Barob Pty Ltd v Commissioner of Stamp Duties
[1998] QCA 223
•7/08/1998
| IN THE COURT OF APPEAL | [1998] QCA 223 |
| SUPREME COURT OF QUEENSLAND |
Appeal No. 6356 of 1997. Appeal No. 1063 of 1998.
Brisbane
[Barob P/L v. Com. of Stamp Duties]
BETWEEN:
BAROB PTY LIMITED
A.C.N. 001 024 915
(Applicant) Appellant
AND:
COMMISSIONER OF STAMP DUTIES
(Respondent) Respondent
CASE STATED BY THE COMMISSIONER OF STAMP DUTIES
PURSUANT TO SECTION 24 OF THE STAMP ACT 1894
___________________________________________________________________________
Pincus J.A.
Thomas J.A.Derrington J.
___________________________________________________________________________
Judgment delivered 7 August 1998
Joint reasons for judgment of Pincus J.A. and Derrington J., separate concurring reasons of Thomas
J.A.
___________________________________________________________________________
APPEAL NO. 1063 OF 1998
1. QUESTION (a) IS DETERMINED AS FOLLOWS -
THE COMMISSIONER OUGHT TO HAVE BEEN SATISFIED THAT THERE HAD BEEN PRODUCED EVIDENCE THAT THE CONTRACT IN ISSUE, DATED 28 JANUARY 1989, WAS RESCINDED WITHIN 30 DAYS OF ITS EXECUTION WITHIN THE MEANING OF S. 54(7) OF THE STAMP ACT 1894.
2. QUESTIONS (b) AND (c) - UNNECESSARY TO ANSWER.
3. QUESTION (d) - BY THE COMMISSIONER.
4. ORDER THAT THE DUTY PAID BY THE APPELLANT IN CONFORMITY WITH THE ASSESSMENT DATED 24 FEBRUARY 1997, TOGETHER WITH ANY PENALTY PAID IN RESPECT THEREOF, BE PAID TO THE APPELLANT BY THE COMMISSIONER, TOGETHER WITH THE APPELLANT’S COSTS OF THE APPEAL, TO BE TAXED.
APPEAL NO. 6356 OF 1997
1. LEAVE TO APPEAL SOUGHT IN THE NOTICE OF MOTION DATED 17 JULY 1997 GRANTED AND APPEAL ALLOWED, BUT ONLY TO THE EXTENT OF SETTING ASIDE THE ORDER FOR COSTS THEREIN REFERRED TO, MADE ON 20 JUNE 1997.
2. NO ORDER FOR COSTS, HERE OR BELOW, IN RESPECT OF THE PROCEEDINGS FOR JUDICIAL REVIEW.
___________________________________________________________________________
CATCHWORDS: STAMP DUTY - conveyance duty - where initial contract of sale from A
to B has been, by agreement, promptly replaced by two contracts, under one A sells to B only part of the property dealt with by the original contract and under the other A sells to C the rest of the property - whether the initial contract was rescinded - whether in s. 54(8) the inclusive definition should be treated as exhaustive.
Stamp Act 1894 ss. 54(7), 54(8)
YZ Finance Company Pty Limited v. Cummings (1964) 109 C.L.R. 395Zickar v. MGH Plastic Industries Pty Ltd (1995) 187 C.L.R. 310
| Counsel: | Mr D G Russell Q.C. with him Mr J A Logan for the appellant. Mr P R Dutney Q.C. with him Mrs D A Mullins for the respondent. |
| Solicitors: | Mallesons Stephen Jaques for the appellant. Mr B T Dunphy, Crown Solicitor for the respondent. |
| Hearing date: | 27 July 1998. |
IN THE COURT OF APPEAL
SUPREME COURT OF QUEENSLAND
Appeal No. 6356 of 1997. Appeal No. 1063 of 1998.
Brisbane
Before Pincus J.A.
Thomas J.A. Derrington J.
[Barob P/L v. Com. of Stamp Duties]
BETWEEN:
BAROB PTY LIMITED
A.C.N. 001 024 915
(Applicant) Appellant
AND:
COMMISSIONER OF STAMP DUTIES
(Respondent) Respondent
CASE STATED BY THE COMMISSIONER OF STAMP DUTIES
PURSUANT TO SECTION 24 OF THE STAMP ACT 1894
JOINT REASONS FOR JUDGMENT - PINCUS J.A. AND DERRINGTON J.
