Commonwealth Funds Management Ltd v Chief Commissioner of Stamp Duties

[1996] HCATrans 203

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S171 of 1995

B e t w e e n -

COMMONWEALTH  FUNDS MANAGEMENT LIMITED

Applicant

and

CHIEF COMMISSIONER OF STAMP DUTIES

Respondent

Application for special leave to appeal

BRENNAN CJ
GAUDRON J
GUMMOW J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON MONDAY, 5 AUGUST 1996, AT 9.31 AM

Copyright in the High Court of Australia

MR D.H. BLOOM, QC:   May it please the Court, I appear with MR J.L.B. ALLSOP, SC, for the applicant.  (instructed by Freehill, Hollingdale & Page)

MR A.H. SLATER, QC:   If it please the Court, I appear with MR B. R. PAPE for the respondent.  (instructed by I.V. Knight, Crown Solicitor for the State of New South Wales)

BRENNAN CJ:   Yes,  Mr Bloom.

MR BLOOM:   Your Honours, in our respectful submission, this case warrants a grant of special leave at both specific and general levels.  At the specific level, the same or a similar issue continues to arise under current legislation in the Australian Capital Territory, the Northern Territory, Victoria and Tasmania and, on the respondent’s admission, there is a substantial amount of revenue still outstanding in New South Wales in relation to the repealed section.

At a general level, your Honours, the case raises an important question as to the construction of fiscal statutes generally.  Your Honours should have a copy of the relevant pages from the most recent edition of Pearce and Geddes, and at pages 236 to 237, after referring to the decision of this Court in Cooper Brookes, the last paragraph on page 236 the authors say:

Despite these general statements that would seem to minimise distinctions between taxing and other legislation, it seems likely that the courts will maintain the view that it is for the Crown to show that a taxing statute imposes a charge on a person sought to be taxed.....In addition, it is ‘a strong thing’ to read into an Act of Parliament words which are not there and it is a ‘particularly strong thing to do so when it amounts to modifying, as against the fiscal subject, words which have a plain, natural and ordinary meaning in his favour.....and if the terms of the Act plainly impose the tax they should be given effect, equally if they do not reveal a clear intention to do so the liability should not be inferred from ambiguous words.

Then there is finally a reference to the judgment of Sir William Deane in Hepples’ Case, and if I could just hand up to your Honours a copy of the relevant pages of Sir William Deane’s judgment.  The relevant passage is at 510 to 511, where his Honour says in the first full paragraph on 510:

There has been a marked, and justifiable, tendency in recent times for the courts to construe taxation provisions as being directed to the substance as well as the form of transactions to an extent which previously would have been thought to be inconsistent with statements of high authority in cases such as Partington.....Duke of Westminster.  Nonetheless, at least in cases where tax avoidance is not involved and where the substance of relevant transactions is not concealed by artificialities of form, the basic “principles of statutory construction” of taxing provisions remain those identified and explained by Rich and Dixon JJ -

in Anderson’s Case.  And their Honours there said:

“In Brunton.....Lord Parker of Waddington, speaking for the Privy Council says: ‘The intention to impose a tax or duty, or to increase a tax or duty already imposed, must be shown by clear and unambiguous language and cannot be inferred from ambiguous words.’  This rule he again emphasized in Attorney‑General v. Milne where he said, in the House of Lords: ‘The Finance Act is a taxing statute, and if the Crown claims a duty thereunder it must show that such duty is imposed by clear and unambiguous words.’

And then, coming back to Sir William at page 511:

The above extract constituted the foundation of Rich and Dixon JJ’s decision in Anderson.  It represents a general statement of the “principles of construction applicable to an Act which imposes a tax or duty”.  It is supported by strong reasons in both law and common sense.  For one thing, statutes imposing taxation derogate from the ordinary rights of the citizen in that they represent a compulsory exaction of money.  For another, the framing of the provisions of such legislation is essentially within the control of the government.

Now, your Honours, naturally construed, the word “reservation” imports a keeping back at a time when something passes, when something is given.  Thus, on our construction, the legislation in question, and the legislation of the other States and Territories, would have a significant area of operation; namely, where there is a demise, legal or equitable.  But absent a demise, legal or equitable, as is the case here, there would not, speaking literally or naturally, be any reservation.  But the Court of Appeal held that one should treat “reserved” in the phrase “rent reserved” as equivalent to payable, and the phrase meaning, therefore, rent payable or, indeed, to be payable at some future time.

Now, your Honours, the statute here is not only a fiscal one, but it is a Stamp Duty Act that imposes a duty on instruments and not transactions.  There is no suggestion of tax avoidance here, and so the real question arises:  is what Sir William Deane said about Anderson’s Case the law because, if it is, the Court of Appeal’s decision simply could not be correct.

BRENNAN CJ:   Well, you have to construe 78D together with 76, do you not?

MR BLOOM:   Yes, your Honour.

