G E Crane and Sons Ltd v Commissioner of Stamp Duties

[1998] QCA 5

IN THE COURT OF APPEAL	[1998] QCA 005
SUPREME COURT OF QUEENSLAND

Appeal No. 1288 of 1997.

Brisbane
[G E Crane & Sons Ltd & Ors. v. Com. of Stamp Duties]

BETWEEN:

G E CRANE & SONS LIMITED
(ACN 000 003 832)
- and -
POSTRUBY PTY LIMITED
(ACN 062 897 867)
- and -
G E CRANE HOLDINGS LIMITED
(ACN 008 410 302)

Appellants

AND:

COMMISSIONER OF STAMP DUTIES

Respondent

CASE STATED BY THE COMMISSIONER OF STAMP DUTIES
PURSUANT TO SECTION 24 OF THE STAMP ACT 1894

___________________________________________________________________

Macrossan C.J.
Pincus J.A.

Williams J.

___________________________________________________________________________

Judgment delivered 10 February 1998

Joint reasons for judgment of Pincus J.A. and Williams J, separate reasons for judgment of
Macrossan C.J. dissenting in part.

___________________________________________________________________________

ANSWERS TO QUESTIONS RAISED PURSUANT TO S. 24 OF THE STAMP ACT 1894, AND
ORDERS

(a)          NO.

(b)          YES.

(c)          NO.

(d)         NONE OF THEM.

(e)          NO.

(f)          THE MATERIAL DOES NOT DISCLOSE THE VALUE OF THE DUTIABLE ASSETS AND THEREFORE THE AMOUNT OF DUTY CANNOT PRESENTLY BE ASSESSED.

(g)          BY THE COMMISSIONER OF STAMP DUTIES.

IT IS ALSO ORDERED THAT, UNLESS THE PARTIES WITHIN 60 DAYS REACH

AGREEMENT ON THE AMOUNT OF DUTY PAYABLE:

(1)	THE APPEAL IS, ON THE BASIS OF THE REASONS AND ANSWERS GIVEN, REMITTED TO THE TRIAL DIVISION FOR DETERMINATION BY TRIAL;
(2)	SUCH DIRECTIONS MAY BE GIVEN IN THE TRIAL DIVISION AS ARE NECESSARY FOR THE PROPER AND EXPEDITIOUS DETERMINATION OF THE APPEAL, INCLUDED BUT NOT LIMITED TO AN ORDER THAT AN EXPERT BE APPOINTED TO ADVISE THE COURT ON ANY ISSUE OR ISSUES ARISING, ON SUCH TERMS AS TO COSTS AND OTHERWISE AS THE COURT THINKS FIT.

___________________________________________________________________

CATCHWORDS: STAMP DUTY - Sale of a business - whether value of goods sold

are to be included in value of business - whether
Commissioner correct in assessing duty on a "final
instalment" by applying the contingency principle.

Stamp Act 1894 ss. 22A and 54A

Counsel:	Mr J A Logan for the appellants. Mr R W Gotterson Q.C. with him Ms J H Dalton for the respondent.
Solicitors:	Corrs Chambers Westgarth for the appellants. Crown Solicitors Office for the respondent.
Date of hearing:	28 July 1997.

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

Appeal No. 1288 of 1997

Brisbane

Before Macrossan CJ
Pincus JA
Williams J

[G.E. Crane & Sons Ltd & Ors v. Com. of Stamp Duties]

BETWEEN:

G E CRANE & SONS LIMITED

(ACN 000 003 832)

-and-

POSTRUBY PTY LIMITED

(ACN. 062 897 867)

-and-

G E CRANE HOLDINGS LIMITED

(ACN 008 410 302)

Appellants

AND:

COMMISSIONER OF STAMP DUTIES

Respondent

CASE STATED BY THE COMMISSIONER OF STAMP DUTIES

PURSUANT TO SECTION 24 OF THE STAMP ACT 1894

REASONS FOR JUDGMENT - THE CHIEF JUSTICE

Judgment delivered 10 February 1998

This appeal concerns the amount of stamp duty payable as a result of a transaction recorded

in a Deed dated 12 January 1994. Duty has been imposed by the Commissioner upon an associated

Form S(a) lodged by one of the parties to the Deed, G.E. Crane & Sons Ltd, pursuant to the obligation

imposed by s.54A(2) of the Stamp Act 1894 upon a person “who acquires or agrees to acquire a business”. The Commissioner exercising claimed statutory powers under the Act made certain

alterations to the form as lodged to reflect what he alleged to be the Deed’s true effect in the

circumstances.