Judgment delivered 7 August 1998
There are before the Court an appeal by way of a case stated under the Stamp Act 1894 and
an application for leave to appeal against dismissal of an application for judicial review. The fate of the
latter proceeding substantially depends upon that of the former.
In outline, the problem is whether the Commissioner is entitled to conveyance duty on a contract
of sale from A to B after that contract has been, by agreement between A and B, promptly replaced
by two contracts, under one of which A sells to B part only of the property dealt with by the original contract and under the other of which A sells to C the rest of that property. The issue is whether, as
the appellant contends in this appeal, the initial contract was "rescinded" within the meaning of s. 54(7)
of the Stamp Act, with the result that the duty which would otherwise have been exigible on that
contract cannot be claimed by the Commissioner. It is in substance common ground that the initial
contract was "rescinded" within the ordinary meaning of that word, but it is argued for the Commissioner
that s. 54(8) of the Stamp Act limits its meaning in such a way as to exclude what was done by the
parties here.
Two companies called Vital Pty Ltd and Highway Operations Pty Ltd ("the vendors") entered
into a contract in writing dated 28 January 1989 ("the first contract") to sell the Wallaby Hotel,
Mudgeeraba, for $4.075M; the purchaser under that contract was the appellant ("Barob") and the
property sold included the freehold of the hotel, the licence, goodwill, stock in trade and other chattels.
In February 1989 the vendors and Barob executed a deed dated 6 February 1989 by which they
acknowledged and confirmed that the first contract was rescinded and the vendors acknowledged that
they had no claim to the deposit paid under that contract. In the same month two further contracts of
sale were executed. By one dated 6 February 1989, the vendors agreed to sell the freehold of the hotel
- i.e. the land only - to Barob for $2.275M. The vendor also executed a contract by which they agreed
to sell the licence, goodwill and chattels of the hotel to Vrachas Holdings Pty Ltd ("Vrachas") a wholly
owned subsidiary of Barob, for $1.8M.
In summary, then, the first contract providing for sale of all the property to Barob for $4.075M
was replaced by two contracts the total consideration under which amounted to the same figure,
$4.075M; under one of those two contracts the land was sold to Barob and under the other the rest
of the property dealt with by the first contract was sold to Vrachas, a subsidiary of Barob.
It is the duty on the first contract, that dated 28 January 1989, which is in question. Under s.
54(1) of the Stamp Act it is made chargeable with duty as if it were a conveyance; it is not in dispute
that if there were no more to the matter, duty of $150,037.50 would under the Stamp Act be payable
on the consideration. The Commissioner also claims to be entitled to a penalty which has been assessed
at $121,622, but it is not necessary to discuss that at this stage.
Section 54(7) of the Stamp Act reads as follows:
"Ad valorem duty with which a contract or agreement would otherwise be chargeable shall not be claimed in any case where there is produced to the commissioner evidence satisfactory to the commissioner that such contract or agreement was rescinded within 30 days after its execution."
Section 54(7A) makes provision for a refund of duty, when rescission occurs after duty has
been paid.
The Commissioner does not dispute that the deed dated 6 February 1989, if it rescinded the
first contract, did so within 30 days after execution of the first contract. The Commissioner, however,
contends that s. 54(8) of the Stamp Act has the effect of excluding what was done between the parties
from the concept of rescission, for the purposes of s. 54(7) of the Stamp Act. We were referred to
s. 54(8) as originally enacted and to that provision in the form which is found in the current reprint, but
it does not appear to us that there is any significant difference between the two; if that were not so, then
the original version would have to be used, since by virtue of s. 8 of the Reprints Act 1992 what are described as "editorial changes", being those which were made for the purpose of reprinting s. 54(8),
cannot change the provision’s effect. As reprinted, s. 54(8) reads as follows:
"For the purposes of subsections (7) and (7A) and without limiting their meaning, a contract or an agreement which has been rescinded includes a contract or agreement under which all rights and obligations are at an end and the parties to the contract or agreement have been returned to the original positions in respect of the property the subject of the contract or agreement which they held prior to the execution of the contract or agreement, but the term does not include a contract or agreement which is at an end because the vendor has entered into or has agreed to enter into a further contract or agreement with a person nominated, introduced, substituted or otherwise by the purchaser in the original contract or agreement or some other person pursuant to that original contract or agreement or a related document".
