisition of the first one twenty-first interest, even though he was acquiring 20% of the interest as a trustee. 100 Mr Kelly agreed that he was not able to produce any document showing how Messrs Budd and Conrad agreed to hold part of their interest on trust for the BCK Partnership Trust. 101 Mr Kern produced at the trial a number of schedules and documents purporting to show the following: 1. Profit distributions of the BCK Partnership and BCK Partnership Trust for the years of income ended 30 June 2005 – 2008 inclusive; and 2. The persons and entities who held interests in the BCK Partnership and the quantum of those interests between 30 June 1998 and 16 October 2008. 102 They, or at least the documents referred to in paragraph 2, had been prepared by Mr Kern's staff in about August, September and October 2009 as part of the taxation dispute with the Commissioner. Mr Kern said that he had checked them for accuracy. He could not "explain the maths" whereby the respective interests of Messrs Budd and Conrad went from one twenty first on 1 July 2004 to one seventeenth on 25 June 2005. 103 I turn now to a major transaction which Mr Kelly contends occurred on 25 June 2005 whereby the partners sold or assigned interests totalling 30% in the BCK Partnership to the BCK Partnership Trust. The transaction involved a loan by the National Bank of $637,500 and then a series of transactions involving persons and entities in the BCK Partnership group, and then repayment of the loan to the National Bank on the same day. If the transaction took place in June 2005, then it is likely, having regard to the National Bank records, that it took place on 29 June 2005 rather than 25 June 2005. There was no sale or assignment agreement and there are no minutes of a partners meeting or a trustees meeting where the sale or assignment was authorised. 104 I do not understand the Commissioner to contend that the records of the BCK Partnership group do not record a transaction involving an acquisition by the BCK Partnership Trust from the partners. Nor does he contend that duty was not assessed on dutiable property for a consideration of $637,500. However, he submits that the documents and evidence are so unsatisfactory that I cannot be satisfied that transactions of the type alleged by Mr Kelly occurred in late June 2005. Crucial details were worked out later, and, if the parties had an intention to transfer interests in June 2005, it was an intention to transfer interests totalling around 70-79% to the BCK Partnership Trust. More importantly, he submits that the alleged assignment was not effective because there were no assignments by individual partners of particular interests they held. 105 Although the documentation is confusing, the starting point is that there was a transaction in 2005 that the partners considered involved the transfer of dutiable property for a consideration of $637,500. The assessment notice issued under the Duties Act shows as much. The parties to the transaction were said to be "K Kern, P Logan and others" of the one part and "K Kern, P Logan and others" of the other part. The assessment notice identifies the date of the transaction as 28 September 2005. Neither Mr Kelly or any witness he called was able to explain why that date appeared on the assessment notice if the transaction occurred in June. The form which led to the assessment notice was not tendered in evidence. 106 The National Bank statements produced by Mr Kern support the conclusion that an amount of $637,500 was borrowed from the bank on 29 June 2005 and repaid on the same day. The records of the BCK Partnership group produced by Mr Kern record transactions occurring on 29 June 2005 which involved the following steps: 1. The BCK Partnership borrowed $637,500 from the National Bank. 2. The BCK Partnership lent the said $637,500 to the then partners of the BCK Partnership in proportion to the interests held in the BCK Partnership by those partners. 3. The partners of the BCK Partnership then lent their respective loan funds to their family trusts. 4. The partners' respective family trusts each lent the funds loaned to them to the trustees of the trust called the BCK Finance Trust. 5. The trustees of the BCK Finance Trust then lent the total amount of the funds loaned to the BCK Finance Trust (i.e., $637,500) to the BCK Partnership Trust. 6. The BCK Partnership Trust then used the funds loaned to it by the BCK Finance Trust to purchase a 30% interest in the BCK Partnership from the partners of the BCK Partnership for a purchase price of $637,500. 7. The partners of the BCK Partnership then repaid their respective loans from the BCK Partnership with the purchase prices paid to them by the BCK Partnership Trust for the sale of the BCK Partnership Trust of the 30% of the BCK Partnership. 8. The BCK Partnership then repaid its loan to the National Bank with the funds received from the partners of the BCK Partnership in repaying their loans to the BCK Partnership. 107 The records produced by Mr Kern were confusing because one of the records ("June 2005 Restructure Detailed Flow Chart of Cheques") suggested that step 3 would involve a gift rather than a loan and that step 6 involved a 79% interest rather than a 30% interest. The transfer of a 79% interest would have brought the holding of the BCK Partnership Trust to a total of 99%. The Commissioner suggested that if any amount was in the minds of the partners in June 2005, it was an amount of that order, and in support of that contention he relied on two further pieces of evidence. 108 The partners were unsure whether they needed the approval of the Queensland Law Society for the transaction they proposed and they wrote to the Society in June 2005. In a letter dated 10 June 2005 they advised the Law Society that they were proposing a transaction which would have the result of the BCK Partnership Trust holding approximately 50% of the total partnership interest. 109 In a second letter to the Law Society dated 16 June 2005, the partners did a number of things. First, they made applications supported by undertakings for Mr Kelly and Messrs Budd and Conrad to share partnership receipts with unqualified persons. Secondly, they sought approval for the BCK Partnership Trust to hold up to a 99% interest in the BCK Partnership or, if the Law Society was not comfortable with the trust holding a controlling interest, then a 49% interest in the partnership. Thirdly, they asked for a decision at the Law Society's meeting on 23 June 2005 "so that the new structure can be put in place by 30 June 2005". 110 The Law Society granted approval for the application at its meeting on 23 June 2005. 111 The other material relied on by the Commissioner is that the partners of the BCK Partnership decided to distribute approximately 92% of its income to the BCK Partnership Trust for year of income ended 30 June 2005. The Commissioner submits that this shows (at the least) that the partners were uncertain about what they were transferring. Mr Kelly and his witnesses said that the partners thought that, irrespective of who held what partnership interest, they could do that if all of them agreed. 112 Mr Kelly and the witnesses he called were cross-examined about the inconsistencies in the documents relevant to the transaction said to have occurred in June 2005. It was during his cross-examination on this topic that Mr Kelly frankly admitted that there were "a lot of errors and inconsistencies in the documents". Despite that fact, I accept Mr Kelly's evidence as truthful. The partners, as partners and as trustees, agreed to the transfer of a 30% interest in the BCK Partnership to the BCK Partnership Trust in June 2005 and a transaction was carried out in accordance with the eight steps (previously referred to) in late June, or by no later than late September 2005. The National Bank statements suggest that the transaction was carried out on 29 June 2005. With some hesitation, I find that the transaction was effected on 29 June 2005. 113 It seems that over a period of time the partners had different views about the extent of the interest which should be held by the BCK Partnership Trust. For example, Mr Kern was in favour of the largest interest possible whereas other partners were wary of it holding too large an interest. It is likely that these debates were going on within the partnership in June 2005. 114 I found the following evidence of Mr Kelly and Mr Budd convincing. 