Since the Court heard argument on the appeal and reserved its decision Kirby J in the High

Court, on 12 November 1997 pursuant to s.40 of the Judiciary Act ordered the removal into the High

Court of the following question “namely, whether s.90 of the Constitution prevents s.54A of the Stamp

Act 1984 (sic) (Qld) from validly applying so as to enable the exaction of duty in respect of an

agreement for the sale of a business and, in particular, in respect of goods the stock of the business”.

That order was made on the basis that there was in these proceedings pending in this Court a cause

“arising under the constitution or involving its interpretation”.

Notwithstanding the order for removal to the High Court the parties to the appeal are anxious

to avoid undue delay and request the Court to decide so much of the case stated as can be decided

which will be, in effect, the whole of it apart from the constitutional point. If it should turn out that the

Commissioner either wins or loses in his claim for duty so far as it is thought to depend on the

constitutional question and on there being a sale of stock involved, this Court for reasons that will

appear will still not be able to answer all of the questions in the form raised by the appeal case stated.

In the circumstances, the course that commends itself is that this Court should decide such of the points

other than the constitutional one as it is able to decide, making declarations and providing answers and

making any further necessary orders pending the High Court’s decision.

The constitutional point apart, the central questions for determination in the appeal require a

consideration of the transaction or transactions involved bearing in mind the effect of s.54A of the Stamp

Act. It is not in contest that the Deed involved “an acquisition or an agreement to acquire a business” that being the topic with which s.54A(1) is concerned. The subsection continues by providing that such

transactions are “deemed to include all goods . . . other movable chattels . . . and the goodwill” in the

situation specified that is when they are “appertaining to the business” acquired or agreed to be acquired

from the owner of the business, whether included in the same transaction or otherwise. By subs.(2) the

one who acquires or agrees to acquire a Queensland business must within one month deliver to the

Commissioner a statement in the prescribed form verified as required. This is the Form S(a) already

referred to. There are penalties for failure to deliver the form in response to the statutory requirement.

Subsection (5) determines how duty under the Act shall be charged. It provides that the

statement which is lodged in response to the obligation “shall be charged with duty under this Act as if

it were a conveyance or transfer of the property to which the statement relates for a consideration equal

to the full unencumbered value of such property and the person delivering that statement shall be liable

accordingly”.

The principal contentions of the appellant are that stock in trade referred to in the Deed

recording the relevant dealings should not have had its value included for the purpose of making an

assessment of duty and that the amount calculable for the “Final Instalment” under the Deed, which

provided for payment on the acquisition by two instalments, should also not have had its value included

for the purpose of assessment. The Commissioner, purporting to rely upon powers of alteration

conferred by s.22A(2) of the Act in cases where he is not satisfied with a statement returned or

document lodged, proceeded to alter the Form S(a). In the end he altered the amount of the

consideration stated in the form at $4,715,870 to $18,067,214 by adding $6,165,594 as being in

respect of stock, an item originally stated by the taxpayer as “N/A”, and by the addition of a Final Instalment of $7,185,750, when that item had not been referred to at all in the document lodged. The

Commissioner’s assessment in its final form also added “Postruby Pty Ltd” to the other parties

mentioned in the Form as lodged as a party which agreed to acquire an interest in the business. These

actions of the Commissioner are what are challenged on the appeal.

The questions which, subject to the ruling of the High Court are involved in the appeal, depend

very largely upon the proper construction of the Deed considered with regard to the concepts that the

Stamp Act makes relevant for duty purposes. The Deed is a lengthy one and contains many detailed

provisions.

By way of commencement the Deed declares that it is made between seven named parties one

of whom is the company Postruby Pty Ltd already referred to. The parties are listed in full as follows:

Burns Philp & Co Ltd ACN 000 000 359 having its registered office at 7 Bridge
Street, Sydney, New South Wales (“Burns Philp”)

Burns Philp Hardware Ltd ACN 000 003 378 having its registered office at 7 Bridge
Street, Sydney, New South Wales (“Hardware”)

Burns Philp Plumbing Leasing Pty Ltd ACN 010 456 863 having its registered office at 7 Bridge Street, Sydney, New South Wales (“Plumbing”)

Burns Philp Purchasing Pty Ltd ACN 002 926 276 having its registered office at 7

Bridge Street, Sydney, New South Wales (“Purchasing”)

G.E. Crane & Sons Ltd ACN 000 003 832 having its registered office at 242 Beecroft

Road, Epping, New South Wales (“Crane”)

