Amatek Holdings Limited and Commissioner Of State Revenue

[2006] WASAT 197

JURISDICTION     :   STATE ADMINISTRATIVE TRIBUNAL

STREAM:   DEVELOPMENT & RESOURCES

ACT: TAXATION ADMINISTRATION ACT 2003 (WA)

CITATION:   AMATEK HOLDINGS LIMITED and COMMISSIONER OF STATE REVENUE [2006] WASAT 197

MEMBER:   JUSTICE M L BARKER (PRESIDENT)

HEARD:   25 MAY 2006

DELIVERED          :   24 JULY 2006

FILE NO/S:   DR 614 of 2005

BETWEEN:   AMATEK HOLDINGS LIMITED

Applicant

AND

COMMISSIONER OF STATE REVENUE
Respondent

Catchwords:

State revenue - Stamp duty - Stamp Act 1921 (WA) - Second Schedule, Item 4A(1)(f) and (fa) of the Stamp Act 1921 as it applied on 29 March 2001 - "Marketable securities... not listed on a prescribed stock exchange" - Whether shares in company admitted to official list of the ASX and subject to quotation but suspended from quotation on 29 March 2001 were "marketable securities ... not listed on a prescribed stock exchange" - Whether penalty tax correctly imposed under Stamp Act 1921, s 75JE

Legislation:

Corporations Law (Cth), s 412(6), s 664F, s 1097A, s 1097A(1), s 1097A(1)(4), Pt6A.2
Financial Relations Agreement (Consequential Provisions) Act 1999 (WA)
Stamp Act 1921 (WA), s 75JB, s 75JB(4), s 75JB(5), s 75JE, s 75JE(1), s 75JE(1b), s 75JE(2), s 112BA, s 112FA, Second Schedule - Item 3(a), Item 4A(1)(f), Item 4A(1)(fa), Item 4A(2), Item 4(3), Item 4(4a)
Stamp Amendment (Marketable Securities Duty) Act 1995 (WA)
Stamp Amendment Act 1994 (WA)

State Administrative Tribunal Act 2004 (WA), s 27(1), s 27(2)

Result:

Decision of Commissioner of State Revenue affirmed
Review application dismissed

Category:    A

Representation:

Counsel:

Applicant:     Mr G H Murphy SC

Respondent:     Mr NC Monahan

Solicitors:

Applicant:     Mallesons Stephen Jaques

Respondent:     State Solicitor

Case(s) referred to in decision(s):

Anderson v Commissioner of Taxes (Vic) (1937) 57 CLR 233

C & J Clark Limited v Inland Revenue Commissioners [1975] 1 WLR 413

Collector of Customs v Agfa-Gevaert Limited (1996) 186 CLR 389

Commissioner of Stamp Duties (NSW) v Simpson (1917) 24 CLR 209

Cooper Brookes (Wollongong) Pty Ltd v Commissioner of Taxation (Cth) (1981) 35 ALR 151

Fire and All Risks Insurance Co Ltd v Southern Cross Exploration NL (No 1) (1983) 1 ACLC 971

Inland Revenue Commissioners v Westminster (Duke) [1936] AC 1

Lumsden v Inland Revenue Commissioners [1914] AC 877

Maunsell v Olins [1975] AC 373

Pinesales Pty Ltd and Commissioner of State Revenue [2006] WASAT 202

Re Australand Holdings Ltd (2005) 54 ACSR 687

Scott v Cawsey (1907) 5 CLR 132

Case(s) also cited:

Minister for Immigration and Multicultural Affairs v WABQ [2002] FCAFC 329

Speight v Gaunt (1883) 9 App Cases 1

REASONS FOR DECISION OF THE TRIBUNAL: 

Summary of Tribunal's decision

1. The Tribunal affirmed the Commissioner of State Revenue's decision to impose stamp duty on the transfer of shares in Wesfi Limited on 29 March 2001 on the basis described in Item 4A(1)(fa) of the Second Schedule of the Stamp Act 1921 (WA), because they were considered "marketable securities … not listed on a prescribed stock exchange". This followed from the fact that at the relevant date the Wesfi shares were suspended from trading on the Australian Stock Exchange.

2. The Tribunal also affirmed the Commissioner's decision not to remit penalty tax payable under the Act.

Issue

1. The primary issue for determination by the Tribunal is whether the Commissioner of State Revenue (Commissioner) was correct in assessing stamp duty on the transfer of shares in Wesfi Limited (Wesfi) from the applicant to Laminex (Australia) Pty Ltd at the rate set out in Item 4A(1)(fa) of the Second Schedule  of the Stamp Act 1921 (WA) (the Stamp Act).

2. The determination of this issue depends on the question whether, on 29 March 2001, the shares of Wesfi were "not listed on a prescribed stock exchange" - in this case the Australia Stock Exchange (or ASX).

3. This question is important because, if the shares of Wesfi were "listed on [the ASX]", the rate of duty payable on the transfer of the shares on that day is calculated at the rate of 30 cents per $100 under Item 4A(1)(f) of the Second Schedule of the Stamp Act, whereas if they were "not listed on [ASX]", then the duty is double that rate, namely, 60 cents per $100 pursuant to Item 4A(1)(fa) of the Second Schedule of the Stamp Act.

4. The resolution of the preliminary issue therefore depends upon the proper interpretation of Items 4A(1)(f) and (fa) of the Second Schedule of the Stamp Act.

5. A secondary issue concerns the liability of the applicant to pay a penalty tax.

Facts

1. The following facts are agreed by the parties.

2. Wesfi was at all material times a Western Australian registered company. 

3. By letter dated 16 November 2000, sent by fax from Wesfi to the Australian Stock Exchange, Wesfi requested a suspension of trading in its shares.  In response to that letter, the ASX issued a market release on 16 November 2000 giving notice that the securities of Wesfi were suspended from official quotation from that date.

4. By the letter dated 16 November 2000 from Wesfi to ASX, Wesfi indicated that it expected the suspension to last for a period of between one and two weeks. 

5. On 22 January 2001, an information memorandum was registered pursuant to sub-section 412(6) of the Corporations Law (Cth) in relation to a recommended merger between Wesfi and Amatek Holdings Limited (the applicant).

