Bell Resources Holding Pty Ltd v The Commissioner for Act Revenue Collections
[1990] FCA 173
•20 APRIL 1990
Re: BELL RESOURCES HOLDINGS PTY LIMITED
And: COMMISSIONER FOR AUSTRALIAN CAPITAL TERRITORY REVENUE COLLECTIONS
No. VG30 of 1989
FED No. 173
Stamp Duties
90 ATC 4327/8 ACLC 533
22 FCR 178
COURT
IN THE FEDERAL COURT OF AUSTRALIA
AUSTRALIAN CAPITAL TERRITORY DISTRICT REGISTRY
GENERAL DIVISION
Jenkinson(1), Neaves(2) and Von Doussa(3) JJ.
CATCHWORDS
Stamp Duties - What transactions or instruments are liable - Miscellaneous instruments and transactions - Australian Capital Territory - "Transfer of a marketable security" - Seal of transferor company affixed without authority.
Australian Capital Territory Stamp Duty Act 1969
Australian Capital Territory Taxation (Administration) Act 1969
HEARING
CANBERRA
#DATE 20:4:1990
Counsel for the applicant : Mr N.H.M. Forsyth, QC
and Mr C.M. Scerri
Solicitors for the applicant : Mallesons Stephen Jaques
Counsel for the respondent : Mr A.F. Tolhurst, Q.C.
and Mr B.J. Sullivan
Solicitor for the respondent : Australian Government Solicitor
ORDER
1. The appeal against the decision of the
Administrative Appeals Tribunal affirming the decision of the Commissioner of Taxation of the Commonwealth of Australia on the applicant's objection to his assessment of which notice is dated 16 December 1986 be allowed.
2. The said decision of the Administrative Appeals
Tribunal be set aside and in lieu thereof it be determined that the said decision of the Commissioner of Taxation of the Commonwealth of Australia be varied so that the said objection is wholly allowed.
3. The applicant's costs of the appeal (including costs reserved) be paid by the respondent.
Note: Settlement and entry of orders is dealt with by Order 36 of the Federal Court Rules.
JUDGE1
Appeal from a decision of the Administrative Appeals Tribunal.
Stamp duty was at the relevant time imposed on a transfer of a marketable security that was registered in a register kept by a company in the Australian Capital Territory : Australian Capital Territory Stamp Duty Act 1969. A document purporting to be a transfer by Ambassador Nominees Pty. Ltd. to the applicant of 31,520,911 ordinary $1 shares in The Broken Hill Proprietary Company Ltd. ("BHP") was executed in Melbourne by sealing with the common seal of the transferor and of the transferee on 26 May 1986, when the shares were registered in a register kept by BHP in the Australian Capital Territory. Each share was a marketable security listed for quotation in the official list of an Australian Stock Exchange and such a transfer, having been executed outside that Territory, was required to be stamped within 30 days after it was first received in the Territory after it was so executed, if it was what it purported to be : Australian Capital Territory Stamp Duty Act 1969, s.3; Australian Capital Territory Taxation (Administration) Act 1969, ss. 4(1), 4(3), 9(1)(c) and 56(1)(b). The transfer document was sent into the Territory and received there by a Deputy Commissioner of Taxation on or about 28 May 1986. An employee of the applicant, Denise Hincks, posted the document to "Stamp Duties Office ... Canberra" with a written request, on a printed form headed "Stamps Act 1958", that "the Comptroller of Stamps" give his opinion whether the document was chargeable with any duty and, if so, the amount of the duty chargeable. Miss Hincks believed that her superiors approved of her taking that course. The Commissioner of Taxation made an assessment of the stamp duty payable on the transfer, and of an additional amount payable by way of penalty, and gave notice in writing of the assessment to the applicant in December 1986. The decision on the applicant's objection against the assessment was to delete the penalty, but otherwise to confirm the assessment. At the applicant's request the decision was referred to the Administrative Appeals Tribunal, which affirmed the decision. From the Tribunal's decision this appeal is brought. The respondent Commissioner for Australian Capital Territory Revenue Collections now stands in the place of the Commissioner of Taxation. The duty assessed was $1,626,479.10.
Mr. Forsyth Q.C., who appeared with Mr. Scerri for the applicant, submitted that the document, although in form a transfer of the shares, was not a "transfer" within the meaning of the legislation because the two persons who had effected the sealing by each of the parties named as transferor and transferee respectively had lacked authority to perform that act on behalf of either party. On one view of the evidence before the Administrative Appeals Tribunal there was greater substance in the submission that those two persons had lacked authority to effect the sealing by the transferor than in the submission that they had lacked authority to effect the sealing by the applicant transferee. One answer to these submissions which was advanced by Mr. Tolhurst Q.C., who appeared with Mr. Sullivan for the respondent, was that the words "transfer of a marketable security", in Item No. 8 in Schedule 1 to the Australian Capital Territory Stamp Duty Act 1969, wherein are specified the classes of instrument on the members of which classes stamp duty is imposed, did not on their proper construction require that an instrument should, in order to answer the description the words express, be effective in law to transfer ownership of the marketable securities to the transferee. It was sufficient, Mr. Tolhurst submitted, that the instrument should be in such terms as to be capable of effecting such a transfer upon its execution by the parties and apt to ground registration of the transferee as holder of the shares if it should be executed by the parties. Section 56 of the Australian Capital Territory Taxation (Administration) Act 1969 gave an indication that it was in that sense that the words "transfer of a marketable security" should be construed, Mr. Tolhurst said. In May 1986 that section provided:
"56.(1) The transferee under a transfer of a marketable security on which stamp duty is imposed, being a marketable security listed for quotation in the official list of an Australian Stock Exchange or a prescribed stock exchange (whether within or outside Australia), shall cause the instrument of transfer to be duly stamped -
(a) where it is executed by or on behalf of the transferee in the Territory - within 30 days after the instrument is so executed; and
(b) where it is executed by or on behalf of the transferee outside the Territory - within 30 days after it is first received in the Territory after the instrument is so executed.
(2) The transferee under a transfer of any other marketable security on which stamp duty is imposed shall lodge the instrument of transfer with the Commissioner for assessment -
(a) where it is executed by or on behalf of the transferee in the Territory - within 30 days after the instrument is so executed; and
(b) where it is executed by or on behalf of the transferee outside the Territory - within 30 days after it is first received in the Territory after the instrument is so executed."
