Arco Resources Ltd v Commissioner of Stamp Duties

[1994] QCA 321

IN THE COURT OF APPEAL	[1994] QCA 321
SUPREME COURT OF QUEENSLAND	Appeal No. 237 of 1993
Brisbane
Before	Macrossan C.J. Davies J.A. Shepherdson J.

[Arco Resources & anor. v. Commissioner of Stamp Duties]

IN THE MATTER of The Stamp Act

1894

- and -

IN THE MATTER of an appeal by ARCO RESOURCES LIMITED and by PL MINING PTY LTD against an assessment of stamp duty by the Comissioner of Stamp Duties on a Sale Agreement dated 26 June 1985

BETWEEN:

ARCO RESOURCES LIMITED First Appellant

AND:

PL MINING PTY LTD Second Appellant

AND:

COMMISSIONER OF STAMP DUTIES Respondent

REASONS FOR JUDGMENT - THE COURT

Judgment delivered 26/08/1994

This is an appeal by way of case stated from an assessment or purported assessment of stamp duty on 25 September 1992 upon a sale agreement said to have been executed on 26 June 1985. Notices of the assessment described it as being made under the provisions of ss. 49C(4) and 54(1) of the Stamp Act. The amount said to be payable by way of duty in the notices was $2,776,101.75, being the ad valorem conveyance on sale duty upon a consideration of $74,109,906. The Commissioner also claimed interest on that sum pursuant to s. 49C(4). The sale agreement referred to appears in fact to have been executed on 24 June 1985 though nothing turns on that discrepancy.

The agreement on its face is one between the appellants by which the first appellant ("Arco") agreed to sell to the second appellant ("PLM") the whole of Arco's interest in a mining joint venture and some shares in two coal mining companies. The sale was expressly made subject to a deed of charge and mortgage which secured a loan from financiers.

The consideration for the sale was said to be $74,109,906 of which $37,500,000 was by the assumption by PLM of Arco's obligations under a loan agreement to the financiers, and the balance of $36,609,906 was to be paid by PLM to Arco on the completion date. The completion date under the agreement was 26 June 1985. PLM assumed the liability referred to but did not, on the completion date or at any date since, pay to Arco the above sum of $36,609,906 or any part thereof.

At the time of execution of the agreement for sale the appellants were associated companies, PLM being a wholly owned subsidiary of Arco. On submitting the agreement to the Commissioner, the appellants sought and obtained exemption from duty pursuant to s. 49C of the Act. The exemption was relevantly sought and granted on the basis of a declaration made by a director of Arco that, amongst other things:

"the Sale Agreement was not within the meaning of s. 49C(2)(d) of the Stamp Act made pursuant to or in connection with an arrangement whereunder:-

(i)  the consideration, or any part thereof, for the assignment was to be provided or received, directly or indirectly, by a person other than the transferor, transferee or a company which at the time the instrument was made was associated with either the transferor or transferee".

After a subsequent, apparently quite lengthy inquiry, on 25 September 1992 the Commissioner disallowed the exemption and made the assessment to which we have referred. In disallowing the exemption, the Commissioner purported to act pursuant to s. 49C(4) and in making the assessment he presumably purported to act pursuant to s. 22(2)(a)(ii).

Section 49C(4) relevantly provides:

"(4) Where a claim under this section for exemption (total or partial) from payment of stamp duty has been allowed and -

(a) it is subsequently discovered that any declaration or other evidence furnished to the Commissioner in support of the claim was untrue in a material particular; ...

...
the claim shall be deemed to have been disallowed
and an amount equal to the duty remitted or
deducted shall become payable forthwith upon such
discovery ... and may be recovered in any court of
competent jurisdiction from either the transferor
or the transferee as a debt due to Her Majesty
..."