6. On 24 January 2001 the suspension from Official Quotation of securities in Wesfi was removed.

7. On 21 February 2001 (from the close of trading), securities in Wesfi were again suspended from Official Quotation by the ASX.  The shares were suspended from Official Quotation pending the outcome of the proposed acquisition of Wesfi by the applicant.

8. On 26 February 2001, the Supreme Court of Western Australia made orders concerning the proposed merger.  The first of these orders was that the proposed scheme of arrangement, annexed to the orders made, be approved.  By letter dated 27 February 2001 from Mallesons Stephen Jaques (Mallesons) to the ASX, Mallesons informed the ASX that the acquisition of Wesfi by the applicant was effective from the date of their letter (27 February 2001).

9. A share transfer form for the transfer of all ordinary shares in Wesfi from the applicant to Laminex (Australia) Pty Limited (Laminex) was executed by the applicant on 29 March 2001. As at that date, Laminex was an associated body corporate of the applicant for the purposes of s 75JB of the Stamp Act.

10. By letter dated 10 April 2001 from Wesfi to the ASX, Wesfi requested that it be de-listed from the ASX.

11. At the close of trading on 20 April 2001, Wesfi was removed from the official list of the ASX.

12. By letter dated 1 May 2001, Mallesons on behalf of the applicant, sought an exemption from payment of stamp duty under the corporate reconstruction provisions contained in s 75JB of the Stamp Act, in relation to the share transfer reflecting the acquisition by Laminex of the applicant's share holdings in Wesfi.

13. On 2 May 2001, the share transfer was stamped "exempt from WA Stamp Duty".

14. On 18 October 2002, PriceWaterhouseCoopers (PWC) on behalf of the applicant and Laminex wrote to the Commissioner to advise of a proposed transaction which would, if it proceeded, require notification to the Commissioner pursuant to s 75JB(4) of the Stamp Act of a change in beneficial ownership of the shares of Laminex Group Limited, a Victorian company (and a parent of Laminex).

15. Generally speaking, the relevant effect of s 75JB(5) of the Stamp Act is that a claw-back applies to a transfer of a beneficial interest in property between two associated bodies corporate if they cease to be associated within five years of the execution of the relevant instrument.

16. Generally speaking, the proposal advised by PWC, if implemented, would have the effect that the applicant and Laminex would cease to be associated, with the consequence that the claw-back provision would be applied to the Wesfi share transfer executed on 29 March 2001.  On 18 October 2002, when PWC advised the Commissioner of the then proposed transaction, that proposed transaction had not yet been implemented.

17. On 24 October 2002, the Commissioner issued a stamp duty requisition to PWC seeking a copy of the Wesfi share transfer document that was exempted from stamp duty pursuant to the provisions of s 75JB of the Stamp Act.

18. On 4 November 2002, PWC wrote to the Commissioner concerning the proposed transaction, advising that the proposed transaction referred to in their letter of 18 October 2002 had not yet taken place and that the claw-back provisions of the Stamp Act ought not to apply until the transaction was effected.

19. At the time of this correspondence between PWC and the Commissioner (between 18 October 2002 and 4 November 2002), the then proposed transaction referred to in PWC's letter of 18 October 2002 had not yet been implemented. 

20. On 21 November 2002, PWC wrote to the Commissioner confirming that the applicant and Laminex ceased to be associated bodies corporate on 13 November 2002 and enclosed the Wesfi share transfer form dated 29 March 2001. On 13 November 2002, the applicant and Laminex ceased to be associated bodies corporate for the purposes of s 75JB(4) of the Stamp Act.

21. On 4 December 2002, PWC sent an email to the Commissioner advising that the Wesfi shares were not "de‑listed" until 19 April 2001.  Wesfi was removed from the Official List of the ASX at the close of trading on 20 April 2001.  On 5 December 2002, the Commissioner wrote by email to PWC advising that the main factor in determining the applicable rate of duty to be applied to an assessment of the Wesfi share transfer under the claw‑back provisions, was whether the Wesfi shares were trading on the stock exchange at the time of the Wesfi share transfer or were suspended from quotation.  While the applicant accepts that the Commissioner sent such an email, the applicant rejects the contentions set out in that email.

22. On 11 December 2002, PWC wrote to the Commissioner indicating that the appropriate rate of duty that should be charged under the claw‑back provisions was the rate applying under Item 4A(1)(f) of the Second Schedule of the Stamp Act, which applied where a marketable security or right in respect of shares was listed on a prescribed stock exchange.

23. On 18 December 2002, the Commissioner issued a stamp duty assessment notice in the amount of $939 715.60, comprising duty of $783 096.60 and penalty tax of $156 619.00, applying the rate of duty under Item 4A(1)(fa) of the Second Schedule of the Stamp Act, which applied where the marketable security or right in respect of shares was not listed on a prescribed stock exchange.

24. On 17 January 2003, PWC wrote to the Commissioner enclosing a statement of grounds of objection to the assessment issued on 18 December 2002.

25. On 12 August 2004, the Commissioner wrote to PWC disallowing the objection.

26. On 19 October 2005, solicitors for the applicant filed and served an application for review before this Tribunal.

Contentions

1. The relevant statutory context is the Stamp Act as at 29 March 2001. At that time the Stamp Act provided for duty to be charged on the transfer of marketable securities at different rates, depending on whether "the securities" were "listed on a prescribed stock exchange" (30 cents per $100 - Item 4A(1)(f)) or "not listed on a prescribed stock exchange" (60 cents per $100 - Item 4A(1)(fa)).

2. The Commissioner says that these expressions, properly interpreted, refer to "securities" that are "listed for quotation" or "not listed for quotation" in the sense that they are able to be traded, and not merely to securities that have been issued by an entity which is "listed" on a prescribed stock exchange by reason of the fact that it has been entered on the official list of a prescribed stock exchange. 

3. The result of adopting the Commissioner's approach is that, where the quotation of shares has been suspended on the stock exchange - as in the case of the Wesfi shares at the relevant date - the "securities" could not be considered "listed on [the ASX]" because they could not be bought and sold on that market.

4. The applicant contends, however, that the share transfer form was for the transfer of shares "listed on a prescribed stock exchange", notwithstanding that the shares were suspended from quotation at the relevant date, because on that date the entity Wesfi was and remained "listed" on the ASX, that is to say, it was entered on the official list of the ASX.