That provision contemplates, according to the submission, that the imposition of the duty may precede execution by the transferor, and so may occur at a time when the instrument has no legal effect and is incapable of justifying a change of registration.
Section 57 of the Australian Capital Territory Taxation (Administration) Act 1969 (which I shall call "the Administration Act") provides:
"Stamp duty imposed on an instrument of transfer of a marketable security is payable by the transferee."
"Marketable security" was in May 1986 defined in s.4(1) of the Administration Act, with which Act s.3 of the Australian Capital Territory Stamp Duty Act 1969 ("the Stamp Duty Act") declares the Stamp Duty Act to be incorporated, and which Act s.3 requires to be "read as one with" the Stamp Duty Act, to mean unless the contrary intention appears -
"(a) a share in the capital of, or a debenture of, a company; or
(b) a unit in relation to a unit trust scheme,
and includes a right, whether existing or future and whether contingent or not, of a person to have issued to the person such a share, debenture or unit, whether on payment of money or other consideration or not;"
In my opinion a document will not answer the description "transfer of a marketable security" until it has been executed by the transferor. Unlike the legislation under consideration in Commissioner of Stamp Duties (Q) v. Hopkins (1945) 71 CLR 351, to which counsel for both parties referred the Court, this stamp duty legislation evinces no general intention that an instrument on which duty is imposed is to be stamped before execution. Unless constrained by some legislative indication that the words "transfer of a marketable security" are to be understood as denoting, or as comprehending, a document which is intended to be made into such a transfer by execution, I would understand those words in their ordinary meaning, as describing a document executed by or on behalf of the person named therein as transferor. And I find in this legislation no such a constraint. Section 56 is concerned only with times for compliance with the requirements of the legislation and cannot in my opinion be taken to imply a definition of the word "transfer" at odds with what I think to be its natural meaning in the Schedule.
The articles of association of Ambassador Nominees Pty. Ltd. provided at relevant times:
"The seal shall be used only by the authority of the Directors, or of a committee of the Directors authorised by the Directors to authorise the use of the seal, and every document to which the seal is affixed shall be signed by a Director and be countersigned by another Director, a secretary or another person appointed by the Directors to countersign that document or a class of documents in which that document is included."
The applicant company's articles of association are in all respects relevant to this appeal indistinguishable from those of Ambassador Nominees Pty. Ltd. The two persons who affixed the seal of transferor and of transferee were Geoffrey Victor George Cornish, who was at material times the secretary of the transferor company and of the applicant transferee, and Ian David Wildy, who was at material times an alternate director of the transferor company and a director of the applicant. Mr. Wildy signed and Mr. Cornish countersigned the document in compliance with the quoted clause of each party's articles of association. The articles of association of the transferor company made provision for the appointment of a person by a director to be an alternate director in his place and empowered an alternate director to exercise any power that the appointor might exercise, and provided that the exercise of any such a power by the alternate director should be deemed to be the exercise of the power by the appointor. It was submitted by Mr. Forsyth that the evidence precluded any finding but that the use of the seal of neither transferor nor transferee on this purported instrument had the authority of the directors or of a committee of the directors authorised by the directors to authorise the use of the seal, and that the sealing of the document had been the act of neither company, either when it was done or, by ratification, at any later time. If that were so, the conclusions followed, according to Mr. Forsyth, that the Tribunal's findings to the contrary constituted errors of law, and that the document was not liable to duty as a transfer.
In support of the last stated conclusion for which he contended Mr. Forsyth cited a number of authorities that a legally ineffective document is not liable to stamp duty. He relied upon the statement by Latham C.J. in Commissioner of Stamp Duties (Q) v. Hopkins (1945) 71 CLR 351 at 360 that if "a person purported to make a conveyance or settlement of land in which he had no interest whatever, the instrument would not be dutiable as a conveyance or settlement, because it would not produce any legal effect whatever in relation to the property with which it purported to deal : See per Rich ACJ. in Wedge v. Acting Comptroller of Stamps (Vict.) (1941) 64 CLR 75, at p 79; Kent v. Commissioner of Stamps (1927) QSR 398, at p 408; Alpe, Law of Stamp Duties, 19th ed. (1929), p 249:- 'A settlement must effect a disposition of property'; Massereene v. Commissioners of Inland Revenue (1900) 2 I.R. 138"; and upon the decision of the Full Court of the Supreme Court of Queensland in Kern Konstruction (Townsville) Pty. Ltd. v. Commissioner of Stamp Duties (Q.) (1981) 81 ATC 4147 that an instrument of transfer of Torrens Title land, being expressed as a transfer of "the bare legal estate" and therefore not registrable, was not liable to stamp duty because it had no legal effect; and upon several other authorities which support the conclusion that, in stamp duty and other legislation, a reference to a class of documents, the execution of which is designed to have a legal effect, by the generic name of such documents (e.g. "settlement", "conveyance", "declaration of trust", "transfer") will be construed as not including a member of the class which has wholly failed of legal effect. In several, but not all, of the instances cited by Mr. Forsyth that construction was virtually dictated by the express terms of the statute, as for example where a settlement is described in the statute as "an instrument ... whereby any property is settled or agreed to be settled" : O'Donohue v. Comptroller of Stamps (1969) V.R. 431 at 443-444.