115 Mr Kelly said: Ok? - - I remember it was a subject of great debate as to how much that partnership trust would hold. There were some partners who wanted it to hold more, which was the basis for the application for 99%, and there were those who didn't like it holding such a large percentage in the partnership. I see. And – but there's no minute of that meeting or that discussion? - - There were many discussions about it. … Yes. Or is it the case that maybe at the time you thought there had been an assignment of a larger proportion of interest in the partnership? - - Certainly not. The 50% was contentious enough amongst the partners. That was the happy middle ground. I certainly didn't think there was an assignment of anything else to it. 116 Mr Budd said: Yes? - - The - there was [sic] a number of partners who wanted to transfer 90% and there was [sic] a number of partners who didn't on the basis that - it was put to me that they would lose control of their interests by having it in a trust as opposed to within their family units. I see. But isn't - is not the arrangement in relation to the partnership trust that you all get an equal distribution out of the partnership trust? - - I didn't say I agreed with it. I just said that was the two views that was put to me, and 50% was a - a middle ground that people could agree too. 117 The letter to the Law Society referred to above ([109]) supports the conclusion that the partners were anxious to put the arrangements in place before the end of the financial year. 118 I think the agreement of the partners to distribute 92% approximately of the BCK Partnership income to the BCK Partnership Trust was quite separate and unrelated to the transfer of a 30% interest to the BCK Partnership Trust. Whether the distribution was effective for income tax purposes is not a matter before me. 119 I find that there was a transaction on 29 June 2005 whereby the partners attempted to transfer a 30% interest in the BCK Partnership to the BCK Partnership Trust for a consideration of $637,500. It follows that I think that the reference to a 79% interest in step 7 in the flowchart was either an error or an earlier version of the flowchart. I am also disposed to think that, despite the matter referred to in [52] above, the reference to a gift in step 3, rather than a loan, was also an error in June 2005. The internal records of the BCK Partnership group support that conclusion as did the evidence of Mr Kelly. There is no suggestion that the transaction was a sham or that, although effected by the creation of debts within the BCK Partnership group, consideration was not provided. The documentation does not identify particular interests of individual partners being transferred, although the amounts paid to particular partners are identified (an amount of $112,500 to each of Messrs Kern, Loan, Sterling, Guy and Kelly and an amount of $37,500 to each of Messrs Budd and Conrad) and one can extrapolate percentages from these figures (5.295% and 1.773% respectively). Year ended 30 June 2006 120 Mr Kelly's case is that on 29 June 2006 the BCK Partnership Trust held a 50% interest in the BCK Partnership. On that day it transferred various interests in the partnership to the various Holding Trusts of the partners. He claims that the trustees of the BCK Partnership Trust transferred to the Holdings Trusts of each of Messrs Kern, Logan, Sterling, Guy and Kelly a 4.737% interest in the BCK Partnership, and 3.158% interest (two thirds of a 4.737% interest) to each of the Holdings Trusts of Messrs Budd and Conrad. A statement of dutiable transaction was completed by the transferors and transferees in the case of each transaction and it recorded details of the transaction, including, in each case, a statement that the transaction occurred on 29 June 2006. Each statement was apparently signed on a date in September 2007 and duty was paid with respect to each transaction on 25 October 2007. None of the witnesses were able to explain why, if the transactions occurred on 29 June 2006, statements under the Duties Act were not signed and lodged until September 2007. 121 Mr Kelly's case is that in addition to these transactions, a second group of transactions occurred in late June and early July 2006 where some, but not all, of the partners transferred parts of the interest they held in the BCK Partnership to their respective Holdings Trusts. Those transactions were as follows: 1. Each of Messrs Logan and Sterling transferred a 1.930% interest they each held in the BCK Partnership to their respective Holdings Trusts on 29 June 2006. 2. The applicant transferred a 3.120% interest he held in the BCK Partnership to his Holdings Trust on 29 June 2006. The applicant corrected his evidence with respect to this transaction by way of a second affidavit wherein he said that he transferred a 1.93% interest on 29 June 2006 and a 1.19% interest on 1 July 2006. 3. Each of Messrs Budd and Conrad transferred a 0.501% they each held in the BCK Partnership to their respective Holdings Trusts on 29 June 2009. 122 The statement of dutiable transaction in relation to each of these transactions was tendered in evidence. Each of them was signed and lodged in September 2007. Again, none of the witnesses were able to explain why, if the transactions took place on 29 June 2006 (as stated in the statements), they were not signed and lodged until September 2007. 123 There were some other transactions between the partners on the one hand and each of Messrs Budd and Conrad on the other on 1 July 2006, but they are not presently material. 124 The Commissioner contends that the documents and other evidence are so misleading and confusing that I could not be satisfied of what transaction took place and when. The Commissioner submits, correctly in my view, that it was not up to him to establish the nature of the transactions or when they took place. The onus was on Mr Kelly and the Commissioner submits he has failed to discharge it. 125 The evidence as a whole establishes the following. The partners of the BCK Partnership considered that there were advantages in interests in the partnership being held by trusts. Mr Kelly gave evidence of his reasons for supporting that view. Having regard to the issues in this proceeding, those reasons were not strongly challenged. Rightly or wrongly, Mr Kelly held that view. However, there was a difference in view among the partners as to the quantum of the interest which should be held by the BCK Partnership Trust. Some of the partners were concerned that it was unwise for a trust with so many trustees to hold a large interest in the partnership. The precise reasons for this view were not articulated in the evidence, but presumably some partners were concerned about losing individual control of the rights attendant upon a large interest in the partnership. It would seem that this difference in views was in the background throughout 2005 and 2006 and ultimately lead to a desire by the partners to transfer a 30% interest in the partnership out of the BCK Partnership Trust in 2006. Even on Mr Kelly's case, there was no unanimity about precisely what should be done until effectively the "last moment" in the financial year. At that time, an agreement was reached but then implemented somewhat informally. There are no minutes of meetings of the partners of the BCK Partnership or of the trustees of the BCK Partnership Trust and there was no written agreement recording the terms and conditions of the agreement. It appears that agreement was reached and somebody was left to implement the transaction, to ensure that it was recorded in the financial records of the BCK Partnership group, and to attend to the necessary incidents of the transactions such as the payment of duty. The evidence did not clearly reveal the identity of that person or those persons. The other general matter is that the partners considered they needed, or may have needed, the approval of the Law Society whenever an unqualified person obtained an interest in the BCK Partnership. Communications with the Law Society were tendered as evidence of what the partners were thinking and doing at particular points in time. 126 Mr Kelly said that the partners of the BCK Partnership, the trustees of the BCK Partnership Trust and the partners in their individual capacities as trustees of their respective Holdings Trusts agreed to the transactions identified in [120] - [121] above in June 2006. He said that the push was on to finalise the position before the end of the financial year. I accept that evidence. It is consistent with the documentary and other evidence. Precisely when the transactions were implemented and recorded is a separate question. The evidence which supports Mr Kelly's evidence is as follows. 