Postruby Pty Ltd ACN 062 897 867 having its registered office at 242 Beecroft Road,

Epping, New South Wales (“Postruby”)

G.E. Crane Holdings Limited ACN 008 410 302 having its registered office at
242 Beecroft Road, Epping, New South Wales (“Crane Holdings”)

Notwithstanding the fact that the Deed named seven entities as being parties to it the argument advanced on behalf of the appellant, based on facts recorded in the case, commences with the proposition that we are concerned with the s.54A charge of duty on an acquisition or agreement to

acquire a “business”. It is said that the only “business” comprehended by the Deed was the business

conducted by Hardware and Plumbing (subsidiaries of Burns Philp) which business was acquired by

Crane (like Postruby a subsidiary of Crane Holdings). The case stated makes clear that Hardware and

Plumbing conducted a business supplying to the public goods acquired from Purchasing, another

company listed as a party in the Deed and itself also a subsidiary of Burns Philp. Purchasing did not,

in any direct sense, supply to the public. Purchasing, as well as supplying all of the trading stock of

Hardware and Plumbing, also supplied stock to other companies in the Burns Philp group at least after

the Deed was executed. The argument of the appellant was that the stock held by Purchasing could not

be regarded as included within the description of “goods . . . appertaining to the business” being

disposed of by the Deed, that being an essential characteristic for inclusion for taxing purposes by virtue

of s.54A(1). Correspondingly it was argued that one of the purchasers named in the Deed, Postruby,

could not be regarded as acquiring or agreeing to acquire the “business” in question. It was said that

the arrangements revealed by the Deed showed that Postruby was simply acquiring stock from

Purchasing, and that Crane was acquiring the business from Hardware and Plumbing.

Although there are a number of different strands covered by the Deed not all of them providing

indications in the same sense or to the same effect, I am not persuaded that these arguments of the

appellant should be accepted. At least to the extent so far discussed the approach of the Commissioner

should be upheld. The reasons should now be stated.

It is not necessarily an easy matter to decide in certain situations what are the limits of a business

being conducted by a number of entities associated together: see in this context the remarks of Mason

CJ in Federal Commissioner of Taxation v Whitfords Beach Pty Ltd (1982) 150 CLR 355 at 378-9. In some cases there may, from one point of view, be a composite business which the co-operating

participants are sustaining by their united efforts and at the same time, from different perspectives, there

may be separate businesses conducted by the individual participants. The Deed in this case says in

recital A, it is true, that the vendors except for Purchasing “carry on the Business and the Stock is

owned by” Purchasing. Then it is said by recital B that the Vendors (without discrimination) have

agreed to sell and the Purchaser has agreed to purchase the Assets of the Business. “Vendors” is a

term referred to in the introductory part of the Deed where the parties are identified. It is there indicated

that Hardware Plumbing and Purchasing “are collectively referred to as the ‘vendors’ and each of them

individually as the ‘vendor’”. There is a definition for “Purchaser” in clause 1.1, the interpretation

clause, as being “in relation to all of the Assets apart from Stock” Crane and “in relation to Stock”

Postruby. There is also in clause 1.1 a definition of “Assets” embracing a number of items including

Goodwill and also Stock and adding “all other property and assets of the Vendors connected with the

Business”. The definition of “Business” is “the plumbing supply business presently carried on by the

Vendors from the Business Premises . . .”. In this it will be noted that Purchasing’s participation as a

vendor is not specifically excluded. A subsequent clause, 2.1, states that “The Vendors agree to sell

and the Purchaser agrees to purchase the Assets and the Business as a going concern . . .” it being

necessary for our purposes to remember that Assets is defined to include both Goodwill and Stock.

Once again specific discrimination does not appear, such as by placing in separate categories the

positions of Purchasing and Postruby.

The very many provisions of the Deed which follow are concerned to arrange the details of the

transaction and the obligations of the parties in a way presumably conformable with their intentions for

the planned disposal and acquisition, but they give no particular reason to think that the terms of the Deed have been settled with the questions now arising under the Stamp Act in mind. One later clause,

18, provides that until completion the Vendors must, unless the Purchaser otherwise agrees, conduct

“the” Business in the ordinary course of business and there is no reason to think that the parties are there

doing anything other than recording an intention that trading with the usual range of customers will be

continued by Hardware and Plumbing and that Purchasing will continue to supply stock. The reference

in this clause appears, at least most naturally, to extend to the concept of a composite business which

is to be continued. Clause 19 provides for the same plan to be followed for the period following

completion up to 30 June 1996. Audited accounts are to be prepared, the reference in these clauses

being to “the Combined Business”. Clause 20.1 does draw a distinction between “the Business” and

“the Assets” but again both here and throughout the Deed generally there is no exact correspondence

with the concepts that from the point of view of the scheme of s.54A of the Act are most relevant. It

is true, of course, that contractual agreements for sale of property comprised solely of goods are

excluded from the general rule that contracts or agreements for the sale of property are to be charged

with the same duty as if they were instruments of conveyance of property: see s.54(1) and (2).