It may be accepted that the words "transfer of a marketable security" in Schedule 1 are to be construed as limited in meaning to such a document as has a legal effect of a kind which those words indicate. Although it could hardly have been suggested that the evidence before the Tribunal permitted a finding that Messieurs Cornish and Wildy lacked authority, in relation to either company, physically to stamp an impression of the seal on the document and to write their signatures thereon, so that the document would be ready when required - as it might have been required at short notice - to go out of the custody of the officers of the two companies as what it purported on its face to be, there is an arguable question whether, on the evidence, they had authority to permit the document to be published outside the offices of the companies as what it purported to be, or authority in any other way to treat the document as having been executed by the parties. The transactions in the course of which the document was executed and sent to the Commissioner of Taxation in Canberra were occasioned by the making of a takeover offer for shares in BHP by the applicant. The applicant was a wholly owned subsidiary of a company which was a wholly owned subsidiary of a company which was a wholly owned subsidiary of Bell Resources Ltd. ("BRL"). BRL was a public company, of the shares in which about 42 per centum were owned by another public company called The Bell Group Ltd. ("TBGL"). Ambassador Nominees Pty. Ltd. was a wholly owned subsidiary of TBGL. BRL and its subsidiaries had entered into arrangements with Standard Chartered Bank for the loan of money with which to pay for BHP shares expected to be bought under the takeover. Part of the security for repayment of the loan was agreed to be the provision of "a first legal mortgage on ... a number of BHP ordinary shares owned by" any of those companies or by TBGL or any of its subsidiaries, the number varying in proportion to the number of dollars lent. The takeover offer remained open until 5 p.m. on 27 May 1986 in Perth. In the Melbourne office of BRL during the last days of the takeover offer period the officers of that company and TBGL and their subsidiaries, all of which were managed as a group, were under great pressure of work. Ambassador Nominees Pty. Ltd. had no beneficial interest in any of the shares which were the subject of the transfer now under consideration. Those shares were held by it in trust for several other members of that group of companies. The Administrative Appeals Tribunal found, and the findings were not attacked on the hearing of the appeal, that statements had been made to Miss Hincks by two senior officers of member companies of that group of companies which Miss Hincks reasonably understood to constitute instructions to her to procure execution of a transfer of the shares to the applicant and to set in motion the processes which would enable the transfer of the shares to be registered, and that she in turn had made statements to Mr. Cornish which gave him to understand that one or other of those senior officers, named Griffiths and Staehr, had given instructions for execution of such a transfer of the shares, and that he had so advised Mr. Wildy, and that the course of previous practice in relation to sealing documents of that kind had formed in the minds of Messieurs Cornish and Wildy the belief that instructions by either of those officers were sufficient to confer on them authority to seal the instrument of transfer and deliver it to Miss Hincks so that she might deal with it in accordance with the instructions of those officers. The Administrative Appeals Tribunal held that the two persons who executed the document had authority, deriving from a resolution of the transferee's directors, to cause the transferee to execute the document. (I use the word "execute" here as excluding a proleptic sealing merely to save time when authority to transfer the shares should thereafter be conferred.) The Tribunal held also that by means of a course of conduct by the directors of Ambassador Nominees Pty. Ltd., authority had been conferred on those two persons to cause the transferor to execute the document. It was submitted that in both conclusions the Tribunal had erred in law.
It was submitted that, because the evidence disclosed no resolution by the directors of Ambassador Nominees Pty. Ltd. with respect to the transfer of the shares, a conclusion that authority for execution of the document existed was not in law open to the Tribunal. Mr. Tolhurst's answer on behalf of the respondent was that it could be inferred from the conduct of the directors of Ambassador Nominees Pty. Ltd. over a period of months before 26 May 1986 that they had conferred on the chairman, Mr. Holmes a Court, authority to decide whether, and when, transactions such as this transfer of shares should be effected in implementation of the takeover, and authority to communicate his decisions within that area of delegated authority through certain senior officers of the company. The conduct upon which reliance was placed was in almost every instance conduct in the capacity of a director, not of Ambassador Nominees Pty. Ltd., but of other companies in what was treated by the persons of whose actions there was evidence as a group of companies, that is to say the two public companies TBGL and BRL and their respective subsidiaries. Further than that, most of the conduct upon which reliance was placed related to BRL and its subsidiaries. There was evidence to suggest that the persons who were directors of both Ambassador Nominees Pty. Ltd. and TBGL, when acting as such and when acting as directors of BRL or of a subsidiary of BRL, thought of both the public companies as parts of a single group. But, of the conduct upon which reliance was placed, not much related to the direction of TBGL or of its subsidiaries by the persons whose conduct as directors was in question. The conduct of directors from which the inference was said to arise was the common practice of treating a resolution of the directors of the holding company, whether BRL or TBGL, as sufficient authority for acts of substantial importance by subsidiaries, and of treating a general resolution by directors in favour of a course of action as sufficient authority for particular acts considered to be in furtherance of that course of action, of ratifying after the event an act of substantial importance for which no authority by the directors existed when the act was done, and of failing either formally by resolution to authorise, or formally by resolution to ratify, acts of substantial importance.
The Tribunal concluded that a resolution of the directors of the transferee provided Messieurs Cornish and Wildy with authority to execute the document. The reasons of the Tribunal do not expressly limit that conclusion to execution by the transferee, but it is difficult to find in a resolution of the directors of the transferee, a subsidiary of one company, authority for the doing of an act in the name of the transferor, a subsidiary of another company, when the only formal relation between the two holding companies was that one held 42 per centum of the issued capital of the other. The same may be said of a resolution of the directors of BRL, which might be said to have approved the resolution of the directors of the transferee. The Tribunal stated its conclusions thus:
"On the one hand evidence was given by Ms Hincks that she was instructed by Mr. Staehr to prepare, obtain execution of, and lodge for stamping the transfer after first apprising Mr. Griffiths. She then said that when she consulted Mr. Griffiths he had given her the go ahead. On the other hand Mr. Staehr and Mr. Griffiths both said that they had merely asked her to prepare the transfer form but to go no further.
15. I have decided to accept Ms Hincks account of the events in question substantially for the reasons advanced by Mr. Hill.
........ ........ ........ ........ ........ ......
16. Since I find that Ms Hincks' account of events surrounding the execution of the transfer in question is most probable, the next matter which must be dealt with is whether there existed at the time of the execution of the transfer the requisite authority. I find that the proper authority to undertake such a transfer did exist. As was mentioned in paragraph 6 of these Reasons, on 1 May 1986 the directors of BRH resolved that the company would enter into a Deed of Mortgage and charge of Shares with SCB. Messrs. Cornish and Wildy, amongst others, were authorised to '... do all ... such things as may be necessary ... in relation to the Deed of Mortgage and Charge'. I consider that this included the execution of the transfer form on behalf of the transferee by Messrs. Cornish and Wildy. As was contended by Mr. Hill, the transfer was necessary in order to satisfy the requirements of the facility agreement concluded on 13 May
1986. The offer was still open, and therefore the security arrangements had to be fulfilled. The SCB facility at that stage required 120 million shares to be used as security and to be registered in the name of BRH. Mr. Hill observed that the 120 million shares must have included those registered in AN. As was stated in Ms Hincks' evidence there was, according to Mr. Staehr, urgency in getting the shares transferred to BRH. As corroboration, Mr. Cornish said in his evidence that he believed that on his knowledge of the SCB facility there was approval for the transfer. This was in spite of the fact that it had been Ms Hincks, a relatively junior employee, who had asked him to execute the transfer. Under the resolution of 1 May 1986 Mr. Staehr and Mr. Griffiths were named as two people who were authorised to do necessary things relating to the SCB facility and I therefore find that their involvement in the present transfer of the BHP shares was authorised.