127 The documentary trail starts in March 2006. On 27 March 2006, Mr Logan had a discussion with Mr Conrad and he made handwritten notes of the conversation. The notes dealt with two topics. First, they make reference to the fact that last year they had agreed to transfer 93% over to the BCK Partnership Trust. The notes go on to say that the partners' accountant (Mr Jim Kern who was Mr Keith Kern's brother) had been advised and was "okay" with it as a "one off". Secondly, the notes refer to the establishment of new trusts for the partners. It ends by suggesting that Mr Conrad do a quick memorandum to partners regarding new trusts and whether they want "you" to establish a trust for any of them. 128 Mr Conrad sent an office memorandum to the partners dated 2 June 2006. It is in the following terms: I note that at a previous Partners meeting at which the structure of BCK was discussed, it was resolved that individual partners have the option to transfer as much of their remaining 50% interest in the partnership to their own discretionary trust. To further that restructure, I enclose the following: 1. A copy of my draft letter to QLS; 2. Draft application for you to share receipts; 3. Draft undertaking to QLS; 4. Draft trust deed. Please advise whether you wish to transfer part of your interest in the partnership to a discretionary trust and the percentage share you wish to obtain. I estimate that the stamp duty payable if you were to transfer all but 1% of your interest to the trust would be in the order of $4,500. Such a transfer will trigger a capital gains tax liability for all except Keith, Mark and I. Those with Everetts assignments should take those assignments into consideration. Please also let me know asap if you wish to add any beneficiaries to your QLS approvals. 129 In Mr Conrad's draft letter to the Law Society dated 2 June 2006, he said: Last year, the Society approved the sharing of up to 99% of the profits of Boulton Cleary and Kern Practice with various entities associated with the equity partners of the firm. The proposed mechanism for sharing of those receipts was through a discretionary trust, being the Boulton Cleary and Kern Partnership Trust. Following the approval received from the Society to share receipts received last year, the Boulton Cleary and Kern Partnership Trust took a total 50% interest in the partnership. It is now proposed that instead of the Boulton Cleary and Kern Partnership Trust taking a further interest in the partnership, that discretionary trusts controlled by the individual equity partners will take the further maximum of 43% interest in the partnership leaving the likely structure as at 1 July 2006 as follows: Keith Ronald Kern 1% Keith Kern BCK Holdings Trust 6.14% Peter Logan 1% Peter Logan BCK Holdings Trust 6.14% Paul David Sterling 1% Paul Sterling BCK Holdings Trust 6.14% Jeffrey Keith Guy 1% Jeffrey Guy BCK Holdings Trust 6.14% Sean Kelly 1% Sean Kelly BCK Holdings Trust 6.14% Mark Budd 1% Mark Budd BCK Holdings Trust 6.14% Ian Martin Conrad 1% Ian Conrad BCK Holdings Trust 6.14% Boulton Cleary and Kern Partnership Trust 50% Total: 100% All equity partners will retain a minimum 1% interest each in the partnership. It is possible that individual partners may not transfer their individual holdings to their respective family trusts, to the full extent shown above. 130 On 6 June 2006, each of the partners of the BCK Partnership created a Holdings Trust. Mr Kelly's Holdings Trust is a discretionary trust and he is the trustee. The sum of $10 was settled on the trustee. The first principal beneficiary and the first appointor of the trust is Mr Kelly. The second principal beneficiary is Mr Kelly's wife. Mr Kelly and his wife are default beneficiaries under the trust. The Holdings Trusts created by the other partners were in similar terms to Mr Kelly's Holdings Trust. 131 There was a meeting with respect to "Tax Matters" on 5 June 2006. Mr Logan was present and he took handwritten notes of the meeting. Mr Conrad was present but it is not entirely clear who else was present. The note records discussions concerning a proposal whereby 30% of the present 50% interest owned by the BCK Partnership Trust be transferred to the partners' individual Holdings Trusts. 132 The BCK Partnership sent a letter to the Law Society on 7 June 2006. In addition to seeking its approval to the sharing of receipts with unqualified persons, the letter stated relevantly: Last year, the Society approved the sharing of up to 99% of the profits of Boulton Cleary and Kern Practice with various entities associated with the equity partners of the firm. The proposed mechanism for sharing of those receipts was through a discretionary trust, being the Boulton Cleary and Kern Partnership Trust. Following the approval received from the Society to share receipts received last year, the Boulton Cleary and Kern Partnership Trust took a total 50% interest in the partnership. It is now proposed that instead of the Boulton Cleary and Kern Partnership Trust taking a further interest in the partnership, that discretionary trusts controlled by the individual equity partners will take interests in the partnership leaving the likely structure as at 1 July 2006 as follows: Keith Ronald Kern 1% Keith Kern BCK Holdings Trust 10.43% Peter Logan 1% Peter Logan BCK Holdings Trust 10.43% Paul David Sterling 1% Paul Sterling BCK Holdings Trust 10.43% Jeffrey Keith Guy 1% Jeffrey Guy BCK Holdings Trust 10.43% Sean Kelly 1% Sean Kelly BCK Holdings Trust 10.43% Mark Budd 1% Mark Budd BCK Holdings Trust 10.43% Ian Martin Conrad 1% Ian Conrad BCK Holdings Trust 10.43% Boulton Cleary and Kern Partnership Trust 20% Total: 100% 133 This is the proposal which, on Mr Kelly's case, was ultimately implemented as far as the reduction of the interest of the BCK Partnership Trust is concerned, but involves the partners transferring more to their individual Holdings Trusts than the transaction which, on his case, was ultimately implemented. The Law Society approved the application and advised the BCK Partnership of the approval by letter dated 13 June 2006. 134 The financial records of the BCK Partnership group and National Bank statements support findings that the transactions between the BCK Partnership Trust and the individual Holdings Trusts of the partners involved the following steps and had the following consequences: 1. The BCK Partnership loaned a total of $637,500 to each partner's family trust. 2. Each partner's family trust used the monies loaned to it by the BCK Partnership to repay the monies previously loaned to those family trusts on or about 29 June 2005 by the partners of the BCK Partnership. 3. Each of the partners loaned the monies received from their respective family trusts to each of their Holdings Trusts in order that those Holdings Trusts could collectively acquire a 30% interest in the BCK Partnership from the BCK Partnership Trust. 4. At the direction of the BCK Partnership Trust, each partner's Holdings Trust paid the purchase price for its acquisition of an interest in the BCK Partnership to the BCK Partnership. 5. The payment to the BCK Partnership referred to above was treated: (1) by the BCK Partnership and the BCK Finance Trust, as repaying the monies loaned to the BCK Partnership Trust from the BCK Finance Trust on or about 29 June 2005. (2) by the BCK Finance Trust and each partner's family trust, as repaying the monies loaned to the BCK Finance Trust from each partner's family trust on or about 29 June 2005. (3) by each partner's family trust and the BCK Partnership, as repaying the monies loaned to each partner's family trust from the partners of the BCK Partnership on or about 29 June 2006. 135 The internal financial records of the BCK Partnership group show the individual interests being transferred. Again, there is no suggestion that the transactions were a sham or that consideration was not provided. 136 It is not strictly necessary for me to decide precisely when the transaction was effected and recorded. As I have said, I am satisfied that the relevant parties agreed to the transaction in June 2006. I am disposed to think that the transactions were implemented at about the times Mr Kelly alleged. That is suggested by the National Bank statements and what, on any view of the documents, was heightened activity by the BCK Partnership in June 2006. It would follow from that conclusion that the fact that statements of dutiable transactions were not signed and lodged until September 2007 represents a remarkable failure on the part of the partners, who must bear the ultimate responsibility, to see that the transactions were properly implemented. 