5. The applicant contends that the issue of whether or not the shares of Wesfi were "listed on [the ASX]" at the relevant date can only be answered by regarding the Listing Rules of the ASX as they applied at that date.   The applicant draws attention to the ASX Listing Rules which, as at 29 March 2001 provided, in effect, that:

   (1)An "entity" may be admitted to the "official list" (Rule 1.1, 1.16);

   (2)"official list" means official list of entities that ASX has admitted and not removed (Rule 19.12);

   (3)in order for an entity to gain admission it must apply for and be granted permission for "quotation" of its securities or main class of its securities (Rule 1.1, Condition 6, Rule 1.7 and Appendix A1; Listing Rule 2);

   (4)"quotation" is defined as "official quotation by ASX" (Rule 19.12);

   (5)an entity may apply for quotation of a class of securities in addition to an entity's main class of securities (Rules 2.3, 2.7, Appendix 3B);

   (6)quotation is in ASX's absolute discretion and it occurs on the date that ASX decides (Rule 2.9 and Rule 2.10);

   (7)an entity may request a trading halt for a limited period (Rule 17.1 and Rule 17.1.1);

   (8)ASX may suspend an entity's shares from quotation, however, where the entity has requested the trading halt, the suspension will not occur before the expiry of the trading halt (Rule 17.1.2);

   (9)ASX may also suspend an entity's securities at the written request of the entity (Rule 17.2);

   (10)ASX may suspend an entity's securities, or a class of them, for a breach of the listing rules, if it is necessary to prevent a disorderly or uninformed market, or the ASX rules require the suspension, or it is appropriate for some other reason (Rule 17.3);

   (11)ASX may also suspend and entity's securities from quotation if the entity fails to lodge documents or pay annual listing fees (Rule 17.5 and Rule 17.6);

   (12)ASX may at any time reinstate [from suspension] an entity's securities to quotation (Rule 17.7);

   (13)ASX may at any time end quotation of a class of an entity's securities if the entity requests it or the securities no longer meet the requirements necessary for quotation (Rule 17.10);

   (14)ASX may, at the request of the entity, or of its own volition, remove an entity from the official list (Rule 17.11 and Rule 17.12);

   (15) ASX is to suspend quotation of an entity's securities five business days after receipt of a copy of the compulsory acquisition notice following a takeover bid (Rule 17.4);

   (16)Where there is compulsory acquisition under Part 6A.2 of the Corporations Law, ASX will suspend quotation of an entity's securities five business days after it receives written notice from the entity of the objection period having expired and at least 10% of the holders of the securities covered by the compulsory acquisition notice have not objected to the acquisition, or the court has approved the acquisition under s 664F of the Corporations Law (Rule 17.4);

   (17)ASX will remove an entity from the official list at the close of trading on a date decided by ASX if all the quoted securities of an entity have been suspended under Rule 17.4 or Rule 17.4A (Rule 17.14).

6. On the applicant's argument, the suspension of the Wesfi shares from quotation on the ASX on 16 November 2000 is not a relevant factor in determining whether the Wesfi shares were "listed" or "unlisted" on the relevant date because, under the ASX Listing Rules, while Wesfi remained on the official list of the ASX, the shares were "listed" for quotation, even though suspended from quotation.

7. While the applicant accepts that, as a matter of fact, it was unlikely that the suspension would be other than permanent, the applicant contends that whether or not the suspension from quotation of the Wesfi shares was temporary in nature is irrelevant to the issue at hand. 

8. Senior counsel for the applicant says the effect of the ASX Listing Rules (as confirmed by the Explanatory Note in Chapter 17 of the Listing Rules) is that an entity's shares are "listed on [the ASX]" for the purposes of Item 4A(1)(f) of the Stamp Act, wherever :

   (1)the entity is admitted to the official list of entities that ASX has admitted, and not removed; and

   (2)the entity's shares have been granted official quotation and ASX has not ended quotation.

9. The Commissioner, on the other hand, seeks to interpret the expression "security…listed on a prescribed stock exchange" as meaning "listed for quotation on a prescribed stock exchange" in the sense it can be traded on that market.

10. Counsel for the Commissioner seeks to draw some support for the Commissioner's position by referring to s 1097A of the Corporations Law in effect at the relevant time, which was inserted in 1993, and makes reference to a "quoted security" (subsection (1)) and provides in effect that a temporary suspension from quotation does not affect the status of a share as "quoted security" as defined (subclause (3)).

11. Counsel also contends that, in interpreting Parliament's words, it must be accepted that central to the concept of a share being "listed" on a recognised stock exchange, is its capacity to be traded - bought and sold - on that market.  To this end , counsel seeks to draw on the observations of McLelland J in Fire and All Risks Insurance Co Ltd v Southern Cross Exploration NL (No 1) (1983) 1 ACLC 971. In Fire and All Risks, the plaintiff and defendant entered into a deed of mortgage whereby the plaintiff loaned the defendant $400 000 and the defendant mortgaged 4 million shares in a company as security for the loan.  Clause 5 of the deed of mortgage included an obligation to repay the principal monies in these terms:

    "5.Notwithstanding anything elsewhere herein contained the Principal Sum together with all other moneys secured thereby shall become forthwith due and payable should:

    (a)The said shares to the Lender or any of them cease to be listed for quotation in the official list of a Stock Exchange in Australia.

    (b)The value of the said shares be at any time less than One hundred and eighty (180) per centum on the principal sum then owing to the Lender.  The value of the said shares for the purpose of this clause shall be ascertained from the last sale quote on any Stock Exchange in Australia."

12. The plaintiff claimed, amongst other things, that the principal sum had become repayable because the event specified in cl 5(a) of the Deed had occurred.  The fact was that as of the commencement of trading on 30 September 1982, shares in the relevant company were suspended from trading and remained suspended until 26 November 1982.  The question then was whether the suspension from trading constituted the event of "cease to be listed for quotation" referred to in cl 5(a). 

