Commonwealth v State of New South Wales

The Commonwealth of Australia brought an action against the State of New South Wales seeking to recover stamp duty paid under protest. The dispute arose when the Commonwealth, having acquired land in New South Wales under the *Lands Acquisition Act 1906*, later decided the land was not required for public purposes. It agreed to reconvey the land to the original vendors in exchange for them waiving any claim for compensation, with the reconveyance to be free of cost to the vendors. The Commonwealth presented a memorandum of transfer to the Commissioner for Stamp Duties for marking as exempt from duty, but the Commissioner refused, and the Commonwealth paid the assessed duty to enable registration of the transfer. The matter was heard by the High Court of Australia as a special case.

The primary legal issue before the Court was whether the stamp duty imposed by the *Stamp Duties Act 1898* (NSW) and its amendments was payable in respect of the memorandum of transfer from the Commonwealth to the original vendors, given the circumstances of the transaction. A secondary question was whether any duty was payable at all. The Commonwealth contended that the duty was not payable, relying on previous High Court decisions that held the *Stamp Duties Act* did not impose an obligation on the Commonwealth, whether as transferor or transferee, and that instruments involving the Commonwealth were not within the scope of the Act. The State argued that the tax was on the transfer in the hands of the transferees, who were private individuals, and that their liability arose independently of the Commonwealth's involvement.

A majority of the High Court, comprising Barton, Higgins, Gavan Duffy, and Powers JJ., held that the stamp duty was payable and the Commonwealth was not entitled to recover the amount paid. The majority distinguished the present case from *The Commonwealth v. State of New South Wales* and *D'Emden v. Pedder*, finding that the duty was imposed on the instrument and was payable by the transferees, who were private individuals and liable under the *Stamp Duties (Amendment) Act 1904*. They reasoned that the Commonwealth's obligation to transfer the land was fulfilled upon execution of the transfer, and any subsequent steps, including stamping and registration, were the responsibility of the transferees according to conveyancing practice. Therefore, the Commonwealth was not burdened by the tax, and its payment was made for the benefit of the transferees. Higgins J. also noted that a retransfer in consideration of waiving compensation claims was not a "conveyance or transfer on sale" within the meaning of the Act.

Isaacs and Rich JJ. dissented, finding that the Commonwealth should succeed. They relied on the first ground of the decision in *The Commonwealth v. State of New South Wales* (1910), which held that the State Stamp Duties Acts did not, as a matter of construction, impose a liability on the Commonwealth to pay duty before registering a transfer. They argued that the Commonwealth had a right to register the transfer, and the State could not impede this right by demanding stamp duty, as this would interfere with a Commonwealth instrumentality. They considered the payment made by the Commonwealth to be under protest and recoverable. The Court directed judgment to be entered for the defendant, the State of New South Wales, with costs.