137 The BCK Partnership distributed its income for the year of income ended 30 June 2006 in accordance with the transactions carried out in June 2006. Year ended 30 June 2007 138 Mr Kern retired from the BCK Partnership on 30 June 2007. He was replaced by Mr Hick on 1 July 2007. From the partners' point of view, Mr Hick purchased Mr Kern's interests. 139 The BCK Partnership Trust received approximately 23% of the income distributed by the BCK Partnership during this year of income. Year ended 30 June 2008 140 The BCK Partnership distributed its income for the year of income ended 30 June 2008 in accordance with the partners' understanding of the interests held by the various entities. Year ended 30 June 2009 141 This is the year of income in issue. As I have said, Mr Kelly put an argument not articulated in his notice of objection, which relied on the transactions whereby Mr Sterling retired from the partnership and Ms Bligh joined the partnership. 142 On 15 October 2008 Mr Sterling, on his own behalf and as trustee for Paul Sterling BCK Holdings Trust (described as "Retiring Partners"), entered into a Deed of Retirement From Partnership with Messrs Logan, Guy, Kelly, Budd, Conrad and Hick in their personal capacities and in their capacity as trustee of their respective Holdings Trusts and the BCK Partnership Trust (described as "Continuing Partners"). I will refer to this deed as the "Sterling Retirement Deed". The deed provided for the retirement of the Retiring Partners and that the Retiring Partners shall, among other things: … convey, transfer and assign to the nominee/s of the continuing partners without reservation or encumbrance of any kind (other than a reservation or encumbrance created and/or arising for the purposes of financial accommodation or the facility extended to, or the trading activities of, the firm or the firm entities), all of their right, title and interest in the firm, the firm entities, the business carried on by the firm and the firm entities including, without limitation, all of the assets, undertakings and intellectual property of the firm and the firm entities; 143 In terms of consideration, the Continuing Partners agreed to pay the Retiring Partners a total of $450,000 being $187,500 to Mr Sterling and $262,500 to the Paul Sterling BCK Holdings Trust. The Sterling Retirement Deed is signed by each of the partners in their own capacity and in their capacity as trustees of their respective Holdings Trusts and by Messrs Guy, Logan, Kelly, Budd, Conrad and Hick for and on behalf of the BCK Partnership Trust. 144 Ms Bligh was admitted to the BCK Partnership on 15 October 2008. She had established a Holdings Trust by deed of settlement dated 29 September 2008. Her admission to the partnership was governed by a Deed of Nomination Of Acquirer dated 15 October 2008. I will refer to this as the "Bligh Nomination Deed". Messrs Logan, Guy, Kelly, Budd, Conrad and Hick in their own capacities and in their capacity as trustee for their respective Holdings Trusts and the BCK Partnership Trust (described as "Continuing Partners") entered into the deed with Ms Bligh in her own capacity and in her capacity as trustee for the Julie Bligh BCK Holdings Trust. The substance of the deed is as follows: Recitals (a) Under clause 3.2(a) of the deed of retirement from partnership (the "deed") between the continuing partners and Paul David Sterling and Paul David Sterling as trustee for the Paul Sterling BCK Holdings Trust ("the retiring partners") which deed is to be executed on the date hereof, the retiring partners are required to transfer all of their interest in the partnership trading as Boulton Cleary and Kern (the "partnership") to the nominee of the continuing partners on the terms set out in the deed. (b) This document records the nomination by the continuing partners of the entities that are to acquire the interest in the partnership as required under the deed. Nomination The continuing partners hereby nominate the acquiring partners to acquire the interest in the partnership of the retiring partners pursuant to the deed, as follows: Julie Anita Bligh shall acquire the 4.762% interest of Paul David Sterling in the partnership, as provided for in the deed; and Julie Anita Bligh as trustee for the Julie Bligh BCK Holdings Trust is to acquire the 6.667% interest of Paul David Sterling as trustee for the Paul Sterling BCK Holdings Trust in the partnership as provided for in the deed. Acceptance of Nomination Julie Anita Bligh, in her personal capacity and in her capacity as trustee of the Julie Bligh BCK Holdings Trust, as applicable, hereby accepts the nomination provided for herein and hereby agrees to acquire the said interest in the partnership of the retiring partners for a total sum of $350,000. 145 Each of the witnesses called before me were asked by counsel for the Commissioner in cross-examination whether they had dealt with their respective interests in the BCK Partnership after a date he nominated which in each case was well before October 2008. Each of them denied doing so. This was to counter the submission made by Mr Kelly that, at the time of the Bligh Nomination Deed, he declared trusts over his interests in favour of the Sean Kelly BCK Holdings Trust and, with the other partners, in favour of the BCK Partnership Trust. 146 In terms of the distribution of the BCK Partnership income as shown in its taxation returns, the BCK Partnership Trust received a fraction over 20% and the Sean Kelly BCK Holdings Trust received about 8% for the year of income in issue. The issues on the application 147 The principal issue on the application is whether Mr Kelly has established that in the year of income ended 30 June 2009 the BCK Partnership Trust held a 20% interest in the BCK Partnership and the Sean Kelly BCK Holdings Trust a 7.857% interest. Before examining the transactions said to give rise to those interests, I will set out some well established principles of partnership and trusts law. 148 In Federal Commissioner of Taxation v Everett (1980) 143 CLR 440 ("Everett"), a solicitor who practised in partnership with three other solicitors held a 13% interest in the capital and income of the partnership. He assigned six thirteenths of his share in the partnership to his wife for valuable consideration. The High Court held that there had been a valid equitable assignment of an interest in the partnership and that interest carried with it the right to future income referrable to the interest. The income was the income of the trust estate and not income gained by personal exertion. 149 In Everett, there was a deed of assignment which had been executed by Mr and Mrs Everett. The High Court examined the nature of a partner's interest in a partnership and the incidents and consequences of an assignment of such an interest. Although a partner has no title to specific property owned by a partnership, he has a beneficial interest in the partnership assets. His share in the partnership consists of a right to a proportion of surplus assets. Historically, his interest is considered an equitable interest because the right or interest is enforceable in equity and not at law. It is a chose in action which is assignable in whole or part: Hocking v Western Australian Bank (1909) 9 CLR 738. The assignment of part of the chose in action takes effect as an equitable assignment. By reason of the fact that the assignee does not become a partner, and the assignor remains a partner, the trust relationship between assignor and assignee continues and the latter's rights are only ascertainable on dissolution. The High Court referred to s 31 of the Partnership Act 1892 (NSW) which dealt with an assignment by a partner of his share of the partnership 150 Section 34 of the Partnership Act provides, relevantly, as follows: (1) An assignment by any partner of his or her share in the partnership, either absolute or by way of mortgage or redeemable charge, does not, as against the other partners, entitle the assignee, during the continuance of the partnership, to interfere in the management or administration of the partnership business or affairs, or to require any accounts of the partnership transactions, or to inspect the partnership books, but entitles the assignee only to receive the share of profits to which the assigning partner would otherwise be entitled, and the assignee must, except in case of fraud, accept the account of profits agreed to by the partners. (2) In case of a dissolution of a partnership, whether in relation to all the partners or in relation the assigning partner, the assignee is entitled to receive the share of the partnership assets to which the assigning partner is entitled as between the assigning partner and the other partners, and, for the purpose of ascertaining that share, to an account as from the date of the dissolution. 