13. McLelland J, at 975‑976, noted:

    "A distinction is thus to be drawn between the removal of a corporation from the Official List on the one hand, and the suspension of securities of a corporation from Official Quotation on the other hand.  It seems to me that either kind of action by the Committee of the Stock Exchange would bring about the situation specified in cl 5(a), since in either event there would be no ready market for the shares and no up‑to‑date method of ascertaining the value for the purposes of cl 5(b), both of which factors are within the commercial purposes of cl 5(a).  The critical manner to which cl 5(a) appears to direct itself is the listing of the shares for quotation, which connotes availability for trading on the Exchange.  It was submitted for the defendant that suspension of the trading in shares was not the same as suspension of the shares from Official Quotation but I see no legitimate basis for such a distinction.  Even if there were such a distinction I would nevertheless be of the opinion that suspension of trading fell within cl 5(a)."

1. Counsel also submits that dicta in the judgment of Barrett J in Re Australand Holdings Ltd (2005) 54 ACSR 687 assists the Commissioner's argument. In that case, his Honour observed at [26]:

   "Central to the 'quotation' concept is the feature of a market or facility that displays or provides information about prices at which sellers are willing to sell and prices at which buyers are willing to buy financial products which, within the confines of the market or facility, are capable of being sold and purchased."

2. Counsel for the Commissioner says it follows that, when the Wesfi shares were suspended from quotation, at the request of Wesfi - and in circumstances where it could not be suggested that the suspension was intended to be "temporary" - the shares ceased to be subject to "quotation" because they could not be bought and sold on the ASX; and so, for the purposes of Item 4A(1)(f) and Item 4A(1)(fa) of the Second Schedule of the Stamp Act the shares could not be said to be "listed on [ASX]", and were in fact "not listed on ASX".

3. Following the hearing of this application, the State Solicitor's Office brought to the Tribunal's attention s 112FA of the Stamp Act as it was enacted at the relevant time. Section 112FA then provided:

   (1)This Division [Division 3], and the duty payable as calculated on the return referred to in section 112FC, in accordance with item 4A(2) of the Second Schedule, apply to –

   (a)the sale and purchase of a marketable security or a right in respect of shares only if –

   (i)the consideration for the sale and purchase is in money or money's worth of not less than the unencumbered value of the security or the right; and

   (ii)the security or the right is listed for quotation on the stock market of, or permission to deal in the shares on a stock market has been granted by, a prescribed stock exchange;

   and

   (b)the sale and purchase of a marketable security pursuant to the exercise of an exchange traded option as if a reference in section 112FB(1) to an order lodged were a reference to the issue or receipt by a broker of a notice to exercise an exchange traded option.

   (2)Duty payable on a sale and purchase referred to in subsection (1)(b) is to be calculated on the premium paid for the exchange traded option or the consideration for the sale and purchase, whichever is the greater amount.

4. The Tribunal requested further submissions from the parties as to the relevance of s 112FA of the Stamp Act to the interpretation issue in the proceeding.

5. Counsel for the Commissioner draws attention to the different types of transactions referred to in s 112FA(1)(a) and (b) of the Stamp Act. Counsel says that if the shares were listed for quotation "on the stock market" of a prescribed stock exchange, the requirement in this case was met.  If they were not listed on that market, it would be sufficient that they were the subject of a "permission to deal" granted by that exchange, although they were "on a stock market"; i.e. listed for quotation on the stock market of another exchange.

6. Counsel for the Commissioner contends therefore, that the distinction created by s 112FA(1)(a)(ii) was between the markets in which the shares were traded; the point of distinction was not whether the shares were "listed for quotation" - these words were only used as a way of describing those shares which would be "on the market" of the prescribed exchange, as distinct from "on a[nother] market".

7. Counsel therefore contends that in both situations the shares would have the quality of tradeability on the relevant market inherent in the "listed for quotation" concept and a brokered sale and purchase. However, the provision does not assist in the construction of the provision relevant to this proceeding; except in the limited sense of confirming that "listed for quotation" was a concept then part of, and described as such, in the Stamp Act in a different context. Counsel for the Commissioner says that that does not, in itself, provide support of any significance to the interpretation contended for by the applicant or the Commissioner.

8. Counsel for the applicant points out that s 112FA of the Stamp Act as it then appeared in Div 3 of Part IVA, applied solely to the sales and purchases of shares and other marketable securities by brokers. Together with Item 4A(2)(a) of the Second Schedule of the Stamp Act, Div 3 of Part IVA imposed half of the relevant stamp duty on the selling broker and half of the relevant stamp duty on the purchasing broker where a transfer of shares or other marketable securities was effected through brokers.

9. Counsel for the applicant thus contends that s 112FA on its proper construction of Item 4A(2) of the Second Schedule to which s 112FA applied, were concerned with the transfer of shares in listed companies where the transfer was effected by brokers, i.e. for all intents and purposes transfers effected "on market" through the medium of the stock exchange. In other words, s 112FA and Item 4A(2)(a) of the Second Schedule of the Stamp Act dealt with "on market" share trading of the shares listed on the stock exchange, whereas Item 4A(1)(f) of the Second Schedule (relevant to this case), applied to the "off‑market" trading of shares in listed companies.

10. By contrast, the applicant's argument, put concisely, is:

    •Section 112FA and Item 4A(2)(a) applied to "on‑market" trades having regard to the language of s 112FA itself, the evident scope and application of Div 3, the broader provisions of Part IVA of the Act and from the Hansard report of the Second Reading speech which introduced the 1995 amendments to Item 4A of the Second Schedule.

    •Section 112FA(1)(a)(ii) refers to marketable securities "listed for quotation on the stock market of … a prescribed stock exchange".

    •Section 112FA expressly brings together two concepts which are not found in the language of Item 4A(1)(f).  These two concepts commonly taken together, convey the idea that s 112FA, and hence Item 4A(2), are concerned with "on‑market" trading of shares.  This derives from such expressions as "for quotation" and "on the stock market of".

    •Section 112FA(1) further deals with the subject matter of "on‑market" trades and at sub‑section (b) of s 112FA(1) refers to "exchange traded option".

    •The relevant provisions in Div 3 are obviously intended to ensure that all share trades effected on the stock market by a broker are properly accounted for in terms of revenue due to the Commissioner.

    •Other provisions in Part IVA which are linked to Div 3 also use language which confirms that Div 3 is concerned with "on‑market" trading.

    •Section 112BA which is within Part IVA refers to "unlisted" securities. This is language which corresponds with Item 4A(1)(fa) - "not listed on a prescribed stock exchange".