Enough has now been said to indicate why the appellant finds scope for a contention that the

Deed happened to embrace what are essentially distinct transactions, namely a sale of a business by

Hardware and Plumbing to Crane and a sale of stock from Purchasing to Postruby. If one were

concerned to identify, if at all possible, a separate business conducted by Hardware and Plumbing one

could, no doubt, in one sense be able to do it, but it would be a business that could not function without

the continuous co-operative supply of stock from the other entity to whom, under the arrangements in

place, they were continuously linked. A further feature which it is helpful to repeat is that there is a

single deed in which it was apparently considered necessary or desirable to include all seven parties for the functions they performed and the roles they were to play. Appendix 1 in cl.1.1(b) supports a view

of full involvement by Purchasing where it says that each of the vendors “has full power to own the

assets and to carry on the Business”.

The conclusion should be that, taking the Deed as a whole, there was a series of interdependent

obligations reflected within it for the sale of a single business, including goodwill and stock, conducted

by a number of entities in a continuing relationship and the assets of the business were to be passed to

two other entities, also related between themselves, with some division of function in the roles of the

acquiring parties being contemplated for the future. The stock in question should thus be regarded as

an item “appertaining to the business” which was acquired or agreed to be acquired and to this extent

the Commissioner’s contention is correct.

No reason appears, either in justice or on the face of the wording of s.22A(2)(a), which would

call for a reading down of the Commissioner’s powers of alteration under that subsection. The

subsection is obviously designed to give a remedy to the Commissioner and in this case he has simply

made the alterations to the form returned to make it conform with the reality in the Deed as he perceived

it.

The next question is whether the Commissioner had power to look beyond the amount of the

first instalment of the purchase price, it being recalled that for the purposes of his assessment he has

made an addition to it. This he has done by including an adjustment to add an allocated Queensland

proportion of the Final Instalment referred to in the Deed in clause 3.2. This provides for the payment

of an additional amount to the vendors, calculated by taking into account the results of future trading in

the hands of the purchasers, but, notwithstanding what the parties have agreed, the Commissioner has

not applied the particular result of that calculation. He relies instead upon a further part of that clause that provides for an upper limit specified for the amount of the payment. This was in argument

described as a “contingency” provision. Thus, clause 3.2 says, in part, that “the amount of the Final

Instalment under no circumstances shall be less than $2,500,000 or more than $27,500,000". The

decided cases reflect an acceptance in certain circumstances of a principle whereby the Commissioner,

for the purpose of imposing duty, is entitled to look at an agreement between the parties prescribing an

upper limit for the consideration which is to be paid and to adopt that limit when assessing duty payable:

see Pacific Fair Shopping Centre Pty Ltd v CSD [1979] Qd R 410 and the cases referred to in it.

The difficulty with accepting the Commissioner’s argument as applicable in the present case is

that the charging section here, s.54A(5), declares that duty is to be charged upon the statement

delivered under the section, namely the Form S(a) statement, as though it were a conveyance or transfer

of the property to which it relates “for a consideration equal to the full unencumbered value of such

property”. Here, the parties have certainly not agreed that the maximum amount of $27,500,000 (or

the Queensland proportion of it) constitutes the “value” of the property to which the Deed and

Form S(a) relate. There has been no investigation of “value” carried out or statement in respect of it

recorded in the Form S(a). It sufficiently clearly appears that the Commissioner has simply taken the

amount which the parties have indicated as the maximum amount which the Final Instalment cannot

exceed and in the circumstances adopted it as though price represented or was equivalent to “value”

with the contingency principle applying. Section 54A(5) is a specific charging section which does not

permit the Commissioner’s approach to be accepted, cf. Hill 50 Goldmine NL v Commissioner of State

Taxation (WA) (1993) 93 ATC 4880.