151 Although that section may only apply to the assignment by a partner of his entire interest in the partnership, Everett is authority for the proposition that an assignment of part of an interest would entitle the assignee to receive the appropriate proportion of the partner's income attributable to that interest. The High Court said (at 449): Nonetheless, a share in a partnership carries with it the right to receive the proportion of the partnership profits to which the partner is entitled by virtue of the partnership agreement. Consequently, when the share is assigned, it carries with it the right to receive the assigning partner's proportion of those profits. In the same fashion, when a portion of a share is assigned, the portion carries with it the right to receive the proportion of profits attributable to that portion. As the right to receive profits is inherent in the partner's interest in the partnership, unless it be excluded by the partnership agreement, it is carried on assignment of the share, even though no mention of it be made in the assignment. 152 The High Court rejected the proposition that the right to receive profits is separate from the partner's interest in the partnership as such. The Court drew a distinction between an immediate assignment of an interest carrying with it a right to income generated in the future, and the assignment of future income disassociated from the proprietary interest. The Court said that the income referable to the assigned interest was income of a trust estate within s 95 of the Income Tax Assessment Act 1936 (Cth). 153 The assignee of part of a partner's chose in action may be a discretionary trust where the class of beneficiaries are the partner and his family: Federal Commissioner of Taxation v Galland (1986) 162 CLR 408. 154 It was open to a partner of the BCK Partnership to assign his interest, or a part of his interest, for consideration to a third party. If that was done, then the income referable to that portion would be assessable in the hands of the third party and not in the hands of the partner. There must be a clear expression of an intention to make an immediate disposition: Norman v Federal Commissioner of Taxation (1963) 109 CLR 9 at 30 per Windeyer J. Furthermore, the subject matter of the assignment must be of such a nature, and so described, as to be capable of being ascertained and identified: Tailby v Official Receiver (1888) 13 App. Cas. 523 at 243 per Lord Macnaghten. By reason of s 11(1)(c) of the Property Law Act 1974 (Qld) ("Property Law Act"), such an assignment "must be manifested and proved by some writing signed by the person disposing of the same, or by the person's agent lawfully authorised in writing, or by will". 155 In the alternative to an assignment for consideration, a partner may declare a trust over part of his interest in a partnership and this will have the same effect as an equitable assignment: The Comptroller of Stamps (Victoria) v Howard-Smith (1936) 54 CLR 614 at 621-623 per Dixon J (as his Honour then was). An intention to create a trust must be clearly established. In determining whether there is such an intention, the law has regard to the objective circumstances and not the alleged trustee's subjective intention. If the outward manifestation of the alleged trustee's conduct shows an intention to create a trust then a trust will be held to exist even if subjectively the alleged trustee did not intend to create a trust. In Byrnes v Kendle (2011) 243 CLR 253, Heydon and Crennan JJ said at 290 [115] (footnotes omitted): As with contracts, subjective intention is only relevant in relation to trusts when the transaction is open to some challenge or some application for modification – an equitable challenge for mistake or misrepresentation or undue influence or unconscionable dealing or other fraud in equity, a challenge based on the non est factum or duress defences, an application for modification by reason of some estoppel, an allegation of illegality, an allegation of "sham", a claim that some condition has not been satisfied, or a claim for rectification. But subjective intention is irrelevant both to the question of whether a trust exists and to the question of what its terms are. (see also French CJ at 263 [17] and Gummow and Hayne JJ at 274 [55]). 156 Although an intention to create a trust must be clearly established, it is not essential that the alleged trustee use words such as "I declare myself a trustee": Commissioner of Stamp Duties (Qld) v Jollife (1920) 28 CLR 178 at 190-9 per Isaacs J. 157 The other certainties which must be established are certainty of subject matter or property, and reasonable certainty as to the identity of the beneficiaries of the trust: Kauter v Hilton (1953) 90 CLR 86 at 97 per Dixon CJ, Williams and Fullagar JJ. 158 Section 11(1)(c) of the Property Law Act is not confined to equitable interests in land (Adamson v Hayes (1973) 130 CLR 276). An assignment of a partnership interest falls within its terms. Schedule 6 of the Property Law Act defines "disposition" as including a declaration of trust. It is arguable a declaration of trust over a partnership interest also falls within s 11(1)(c): Meagher, Heydon and Leeming, Meagher, Gummow and Lehane's Equity: Doctrines and Remedies (Butterworths, 4th ed., 2002), [7-200]. The writing must prove that there was a trust and what that trust was: Forster v Hale (1798) 3 Ves. Jun 696 at 670; Secretary, Department of Social Security v James (1990) 20 ALD 5 ("James"). One point that emerges from the latter case is that the alleged trustee statements are by no means conclusive and all the circumstances are considered. Section 11(1)(c) of the Property Law Act is in different terms from s 23C(1) of the Conveyancing Act 1919 (NSW) in terms of the requirement for writing. Under s 11(1)(c), the assignment or declaration of trust itself need not be the subject of writing. It is sufficient if those things can be proved by some writing signed by the defendant. The date of the writing is immaterial: Rochefoucauld v Boustead [1897] 1 Ch. 196. A statement in an affidavit is sufficient writing for the purposes of the subsection (James at 622 per Lee J). 159 In a case where consideration is not provided, an ineffective disposition of an equitable interest by one mode of disposition will not be upheld by finding that there was another mode of disposition: Milroy v Lord (1862) 4 De GF & J 264. Even where there appears to be consideration, the Court will be cautious about attempting to rescue the transaction by holding that it occurred by a mode that the parties never intended: Bolton v Federal Commissioner of Taxation (1964) 9 AITR 385 at 386 per Windeyer J. 160 When a partner retires from a partnership and the remaining partners decide to continue the partnership there are two partnerships, one with the retiring partner and one without him or her. The same applies in the case of the admission of a partner. Even when these events occur by agreement, and without the dissolution and winding up of a partnership, there is still, what the High Court noted had been called, a "technical" dissolution of the old partnership, and the reconstitution of a new partnership: Commissioner of State Taxation (SA) v Cyril Henschke Pty Ltd (2010) 242 CLR 508 at 513-4 [10]-[12]. It has been said that it is more accurate to say there has been a "technical winding up", rather than a "technical dissolution": Rushton (Qld) Pty Ltd v Rushton (NSW) Pty Ltd [2003] 1 Qd R 320 at 323 per McPherson JA (with whom McMurdo P and Wilson J agreed). If a partner retires without the dissolution and winding up of the partnership, then his interests and rights are settled by way of an accord and satisfaction with the remaining partners. Where a retiring partner agrees to receive a fixed sum in return for his right to participate in surplus assets, the nature of his right is that of a debt: Bakewell v Deputy Federal Commissioner of Taxation (SA) (1937) 58 CLR 743 at 770 per Dixon and Evatt JJ; Partnership Act, s 46. If a new partner is admitted then the existing rights and interests in the partnership are reconstituted by agreement, usually involving the payment of consideration by the new partner. 