    •Item 4A(2)(a), as applied by s 112FA, provided for (in the ordinary course) duty to be payable at $0.15 for every $100 by both the selling broker and the purchasing broker in a broker effected on‑market transfer, making a total of $0.30 for every $100 for the transfer. The duty applicable under Item 4A(1)(f) was $0.30 per every $100 payable by the transferee. The meaning and application of s 112FA in relation to "on‑market" trading is confirmed by the Second Reading speech in Hansard of 15 June 1995 in relation to the Stamp Amendment (Marketable Securities Duty) Act 1995 which amended Item 4A(1)(f) and introduced Item 4A(1)(fa).  Mr C J Barnett in moving for the Bill to be read a second time said that:

    "The purpose of this Bill is to amend the Stamp Act to reduce the rate of stamp duty on transfers of listed marketable securities.  It is proposed that the rate of duty in the case of on‑market trades will be reduced from 30 cents per $100 or part thereof, to 15 cents per $100, on both the buy and sell sides of the transaction.  Furthermore, the rate of duty in the case of off‑market trades of listed securities will be reduced from 60 cents per $100 or part thereof to 30 cents per $100.  These changes are to apply from 1 July 1995."

11. Consequently, senior counsel for the applicant submits that a proper understanding of what s 112FA does supports the applicant's contention that Item 4A(1)(f) on its proper construction simply refers to the transfer of shares in a company "listed on ASX", i.e. where the company has been admitted to the official list of entities by ASX and has not been removed, and where the company's shares have been granted official quotation, and ASX has not ended quotation.  The only qualification that a consideration of s 112FA brings to that conclusion is that Item 4A(1)(f) is concerned with transfers not effected by brokers, i.e. for all intents and purposes off market transfers.

12. Senior counsel for the applicant notes that the share transfer the subject of this proceeding occurred "off‑market", and that the company in question remained, at the time of the transfer, a company admitted to the official list of the ASX, the shares of which had been granted official quotation and in respect of which the ASX had not then ended quotation.

Tribunal's finding

1. The nature and purpose of a review proceeding such as this is discussed in Pinesales Pty Ltd and Commissioner of State Revenue [2006] WASAT 202 at [43]-[46]. The review is by way of a hearing de novo; State Administrative Tribunal Act 2004 (WA), s 27(1). The Tribunal's task is to produce the "correct and preferable" decision: s 27(2). In this context, no party bears a formal onus of proof, although they may bear a practical onus of proof.

2. There is a deal of judicial guidance on how to interpret a revenue statute. In Scott v Cawsey (1907) 5 CLR 132 at 154‑5, Isaacs J emphasis that a revenue statute should be interpreted strictly but not in a way to defeat the purpose of the legislature. His Honour observed:

   "Where Parliament has in the public interest thought fit … to exact from individuals certain contributions to the general revenue, a Court should be specially careful, in the view of the consequences on both sides, to ascertain and enforce the actual commands of the legislature, not weakening them in favour of private persons to the detriment of the public welfare, nor enlarging them as against the individuals towards whom they are directed."

3. This of course begs the question as to exactly what the "actual commands" of Parliament are in any given case.

4. In Commissioner of Stamp Duties (NSW) v Simpson (1917) 24 CLR 209 at 215‑6, Barton J referred to the literal rule as that which should be applied to revenue statutes in the same way as it is applied to any other statute. He cited Viscount Haldane LC in Lumsden v Inland Revenue Commissioners [1914] AC 877 at 896 to this effect:

   "… the duty of Judges in construing Statutes is to adhere to the literal construction unless the context renders it plain that such a construction cannot be put on the words.  This rule is especially important in cases of Statutes which impose taxation."

5. As Pearce and Geddes, Statutory Interpretation in Australia, 5th ed, at 242 notes, if a taxing act in the end leaves a doubt as to its meaning, the taxpayer is to be given the benefit of the doubt.  The learned authors refer to the position as summarised by Lord Russell of Killowen in Inland Revenue Commissioners v Westminster (Duke) [1936] AC 1 at 24‑5:

   "I confess that I view with disfavour the doctrine that in taxation cases the subject is to be taxed if, in accordance with a Court's the view of what it considers the substance of the transaction, the Court thinks that the case falls within the contemplation or spirit of the statute.  The subject is not taxable by inference or by analogy, but only by the plain words of a statute applicable to the facts and circumstances of his case."

6. This passage was cited with approval by Latham CJ in Anderson v Commissioner of Taxes (Vic) (1937) 57 CLR 233 at 239.

7. In the event, it seems generally accepted that the fact that a statute is a taxing statute does not make it immune to the general principles governing the interpretation of statutes, and that courts are as much concerned in the interpretation of revenue statutes as in the case of other statutes to ascertain the legislative intention from the terms of the instrument viewed as a whole:  Cooper Brookes (Wollongong) Pty Ltd v Commissioner of Taxation (Cth) (1981) 35 ALR 151 at 171 per Mason and Wilson JJ.

8. In Cooper Brookes a literal interpretation of the revenue statute favoured the taxpayer but the Court held that such an interpretation was not supported by the background of the relevant provision's legislative history and its neighbouring sections and produced a result that was "capricious and irrational", as Mason and Wilson JJ described it at 170.

9. Guidance concerning the proper interpretation of revenue legislation may also be found in the more recent decision of the High Court in Collector of Customs v Agfa-Gevaert Limited (1996) 186 CLR 389, where the court was called on upon to construe a phrase in a Commercial Tariff Concession Order (CTCO). The Court (Brennan CJ, Dawson, Toohey, Gaudron and McHugh JJ) explained that CTCOs should be considered a species of delegated legislation and for that reason their interpretation was governed by the rules of statutory construction. The Court considered that the speech of Lord Simon of Glaisdale in Maunsell v Olins [1975] AC 373 was a useful starting point in determining the construction of the instruments in question. In that case, his Lordship had said at 391:

   "Statutory language, like all language, is capable of an almost infinite gradation of 'register' - ie, it will be used at the semantic level appropriate to the subject matter and to the audience addressed (the man in the street, lawyers, merchants, etc).  It is the duty of a court of construction to tune in to such register and so to interpret the statutory language as to give to it the primary meaning which is appropriate in that register (unless it is clear that some other meaning must be given in order to carry out the statutory purpose or to avoid injustice, anomaly, absurdity or contradiction).  In other words, statutory language must always be given presumptively the most natural and ordinary meaning which is appropriate in the circumstances."

