The Federal Court has held that the taxpayers had no right to appeal from the original ex-parte proceeding in Oswal v FCT[2013] FCA 745 in which the taxpayers unsuccessfully sought a declaration from the Court that the decision of a trustee of a discretionary trust to exercise a special power of appointment to make 2 beneficiaries of the trust entitled to part of the corpus of the trust did not trigger CGT event E1 (creation of trust over assets). Instead, the Federal Court in the ex-parte proceedings found even though there was no express declaration of trust and no transfer of property, nevertheless the effect of the appointment was to effect a “declaration” of trust as ordinarily understood which resulted in the creation of a separate trust over the relevant assets to which CGT event E1 applied.
In dismissing the taxpayers’ application, the Court said the relevant principles to apply when considering an application for leave to appeal from an interlocutory judgment of a single judge of the Court are whether the original decision was attended by sufficient doubt to warrant it being reconsidered and whether substantial injustice would result if leave were refused. However, the Court found that the original decision was not attended by such doubt because the Court had properly considered the matter and, with compelling reasons, had concluded that the power of appointment both contemplated and effected the creation of a separate trust. It also found there would be no substantial injustice to the taxpayers in refusing leave. (Oswal v FCT [2014] FCA 812, Federal Court, Foster J, 4 August 2014.)
[LTN 151, 8/7/14]