The appellants concede that, if he correctly disallowed the exemption, the Commissioner was entitled to and could make the assessment which he purported to make. Notwithstanding the concession it is necessary to determine its correctness because if, on the correct construction of s. 49C(4), the assessment was not one authorised by the Act the appeal would not be properly before this Court; though the Commissioner might, in that case, still have a remedy against the appellants by simply suing as contemplated by sub-s. (4).

The argument against the right of the Commissioner to assess, as he purported to do, is that s. 49C(4) is the only provision providing specifically for what happens in the event that the Commissioner subsequently discovers that a declaration furnished to him in support of a claim for exemption is untrue; and consequently the remedy which is provided in that sub-section is the only remedy open to the Commissioner in that event.

The contrary view is that that part of the final paragraph of sub-s. (4), which we have quoted, after the words "the claim shall be deemed to have been disallowed", is intended to provide an additional remedy to the Commissioner in the case where, in allowing the exemption, the Commissioner had also assessed the amount of duty which would be payable if the instrument were not exempt and remitted or deducted that amount. The words "and an amount equal to the duty remitted or deducted" appear to envisage that an amount has previously been assessed and then remitted or deducted.

Sub-section (2), which confers the exemption, makes no reference to assessment or remittal or deduction, simply providing that, if "it is shown to the satisfaction of the Commissioner" that the conditions referred to are satisfied, the instrument should not be chargeable with duty. The difference between these provisions supports the view that the Commissioner, having been so satisfied, need not assess in which case, upon deemed disallowance of the exemption, the instrument would become assessable; or he could assess and remit or deduct duty in which case, upon deemed disallowance of the exemption, he could simply sue for "an amount equal to the duty remitted or deducted".

Although the meaning of sub-ss. (2) and (4) is by no means clear, we think that the latter interpretation is preferable. Sub-section (2) cannot readily be construed so as to require an assessment and remittal or deduction; yet it is difficult to see how the Commissioner could, on disallowance, merely sue for "an amount equal to the duty remitted or deducted" where no assessment and remittal or deduction have been made. Indeed, it may be impossible in some cases to ascertain an amount payable before an assessment is made. We therefore think that the Commissioner in the present case, having effectively disallowed the exemption, was entitled to make an assessment of duty on the instrument as he purported to do.

The Commissioner disallowed the exemption and assessed the agreement for sale to ad valorem duty because he "discovered" that the declaration made by the director of Arco was untrue in the particular part quoted above. Sub- section (2)(d) of s. 49C, pursuant to which the exemption was granted, and which is paraphrased in that part of the declaration quoted above, provides that stamp duty prescribed under the heading "Conveyance or Transfer" shall not be chargeable on an instrument where it is shown to the satisfaction of the Commissioner, inter alia, that:

"(d) the instrument was not made pursuant to or in connection with an arrangement whereunder -

(i)  the consideration, or any part thereof, for the conveyance, transfer or assignment was to be provided ... indirectly, by a person other than ... a company which at the time the instrument was made was associated with either the transferor or transferee."

The facts discovered by the Commissioner and stated in the Case show that, from at least as early as October 1984, there had been negotiations between Arco and NML for the sale by Arco to NML of Arco's interest in a coal mine at German Creek, which appears to have comprised the joint venture interest and the shares. The proposed purchase price was to consist of NML accepting liability under the loan agreement for $37,500,000 and a cash payment determined in accordance with a formula which included inflation, the original base sum being $34,500,000. It appears that these negotiations included an agreement by Arco to transfer the interest first to a subsidiary; and then to procure the subsidiary to issue ten ordinary shares to NML and convert all of Arco's shares in the subsidiary to cumulative preference non-voting shares. Reference was made during the course of negotiations to the obtaining of an exemption under s. 49C. PLM was acquired as a wholly owned subsidiary of Arco in about March 1985.

When seen in the context of these negotiations and subsequent events the sale agreement of 24 June 1985 was plainly the first step in a chain of events contemplated by those negotiations to give effect to a sale by Arco to NML, utilising a stamp duty exemption under s. 49C by the insertion of an intermediary, PLM.