In argument on behalf of the Commissioner an attempt was made to suggest that if the parties dealing at arms length were prepared to agree on a price that is some evidence of value that can be adopted but there are objections to this approach. The parties have not, in fact, agreed upon

$27,500,000 as a price to be paid under their “arms length” negotiations but have left the price to be

determined by the course of future events simply adding a reservation that it cannot exceed

$27,500,000. Since they have not agreed on $27,500,000 as the “price” no logically acceptable

application of Spencer’s case (1907) 5 C.L.R. 418 could have regard to that figure and convert it into

evidence of value. The case stated does not assert that that figure is the “value” within the sense

enshrined in s.54A(5). Also, as appears from the figure referred to in Annexure P to the case stated,

the amount of the final instalment was in fact calculated and fixed at $2.5 million and on 10 September

1996 that was what was paid under that heading.

Subject of course to the High Court’s ruling the conclusions expressed so far leave for

determination the amount of duty and one of the questions asked is what amount of duty is payable on

the Form S(a). That question cannot be considered at this point. The decision in EIE Ocean B.U. v.

Commissioner of Stamp Duties (1996) 34 A.T.R. 366 provides an example of a convenient course to

follow when value depends on factual considerations.

This Court must now indicate how in the particular circumstances it will proceed. The Court

should provide answers and make orders so far as is possible to the questions asked which answers

and orders will be subject to any ruling of the High Court affecting the matter and will be as follows:

(a) Is the Commissioner empowered, and permitted, to assess duty pursuant to s.54A of the Stamp

Act by adopting the maximum contingent sum payable for goodwill under the Deed as the

amount of the Final Instalment of the Purchase Price? Answer - No.

(b)        Was the acquisition of the Stock under the Deed an acquisition from a person other than the

owners of the business which was the subject of the transaction falling within s.54A of the

Stamp Act? Answer - No.

(c)         Were all the alterations made by the Commissioner to the Form S(a) required to be made in

order to satisfy the requirements of the Stamp Act? Answer - No.

(d)        If “no” to (c), were any alterations, and if so which, required (sic) to the Form S(a) so as to

satisfy the requirements of the Stamp Act? Answer - Yes, to alter the Form to state the

consideration for the acquisition provided for by the Deed in an amount equal to the full

unencumbered value of the business and assets of the kinds specified in s.54A(1) appertaining

to the business.

(e)         If, “yes” to (c), was the duty assessed on the Form S(a) by the Commissioner in the Amended

Default Assessment issued 7th February, 1995, correct? - Unnecessary to answer.

(f)          If “yes” to (d) or “no” to (e), what amount of duty is payable on the Form S(a)? - Unable to

answer.

(g)         How should the costs of and incidental to the stating of this case and of the appeal be borne and

paid? - As indicated below.

The Court further orders as follows:

Following the making of orders by the High Court upon the question reserved to it, remit any

further necessary hearing of the matter to the Trial Division for the purpose of determining by trial any

questions of valuation and any associated questions arising applying the principles stated in these reasons

and to provide for the costs of those further proceedings.

Each party to bear its own costs of the appeal of and incidental to the stating of this case and

of the appeal incurred up to the date of this order.
IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

Appeal No. 1288 of 1997.

Brisbane

Before Macrossan C.J.

Pincus J.A. Williams J.

[G E Crane & Sons Ltd & Ors. v. Com. of Stamp Duties]

BETWEEN:

G E CRANE & SONS LIMITED
(ACN 000 003 832)
- and -
POSTRUBY PTY LIMITED
(ACN 062 897 867)
- and -
G E CRANE HOLDINGS LIMITED
(ACN 008 410 302)

Appellants

AND:

COMMISSIONER OF STAMP DUTIES

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 WILLIAMS J.

Judgment delivered 10 February 1998

This is a stamp duty appeal relating to an assessment of duty, on the sale of a business, under s. 54A of the Stamp Act 1894 ("the Act"). That provision allows the Commissioner to charge duty on a statement which has to be lodged by a person who buys a business. The parties entered into a rather complicated transaction which on the Commissioner's argument was the sale of a business consisting in part of goods; the appellant on the other hand says that although goods were sold, their sale was no part of the business sale and so the Commissioner cannot charge duty on the value of the goods. Apart from that dispute, a question arises about the way in which the value of the property sold is to be assessed.

Because the Commissioner claimed to be able to exact duty on the value of goods sold a question arose as to whether, consistently with the Commonwealth Constitution, duty could be charged on the value of the goods sold and by order of the High Court that question has been removed into the High Court, on application of the Queensland Attorney-General. Kirby J, who made the order of removal on 12 November 1997, expressed the view that there was no reason why this Court should not dispose of the matters other than the Constitutional question “to the extent that it can properly and conveniently do so”.

