This matter involved a public float of a land rich private unit trust scheme known as the Challenger Diversified Property Trust 1 (the Trust). As a result of that float, Challenger Property Funds Management Limited (CPFML) as trustee for the Challenger North of England Gas Holding Trust (Old Holding Trust) effectively sold 61 per cent of its units in the Trust to members of the public and the remaining 39 per cent of its units to another Challenger-related trust.
The Commissioner assessed duty on the transaction pursuant to the land rich conversion provisions in section 89C of the Duties Act 2000. The primary dispute which arose was whether a prerequisite to the application of that section was satisfied in the matter. That is, whether CPFML, in its capacity as trustee for the Old Holding Trust, could be identified as holding an interest in the Trust immediately prior to the transaction.
The Court of Appeal held that CPFML did not hold such an interest in the Trust and therefore decided the matter against the Commissioner. In doing so, it confirmed an earlier decision of the Supreme Court in Landrow, which held that in the context of the land rich provisions a trustee could not hold such an interest because that interest had to be held beneficially.