Documents executed and other steps taken on and after 13 August 1985 completed the transaction between Arco and NML in the way contemplated in the original negotiations. NML agreed to pay Arco a capital sum which by then had become a base sum of $36,023,222 subject to certain adjustments, and to accept primary liability to pay all principal, interest and other moneys payable under the loan agreement; and Arco agreed to procure PLM to assign to NML the sale proceeds of the joint venture, to procure PLM to allot ten ordinary shares to NML and to reclassify Arco's shares as redeemable preference shares without voting rights, to forgive PLM its indebtedness to Arco arising out of the sale agreement, and to pre-pay the lenders under the loan agreement an amount such that the amount outstanding under the loan agreement at completion would be $37,500,000. PLM then completed those share re-arrangements and the Arco directors of PLM were replaced by NML directors. PLM also assigned the sale proceeds to NML. At a later date Arco transferred to NML its redeemable preference shares in PLM.

It was on these facts that the Commissioner disallowed the claim for exemption which he had previously allowed and assessed the agreement for sale to ad valorem duty.

The appellants accepted that they carried the onus of showing that the assessment was wrong. However, they submitted that the Commissioner was not entitled to disallow the exemption claim unless:

1.   the declaration furnished to the Commissioner in support of the claim was untrue in a material particular, and

2.    the Commissioner discovered that fact.

They submitted that it followed that they were entitled to succeed in this appeal unless, on the facts in the case stated, the consideration for the assignment and transfer by Arco to PLM of the participating interest and the shares, or part of that consideration, was provided, at least indirectly, by NML. And they submitted, in reliance on such authorities as McCaughey v. The Commissioner of Stamp Duties (1945) 46 S.R.(N.S.W.) 192 at 208, that this Court had no power to draw from the facts stated inferences of the existence of other facts.

The submission that the Commissioner could not act under sub-s. (4) unless the consideration, or part of it, was in fact provided by NML, is wrong in our view for two reasons.

In the first place, as Mr Gotterson Q.C., for the Commissioner, submitted, the word "discovered" in sub-s. (4)(a), which plainly means discovered by the Commissioner, is more consistent with a requirement that he should bona fide reach the conclusion referred to in that provision than that it should be established as an objective fact which he discovered. Francis v. Commissioner of Stamp Duties (NSW) (1954) 91 C.L.R. 368 supports that submission. The section there under consideration provided that "if it is discovered that any duty payable has not been fully assessed and paid" the Commissioner might make a further assessment of the duty so unpaid. Sir Owen Dixon interpreted this provision as referring to "a bona fide conclusion at which the Commissioner has newly arrived on materials before him that duty payable has not been fully assessed and paid". Similarly, at 410, Kitto J. equated the phrase "if it is discovered" to an expression such as "if it is perceived". It is true that in that case, but possibly not in this, the matters to be discovered included matters of opinion, but we do not think that the views which we have quoted turned on that possible difference.

Secondly, that construction is more consistent with reading sub-s. (4) in the context of the section as a whole. In order for the exemption to be allowed in the first place, it is sufficient if "it is shown to the satisfaction of the Commissioner" that a number of conditions exist including that no part of the consideration is provided by a company unassociated with either the transferor or the transferee.

It would be curious if, in order for the Commissioner to allow the exemption, that condition had to be shown only to his satisfaction but that, in order for him to disallow it after discovering further facts, the absence of that condition must be shown as an objective fact.

Sub-section (4) contemplates that where the Commissioner, having assessed but remitted duty under sub-s. (2), discovers a declaration to be untrue in a material particular, he may immediately sue for an amount equal to the duty remitted; but it follows from what we have said that, in that action, the defendant would be able to raise as a defence that the declaration was not untrue in fact.