161 I turn now to examine the various transactions upon which Mr Kelly relies. The Transactions on 15 October 2008 162 In his notice of objection, the applicant described the four major transactions upon which he relied in the following way: 1. On 30 June 1999, Mr McFazdean sold and the trustees of the BCK Partnership Trust purchased, for valuable consideration, in an arm's length transaction a 20% interest in the BCK Partnership; 2. On 25 June 2005, Messrs Kern, Logan, Sterling, Guy, Kelly, Budd and Conrad assigned to the then trustees of the BCK Partnership Trust in total a 30% interest in the BCK Partnership; 3. On 29 June 2006, the then trustees of the BCK Partnership Trust assigned, for valuable consideration, to Sean Kelly as trustee of the Sean Kelly BCK Holdings Trust a 4.734% interest [sic 4.737%] in the BCK Partnership; and 4. On 29 June 2006 the applicant declared himself trustee for the Sean Kelly BCK Holdings Trust of his 3.12% equitable interest in the BCK Partnership by means of an assignment of that interest to himself as trustee for valuable consideration. (my emphasis) 163 Mr Kelly's new argument put at the trial was that the equitable interests he claimed were held by the respective trusts arose as a result of his entry into the Sterling Retirement Deed and the Bligh Nomination Deed. They constituted, so it was argued, declarations of trust by Mr Kelly of parts of the interest he held in the BCK Partnership. The prior transactions were irrelevant, except insofar as they were evidence of Mr Kelly's continuing intention to hold part of his interest on trust for the respective trusts. There were obvious difficulties with that argument and at times in the course of the argument it was not clear to me how Mr Kelly sought to overcome those difficulties. 164 The respondent objected to Mr Kelly raising this new argument. 165 Mr Kelly's notice of objection contains no reference to the Sterling Retirement Deed or the Bligh Nomination Deed. No reliance is placed on them as giving rise to trusts or the assignment of equitable interests in October 2008. Mr Kelly may not rely on grounds of objection not in his notice of objection, without the leave of the Court. He does not have that leave. In fact, he has not applied for leave. No explanation was provided by him as why the matters were not raised in the notice of objection. In fact, neither Mr Kelly or the other witnesses said anything in their affidavits or oral evidence about creating trusts or engaging in equitable assignments in October 2008; quite the contrary, they said they did not create interests after a date well before October 2008. That is in a context where they did give evidence of their intentions with respect to the transactions referred to in the notice of objection. If leave is required to raise this new argument, I refuse it. 166 I do not need to decide whether the new argument is a new ground of objection because I am clearly of the view that even if it is not, nevertheless, it must fail on the merits. 167 Mr Kelly fails to establish a clear intention to create trusts in October 2008. He fails to establish certainty of subject matter with respect to the alleged trusts (see Mowbray, J, Lewin on Trusts, (Sweet & Maxwell, 18th ed., 2008) [3-05], [3-06]). There is no express declaration of trust by Mr Kelly in the Sterling Retirement Deed or Bligh Nomination Deed, nor any statement from which such a declaration may be inferred. There is nothing in either document identifying, directly or indirectly, the interests which were the subject of the alleged trusts. If one goes beyond the deeds, there are no contemporaneous documents which support the new argument. There are no duty forms because nobody, other than Ms Bligh, considered that they were dealing with their interests in the manner now suggested. 168 Even if it is possible to consider the partners' evidence as to their intentions, that evidence is directly against the propositions comprising the new argument. 169 If Mr Kelly is to succeed, it is by reference to the transactions identified in his notice of objection. The Transaction on 30 June 1999 170 I am not satisfied that the McFazdean Retirement Deed was effective to confer a 20% interest in the BCK Partnership on the trustees of the BCK Partnership Trust. My reasons are as follows. 171 The first point to note is that Mr Kelly's case is that the 20% interest held by the trustees of the BCK Partnership Trust in the year of income ended 30 June 2009 arose because of the McFazdean Retirement Deed. It is true that he alleges it received another 30% on 25 June 2005, but his case is also that 30% was transferred out of the trust on 29 June 2006. 172 In my opinion, this part of his case stands or falls on the effectiveness of the McFazdean Retirement Deed. It is not open to Mr Kelly to point to what the partners thought they had done, or to point to how they subsequently acted, and argue from those circumstances that he had proved conclusively that there must have been a declaration of trust or equitable assignment. 173 It is true that I am entitled to consider subsequent facts to see what light they might throw on the transaction. However, if the transaction relied on by Mr Kelly was not effective, subsequent conduct cannot affect that conclusion. Mr Kelly relied heavily on the decision in Glennon v Federal Commissioner of Taxation (1972) 127 CLR 503 ("Glennon") at 508 per Williams J. In that case, Williams J did consider circumstances after the event in a case where there was no formal declaration of trust. However, the pre-existing trust relationship was not a central issue in the case, and in fact, the fact of a trust relationship was not in dispute. I do not think Glennon is authority for the proposition that I can ignore the transaction said by Mr Kelly to give rise to the trust relationship in circumstances where, in his notice of objection and in this proceeding, that is the transaction which he identifies and relies upon. If that transaction did not have the legal effect for which he contends, then his case fails as far as the alleged interest of the BCK Partnership Trust is concerned, even if, after the event, the partners appear to have acted as if the trust held such an interest 174 Prior to 30 June 1999, Mr McFazdean had, among other things, a chose in action entitling him to share in the profits of the BCK Partnership and the net assets on a dissolution and winding up of the partnership. He could assign that chose in action or declare himself a trustee of the chose in action. In either case, he would remain a trustee of the chose in action. Plainly, Mr McFazdean was not doing either of those things when he retired because he was retiring from the partnership, not remaining a partner albeit as a trustee. 175 It would have been open to Mr McFazdean to sell his interest in the BCK Partnership, in a practical sense, to a new partner where all the existing partners agreed to the admission of a new partner (s 27(1)(g) of the Partnership Act). I say in a practical sense because on a proper legal analysis the following steps would have been involved. First, the existing partnership would have been dissolved and the retiring partner would have accepted a sum of money by way of an accord and satisfaction for his interest in the partnership. Secondly, a new partnership would have been formed with the partnership interests reconstituted on the basis that the new partner would provide consideration to the continuing partners for the new interests that he or she obtained in the partnership. The consideration provided by the new partner might be the same as the consideration provided to the retiring partner by the remaining partners of the old partnership. 176 Mr McFazdean did not sell his interest to a new partner, being the BCK Partnership Trust. As I have said, it is no part of Mr Kelly's case that the BCK Partnership Trust ever became a partner of the BCK Partnership. In fact, he said that he knew that it was not a partner. 