The argument for the Commissioner on the first limb of s. 54(8), up to and including the words
"execution of the contract or agreement", is that it is possible to read the word "includes" as if it were
"means" and that unless one does so then the whole of the first limb achieves nothing.
As to the first point, we were referred to a number of authorities, of which one of the more
significant is the decision of the High Court in YZ Finance Company Pty Limited v. Cummings (1964)
109 C.L.R. 395. In that case a provision of a New South Wales statute beginning "In this section
‘security’ includes . . ." was read as an exhaustive definition. That case was referred to in Zickar v.
MGH Plastic Industries Pty Ltd (1996) 187 C.L.R. 310; there, what was in issue was, again, the effect
of words of inclusion in a definition section. A majority of the court declined to treat the definition as
exhaustive. The principal judgment, after referring to the YZ Finance case, commented:
". . . there is no rule of construction which requires inclusive words to be read as exclusive of any elements which otherwise fall within the meaning of the word or expression being defined . . .". (330)
The other member of the majority, Kirby J., said of the statute there in question, one providing for compensation to workers:
"To add to a definition a special additional ground for securing benefits and to provide that the definition ‘includes’ those grounds does not, on ordinary principles of construction, subtract from the operation of the primary definition according to its terms". (346)
But authority is hardly needed for the proposition that to say that A is included in B does not ordinarily
imply that nothing else is included in B. Some particular reason is necessary, to justify reading "includes"
as if it were "means".
Here, the only reason put forward for taking this course is that which we have mentioned: the
Commissioner says that unless the first limb is treated as an exhaustive definition of the meaning of
"rescinded" in s. 54(7) it adds nothing. The word "rescinded" has in this context two relevant, rather
different, meanings. First, a contract is rescinded when a party to it, having a right to do so, for example
because the other party has repudiated its obligations, brings it to an end. The second meaning is
rescission by agreement, which is this case: Morris v. Baron & Co. [1918] A.C. 1, Tallerman & Co.
Pty Ltd v. Nathan’s Merchandise (Victoria) Pty Ltd (1957) 98 C.L.R. 93 at 112, 113. Mr Russell
Q.C., who led Mr Logan, argued on behalf of Barob that if the first limb were treated as exhaustive then
there would be no rescission in the former situation - i.e. where one party rescinds for breach.
Mr Russell pointed out that then a right of action for damages or for return of the deposit, based on the
rescinded contract, will ordinarily subsist, although the contract has been rescinded; see McDonald v.
Dennys Lascelles Ltd (1933) 48 C.L.R. 457 at 476, 477, where, in a famous passage, Dixon J.
explains among other things that:
". . . when a contract . . . is dissolved at the election of one party because the other has not observed an essential condition or has committed a breach going to its root, the contract is determined so far as it is executory only and the party in default is liable for damages for its breach".
And in Ogle v. Comboyuro Investments Pty Ltd (1976) 136 C.L.R. 444, speaking of the position of
the party not in breach, Barwick C.J. remarked:
"But if the promisee chooses to treat the contract as at an end, in so far as it requires further performance on the part of either party to it, the promisor will be quit of any obligation further to perform the contract . . . However, the promisee’s right to damages for any breach which has occurred up to the date of the termination of the contract . . . remains". (451)
It appears to be correct, then, that the situation in which one party to a contract rescinds unilaterally for
breach, retaining the right to bring an action on the contract for damages, would be excluded from the
relief available under s. 54(7), if the Commissioner’s argument that the first limb of s. 54(8) is exhaustive
prevails. That is so because the rescinded contract would not be one "under which all rights and
obligations are at an end", the innocent party’s right to sue on it, for damages for breach, surviving the
rescission. It would no doubt be possible to overcome this difficulty by reading down the word "all" in
the expression just quoted so as to exclude the right to claim damages for breach; but there does not
appear to be any sensible reason to add that qualification.
It is of course possible that the legislature intended just the result we have mentioned, that is,
to exclude the case where after rescission the innocent party retains a right to sue on the contract, for
damages. It is not easy to think of a policy reason why that should have been thought fair, or desirable.
