An Australian-resident husband and wife (Anthony and Maria) were the equal partners of a partnership (the “AMS Partnership”) and were registered as joint tenants of freehold title to partnership property. Upon the death of Anthony in February 2011 (leaving his estate to be divided equally between three testamentary trusts for his children), the partnership was dissolved, and three months later, the partnership was subject to a general dissolution in accordance with the partnership deed. Maria, as the surviving joint tenant, became registered as proprietor of the freehold titles. In December 2013, Maria, the beneficiaries of Anthony’s estate and a trust company (“Rojoda”) entered into a deed (the “2013 Deed”) whose effect was to declare a bare trust over the legal title to the properties held by Maria in favour of each of the former partners and the legatees of the deceased estate.
The Duties Act (Western Australia) imposed duty on “dutiable transactions" including "a declaration of trust over dutiable property, such as "land in Western Australia." At issue was whether, as found by the Court of Appeal below, the interests of the beneficiaries of the trust over the partnership property changed to fixed interests on the partnership dissolution that occurred on death (which was not a dutiable transaction), or whether the change to fixed interests occurred under the 2013 Deed (which would be a dutiable transactions). Essentially the same issue arose respecting the dissolution on death of Anthony and a 2013 Deed respecting a second family partnership.
After noting (at para. 21) the “orthodox” and correct view that “the interest of partners in relation to partnership assets is not an interest in any particular asset but is an indefinite and fluctuating interest in relation to the assets, being the right to a proportion of the surplus after the realisation of the assets and payment of the debts and liabilities of the partnership”, and in finding that the 2013 Deeds involved dutiable transactions, being the declaration of new trusts, the majority of the High Court stated (at paras. 26, 33, 41-42):
[P]artnership property is held on trust for the partners. … However, the equitable rights of partners under a trust of partnership property differ substantially from the equitable rights created by the declarations of trust in the 2013 Deeds. Contrary to the reasoning of the Court of Appeal, those rights did not change after dissolution due to the equitable maxim that equity regards as done that which ought to be done. ...
[T]he only right that the partners have, both before and after dissolution, in relation to each asset is a right to the account and distribution after sale of the proceeds of that asset … .
Prior to the 2013 Deeds …[s]ince there was no provision to the contrary in either of the partnership deeds, Maria held the freehold titles of each partnership on trust for the partners. … Each partner had a non-specific interest in relation to all of the partnership freehold titles (as well as all of the current assets of each partnership) with a right, upon dissolution, to compel the sale of the freehold titles in order to realise a fund from which at the conclusion of the winding up a vested share could then be claimed.
Although the relevant operative clause of each of the 2013 Deeds provided that Maria "confirms" that she held the freehold titles of each partnership on trust in the relevant proportions for each former partner or their successors, those "confirmations" of fixed trust had a substantive effect. They extinguished the unique equitable rights of the partners under the partnership trusts and created new fixed trusts.
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