177 It follows then, that if the BCK Partnership Trust held a 20% interest in the BCK Partnership as a result of a transaction on 30 June 1999, it is because a continuing partner assigned an interest to it, or declared himself a trustee of an interest. The partner must have continued as a partner, although he might have held part of his interest on trust. In this case, that means that Messrs Kern, Logan, Sterling and Guy must have assigned interests to the BCK Partnership Trust or declared themselves as trustees of interests in favour of that trust. 178 The most obvious observation to make about the McFazdean Retirement Deed is that it is not in the form of an assignment or declaration of trust by Messrs Kern, Logan, Sterling and Guy. As I said earlier, there are difficulties in persuading a Court that it should rescue one form of transaction by holding that it was in effect another form of transaction. 179 There is insufficient evidence for me to find on the balance of probabilities that the BCK Partnership Trust actually paid any amount in connection with the McFazdean Retirement Deed. The evidence supports the conclusion that the payment was made by the BCK Secretarial Unit Trust. Mr Kern's evidence is too slender a basis to find that at the time there was a loan agreement between the BCK Secretarial Unit Trust and the BCK Partnership Trust. 180 I realise that there is evidence of subsequent conduct supporting the conclusion that the BCK Partnership Trust held an interest in the BCK Partnership. However, there is no express promise to pay by it in the McFazdean Retirement Deed and I am not satisfied that it paid the consideration. It seems to me that I should treat the case as similar to the gift cases and hold that it is not open to me to conclude that, despite the form of the McFazdean Retirement Deed, there was an assignment or declaration of trust by Messrs Kern, Logan, Sterling and Guy. Put another way, if Mr Kelly is saying that the substance of the transaction was that the BCK Partnership Trust discharged the liability of Messrs Kern, Logan, Sterling and Guy to Mr McFazdean in return for an interest in the partnership then he would need to identify a promise to pay or actual payment. He can identify neither of those things. There is no statement in the McFazdean Retirement Deed concerning who was to pay the purchase price or to whom the interest was to be transferred. 181 I think the same result follows even if I am wrong and should proceed on the basis that it is proper to infer that the BCK Partnership Trust provided the consideration in relation to the McFazdean Retirement Deed. There is simply no other evidence, whether it be a document or oral declaration, that Messrs Kern, Logan, Sterling and Guy were individually declaring trusts or assigning interests. Although duty was paid, it was not paid on the basis of individual assignments by each of the continuing partners to the BCK Partnership Trust. 182 Reference to evidence of the partners as to what they thought they were doing (even if permissible) does not assist Mr Kelly. Each of Messrs Kern, Logan and Guy gave evidence that the BCK Partnership Trust acquired its 20% interest from Mr McFazdean and, by strong implication, not from any of them by way of assignment or declaration of trust. The evidence of Messrs Kelly and Conrad was that this was also their understanding of what had occurred in about June 1999. 183 For these reasons, I am not satisfied on the evidence presented by Mr Kelly that a 20% interest in the BCK Partnership was transferred to the BCK Partnership Trust on 30 June 1999. 184 I should say that, even if I had reached the contrary conclusion, there are difficulties for Mr Kelly arising from his admission to the partnership on 1 July 2002 and Messrs Budd and Conrad's admission to the partnership on 15 July 2004. 185 In terms of Mr Kelly's admission, there are two possibilities. The first is that when the BCK Partnership was reconstituted on the admission of Mr Kelly, Messrs Kern, Logan, Sterling and Guy held their respective interests on trusts to the extent of a total of 20% for the BCK Partnership, or all the partners, including Mr Kelly, held their respective interests on trusts to the extent of a total of 20% for the BCK Partnership Trust. In the case of the former possibility, each of Messrs Kern, Logan, Sterling, Guy and Kelly would hold a 20% interest with each of Messrs Kern, Logan, Sterling and Guy holding 5% of their 20% interest on trust for the BCK Partnership Trust, and in the case of the latter possibility, each of Messrs Kern, Logan, Sterling, Guy and Kelly would hold 4% of their 20% interest on trust for the BCK Partnership Trust. Mr Kelly's case is that it is the latter and not the former that occurred, both on his admission and on the admission of Messrs Budd and Conrad. 186 The difficulty with this case is that whatever their actual intentions, the objective circumstances do not support Mr Kelly's case. The one document that was produced in relation to the transaction when he was admitted is not consistent with that case, and in fact it suggests that the BCK Partnership Trust was to hold a one sixth interest in the BCK Partnership directly. The documents produced in relation to the transaction involving Messrs Budd and Conrad suggest the interests were to be divided among the partners, but there are no documents supporting an assignment or declaration of trust in favour of the BCK Partnership Trust at or about the time the new partnership including Messrs Budd and Conrad was constituted. 187 I acknowledge that it is difficult to think that if, contrary to my primary conclusion, the BCK Partnership Trust had a 20% interest in the BCK Partnership in or about June 1999, it disappeared completely as a result of Mr Kelly's admission to the partnership and then the admission of Messrs Budd and Conrad. However, that is not enough for Mr Kelly to succeed. He bears the onus of proof, and if the evidence is equivocal as to dilution of the interest held by the BCK Partnership Trust and the extent of the dilution, then he fails to make out his case as to the interest held by the BCK Partnership Trust in the year of income ended 30 June 2009. 188 Before leaving the McFazdean Retirement Deed, I should record the fact that in his objection, Mr Kelly raised resulting trusts in the alternative to express trusts. The possibility of resulting trusts was not seriously pressed before me. Presumably the resulting trusts being referred to are resulting trusts by reason of the provision of purchase monies. There are a number of reasons why such an argument could not succeed which I do not need to traverse. One clear reason in the case of the McFazdean Retirement Deed is that I am not satisfied that the BCK Partnership Trust provided the purchase monies. The Transaction on 29 June 2005 189 My findings in relation to the transaction alleged to have occurred on 29 June 2005 are set out above ([112] - [119]). In view of those findings, there are two principal issues in determining whether the transaction was effective. 190 The first issue is as follows. The rights of partners to partnership property while the partnership carries on business are indivisible. However, the Commissioner contends that, for the purposes of an assignment of an interest in the partnership, that can only be done by the individual partner with respect to his or her individual interest. While individual partners may transfer interests which, taken together, total a particular interest, there is no such thing as a collective interest which can be assigned. The Commissioner contends that any attempt to assign interests in that way is ineffective in law. 191 The second issue is closely related to the first issue. It is that the requirement for writing in s 11(1)(c) of the Property Law Act can only be satisfied by writing recording individual assignments. It cannot be satisfied by writing recording an assignment of a "collective" interest of, in this case, a 30% interest. The Commissioner contends that the statements in Mr Kelly's affidavit and in the affidavits of other witnesses he called do not satisfy the requirement for writing because they record an assignment of a 30% interest in the BCK Partnership, not individual assignments by individual partners. 