BRENNAN CJ:   Well, what does that say in relation to the definition of “leases, including an agreement for lease”?

MR BLOOM:   It says, subject to the Interpretation Act, of course, that an agreement for lease is a lease.

BRENNAN CJ:   Where does it say that?

MR BLOOM:   Well, it does not have the words, of course, “subject to the Interpretation Act” - - -

BRENNAN CJ:   No, it says, “for the purposes of this Act”.

MR BLOOM:   Yes, your Honour.

BRENNAN CJ:   Well, now, for the purposes of 78D, “lease” includes an agreement for lease.  How do you then have an agreement for lease reserving in the sense in which you have put it; rent.

MR BLOOM:   If it is specifically enforceable in the strict sense.  If it is an agreement for lease, which is specifically enforceable in the sense that the order would be an order for the grant of the lease, then you have an equitable demise and a reservation in equity, and then the section would work with an agreement for lease.

BRENNAN CJ:   A reservation in equity?

MR BLOOM:   Well, your Honour, in so far as one can have something called an “equitable demise,” and one applies to that the same terms - - -

BRENNAN CJ:   But that is a catchword, is it not?  It means that you have a right which equity will enforce for the grant of a lease.

MR BLOOM:   Perhaps one could go further and say it also means that one has an interest in the land which is equivalent to the interest that one would have at law if a lease were granted and that, therefore, one has a demise, either at law or in equity and, therefore, one can, without doing any injustice to the words used, treat the rent which is kept as rent reserved, either at law or in equity.

BRENNAN CJ:   It is certainly straining the use of the term, is it not?

MR BLOOM:   Well, your Honour, it was that which led us to submit before Justice Windeyer, firstly, that because of the Acts Interpretation Act one did not apply the section 76 definition in the context of the old section 78D.  That was the first thing.  Secondly, to submit that having regard to the use of the phrase - - -

GUMMOW J:   Well, wait a minute.  One did not apply the whole of 76, including 76(2)?

MR BLOOM:   76(1), your Honour.

GUMMOW J:   Yes.

MR BLOOM:   We relied, of course, upon 76(2).

GUMMOW J:   Well, you seem to be approbating and reprobating a bit.

MR BLOOM:   Well, yes, but they are very different subject matters.

GUMMOW J:   Yes, all right.

MR BLOOM:   Your Honours, this was the case of a building contract to be followed by the grant of a lease, and the best that the putative lessee could get, in our submission, was a Butts v O’Dwyer order - certainly not an ordinary degree for specific performance, and in those - - -

BRENNAN CJ:   What meaning do you attribute to the word “promise” in 76(1), even if you restrict agreement to that which is specifically enforceable?

MR BLOOM:   I see what your Honour puts.  That may mean at worst though that one gets something which is an agreement for lease into section 78D.  But, again, in the context of the expression “rent reserved” one needs something which is kept back at the time that something passes.  It cannot be the same as “rent payable”.  The term “rent payable” appears

two or three times within the same section; but the term that we have to construe is “rent reserved”.  And, if promise or agreement for lease is something to which 78D(1) applies, then one can say of an equitable demise that the concept of a reservation is feasible.  But one can certainly not say it at some point antecedent to a demise in equity or at law.

Your Honours, on the point of construction, as we say, the case does not involve tax avoidance.  It raises very neatly the question of whether or not Anderson’s Case does apply to taxing statutes, following the decision of this Court in Cooper Brookes, and it is an appropriate vehicle for the determination of that because the question is, of course, given that this is a statute which has as its taxing point the date of execution of the instrument in question, and given that at that point there could, on no view, and indeed the court below held, be any legal or equitable interest passing to the putative tenant, the sole question then is whether one takes the ordinary meaning of “reserved,” which is a term which, although originally applied in relation to leases at law, is capable, in our submission, by analogy of being applied to leases in equity.  But where one has neither a lease at law nor an equity, then one cannot have, in any real sense of it, a reservation.  If your Honours please, those are our submissions.

BRENNAN CJ:   Yes.  We need not trouble you, Mr Slater.

The definition of “lease” in section 76 is of such width as to preclude a construction of the phrase “rent reserved” in section 78D restricted to the rent reserved out of the grant made by a demise of the term.  On this aspect of the case neither the point of construction nor the argument based on the Walsh v Lonsdale point enjoys sufficient prospects of success to warrant a grant of special leave.

The proposition that on its true construction, the agreement for lease did not reserve or contain a stipulation for rent turns solely on the terms of the particular instrument.  Even if that proposition were correct, it is not a question which warrants consideration on appeal.  For these reasons, special leave will be refused.

MR SLATER:   If the Court pleases, we ask for costs.

BRENNAN CJ:   You have nothing to say about that, Mr Bloom?

MR BLOOM:   No, your Honour.

BRENNAN CJ:   Special leave will be refused with costs.

AT 9.43 AM THE MATTER WAS CONCLUDED