17. In addition, as contended by Mr. Hill, it appears that there was a consistent practice that once a course of action was approved of in principle by the Board, approval carried with it approval for the executives of the company to carry out all subsidiary matters which were requisite to effect the Board's resolution (see paragraph 7 of these Reasons). Furthermore, it would seem that even where the Board had not necessarily approved of a matter in principle, documents were acted upon and treated as valid although not ratified by the Board. An example of this was the transfers by ANZ Nominees Limited to AN of 31,938,809 BHP shares of 1 May 1986. These transfers were acted upon and treated as valid although they were not ratified by the AN Board of Directors.
18. As I have found on the facts that there was authority for the transfer in question to be prepared, lodged and executed, I find that it, a properly executed document, should have the legal consequences for which on its face it apparently was intended."
The letters "BRH" stand for the applicant. By "SCB" is signified Standard Chartered Bank. By "AN" is signified Ambassador Nominees Pty. Ltd. Paragraph 7 of the Tribunal's reasons, to which reference was made, reads as follows:
"7. Mr. Cornish in his evidence indicated that it was standard practice for the Board of the Bell Group to deal with matters of general principle and to leave matters of detail to be attended to by executives such as himself. Apparently the general giving of approval by the Board to entry into certain transactions carried with it the approval to do those things necessary to give effect to them. Mr. Holmes a Court was the driving force behind the group at that time, and he generally was, according to Mr. Cornish, interested in the big picture of a transaction rather than in its finer detail. In the case of the SCB facility, the directors of BRH signed a resolution dated 1 May 1986 stating that the company would enter into a Deed of Mortgage and Charge of Shares with SCB. The names of G.V.C. Cornish and I.D. Wildy were on that list. Mr. Cornish said that he knew that he was able to sign any documents required to be signed under the SCB facility. Mr. Wildy signed the resolution in question, which was dated 1 May 1986, and presumably was aware of its contents. On 13 May 1986, at a meeting of the directors of BRL, it was resolved to accept the offer by SCB to provide to the company or a wholly owned subsidiary of the company, being BRF, loan facilities of up to $2.618 billion upon the terms and conditions as set out in letters from SCB to the company dated 8 May 1986. As was mentioned earlier, SCB was to receive as security a charge acceptable to SCB over 120 million BHP shares plus all of the BHP Shares acquired under the take-over offer. The BHP shares were to be in the name of BRH. Mr. Studdy's evidence also supports this general proposition."
"BRF" signifies Bell Resources Finance Pty. Ltd., a subsidiary of BRL. The expression "the Bell Group" signifies TGBL and its subsidiaries and BRL and its subsidiaries. I am uncertain of the meaning of the expression "the Board" in paragraph 17. If it is intended to signify what in paragraph 7 is called "the Board of the Bell Group", further difficulties arise. There was no evidence that any meeting of the directors of BRL had been held simultaneously with a meeting of the directors of TBGL. The evidence does not indicate in what sense the two holding companies might be said to have had one "Board". If the expression "the Board" in paragraph 17 is understood to signify the directors of the transferor - and nowhere else in the Tribunal's reasons is a conclusion expressed which is limited to the source of authority for execution by the transferor - there was no evidence that the transferor's directors had by resolution as directors of the transferor "approved in principle" a course of action having relation to the shares. Nor was there evidence that such a resolution had been passed by the directors of TBGL.
In my opinion the evidence before the Tribunal did not justify a conclusion that the requirements of the article concerning the use of the transferor's seal had been satisfied in respect of the execution of the document. No resolution by BRH or BRL could satisfy those requirements. The practice upon which reliance was placed may have justified an expectation in the mind of each director and officer that an unauthorised act which was done in accordance with the practice would be treated by the directors either as though authority had not been lacking or as an act which should be ratified. But in my opinion the practice did not have the effect of providing authority for an act not authorised in compliance with the articles. If the expectation which the practice had created were in a particular case disappointed, as in this case it was, the practice could not otherwise provide authority for the act. If, contrary to that opinion, the practice did provide authority for acts not authorised in compliance with the articles, it was a practice proved only in respect of BRL and its subsidiaries. There was in my opinion no evidence to justify a conclusion that the practice obtained in the conduct of the business of TBGL and its subsidiaries. If I am wrong in the latter conclusion, yet in my opinion the evidence did not justify a conclusion that authority existed for execution of the transfer by Ambassador Nominees Pty. Ltd., for the following reasons.