192 I reject both of the Commissioner's arguments. Two matters are clear from the objective circumstances. First, the partners intended to transfer a total 30% interest in the BCK Partnership to the BCK Partnership Trust in June 2005. Secondly, consideration was provided by the BCK Partnership Trust in relation to the transaction. Had the BCK Partnership Trust brought a suit against the partners in 2005 seeking to enforce the transaction, I think any difficulty with the identification of the subject matter of the assignment would have been overcome, bearing in mind that there was consideration for the transaction, by the Court inferring that each partner assigned 30% of his individual interest, or by extrapolating from the total purchase price and the consideration paid to each partner as revealed in the internal records of the BCK Partnership group the relevant interests transferred (see [119] above). 193 I am not aware of any authority which aids in the resolution of the second issue. However, bearing in mind my view that the Court would overcome the difficulty in identifying the subject matter of the assignments in the manner I have indicated, I think the statements in the affidavits of Mr Kelly and the other witnesses called by him are sufficient to satisfy the requirement for writing. I should make the point that the statements in the affidavits are not received as admissions against interest. They would not meet that description in the circumstances of this case. They are received as satisfying the requirement for writing in s 11(1)(c) of the Property Law Act. 194 I think that there were valid assignments in June 2005 by the partners to the BCK Partnership Trust of interests in the BCK Partnership which totalled 30%. The Transactions on 29 June and 1 July 2006 195 My findings in relation to the transactions in June and July 2006 are set out above ([126] - [136]). There is no reason to hold that the assignment by the BCK Partnership Trust to Sean Kelly BCK Holdings Trust on 29 June 2006 was not effective. Consideration was provided and the requirement for writing is satisfied. 196 In relation to the assignments by Mr Kelly to the Sean Kelly BCK Holdings Trust, the Commissioner's main point was to draw the contrast between Mr Kelly's original evidence that he transferred a 3.120% interest on 29 June 2006 with his revised evidence from which he transferred a 1.93% interest on 29 June 2006 and a 1.19% interest on 1 July 2006. 197 I do not think that this is a reason to find that the assignments were not effective. I accept Mr Kelly's evidence, and, therefore, I accept that his original evidence that he transferred a 3.120% interest on 29 June 2006 was a genuine error made by reference to the statement of dutiable transaction, and that the true position was that he transferred a 1.93% interest on 29 June 2006 and a 1.19% interest on 1 July 2006. 198 I have summarised the views of the partners as to whether the trusts became partners. As I have said, the views differed to an extent. Even if some of the partners fundamentally misunderstood the status of an assignee, I do not think that factor of itself affected the efficacy of the transactions. New Partnerships in 2007 and 2008 199 Although new partnerships were formed in June and July 2007 and again in October 2008 and new choses in action created at those times, there is no reason to think that the interest in the BCK Partnership held for the Sean Kelly BCK Holdings Trust was diluted or diminished at those times. Superannuation Deduction 200 The Commissioner has an alternative argument in the event that Mr Kelly succeeded in relation to his primary arguments. As Mr Kelly has partly succeeded with respect to these arguments, it is necessary to consider the Commissioner's alternative argument. 201 A Judge of this Court made orders for the filing of affidavits and Mr Kelly filed and served his own affidavit and witness affidavits in early March 2012. At the trial, Mr Kelly sought to rely on a second affidavit which, among other things, showed a distribution to him from the Kelly Family Trust ("Family Trust") for the year of income in issue of $50,748. A similar amount was distributed to Mr Kelly's wife. The Family Trust apparently received a distribution of $203,027 from the Sean Kelly Holdings Trust, but deducted amounts, including an amount for superannuation of $100,000, before making the distributions. This material was put forward at a late stage so, according to counsel for Mr Kelly, the Court would have a "complete picture" for the year of income in issue, and to show why the assessment is not said to be excessive by a larger amount. However, I think counsel for the Commissioner summarised the matter accurately when he said that someone acting for Mr Kelly realised late in the day that Mr Kelly had not proved his correct income and sought to remedy that defect. I gave Mr Kelly leave to rely on his second affidavit. That in turn has led to a submission by the Commissioner that the superannuation deduction by the Family Trust is not a proper deduction. The Commissioner submits that I should so hold and that, as Mr Kelly is a default beneficiary of the Family Trust, I should remit the matter to him to determine the extent of the additional income attributable to Mr Kelly. 202 Mr Kelly opposes this course. He submits that the Commissioner should not be permitted to raise this point as it is not in his appeal statement filed and served under O 52B r 5 of the now repealed Federal Court Rules. This is correct, but, nevertheless, I would allow the Commissioner to raise this point because the point has arisen at the last moment by reason of Mr Kelly seeking to prove the correct amount of his assessable income. 203 There was both cross-examination and re-examination on the merits of the point. That evidence and the documents tendered established the following: (1) The trustee of the Family Trust is a company called 351 Pty Ltd. Mr Kelly and his wife are directors of that company. He is the sole shareholder and he holds one $1.00 share. (2) The Family Trust does not trade or carry on business and it does not have any employees or pay any wages. (3) The income of the Family Trust for the year in issue was $204,228, of which $203,027 was a distribution from the Sean Kelly BCK Holdings Trust. The remaining $1,201 was a distribution from a trust called the Lakes Property Discretionary Trust. (4) The expenses of the Family Trust for the year of income in issue were accountancy fees of $1,000, bank fees of $332 and superannuation of $100,000. (5) The superannuation deduction related to Mr Kelly and his wife and, according to Mr Kelly, was made on the basis that they are directors and do everything for the Trust. The Commissioner addressed the merits of the issue of whether the superannuation deduction was a proper deduction at some length. Mr Kelly did not address the merits of the issue. He relied on his argument that the Commissioner ought not to be permitted to raise the point. 204 The Commissioner referred to sections 290-60, 290-65 and 290-70 of the Income Tax Assessment Act 1997 (Cth) ("ITA Act") and s 12 of the Superannuation Guarantee (Administration) Act 1992 ("Superannuation Guarantee Act"). There is no evidence that Mr Kelly is entitled to payment for any of the duties he performs as a director of 351 Pty Ltd, and therefore he would not appear to be an employee within s 12 of the Superannuation Guarantee Act. He would not appear to otherwise fall within sections 290-60 and 290-70 of the ITA Act. The Commissioner's argument appears to be correct and the orders he seeks appropriate. However, because of the unusual way in which this issue arose, I will give Mr Kelly a final opportunity to make a submission on the merits of the issue of whether the superannuation deduction by the Kelly Family Trust was a proper deduction. Conclusion 205 Mr Kelly has not established his case that the Commissioner's assessment was excessive by reason of the fact that the BCK Partnership Trust held a 20% interest or any interest in the BCK Partnership. He has established his case that the Commissioner's assessment was excessive by reason of the fact that the Sean Kelly Holdings Trust held a 7.857% interest in the BCK Partnership. 206 I will make the following orders: 1. The applicant file and serve within 14 days draft minutes of order reflecting the conclusions in these reasons and, if so advised, a short submission on the propriety of the superannuation deduction claimed by the Kelly Family Trust for the year of income ended 30 June 2009. 2. The respondent file and serve within 21 days draft minutes of order reflecting the conclusions in these reasons and, if so advised, a short responding submission to any submission filed and served by the applicant pursuant to order 1 above. I certify that the preceding two hundred and six (206) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Besanko. Associate: Dated: 27 April 2012