On behalf of the appellant reference was made to the explanation of the reason for the addition of subs.
(8) presented to the Queensland Legislative Assembly on behalf of the responsible Minister on 13 April
1988. It was then said that:
"New subsection 54(8) inserted by clause 54 clarifies the meaning of rescission (which would allow for non-dutiability of a contract or a refund of duty paid on the contract) to clarify that it does not include effective subsales where a purchaser may substitute another purchaser under the terms of his agreement with a vendor".
If, in addition to closing the gap referred to in the explanation given to Parliament, it was intended to
exclude what might fairly be described as the perfectly legitimate case for relief which arises where the
contract is brought to an end unilaterally for breach, then the explanation the Minister gave would have
been seriously deficient.
The appellant also relied, of course, upon the words "For the purposes of subsection (7) . . .
and without limiting [its] meaning" with which subsection (8) begins. Counsel have not referred us to
any authority, nor have we found any, in which a statutory explanation of meaning of a word, expressed
to be inclusive only, has been treated as exhaustive, although the explanation is also said not to limit
meaning. It is one thing to read "includes" as "means", and a more drastic step to read "without limiting
[its] meaning" as "by way of limiting its meaning".
One returns, then, to the basis on which this reconstruction of the language which the legislature
has chosen is said to be justified; that unless it is done the first limb adds nothing, leaving the meaning
of "rescinded" unaltered. It is not the case that all contracts which come to an end, leaving no rights and
obligations on either side, have been in the ordinary sense "rescinded". Where a contract is discharged
by frustration all parties are relieved of their contractual obligations, except as to accrued rights: Fibrosa
S.A. v. Fairbairn Lawson Combe Barbour Limited [1943] A.C. 32 at 50. It is unlikely that the purpose
of enactment of the first limb of subs. (8) was to deal with this uncommon problem. One might say,
however, as was said in Giles v. Woodward [1985] 2 Qd.R. 91 at 94 of another inclusive definition,
that the purpose of subs. (8)’s first limb was to allay doubts - although, if that was the purpose, it has demonstrably not been fulfilled. But that seems to us a more plausible explanation than that put forward
on behalf of the Commissioner, acceptance of which depends upon treating the legislature as having
used language which is quite inappropriate for an exhaustive definition.
To these considerations there may be added that the second limb of subs. (8) provides an
example of what may be said in a definition intended to have an exclusive effect. Just as the second limb
begins, "the term does not include . . ." the first could have begun with similar language, to the effect that
"The term ‘rescinded’ does not include a contract or agreement other than one under which all rights
. . .".
The second argument for the Commissioner is based on the exclusive language of the second
limb, to which we have just referred. The principal point of dispute, as to the second limb, is the
identification of that part of the language to which the expression "pursuant to that original contract or
agreement or a related document", with which the subsection ends, refers. Mr Dutney Q.C., who led
Mrs Mullins for the Commissioner, argued that the quoted expression qualifies only "some other
person". If that is so then, it is contended, the contract in question here was not rescinded, the reason
being that it -
". . . is at an end because the vendor has entered into or has agreed to enter into a further contract or agreement with a person nominated, introduced, substituted or otherwise by the purchaser in the original contract or agreement".
Here the proper inference is that the first contract came to an end because the vendors entered into or
agreed to enter into two further contracts, one with Barob, the purchaser under the first contract and
another with Vrachas. Let it be assumed, although the case stated does not say so, that Vrachas was "nominated, introduced, substituted or otherwise" by Barob and let it further be assumed that the rule
that the singular includes the plural applies here, so far as necessary for the Commissioner’s purposes.
Still it is by no means evident that Barob itself is "a person nominated, introduced, substituted or
otherwise" by Barob. It appears to us doubtful whether the natural meaning to be attributed to these
expressions, in the context, is such as to catch the case where the original contract comes to an end
because the parties to it agree to enter into a fresh contract relating to the same property. (It is
necessary to observe, further, that the words we have used, "relating to the same property", are a
qualification which is not express but at best implicit in the second limb.)
In our opinion the doubt to which we have just referred should be resolved against the
Commissioner, again because of the content of the explanation given to Parliament and quoted above.
It will be recalled that it asserted that subs.(8) -
". . . clarifies the meaning of rescission . . . to clarify that it does not include effective subsales where a purchaser may substitute another purchaser under the terms of his agreement with a vendor".