At its highest the evidence might have justified a conclusion that Mr. Holmes a Court had from the directors of Ambassador Nominees Pty. Ltd. either actual implied authority or at least ostensible authority to authorise the transfer by Ambassador Nominees Pty. Ltd. of the shares in question. (See Hely-Hutchinson v. Brayhead Ltd. (1968) 1 QB 549.) The evidence might also have justified a conclusion that each of Messieurs Griffiths and Staehr had from Mr. Holmes a Court authority to communicate his instructions, given in the exercise of the authority he had, to Messieurs Cornish and Wildy, and that the latter two gentlemen knew of the authority Griffiths and Staehr had to pass those instructions from Mr. Holmes a Court, who was at relevant times outside Melbourne, to Cornish and Wildy in Melbourne. If therefore Griffiths or Staehr had told Cornish or Wildy to cause the shares to be transferred, it might have been possible to say, if Holmes a Court's authority were actual, that the execution of the transfer and its delivery to Miss Hincks by Cornish and Wildy on behalf of the transferor were duly authorised acts. If Holmes a Court's authority were not actual, but ostensible, it is not easy to imagine how Messieurs Cornish and Wildy, as representatives of the transferee, could have the benefit either of the rule in Royal British Bank v. Turquand (1856) 6 E and B 327; 119 ER 886 or of s 68A of the Companies Code in respect of the transferee's dealing with the transferor in relation to the transfer. Each of them was so circumstanced in relation to both companies that each ought to have known what Mr. Holmes a Court's authority was. Be that as it may, neither Cornish nor Wildy had instructions from Griffiths or Staehr. Their instructions to cause Ambassador Nominees Pty. Ltd. to execute the transfer came from Miss Hincks, who represented to Mr. Cornish, accurately as the Tribunal found, that she was communicating the instructions of Messieurs Griffiths and Staehr. On that finding it might be suggested that Messieurs Cornish and Wildy had acted upon an instruction from persons on whose instruction they were authorized to act. But in my opinion that is not so. Neither Griffiths nor Staehr was a director, nor was either of them clothed with authority to direct that the shares be transferred. The authority of each was to communicate to Messieurs Cornish and Wildy the instructions of Mr. Holmes a Court, and, no doubt, the instructions of the directors. There was in my opinion no evidence to justify a finding that either Griffiths or Straehr had authority in his turn to achieve that communication by the agency of another person, or a finding that Cornish or Wildy was authorized to receive such a communication by the agency of another person. Nor was the evidence capable of supporting a finding that Mr. Holmes a Court had given Griffiths or Staehr any instruction to cause the transfer to be executed.
For the foregoing reasons I am of the opinion that the evidence could not support a conclusion that execution and delivery to the transferee on behalf of the transferor was authorised by a person or persons empowered to give that authority. Mr. Tolhurst's submission that the imposition of duty may precede execution by the transferor has been considered and rejected. Is the conclusion to be drawn that the document was not a "transfer of a marketable security" within the meaning of that expression in the Stamp Duty Act? The transferor might in my opinion have denied, as between itself and the transferee, that the document was legally efficacious as such a transfer, and in any proceeding between those two the denial would in my opinion have been held good. Sections 68A and 68D of the Companies Code provide:
"68A(1) A person having dealings with a company is, subject to sub-section
(4), entitled to make, in relation to those dealings, the assumptions referred to in sub-section (3) and, in any proceedings in relation to those dealings, any assertion by the company that the matters that the person is so entitled to assume were not correct shall be disregarded.
(2) A person having dealings with a person who has acquired or purports to have acquired title to property from a company (whether directly or indirectly) is, subject to sub-section (5), entitled to make, in relation to the acquisition or purported acquisition of title from the company, the assumptions referred to in sub-section (3) and, in any proceedings in relation to those dealings, any assertion by the company or by the second-mentioned person that the matters that the first-mentioned person is so entitled to assume were not correct shall be disregarded.
(3) The assumptions that a person is, by virtue of sub-section (1) or (2), entitled to make in relation to dealings with a company, or in relation to an acquisition or purported acquisition from a company of title to property, as the case may be, are -
(a) that, at all relevant times, the memorandum and articles of the company have been complied with;
(b) that a person who appears, from returns lodged with the Commission under section 238 or 163 or with a prescribed State authority under a corresponding provision of a previous law of the State, to be a director, the principal executive officer or a secretary of the company has been duly appointed and has authority to exercise the powers and perform the duties customarily exercised or performed by a director, by the principal executive officer or by a secretary, as the case may be, of a company carrying on a business of the kind carried on by the company;
(c) that a person who is held out by the company to be an officer or agent of the company has been duly appointed and has authority to exercise the powers and perform the duties customarily exercised or performed by an officer or agent of the kind concerned;
(d) that an officer or agent of the company who has authority to issue a document on behalf of the company has authority to warrant that the document is genuine and that an officer or agent of the company who has authority to issue a certified copy of a document on behalf of the company has authority to warrant that the copy is a true copy;
(e) that a document has been duly sealed by the company if -
(i) it bears what appears to be an impression of the seal of the company; and
(ii) the sealing of the document appears to be attested by 2 persons, being persons one of whom, by virtue of paragraph (b) or (c), may be assumed to be a director of the company and the other of whom, by virtue of paragraph (b) or (c), may be assumed to be a director or to be a secretary of the company; and
(f) that the directors, the principal executive officer, the secretaries, the employees and the agents of the company properly perform their duties to the company.
(4) Notwithstanding sub-section (1), a person is not entitled to make an assumption referred to in sub-section (3) in relation to dealings with a company if -
(a) he has actual knowledge that the matter that, but for this sub-section, he would be entitled to assume is not correct; or
(b) his connection or relationship with the company is such that he ought to know that the matter that, but for this sub-section, he would be entitled to assume is not correct, and where, by virtue of this sub-section, a person is not entitled to make a particular assumption in relation to dealings with a company, sub-section (1) has no effect in relation to any assertion by the company in relation to the assumption.
(5) Notwithstanding sub-section (2), a person is not entitled to make an assumption referred to in sub-section (3) in relation to an acquisition or purported acquisition from a company of title to property if -
(a) he has actual knowledge that the matter that, but for this sub-section, he would be entitled to assume is not correct; or
(b) his connection or relationship with the company is such that he ought to know that the matter that, but for this sub-section, he would be entitled to assume is not correct,
and where, by virtue of this sub-section, a person is not entitled to make a particular assumption in relation to dealings with a company, sub-section (2) has no effect in relation to any assertion by the company or by any other person in relation to the assumption." ........ ........ ........ ........ 68D Section 68A operates-
(a) to entitle a person to make the assumptions referred to in sub-section (3) of that section in relation to dealings with a company; or
(b) to entitled a person to make the assumptions referred to in sub-section (3) of tha section in relation to an acquisition or purported acquisition (whether direct or indirect) of title to property from a company,
not withstanding that a person referred to in paragraph 68A(3)(b), (c) or (e) or an officer, agent or employee of the company referred to in paragraph 68A(3)
(d) or (f)-
(c) has acted or is acting fraudulently in relation to the dealings, or in relation to the acquisition or purported acquisition of title to property from the company, as the case may be; or
(d) has forged a document that appears to have been sealed on behalf of the company, unless the person referred to in paragraph (a) or (b) of this section has actual knowledge that the person referred to in paragraph 68A(3)(b), (c) or (e), or the officer, agent or employee of the company referred to in paragraph 68A(3)(d) or (f), has acted or is acting fraudulently, or has forged a document, as mentioned in paragraph (c) or (d) of this section."