The sale in issue was effected by a deed made on 12 January 1994 to which there are seven parties. The vendors are Burns Philp Hardware Limited (“Hardware”), Burns Philp Plumbing Leasing Pty Limited (“Plumbing”), and Burns Philp Purchasing Pty Limited (“Purchasing”) and the purchasers are G E Crane & Sons Limited (“GECS”) and Postruby Pty Limited (“Postruby”).

The relationship between the companies involved appears from correspondence in the record and from the terms of the deed. These are discussed below, but it is convenient first to explain why it is that one must decide:

1.          Was Purchasing an owner of the business sold?

2.          Did Postruby acquire or agree to acquire a business?

The Commissioner's assessment cannot stand unless the answer to both these questions is yes. This is so because the Commissioner has included among the assets of the business stock which was (in the view we take) sold by Purchasing to Postruby. The Commissioner's contention is that that sale was, to put it simply, part of the business sale and that the stock is properly included among the assets of the business sold.

The fundamental provisions of s. 54A are subs. 2 and 5; the former requires every person “who acquires or agrees to acquire a business that exists in Queensland” to deliver to the Commissioner a certain statement. The latter imposes a charge of duty on that statement and makes the person delivering it liable for that duty. GECS, in purported fulfilment of its obligations under subs. 2, delivered a statement saying that it had agreed to acquire an interest in a business conducted in Queensland and setting out the values of the assets acquired, not including stock. The Commissioner, asserting the statement to be incomplete, included the value of the Queensland stock in the statement, claiming to be entitled to do so under s. 22A(2) of the Act; that gives the Commissioner power, if not satisfied with a statement delivered and on which duty is chargeable, to alter it so that it satisfies the requirements of the Act. An alteration so as to include in the statement property which s. 54A(2) did not require to be included could not be authorised by s. 22A(2).

Section 54A(1) defines in an inclusive and not necessarily exhaustive way the property included in an acquisition of or agreement to acquire a business:

“An acquisition or an agreement to acquire a business shall, for the purposes of this section, be deemed to include all goods, livestock, vehicles and other movable chattels, and all leases, tenancies and licences, and the goodwill appertaining to the business, which are acquired or agreed to be acquired from the owner of the business whether the same are included in the transaction by which the business is acquired or agreed to be acquired or are the subject of another transaction or other transactions.”

There was some discussion when the matter was before this Court as to whether or not the notion of a “business” for the purposes of s. 54A should be regarded as broad or otherwise. Mr Gotterson Q.C. who led for the Commissioner urged upon us a flexible interpretation of the word. In our view there might in other cases be, but is not in this case, a question to be decided about the effect of the expression “appertaining to the business”. That is, one can imagine circumstances in which the extent of what is included in the acquisition of a business, for the purpose of s. 54A, might be a matter of serious dispute and the answer to the question would presumably depend upon the width given to the expression “appertaining to the business”. Here, it is clear enough that the connection of the stock with the business is such that it is properly within that description; the stock was that which the owners of the business were in the business of selling.

But that is not the real problem for the Commissioner. Only property “acquired or agreed to be acquired from the owner of the business” is within the scope of s. 54A(1). Further, only persons who acquire or agree to acquire a business are obliged to deliver a statement under subs. 2. If the appellant is right, then the stock, although sold by the same deed by which other property appertaining to the business was sold, was not acquired or agreed to be acquired from the owner of the business, because it was acquired and agreed to be acquired from Purchasing, which was not an owner of the business. Further, if the appellant is right, it was Postruby which acquired and agreed to acquire the stock and Postruby was not a person which acquired or agreed to acquire a business; therefore, on the appellant's contention Postruby had no obligation to deliver or be a party to the delivery of a statement such as is required by s. 54A(2).

Another aspect of the latter point is that if Postruby was to avoid making a false declaration it could not, on the appellant's argument, have signed a statement “in the prescribed form” as required by s. 54A(2). Clause 1 of that form, identified as Form S(a), asserts that on a certain day “I(We) acquired or agreed to acquire a business . . .“. If Postruby acquired stock only and that was not, within the meaning of the Act, a business, the making of such a declaration by it would have been an offence on the part of the declarant.

It is common ground that Purchasing owned the stock which was acquired from it under the deed; the question is that which we have stated: was Purchasing “the owner of the business” within the meaning of s. 54A(1)? “Owner” includes “owners” under s. 32C(a) of the Acts Interpretation Act 1954, so that it is enough, so far as this problem is concerned, if it appears from the case stated that Purchasing was one of the owners of the business sold. The Commissioner succeeds on this point unless it appears from the material that at the time of the sale Purchasing had no proprietary interest in the business.