That is, we are of opinion that even if, in accordance with Mr Dutney’s submissions, the words
"pursuant to that original contract or agreement or a related document" are taken to refer only to "some
other person", the second limb does not on its proper construction exclude these facts. That is so
because a substantial reason for bringing the first contract to an end was that the vendors entered into
a further contract with the original purchaser.
With respect to the contention of Mr Dutney as to the qualifying effect of the words "pursuant to that original contract or agreement or a related document", viz. that if they apply only to "some other person", it may be thought that the more natural reading of the second limb is to the contrary. But
whether or not that is so, the intended reference of the words in question is at least doubtful and the
ambiguity should again be resolved with the assistance of the explanation given to Parliament and quoted
above. That deals with the case "where a purchaser may substitute another purchaser under the terms
of his agreement with a vendor"; whereas if the Commissioner’s contention is right the sub-section has
a quite different operation. Further, if that contention is right then the only relevance to the subject of
substitution that the terms of the original agreement have, is to the situation where the original contract
empowers someone other than the purchaser to require the substitution. As a practical matter, it seems
unlikely that such an unusual event was intended to be specifically provided for.
In summary, both the bases of assessment relied upon by the Commissioner should be rejected,
because:
1. The first limb of s. 54(8) is not intended to be an exhaustive or exclusive definition of the word
"rescinded".
2. The words "pursuant to that original contract or agreement or a related document" in subs. 8
qualify "person nominated, introduced, substituted or otherwise by the purchaser in the original
contract", as well as "person nominated, introduced, substituted or otherwise by . . . some other
person"; further, if that were not so, the second limb would not catch the present case because
the purchaser in the original contract is not "a person nominated, introduced, substituted or
otherwise by the purchaser in the original contract".
It follows that the appeal against the assessment must be allowed.
We have mentioned that there is also before us an application for leave to appeal against an
order dismissing other, related proceedings, being an application for judicial review intended to
challenge the assessment of duty and the penalty imposed on Barob. Under s. 24(4) of the Stamp Act
this Court is obliged to order repayment of the penalty, the assessment having been held to be
erroneous; there is in our opinion no need to deal with the application for leave, except in relation to
costs. Barob was ordered to pay the costs of the application for judicial review, when it was dismissed.
At that time, the application may well have had some point, since no case had been stated and Barob
might well have been uncertain whether, when stated, the case would adequately set out the facts - as,
the appellant concedes, it ultimately did. However, from the time when the case was stated, on
24 January 1998, the application for review had no further purpose which we can discern and the
appellant should then have advised that it would no longer be pursued.
It appears to us fair, on the whole, to make such orders as to achieve the result that each side
bears its own costs, with respect to the application for review.
We therefore order:
Appeal No. 1063 of 1998
1. Question (a) is determined as follows -
The Commissioner ought to have been satisfied that there had been produced
evidence that the contract in issue, dated 28 January 1989, was rescinded
within 30 days of its execution within the meaning of s. 54(7) of the Stamp Act
1894.
2. Questions (b) and (c) - unnecessary to answer.
3. Question (d) - by the Commissioner.
4. Order that the duty paid by the appellant in conformity with the assessment dated 24 February
1997, together with any penalty paid in respect thereof, be paid to the appellant by the
Commissioner, together with the appellant’s costs of the appeal, to be taxed.
Appeal No. 6356 of 1997
1. Leave to appeal sought in the notice of motion dated 17 July 1997 granted and appeal allowed,
but only to the extent of setting aside the order for costs therein referred to, made on 20 June
1997.
2. No order for costs, here or below, in respect of the proceedings for judicial review.
IN THE COURT OF APPEAL
SUPREME COURT OF QUEENSLAND
Appeal No. 6356 of 1997 Appeal No. 1063 of 1998
Brisbane
| Before | Pincus J.A. Thomas J.A. Derrington J. |
[Barob P/L v Com. of Stamp Duties]
BETWEEN:
BAROB PTY LIMITED
A.C.N. 001 024 915
(Applicant) Appellant
AND:
COMMISSIONER OF STAMP DUTIES
(Respondent) Respondent
CASE STATED BY THE COMMISSIONER OF STAMP DUTIES
PURSUANT TO SECTION 24 OF THE STAMP ACT 1894
REASONS FOR JUDGMENT - THOMAS J.A.