10. In Agfa-Gavaert, their Honours then added at 398-399:

    "When construing revenue statutes that utilise trade or technical terms, therefore, the law generally favours interpretation of the terms as they are understood in the trade to which the statute applies.  In Herbert Adams Pty Ltd v Federal Commissioner of Taxation (1932) 47 CLR 222 at 227, Dixon J said: 'A revenue law directed to commerce usually employs the descriptions and adopts the meanings in use among those who exercise the trade concerned.' The courts have also said that it may be less difficult to establish a trade meaning which extends the ordinary meaning of an expression than one which limits the ordinary meaning in a specialised way. (footnote omitted) However, the 'presumption' in favour of trade meaning in revenue statutes does not deny the possibility that words used in a revenue statute directed to commerce are to be understood in their ordinary meaning (footnote omitted)."

11. Pearce and Geddes nonetheless suggest at page 243 that, despite general statements that would seem to minimise distinctions between taxing and other legislation, it seems likely that the courts will maintain the view that "it is for the Crown to show that a taxing statute imposes a charge on a person sought to be taxed", as Scarman LJ suggested in C & J Clark Limited v Inland Revenue Commissioners [1975] 1 WLR 413 at 419.

12. The interpretation issue that arises in this case has not been dealt with in any earlier case.  There is no particularly helpful precedent authority on the issue.  Moreover, the interpretation difficulty has now largely been removed because, with effect from 1 July 2001 (after the date of the relevant share transfer in this case) the Financial Relations Agreement (Consequential Provisions) Act 1999 (WA) deleted Item 4A(1)(f), with the result that transfers of listed marketable securities are no longer subject to duty. And - just to add to the interpretation intrigue - Item 4A(1)(fa) was then amended to refer to "quoted" rather than "listed" securities!

13. The Explanatory Memorandum to the Financial Relations Agreement (Consequential Provisions) Bill 1999 (WA) indicates (for example, by reference to s 112BA) that the amendment was made to remedy "incorrect references" to shares being "listed" on the stock exchange and the need to replace "listed" with "quoted".

14. The Explanatory Memorandum does not assist greatly in the interpretation issue at hand but it does serve to confirm the analysis set out above in that, at material times, the Wesfi shares were not themselves "listed", but were "quoted" on the ASX; only the entity Wesfi was admitted to the "official list" of the exchange.

15. In these circumstances, the question arises whether the Parliament's use of the expressions "listed" and "not listed" in Items 4A(1)(f) and 4A(1)(fa) of the Second Schedule of the Stamp Act by reference to "securities", refers to the status of the securities as "listed" securities, or to the status of the entity that issued the securities as one currently entered on the "official list".

16. On a quite literal view of the ASX Listing Rules that applied both when Items 4A(1)(f) and 4A(1)(fa) were introduced, and at the date of the relevant share transfer, the shares of Wesfi were not "listed" on the ASX at all, but were subject to "quotation" (subject to the effect of suspension from quotation).  However, Wesfi was entered on the "official list" of the ASX.

17. There is nothing in the ASX Listing Rules that expressly provides for the "listing" of a "security".  Rather, the ASX approves the quotation of a security following the admission of an issuing entity to the official list.  That this is so is confirmed by the explanatory note in Chapter 2 of the ASX Listing Rules that deals with quotation, where it is stated:

    "The first part of this Chapter deals with the + quotation of + securities on admission to the +official list.  In this case, +quotation will be of the +main class of the entity's +securities and any additional class for which +quotation is sought at the time of admission.  If an entity does not meet the tests for +quotation of its +main class of +securities, it will not be admitted to the +official list." (The + symbol indicates a word or term that is defined in Chapter 19 of the ASX Listing Rules)."

18. It is also appropriate to note that in the Explanatory Note to Chapter 17 of the ASX Listing Rules that deals with "Trading Halts, Suspension and Removal", it is stated that "suspension does not amount to a permanent ending of +quotation, and does not mean that the +securities are not quoted +securities."  That Explanatory Note goes on to state that:

    "If the entity is removed from the +official list, +quotation of all its +securities ends.  Application for admission to the +official list and +quotation of +securities would have to made again and granted, before the +securities could be quoted again."

19. The question therefore arises whether, when the legislature used the expressions "listed" and "not listed" by reference to securities in Items 4A(1)(f) and 4A(1)(fa) of the Second Schedule of the Stamp Act, it effectively meant "listed for quotation" in the sense that the shares could be traded at the time of transfer, or, by contrast, simply meant securities "in an entity" that, at the time of the transfer, is listed on the stock exchange, whose shares are listed for quotation (even if suspended from actual quotation at the material time).

20. As can be seen from the subsequent amendments achieved by the Financial Relations Agreement (Consequential Provisions) Act 1999 (WA), the current position is now clear - the security must be "quoted" on the stock exchange. From this, on the one hand, one might be tempted to conclude that Parliament made clear what it had previously intended. On the other hand, Parliament might have intended to fill a gap it had identified in the stamp duty regime. However, in my view, neither the amending legislation nor the Commonwealth and State corporations legislation referred to by counsel for the Commissioner materially assists in the proper interpretation of Items 4A(1)(f) and 4A(1)(fa). Nor do I consider that s112FA of the Stamp Act as it applied at the relevant date helps the interpretation exercise. By adverting to the concept of "listed for quotation" s 112FA only adds to but does not resolve the interpretation dealt with. The fact that Div 3 in which s 112FA appears, apparently has to do with on market broker transactions, as senior counsel for the application emphasises, in the end it does not aid the proper interpretation of Item 4A(1)(f). Rather, I think one must look at the words actually used by the Parliament and seek to understand them in the context of the taxing statute in which they have been used.

1. As a matter of grammar, the first thing to note about the two Items is that the Parliament has focussed its attention for the purpose of imposing a stamp duty on "the marketable security" which is "listed on a prescribed stock exchange", not the entity which has issued that security. 

2. It is acknowledged by each of the parties that the marketable securities in question in this case - the shares of Wesfi - were not, at the material times, themselves "listed".  Only the entity Wesfi could be said to be "listed" in any relevant sense, and only then in the sense that it had been "admitted" by the ASX to the official list on that exchange.