It should perhaps be added that the operation of this part of s. 54A(1) may be in some doubt where the purchaser of the business acquires an interest in property appertaining to the business, but not that interest which the owner of the business had. For example, motor vehicles owned by a finance company might be used in the business and therefore appertaining to it, the business owner having, let it be assumed, merely an interest as lessee. If the purchaser of the business arranges to buy with it the finance company's interest in the vehicles, rather than the business owner's interest as lessee, it does not appear that the vehicles would fit the description of having been acquired from the owner of the business.

We turn now to examine those parts of the case stated and its annexures which are relevant to the question whether Purchasing was one of the owners of the business sold. There are three sources of information on that subject: the text of the case stated itself; the terms of the deed; and assertions in correspondence annexed to the deed.

As to the first, para. 16 of the case stated reads in part:
“In so further altering the Form S(a) and in assessing the duty with which, in the
Commissioner's opinion, the Form S(a) was chargeable, as then so further
altered, the Commissioner determined that, as at the date of execution of the
Deed:

(a)         BPH [Hardware] and BPPL [Plumbing] carried on the “Tradelink” retail plumbing supply business in Queensland, as well as carrying on another such business in Queensland (“the other Queensland business”) which it thereafter continued to carry on;

(b)         BPH [Hardware] and BPPL [Plumbing] acquired all stock for both the “Tradelink” business and the other Queensland business from BPP [Purchasing] solely, not acquiring any stock from any other supplier;

(c)         BPP [Purchasing] purchased all its stock from suppliers external to the Burns Philp & Company Limited Group;

(d)         BPP [Purchasing] supplied stock solely to BPH [Hardware] and BPPL [Plumbing], although it supplied such for each of those businesses separately, and after such date BPP [Purchasing] continued to supply stock to BPH [Hardware] in relation to the other Queensland business;

(e) the sale of the “Tradelink” business was not separate and distinct from the sale of the Stock for the “Tradelink” business, but was one enterprise and, therefore, a business within s. 54A of the Stamp Act;”

The critical determination is in para. (e), but when read literally what is said there is a little puzzling; the assertion appears to be that the sale of the business was one enterprise and therefore a business. It is not clear what is the point being made.

Secondly, the deed contains two inconsistent provisions. One, recital A, says “[t]he Vendors, except for [Purchasing], carry on the Business and the Stock is owned by [Purchasing]". Then cl. 1.1 defines the word “business” used in the deed as meaning “the plumbing supply business presently carried on by the Vendors . . .". It appears that the correct way to read these provisions is to treat the first as a qualification of the second and if that view is adopted then what comes out of them is that the business sold was not carried on by Purchasing.

The deed says that the Vendors agree to sell and the Purchaser agrees to purchase the Assets and the Business (cl. 2.1). The term “Assets” is defined so as to include the stock (cl. 1.1), but the term “Purchaser” is defined to mean:

“ . . . in relation to all of the Assets apart from the Stock - GECS, and in relation
to Stock - Postruby”.

That seems to make clear a point which is not we think in issue, that Postruby was the purchaser of the stock only, nothing else.

The third source of information we have referred to consists in correspondence identified as Annexures “U”, “V”, “W”, “AA” and “BB”, the information in which is accepted by the Commissioner: paras. 23 and 26 of the case stated. It seems unnecessary, however, to set out the information contained in this correspondence, not all of which is manifestly consistent. Its only importance is that it reiterates that Purchasing at the time of sale supplied stock to other businesses than that sold by the deed and, further, that Postruby bought the stock.

To return now to s. 54A(1), the question is whether Purchasing was one of the owners of the business sold. If it was not, then since the stock was acquired from it the acquisition is not, under subs. 1, deemed to include that stock. We have expressed above our view that the stock is within the description “appertaining to the business”, but that does not necessarily mean that the owner of the stock is an owner of the business; the situation postulated above exemplifies this - it would be quite possible to have vehicles used in a business but owned by a finance company having no interest in the business.

The Commissioner's difficulty, as it seems to us, in supporting a conclusion that Purchasing was an owner of the business sold, is that on the facts to which we have referred, Hardware and Plumbing had no financial interest in Purchasing’s business, which was one of selling goods to them and perhaps others; conversely, Purchasing had no financial interest in the business of Hardware and Plumbing, which business was one of selling goods to persons other than the three parties just mentioned. Since the three companies were under the same control there was no doubt a degree of artificiality about the arrangements made; but the Commissioner does not question their genuineness.