The "connection" and the "relationship" of each of Messieurs Cornish and Wildy and the transferee company with the transferor company were such that each of those three ought to have known that the document had not been duly sealed by the transferor company. The operation of s.68A(4)(b) would in my opinion preclude reliance by the transferee company on s.68A(1) in any proceeding between transferee and transferor in which the latter company denied that the document had been duly sealed by it. But with the executed transfer the applicant might have had dealings with a third party of such a character and in such circumstances that the third party would, by virtue of sub-sections 68A(1) and 68A(2), be entitled to make in relation to the transfer the assumptions referred to in sub-section 68A(3), and would in any proceedings in relation to those dealings be assured of immunity from assertions by either Ambassador Nominees Pty. Ltd. or the applicant of a kind specified in sub-sections 68A(1) and 68A(2) respectively. Those are the assertions upon which any claim against a third party by either transferor or transferree that it had not authorised transfer of the shares would be based. If that be so, the executed transfer might in my opinion be recognised as a "transfer of a marketable security" within the meaning of that expression in the Stamp Duty Act. It was upon delivery to Miss Hincks a document capable of having, in law, the effect which the statutory description denotes. That in certain circumstances the document would fail of that effect, whether as between the parties to it or as between the applicant and a person in relation to whom sub-section 68A(4) or 68A(5) applied or as between the applicant and a person having the actual knowledge specified in s.68D, may not in my opinion deprive it of the character in virtue of which it might be said to answer the statutory description. That character is the aptness of the document to justify registration, by the company in which the shares to which the document relates are held, of the transferee named in the document as the holder of the shares in place of the transferor named therein. On that view this document would have become a document apt to justify registration at the latest when, having been executed, it came under the control of officers of the transferee. To comprehend within the meaning of the expression "transfer of a marketable security" a document in virtue of its potentiality in the hands of the transferee involves no enquiry into the actual history of the document after it has come into the possession of the transferee. Thus no enquiry would be directed to the question whether in this case the Commissioner of Taxation could be said to be "a person having dealings with" the transferee, in the sense of sub-section 68A(2). (Cf Australian Capital Television Pty. Ltd. v. Minister for Transport and Communications (1989) 7 ACLC 525.) But, although counsel for the applicant had sought, unsuccessfully, to persuade the Administrative Appeals Tribunal that sub-section 68A(4) precluded reliance by either transferor or transferee on s.68A(1), no submission was advanced on behalf of the respondent to the Tribunal, or to this Court, of a kind that might be regarded as raising the considerations which I have suggested might flow from ss.68A and 68D. Without the benefit of argument, I am not sufficiently persuaded by those considerations to dismiss the appeal on a ground eschewed by the Commissioner whose function it is to protect the revenue. I would allow the appeal, set aside the decision of the Administrative Appeals Tribunal, and order that in lieu of that decision it be determined that the decision of the Commissioner of Taxation on the applicant's objection to the assessment be varied to provide that the objection is wholly allowed. The respondent should pay the applicant's costs of the appeal.
JUDGE2
In my opinion, on the proper construction of the relevant legislation, namely the Australian Capital Territory Stamp Duty Act 1969 (Cth) and the Australian Capital Territory Taxation (Administration) Act 1969 (Cth), an instrument will not answer the description of a "transfer of a marketable security" and thus attract stamp duty unless the instrument has been validly executed by the transferor of the security.
I am also of opinion, for the reasons given by Jenkinson J., that it was not open to the Administrative Appeals Tribunal, on the material that was before it, to conclude that the seal of the proposed transferor, Ambassador Nominees Pty Limited, had been affixed to the instrument with the authority of those entitled to give that authority under the company's articles of association. Additionally, there was no material before the Tribunal to show that the execution of the instrument had been subsequently ratified either by formal resolution or by conduct amounting to acquiescence.
The appeal should, therefore, be allowed. I agree in the other orders proposed by Jenkinson J.
JUDGE3
I have had the advantage of reading the judgment prepared by Jenkinson J. I agree with his conclusion that on the proper construction of the description "transfer of a marketable security" in Item No. 8 in Schedule 1 of the Australian Capital Territory Stamp Duty Act 1969 the word "transfer" should be accorded its ordinary meaning. The transfer document the subject of these proceedings of itself would not, unless validly executed by the transferor, produce any legal effect whatever in relation to the marketable securities with which it purported to deal, and for that reason would not be within the description.
I also agree with Jenkinson J.'s conclusion that the evidence before the Administrative Appeals Tribunal cannot support the finding made by the Tribunal that the transfer document was executed under seal affixed with authority of the directors of the putative transferor, Ambassador Nominees Pty Ltd, or with the authority of a committee of the directors authorised by the directors to authorise the use of the seal, as required by regulation 86(b) of the articles of association of that company. However I would add the observations which follow on that aspect of the appeal, and also in relation to s.68A of the Companies Code.
Ambassador Nominees Pty Ltd was a wholly owned subsidiary of The Bell Group Limited ("TBGL"). TBGL held approximately 42% of the issued capital of Bell Resources Limited ("BRL"). The applicant, Bell Resources Holdings Pty Ltd, was a subsidiary of BRL. The Tribunal, in para.16 of its reasons which Jenkinson J. has set out, based its finding that proper authority to undertake the transfer existed on a resolution of the directors of the applicant dated 1 May 1986; by implication the authority found to emanate from that resolution was an authority to Messrs. Cornish and Wildy to execute the transfer document on behalf of both Ambassador Nominees Pty Ltd and the applicant. It is necessary to consider the terms of the resolution dated 1 May 1986. The resolution reads:
"DEED OF RESOLVED : MORTGAGE OVER SHARES: (a) that the Company enter into a Deed of Mortgage BELL and Charge of Shares, Deposit Accounts and RESOURCES Deposited Moneys in the form of the draft HOLDINGS PTY document submitted to the Company (with such LTD AND amendments or additions thereto as the STANDARD Attorneys hereinafter appointed shall consider CHARTERED necessary or desirable) with Standard BANK Chartered Bank and that attorneys for the
Company be authorised to sign, seal and deliver or otherwise execute and deliver the Deed of Mortgage.