But where, as in this case, the Commissioner, having allowed the exemption but not having assessed and remitted duty, assesses after discovering the untruth, the appellants against that assessment, in order to prove that the assessment was wrong, must prove that it was not open to the Commissioner to have perceived that the declaration was untrue in respect of the matter quoted above; just as, if the Commissioner had, in the first place, not been satisfied of that matter and had consequently assessed, an appellant against that assessment would have had to show that it was not open to the Commissioner to fail to be satisfied: J.A.W.

& S. Property Management Nominees Pty Ltd v. Commissioner of

Stamp Duties (1989) 1 Qd.R. 530, 534-5, 538-9; Quetel Pty Limited v. Commissioner of Stamp Duties (1993) 2 Qd.R. 57, 62.

The appellant therefore must show, on the facts stated in the case, that it was not open to the Commissioner to have been satisfied, in effect, that at least part of the consideration for the assignment effected by the agreement for sale of 24 June 1985 was provided by NML.

Even if we were to assume that "consideration" in sub-s. (2)(d)(i) were strictly limited to the consideration prescribed by cl. 3 of the agreement for sale, that is a promise to assume liability to the financiers to the extent of $37,500,000 and a promise to pay $36,609,906, we would be inclined to think that, when the agreement is looked at in the context of the negotiations which preceded it and the events which followed, that consideration was, at least indirectly, provided by NML. It will be recalled that NML, on 13 August 1985, agreed to pay Arco a capital sum, being a base sum of $36,023,222 subject to certain adjustments, and to accept primary liability to the financiers under the loan agreement; and that in return it, in effect, obtained Arco's joint venture interest and the shares in the two coal mining companies. In any event, we would not be prepared to say that it was not open to the Commissioner to so conclude.

Were it necessary to decided the question, like Lords Reid and Guest in Shop and Store Developments Ltd v. Commissioners of Inland Revenue [1967] A.C. 472 at 489-490 and 501 respectively, we would not be inclined to give "consideration" such a narrow meaning. The context, including the phrase "directly or indirectly" and the evident purpose of the section which we think is correctly stated in the passage to which we have referred from the speech of Lord Reid, in reference to an analogous provision in the Finance Act 1967 (UK), are against such a narrow view. But it is unnecessary to express any final view on this or to consider the operation of sub-s. (6)(a).

The appellants therefore have failed in their appeal so far as it relates to the disallowance of the exemption. They contend however that, even if that is so, the instrument is not dutiable at the ad valorem rate for a conveyance on sale because an unapportioned part of the consideration was payable for an assignment of a mining lease application and a mining lease application is not property and consequently not subject to assessment of ad valorem duty upon its assignment.

The submission appears to be correct to the extent that it asserts that an unapportioned part of the consideration payable was for an assignment of a mining lease application: see cl. 2 and the definition of "mining lease" in cl. 1.1.

However, we do not think that there is any substance in the contention that the mining lease application was not property. To the contrary, a consideration of the Mining Act 1968 provides sufficient indicia to conclude otherwise.

An application gave its holder rights capable of protection. The applicant could maintain an action for damages for trespass against persons who wrongfully interfered with the land the subject of the application, and further, to recover any mineral taken or its value: s. 23(2). Until the application had finally been determined the holder was liable to pay a sum equivalent to the rent which would be payable with respect to a mining lease granted over the land: s. 27(3). And with the Minister's consent the application itself could be transferred or assigned to third persons: s. 37(1)(b). The language of sub-s. (1)(b) perhaps provides the clearest indication of the proprietary nature of an application for a mining lease. It provided that not only an application which had not been disposed of could be transferred, but also that 'any share or interest therein' could be transferred or assigned. And no doubt in the present case it was of considerable commercial value. While the application may not have conferred upon its holder an estate or interest in the land to which it related we would conclude that the application itself was property. Compare

Uniting Church in Australia Property Trust (NSW) v. Immer

(No. 145) Pty Ltd (1991) 24 N.S.W.L.R 510 at 511. We would
therefore reject the appellants' contention.