3. Of course, a necessary ingredient of the securities of Wesfi being subject to "quotation" on the ASX was that the entity itself was admitted to the ASX.  While it might colloquially be said that the shares of Wesfi were listed on the stock exchange as a result of this process - because the issuing entity was entered on the "official list" of the ASX - the correct statement of the position at the material time was that Wesfi was admitted to the "official list" of the ASX and its shares were subject to quotation on the ASX, but suspended from quotation.

4. This meant that, at the relevant time, the Wesfi shares could not be bought and sold on the ASX, could not be traded on‑market.  While Wesfi continued to be admitted to the official list of the ASX and, according to the Chapter 17 explanatory note of the ASX Listing rules, the suspension from quotation did not constitute a "permanent ending" of quotation, and did not mean the securities were "not quoted securities", the fact was its shares were not marketable on the exchange, as they could not be traded on‑market; however, they were capable of being traded off‑market - as indeed they then were.

5. In dealing with the interpretation issue it may be helpful to attempt to understand why it was - or may have been - that the Parliament discriminated between different transactions in the manner of Items 4A(1)(f) and 4A(1)(fa) – indeed, as it still does in respect of securities which are quoted and not quoted.

6. The current position is – it seems as a result of an initiative originally taken by the State of Queensland – that no Australian jurisdiction currently charges stamp duty in respect of a share transfer where the share is quoted on a recognised stock exchange.  No doubt all States were effectively obliged to follow the Queensland lead to limit the listing of entities outside their jurisdictions.

7. Counsel for the Commissioner advised the Tribunal that the marketable securities duty has been part of the Stamp Act for a number of years. Prior to 1994, duty was charged in accordance with Items 4(3), (3a), (4) and (4a) of the Second Schedule of the Stamp Act. The different items of the Second Schedule applied depending on whether the relevant transaction involved sales and purchases of securities by brokers (in which case Items 4(4) or 4(4a) would apply) or trading by members of the UK Stock Exchange (in which case Item 4(3a) would apply) or other conveyances (in which case Item 4(3) would apply).

8. The Stamp Amendment Act 1994 (WA), which was assented to on 26 August 1994 and came into operation on 1 September 1994, deleted those various sub-items and inserted a new Item 4A into the Second Schedule, which comprised sub-items (1), (2), (3) and (4). Prior to this amendment, Item 4(3)(c) of the Second Schedule provided that the duty payable on the conveyance or transfer of any other marketable security, where the amount or value of the consideration was $100 or more, was 60 cents per $100 or part thereof. The equivalent provision in the new Item 4A seems to have been in the form of sub‑item (1)(f), which provided for duty of 60 cents for every $100 or part thereof of the amount or value of consideration. This sub‑item (together with sub‑items (2)(a), (3)(a), (4)(a)) was amended by the Stamp Amendment (Marketable Securities Duty) Act 1995 (WA), to introduce differential rates of duty.

9. Perhaps it can be surmised from this that stock exchanges in Australia and the financial market generally have pushed for lower transaction costs in relation to the trading of shares on recognised stock exchanges, in order to encourage the use of equity markets in Australia.

10. Perhaps it can also be surmised that Parliament's imposition of a lower rate of stamp duty on share transfers where the shares are "not listed" on a recognised stock exchange reflects a concern that shares are more difficult to value for duty purposes when not on‑market and so a higher duty is applied to avoid any possibility of an underpayment of duty. 

11. In any event, the view that the value of a share in a company can more readily or easily or reliably be assessed and accepted where the share is traded on a recognised stock exchange than when it has not been so traded, has, in my view, some support on the legal authorities that have been cited to the Tribunal, and some implications for the interpretation question facing the Tribunal. 

12. It may be accepted – as the decisions of Barrett J in Australand and McClelland J in Fire and All Risks suggest - that once a share is removed from a recognised stock exchange its valuation becomes more problematic.  This is a simple proposition that might be thought to derive from the fact that off‑market transactions will not always have the same features as transactions that occur on‑market.

13. In the present case, for example, Wesfi shares were suspended from quotation on the ASX by reason of a proposed scheme of arrangement whereby the shares in Wesfi were to be acquired by the applicant.  This scheme of arrangement had to be approved by the Supreme Court of Western Australia.  The suspension of Wesfi's shares on the ASX permitted this to happen and for an off‑market transfer of shares to occur.  In such circumstances, it is not obviously the case that that transfer of shares would necessarily be for the value the shares previously had when quoted on the ASX prior to suspension.  A variety of commercial considerations concerning the operation of Wesfi might well have come into play in determining the value of the shares for the purposes of the off‑market transaction.

14. All this suggests the Commissioner's contention that the Parliament intended that where shares are capable of being traded on a recognised stock exchange - where they have a known market value -  they should be subject to a different, and lower, rate of stamp duty, than those traded off‑market.

15. It follows, on this line of reasoning, that when the Parliament referred in the Second Schedule Item 4A(1)(f) of the Stamp Act to a "marketable security … listed on a prescribed stock exchange", it intended the expression to mean "marketable security … listed for quotation on a prescribed stock exchange", in the sense that the shares could actually be bought and sold on‑market at the relevant time.

16. Either the Parliament in Item 4A(1)(f) intended the measure of duty to be in respect of "marketable securities in a company …listed on a prescribed stock exchange" (emphasis added) (or possibly, "listed for quotation under the rules of the stock exchange even though suspended from quotation" (emphasis added)); or it intended the duty payable to depend on whether the marketable securities were themselves, at the relevant time, both capable of being listed for quotation and of being traded on the stock exchange.

17. In the end, I prefer the view that the Parliament intended the lower rate of stamp duty only to be available in respect of a transfer of shares where, at the time of transfer, the shares were both subject to quotation and able to be traded on a recognised exchange, and that this is how the word "listed" should be interpreted where it appears in the Second Schedule, Item 4A(1)(f).

18. In these circumstances, it follows, in my view, that the Wesfi shares, the subject of the share transfer, were "not listed on the prescribed stock exchange" at the relevant time and so duty was payable pursuant to Item 4A(1)(fa) of the Second Schedule of the Stamp Act, as the Commissioner assessed. This is the correct and preferable decision: State Administrative Tribunal Act 2004, s 27(2).