(b) that the Deed of Mortgage and Charge of Shares, Deposit Accounts and Deposited Moneys referred to in paragraph (a) hereof shall be collateral as to the sum of two billion dollars ($2b) with the Deed of Mortgage entered into between Bell Resources Holdings Pty Ltd and Standard Chartered Bank dated 10th March, 1986 and a primary security for the balance of three billion dollars ($3b) and the Deed of Mortgage referred to in paragraph (a) hereof shall rank pari passu with the Deed of Mortgage dated 10th March, 1986.
(c) that Power of Attorney be granted to any one of Messrs. Anthony Charles Gwynne Davies, Thomas Logan Garven, Susan Alison Wilson and John Raymond Cahill to sign, seal and deliver or execute and deliver the Deed of Mortgage and Charge referred to in paragraph (a) of this resolution on behalf of the Company; and
(d) that the Company Seal be affixed to the Power of Attorney; and
(e) that any two of Willem Bertus Reuter, Alan Leslie Newman, David Charles Griffiths, Geoffrey Victor George Cornish, Anthony Charles Gwynne Davies, Ian David Wildy, Peter John Patrikeos, Howard Robert Staehr and Margaret Mary McGuinn are hereby authorised on behalf of the Company to sign and give notices and instructions and do all other such things as may be necessary from time to time in relation to the Deed of Mortgage and Charge."
The Deed of Mortgage and Charge of Shares ("the Deed"), the execution of which was authorised by para.(a) of the resolution, was required to fulfil a condition of a Credit Facility offered by Standard Chartered Bank. In construing the scope of the authority granted by para.(e) of the resolution, it is important to recognise that the resolution was one passed by the directors of the applicant, not of BRL. Evidence was given of a common practice within TBGL and BRL of treating a resolution of the directors of a holding company (which TBGL and BRL were) as a sufficient authority for important transactions by subsidiary companies, but proof of such a practice, standing alone, can provide no ground for treating a resolution of the directors of a subsidiary company as providing the source of authority for acts by a holding company. The terms of para.(e) of the resolution are also important. The authorisation was not simply to "do all such acts as may be necessary...in relation to the Deed..." It was an authority to "sign and give notices and instructions and do all other such things as may be necessary...in relation to the Deed..." The scope of the authority to do "all other such things" is qualified by the kind of specific acts first mentioned. The Deed required the applicant to nominate a person or persons as "Mortgagor Authorised Signatory" by notice to the mortgagee (clause 1.1.(xiii)), and provided that funds could not be withdrawn from defined accounts except on conditions which included a written authority of a Mortgagor Authorised Signatory (clause 4.2). The authority given to carry out the acts first mentioned in para.(e) of the resolution would seem to relate to matters of this kind. The authority given by the general words "all other such things" in my opinion is a narrow one to do things incidental to the requirements of the Deed relating to the administration of the loan to be made pursuant to the Credit Facility.
The beneficial owner of most of the shares registered in the name of Ambassador Nominees Pty Ltd which were the subject of the purported transfer was Bell Resources Development Pty Ltd, another subsidiary of BRL. None of the shares was beneficially owned by the applicant. In my opinion it is doubtful whether the scope of the authority given by para.(e) of the resolution authorised any two of the people named in it to use the seal of the applicant to execute transfers of BHP shares on behalf of the applicant as transferee. It is however unnecessary to finally decide that question. Even if para.(e) gave such an authority, the terms of the resolution could not on any construction authorise any two of the named people to use the seal of other subsidiaries of BRL, let alone the seal of a subsidiary of TBGL, to execute a transfer of a marketable security registered in the name of that subsidiary. In my opinion the conclusion of the Tribunal that authority existed in Messrs Cornish and Wildy to execute the transfer document on behalf of Ambassador Nominees Pty Ltd cannot be supported by reference to the resolution of 1 May 1986. Insofar as the conclusion to that effect expressed in para.16 of the Tribunal's reasons is based on the resolution, I consider it is wrong in law.
The effect of the evidence placed before the Tribunal is that there was no resolution of the directors of Ambassador Nominees Pty Ltd, or of TBGL, which provided a source of authority for the use of the seal to execute the transfer document on behalf of Ambassador Nominees Pty Ltd. The respondent seeks to overcome the absence of such resolution by referring to the evidence of the practice within TBGL and BRL, and their subsidiaries, of ratifying after the event the acts of directors of a particular company which required authority from the board, or of failing to obtain formal authorisation from the board, before or after the event, for acts which at law required such authorisation. The evidence about the alleged practices was inconclusive. But in any event, in my opinion, the evidence that on other occasions important acts, which had been carried out without prior authority of the board, were ratified after the event or were acted on as valid even though never formally ratified by the directors, cannot support a finding that the transfer document was executed with the authority of the directors of Ambassador Nominees Pty Ltd as required by regulation 86(b).
It is beyond question that the use of the seal of the company without prior authority under regulation 86(b) could be ratified afterwards by the directors or a committee of directors authorised by the directors to authorise the use of the seal. Ratification could be by formal resolution, or by conduct which amounts to acquiesence. In The Phosphate of Lime Company Limited v. Green and Anor (1871) LR 7 CP 43 at 56-57 Willes J. said
"Now, the law with respect to ratification is clear, and applies equally to cases of contract and of tort. The principle by which a person on whose behalf an act is done without his authority may ratify and adopt it, is as old as any proposition known to the law. But it is subject to one condition: in order to make it binding, it must be either with full knowledge of the character of the act to be adopted, or with intention to adopt it at all events and under whatever circumstances."
If there were a formal resolution of the directors, or of a relevant committee of the directors, the requisite intention to ratify and adopt the use of the seal which was made without authority at the time would be clear. In the absence of a formal resolution, clear evidence of conduct by the directors, or of a relevant committee of the directors, which demonstrated their knowledge of the use of the seal on the transfer document in question, and their intention to adopt that use, would be required. In the instant case the evidence is to the contrary. The directors of Ambassador Nominees Pty Ltd at a board meeting on 10 July 1986, when the use of the seal was brought to their attention, disclaimed the use of the seal as the act of the company and the disclaimer was recorded in a formal resolution. There is no evidence that the directors, or a committee of directors, of Ambassador Nominees Pty Ltd have at any time acquiesced in the use of the seal on the transfer document. In my opinion the finding of fact by the Tribunal that the transfer document was executed on behalf of Ambassador Nominees Pty Ltd by the affixing of the common seal used with the authority of the directors cannot be supported on the evidence and is therefore wrong in law.