The remaining question argued before this Court was the Commissioner's entitlement to interest. He claimed interest pursuant to s. 49C(4). That sub-section, after providing, in the part which we have quoted above, that an amount equal to the duty remitted or deducted shall become payable forthwith and may be recovered in a court of competent jurisdiction, adds:

"together with interest thereon at the rate of 20 per centum per annum for the period commencing on the date the instrument in question was made and continuing until payment of the amount is made."

The figure 20 was inserted by amendment of 10 April 1987, the rate prior to that date being 6%. The Commissioner therefore sought interest on the dutiable amount at 6% from 26 June 1985, the date asserted in the Case as the date of the agreement, to 9 April 1987, and at 20% from 10 April 1987 until the date of payment.

A claim for interest was made in the notice of assessment and a question was argued as to whether the amount claimed is part of the assessment and consequently properly the subject of this appeal. Plainly it is not part of the assessment but results from a right which arises only upon assessment. However, both parties agreed that the Commissioner's claim for interest, having been fully argued, should be determined by this Court and the appellants sought, in the alternative, declaratory relief. We propose to express a view on that question and, if necessary, to make an appropriate declaration.

Read literally, the concluding words of sub-s. (4) which we have quoted would apply only to the case where the Commissioner is in a position to and pursues the additional remedy which the immediately preceding words confer. This would mean that he could recover interest under sub-s. (4) if he had earlier assessed but remitted the duty; but that, having taken the course which he did in this case, his only claim for money in additional to the amount assessed could be pursuant to s. 26(3)(f).

In our view, that would be an absurd result and one which the legislature could not have intended. There can be no valid basis for distinguishing, for the purposes of a claim for interest, between the two courses open to the Commissioner upon discovering a declaration furnished in support of a claim for exemption to be false in a material particular. We would therefore construe the words last quoted as applying to the case where the Commissioner, having made the discovery referred to, assesses as well as where, because he had earlier made an assessment but remitted or deducted duty, he proceeds to sue.

Notwithstanding obvious difficulties in its construction, the view which we prefer is open and is one which more obviously accords with the intent of the section.

The appellants submit that, even if they are liable to pay interest, the rate of that interest must be 6% for the whole of the period from the date of the instrument until payment.

To require interest at 20% from 10 April 1987 would, they say, be to give the amending provision of that date a retrospective operation. The Commissioner, on the other hand, relies for his right to claim interest at 20% from that date upon the fact that the "discovery", which he says is evidenced by the determination disallowing the exemption and the assessment, occurred after the amendment. However, we do not think that the date of discovery is relevant in the present case because the amount became payable, in the circumstances in this case, by reason of the Commissioner's assessment not upon discovery.

The amount of duty assessed, together with interest if any, became payable upon the making of the assessment or at least within one month thereof: s. 26(3)(f). On that date, the Act provided that interest was payable at 20% from the date the instrument was made until the date of payment. To give those words their ordinary meaning at the time when the provision operates, that is at the time when the debt becomes due, is not to give it any retrospective operation.

The Commissioner would therefore have been entitled, in our

view, to interest at 20% for the whole of this period.

The appellants sought to draw an analogy between the amendment to which we have referred and another amendment made on the same day to sub-s. (4)(b). That provision enables the Commissioner to disallow a claim for exemption previously allowed if the transferor and transferee have ceased to be associated, other than be reason of liquidation, within five years after the date of operation of the assignment in question. The term of five years was substituted for a term of three years by the amending Act.

The appellants submitted, correctly in our view, that if, prior to the amending Act, the transferor and transferee had remained associated for three years, the amendment would not permit the Commissioner to disallow the exemption if, after the date of the amendment, they ceased to be associated within five years from the date of the assignment. But that is because, on the construction of s. 49C as a whole, the parties to the assignment, at the time they made it, were entitled to an exemption if, amongst other things, they remained associated for three years. To apply the later amending provision in the above way to such an assignment after an exemption had been granted would be to give it retrospective operation. The interest provision, by contrast, cannot arise for consideration until discovery or assessment. Consequently, it is the provision in force at that date which determines the liability for interest.