19. In these circumstances, the Tribunal would affirm the decision of the Commissioner and dismiss the review application.

The question of penalty tax

1. A question of penalty tax arises as a secondary issue. 

2. The parties acknowledge that the primary position is that at the relevant date a penalty tax was payable under s 75JE(1) of the Stamp Act whenever the claw‑back provision applied, as it did here. In this case, the relevant penalty tax calculated under s 75JE was $156 619.

3. This is not a situation in which the Commissioner is called upon to exercise a primary discretion as to whether or not a penalty should be paid. The legislature has made it clear that a penalty is payable. However, at the relevant time the Commissioner had the power to relieve the obligation to pay the penalty under s 75JE(2).

4. The Tribunal has been informed that the Commissioner did not have a published policy concerning the circumstances in which the power to relieve the obligation to pay the penalty tax would be exercised and that, in effect, the power was exercised on a case by case basis in exceptional circumstances.

5. The applicant contends that the Commissioner erred in fact and in law in not remitting the penalty tax payable.  The applicant contends that:

   •at the relevant time the Commissioner had a discretion under s 75JE(2) of the Stamp Act to remit the penalty tax;

   •the Commissioner's general policy and practice is and was to reduce the maximum penalty tax rate where there has been voluntary disclosure and no deliberate evasion of the payment of duty;

   •on 29 March 2001 the applicant and Laminex  intended to remain associated bodies corporate for more than five years, and at that time, the applicant had no intention to sell Laminex;

   •by letter dated 18 October 2002 from PWC to the Commissioner, the applicant voluntarily disclosed to the Commissioner that a transaction was being contemplated and that if that contemplated transaction proceeded, the applicant would be required to notify the Commissioner of a change in beneficial ownership of the shares in Laminex Group Limited;

   •by letter dated 21 November 2002 from PWC to the Commissioner, the applicant voluntarily disclosed to the Commissioner that the applicant and Laminex had ceased to be associated bodies corporate for the purposes of s 75JB of the Stamp Act;

   •the applicant has kept the Commissioner fully informed at all times of actual transactions relevant to the assessment of stamp duty on the Share Transfer Form and contemplated transactions that may affect the assessment of duty on the Share Transfer Form; and

   •in these circumstances the penalty tax ought to be further remitted to nil or to a lower amount than has been assessed.

6. In response to these contentions the Commissioner contends that the propositions put forward on behalf of the applicant constitute different ways of saying only two things:

   •that the applicant had no intention of triggering the claw‑back when it applied for the corporate reconstruction exemption;

   •upon triggering the claw‑back, the applicant complied with its statutory obligations with respect to informing the Commissioner.

7. As to the first of these propositions, the Commissioner says this describes every applicant for an exemption who acts without intention to defraud the Commissioner.  The applicant does not specially distinguish itself from the vast majority of applicants by relying on this conduct.

8. In respect to the second proposition, the Commissioner says this is a statutory requirement under the Stamp Act, breach of which would carry its own consequences. Again, the applicant does not make out any special case for leniency by pointing to its compliance with duties it was required to meet in any event under the Act under threat of other consequences.

9. The Commissioner contends there is no distinction to be drawn, for present purposes, between the "early disclosure" on 18 October 2002, and the statutory disclosure on 21 November 2002.  The Commissioner says the former is irrelevant to the Commissioner and the latter is required in any event; and that the Commissioner took this factor fully into account by deciding not to impose any penalty tax effectively for the period after 18 October 2002.

10. From this analysis the Commissioner says that it can be seen that the applicant seeks relief from the penalty tax on the essential basis that it acted bona fide in seeking the exemption, and complied with the Stamp Act when circumstances changed so as to trigger the claw‑back.

11. The Commissioner says, therefore, that the applicant implicitly relegates the intention of the penalty tax to that of punishing an entity lacking such bona fides in its attitude to compliance when the claw‑back is triggered in a particular case.

12. The Commissioner contends this is an unduly restrictive analysis of the penalty tax provision, which evidently has a range of purposes, including but not limited to that of requiring entities to very carefully consider the likely future circumstances within five years before seeking exemption, and ensuring that the Commissioner unquestionably receives full recompense for the duty not paid during the period when the exemption was considered to apply. 

13. The Commissioner contends it is difficult to accept that full remission should be an entitlement in circumstances where the applicant did no more than seek the exemption in good faith and complied with its legal obligations when the claw‑back was triggered.  Such a construction leaves no room for the operation of criteria which must be part and parcel of the scheme, and relegates the discretion to a matter of choosing between those who appear to have acted lawfully and those who appear to have not done so.  This proposition, the Commissioner says, should not be accepted.

14. The Tribunal accepts the substance of the contentions made on behalf of the Commissioner concerning factors which may properly be taken into account in the exercise of the power of the Commissioner to relax the obligation to pay a penalty tax. 

15. In the particular circumstances of the present case where the claw‑back provisions took effect later in 2002 following the share transaction in March 2001, albeit that there is no suggestion that there was any lack of good faith in relation to the claim for exemption at material times, it is not unfair of the Commissioner to decide not to exercise the power to relieve the obligation to pay penalty tax in full in relation to the period up to 18 October 2002.  This ensures, as the Commissioner has put it, that entities "very carefully consider the likely future circumstances within five years before seeking exemption" and that the Commissioner "unquestionably receives full recompense for the duty not paid during the period when the exemption was considered to apply".

16. The Tribunal does not consider that the exercise of the Commissioner's power in this way is either beyond power, in a legal sense, or administratively unjust, in a revenue collection sense.  In those senses it is both the correct and preferable decision: see State Administrative Tribunal Act 2004, s 27(2).

17. In the circumstances of this case, the Tribunal would affirm the Commissioner's decision to impose a penalty tax in the sum imposed and dismiss the review application.

Conclusion and orders

1. For these reasons, the Tribunal;

   (1)affirms the decision of the Commissioner of State Revenue that duty is payable on the relevant transfers at the rate specified in Item 4A(1)(fa) of the Stamp Act 1921; and

   (2)affirms the decision of the Commissioner that penalty tax is payable in the sum of $156 619.

   I certify that this and the preceding [115] paragraphs comprise the reasons for decision of the State Administrative Tribunal.

   ___________________________________

   JUSTICE M L BARKER, PRESIDENT