I turn to s.68A of the Companies Code, and to its possible application in the circumstances of this case. Sections 68A and 68D were inserted into the Companies Code by the Companies and Securities Legislation (Miscellaneous Amendments) Act 1983 (Cth). The section is based on the rule in Royal British Bank v. Turquand (1856) 6 El and Bl 327, often called the indoor management rule. The origins of that rule have recently been explored in Registrar-General v. Northside Developments Pty Ltd and Ors (1988) 14 NSWLR 571 at 586-587 where McHugh J.A., with whom Samuels J.A. agreed, expressed the opinion that the rule had developed as a special rule of company law, and could not be explained simply as an application of agency principles. In Barclays Finance Holdings Limited v. Sturgess and Ors (1985) 3 ACLC 662 at 667 Wood J. said that ss.68A and 68D had been enacted, inter alia, to clarify and codify the rule in Turquand, but in Australian Capital Television Pty Ltd v. Minister for Transport and Communications and Ors (1989) 86 ALR 119 at 157 Gummow J. said s.68A appeared to be not so much a comprehensive code as a provision designed to repair the failings of the common law. Under sub.s.68A(1) in certain circumstances a person is entitled to make in relation to "dealings" with a company the assumptions set out in sub.s.68A(3) and in any proceedings in relation to those dealings any assertion by the company to the contrary shall be disregarded. Under sub.s.68A(2) a person having "dealings" with another (who is referred to in the sub-section as the "second-mentioned person") who has acquired or purports to have acquired property from a company, is also entitled to make those assumptions, and in any proceedings in relation to those dealings any assertion to the contrary by the company or by the second-mentioned person shall be disregarded.
By s.68D, s.68A operates to entitle a person to make those assumptions in certain circumstances involving fraud or forgery.
The statutory protection which ss.68A and 68D afford is one which may be called in aid by a person who comes within the qualifying circumstances which the sections lay down, and who is not precluded from relying thereon by actual or presumed notice. In my opinion in proceedings by such a person against a company or against a "second-mentioned person", the person seeking to rely on those sections must claim their benefit - the claim to the benefit of the sections must be raised as an issue in the proceedings. In the instant case s.68A has not been relied on by the respondent. The section was mentioned in passing by the applicant before the Tribunal, and again before this Court, simply to offer an explanation why the section, in the applicant's submissions, was not and could not be an issue in the proceedings. The possible application of s.68A in favour of the respondent has not been agitated as an issue between the parties. Had it been, the question whether the respondent in any relevant sense had "dealings" with the applicant within the meaning of s.68A would have arisen for decision. In Barclays Finance Holdings Limited v. Sturgess and Ors at 667 Wood J. expressed the opinion that "dealings" referred to a transaction itself with a company, not a step taken unilaterally in the course of, or pursuant to, a transaction. I understand his Honour to mean by transaction the making of a contract. To attribute this meaning to the notion of "dealings" in s.68A would be consistent with the statement of the rule in Turquand which appears in Halsbury's Laws of England 4th ed. vol.7(1) para.980. This statement, which received the endorsement of the House of Lords in Morris v. Kanssen and Ors (1946) AC 459 at 474, reads:
"Persons contracting with a company and dealing in good faith have always been entitled to assume that acts within its constitution and powers have been properly and duly performed, and were never bound to inquire whether acts of internal management have been regular."
In the present case there were no dealings of a contractual nature between the applicant and the respondent. However, in Australian Capital Television Pty Ltd v. Minister for Transport and Communications, Gummow J. at p 156 gave a broader meaning to the notion of "dealings". His Honour held that the Minister was a person having "dealings" with a licensee of a television station when the licensee submitted implementation plans required by the Broadcasting Act 1942 (Cth) to the Minister for approval.
The construction of s.68A has not been the subject of argument before this Court for the reason that the benefit of s.68A has not been claimed by the respondent in the proceedings. In my opinion the outcome of the appeal should not be influenced by the possible application of s.68A. The parties should be bound by the course of the trial and the appeal: Davison v. Vickery's Motors Ltd (In Liquidation) (1925) 37 CLR 1 at 35, and Metwally v. University of Wollongong (1985) 60 ALR 68 at 71.
Jenkinson J. has recognised in his judgment that circumstances could in theory have occurred whereby the applicant had dealings with a third party of such a character that the third party would be entitled to make the statutory assumptions referred to in sub.s.68A(3). Had such circumstances arisen, as between the third party and the applicant and Ambassador Nominees Pty Ltd, the transfer document could be recognised as effective in law in the particular circumstances to transfer ownership of the subject marketable securities. These possible circumstances however did not happen. The theoretical possibility that they may have happened cannot, in my view, give to the transfer document an operation effective in law to transfer ownership of marketable securities to the transferee so as to render the document a "transfer of a marketable security" within the meaning of the Australian Capital Territory Stamp Duty Act. If the contrary were the case, a transfer forged by a person referred to in para.68A(3)(b), (c) or (e) or an officer, agent or employee of the company referred to in para.68A(3)(d) or (f) would be liable to duty, even if it were intercepted by the police soon after the forgery and before the document was uttered. There is nothing in the language of the section which suggests that its operation is intended to have a so far reaching consequence. The section provides that a person having dealings with a company or a "second-mentioned person" is entitled to make certain assumptions, and in proceedings in relation to those dealings requires that an assertion by the company or the "second-mentioned person" to the contrary shall be disregarded. The section does not purport to invest an irregular act of a company done without authority with intrinsic validity. The fact that actual or imputed knowledge, under sub.ss.68A (4) or (5), disentitles a person from making the assumptions referred to in sub.s.(3), serves to illustrate the point. Circumstances could arise where one and the same irregular act not duly authorised by a company is the subject of dealings between the company and several persons. Some of those persons, being ones without notice, could be entitled to make the assumptions; others who had knowledge of matters within sub.ss.(4) or (5), as the case may be, would not be so entitled.
For these reasons I consider this appeal should be allowed. I agree with the orders proposed by Jenkinson J.
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