As we have already indicated, the Commissioner did not seek interest at 20% from the date the agreement for sale was made or required to be completed. In our view, he is entitled to the interest which he claims. In those circumstances, we are not inclined to make any declaration.

However we are prepared to allow either party, within 14 days of the publication of these reasons, to make submissions in writing on this question.

We would answer the questions stated, so far as they are properly answerable, as follows:

(a) In the circumstances, did sub-section 49C(4) apply to disallow the exemption from stamp duty on the Sale Agreement?

Yes.

(b) If "yes" to (a), was duty assessable on the Sale Agreement under sub-section 54(1), sub-section 49C(4) and/or some other provision of the Stamp Act?

Under sub-section 54(1).

(c) If "yes" to (b), what was the amount of the stamp duty to which the Sale Agreement was liable to be assessed?

$2,776,101.75.

(e) How shall the costs of and incidental to this Case be borne and paid?

The appellants should pay the Commissioner's costs.

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND Appeal No. 237 of 1993

Brisbane

[Arco Resources & anor. v. Commissioner of Stamp Duties]

IN THE MATTER of The Stamp Act

1894

- and -

IN THE MATTER of an appeal by ARCO RESOURCES LIMITED and by PL MINING PTY LTD against an assessment of stamp duty by the Comissioner of Stamp Duties on a Sale Agreement dated 26 June 1985

BETWEEN:

ARCO RESOURCES LIMITED First Appellant

AND:

PL MINING PTY LTD Second Appellant

AND:

COMMISSIONER OF STAMP DUTIES Respondent

____________________________________________________________

_____

MACROSSAN C.J.
DAVIES J.A.

SHEPHERDSON J.
____________________________________________________________

_____

Judgment delivered 26/08/1994

REASONS FOR JUDGMENT - THE COURT
____________________________________________________________

_____

ANSWERS TO THE QUESTIONS STATED AS FOLLOWS:

(a) In the circumstances, did sub-section 49C(4) apply to disallow the exemption from stamp duty on the Sale Agreement?

Yes.

(b) If "yes" to (a), was duty assessable on the Sale Agreement under sub-section 54(1), sub-section 49C(4) and/or some other provision of the Stamp Act?

Under sub-section 54(1).

(c) If "yes" to (b), what was the amount of the stamp duty to which the Sale Agreement was liable to be assessed?

$2,776,101.75.

(e) How shall the costs of and incidental to this Case be borne and paid?

The appellants should pay the Commissioner's costs.

Either party may, within 14 days of publication of these reasons, make written submissions on the question of interest.

____________________________________________________________

_____

CATCHWORDS:	STAMP DUTIES - assessment - agreement for sale between appellants for sale of Arco's interest in mining joint venture and some shares in mining companies to PLM - CSD allowed exemption from ad valorem duty on basis of declaration made by director of Arco that the agreement was not one in which part of the consideration was to be provided by a person other than the transferor, transferee or an associated company - exemption subsequently disallowed and assessment made - whether remedy under s. 49C(4) Stamp Act is only remedy where Commissioner disallows exemption, or whether it provides additional remedy where an amount of duty previously assessed had been remitted - whether Commissioner entitled to interest where assessment made on disallowing exemption
Section 49C(4) Stamp Act
STAMP DUTIES - liability of transaction - whether not open for the Commissioner to have been satisfied that at least part of the consideration was provided by unassociated third party
STAMP DUTIES - conveyance or transfer on sale - unapportioned part of consideration for the agreement was for assignment of mining lease application - whether application was 'property' and subject to ad valorem duty
Mining Act 1968 (Qld)
Counsel:	Mr F.L. Harrison Q.C. for the Appellants Mr R.W. Gotterson Q.C. with him Mr R.J. Douglas for the Respondent
Solicitors:	Messrs Feez Ruthning for the Appellants The Crown Solicitor for the Respondent
Date(s) of Hearing:	24 May 1994