Judgment delivered 7 August 1998
It is not necessary to restate the facts which appear in the joint reasons of Pincus J.A and
Derrington J. It will however be convenient to set out, for the purposes of discussion, the following
parts of s.54 of the Stamp Act 1894:
“54.(1) Any contract or agreement for sale of any property or any contract or agreement whereby a person becomes entitled or may, provided the terms and conditions thereof are met, become entitled to the conveyance or transfer of any property shall be charged with the same duty as if it were an instrument of conveyance of the property.
..
(7) Ad valorem duty with which a contract or agreement would otherwise be
chargeable shall not be claimed in any case where there is produced to the
commissioner evidence satisfactory to the commissioner that such contract oragreement was rescinded within 30 days after its execution.
..
(8) For the purposes of subsections (7) and (7A) and without limiting their meaning, a contract or an agreement which has been rescinded includes a contract or agreement under which all rights and obligations are at an end and the parties to the contract or agreement have been returned to the original positions in respect of the property the subject of the contract or agreement which they held prior to the execution of the contract or agreement, but the term does not include a contract or agreement which is at an end because the vendor has entered into or has agreed to enter into a further contract or agreement with a person nominated, introduced, substituted or otherwise by the purchaser in the original contract or agreement or some other person pursuant to that original contract or agreement or a related document”.
Subsection (7) merely requires the production of evidence satisfactory to the commissioner that the
contract in question was rescinded within 30 days. That is a perfectly general exemption from stamp
duty, the operative requirement being rescission. The question is whether this general exemption has
been cut down in some way by the enactment of sub-s.8. In my view that subsection read as a whole
merely gives two statements or examples of the operation of sub-s.7. The first (the inclusory part) states
a situation that is declared to be definitely covered by sub-s.7; and the second states an instance of
something that is declared to be definitely excluded from the benefit. The inclusory example is plainly
narrower than the broad class of contracts that are rescinded under sub-s.7, and presumably was
mentioned in order to put beyond doubt cases of that kind. It was hardly necessary to do so, but that
might be said of a good deal of legislation. The express statement at the beginning of sub-s.8 that it does
not limit the meaning of sub-s.7 should be taken to mean what it says. The exclusionary part simply
succeeds in removing the exemption to the extent there stated.
I agree with Pincus J.A. and Derrington J. that the concluding words of sub-s.8 “pursuant to
that original contract or agreement or a related document” are more sensibly to be taken to apply to
both categories of person that are earlier mentioned in that subsection. It is difficult to see, in the context
of a sub-sale or potential chain of sub-sales, why different rules should be introduced for “the
purchaser” or “some other person” if they nominate, introduce or substitute a third party.
Accordingly I do not consider that sub-s.8 effects any change to the general nature of the
exemption given by s.54(7).
It was submitted for the commissioner that the present contract was covered by the
exclusionary part of sub-s.8. On the construction which I would give to sub-s.8, that submission should
be rejected. In the first place it was not pursuant to the original contract that the further contract was
entered into. In the second place it is not shown by the case stated that the subsidiary company is a
“person nominated, introduced, substituted or otherwise” by Barob.
It may well be that the appellant, with respect to the time immediately preceding the execution
of the second contract, is covered by the inclusionary part of sub-s.8. If so, it is exempt. Even if it is
not so regarded, it is clearly covered by sub-s.7. The facts reveal a plain example of a case where the
purchaser, for understandable reasons, decided that it was desirable to discard the first agreement and
do it another way. It was able to persuade the vendor to agree to rescind the original agreement and
replace it with one which placed the vendor in a position where it would receive exactly the same
benefits. The only change was that designated parts of the vendor’s property would go to B and C
instead of all of it going to B. This seems to me to be a clear instance of rescission. There is no
suggestion of sub-sales or other relevant dealings between the appellant and its subsidiary. Further, so far as the arguments before us proceed, there is no suggestion that any less stamp duty will be paid to
the commissioner by reason of the substituted arrangement. No such submission was made on behalf
of the commissioner.
In my view therefore the appellant is entitled to the benefit of the exemption granted by sub-s.7.
The questions should be answered as proposed by Pincus J.A and Derrington J.
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