One would expect that if parties were carrying on a business together they would ordinarily, perhaps invariably, be partners; the definition of “partnership” in s. 5 of the Partnership Act 1891 is -

“ . . . the relation which subsists between persons carrying on a business in
common with a view of profit”.

Under the arrangements we are discussing, if there were profits made they were quite separate; Purchasing must have been entitled to any profits from its sales, Hardware and Plumbing entitled to any profits from theirs. We can see no reason, on the material, for inferring the existence of a partnership between the three parties, nor any other reason to conclude that Purchasing had an interest in the business conducted by Hardware and Plumbing.

It follows in our opinion that the stock does not fall within the description “acquired or agreed to be acquired from the owner of the business” in s. 54A(1), so the stock is not under that provision deemed to be included in the acquisition or agreement to acquire the business in question. In theory one should perhaps go on to consider whether stock which is not deemed to be included in the acquisition or agreement to acquire under subs. 1 is for some other reason included in the transaction; however, it seems to us clear enough that subs. 1 shows an intention that only property acquired from the owner of the business is to be included.

We note that the prescribed form, Form S(a), contains an assertion that the attached

statement:

“ . . . truly sets out full details of all assets . . . appertaining to, or in any manner connected with the business which were acquired or agreed to be acquired from the owner . . .".

The obligation under subs. 2 is to deliver a statement in that form; and if that requirement is followed the stock would not be included in the statement.

We pass to the point which arises under s. 54A(2) with respect to Postruby. The point is very short. The deed says that “Purchaser” means “in relation to all of the Assets apart from Stock - GECS, and in relation to Stock - Postruby”. We have quoted this provision above and nothing useful can be said in discussion of it. As a matter of construction this definition seems to us to achieve the result that Postruby bought the stock only. For the reasons we have given the stock was not an asset of the business, Postruby is not a person which acquired or agreed to acquire the business or any part of it. It is necessary to add only that under subs. 7, “acquisition of a business” and “agreement to acquire a business” include a transaction by which sufficient of the assets of the business “are acquired or agreed to be acquired to enable the person acquiring the same to carry on the business”. Acquisition of the stock only could hardly fulfil that description.

It should be added that the Commissioner’s counsel put forward an argument to the effect that the assessment could be upheld on the basis that it related to not one business only, but two. The contention was, we understand, that Postruby bought Purchasing’s business and this transaction is dutiable under s. 54A. The argument has no real substance. The relevant duty is exigible on the statement delivered under s. 54A(2). Neither as delivered, nor as amended by the Commissioner, does the statement disclose the sale of two businesses. Further, Purchasing’s business was one of selling stock, to Hardware and Plumbing and perhaps to others. There was no sale of such a business to Postruby or to GECS; after the transaction in question was completed, Purchasing still carried on selling to Hardware and to Plumbing.

In summary, our conclusion on this aspect of the case is that:

(a) The stock sold to Postruby consisted in “goods . . . appertaining to the business” within

the meaning of s. 54A(1), but it was not acquired or agreed to be acquired from the owner of the
business, since Purchasing was not the or an owner of the business acquired;

(b) Postruby was not obliged to deliver a statement under subs. 2, because it acquired and agreed to acquire the stock only, not a business.

It follows that insofar as the assessment seeks to exact duty on the value of the stock, it

cannot stand.

Value of Assets Acquired

We have referred above to s. 54A(5) which makes the statement delivered under subs. 2 chargeable with duty as if it were -

“ . . . a conveyance or transfer of the property to which the statement relates for
a consideration equal to the full unencumbered value of such property . . .".

The statement is not a conveyance whether for consideration or otherwise. Both its character as a conveyance and the consideration are fictional; the latter figure might or might not equate to the consideration in the agreement for acquisition of the business. Ordinarily one would expect that the Commissioner would assess on the basis that the value (which fixes the amount of the consideration in the fictional conveyance) is equal to the consideration for the sale of the business. But the Commissioner is not obliged to do so, nor is the taxpayer necessarily obliged to accept that approach. To reiterate, for the point is important, the figure on which the Commissioner is entitled to exact duty is the value of what is sold, which may or may not be equal to the actual consideration paid. As will appear, the Commissioner has assessed the value by reference to the consideration agreed to be paid. The case stated explains the basis on which this has been worked out, but makes no assertion as to whether or not the figure adopted is the value of the property sold. This Court is not in a position itself to determine that value and unless the parties can agree, it will have to be determined by a single judge.

It is not, in strictness, necessary to say anything further, but in view of the arguments advanced it may be helpful to comment upon the method used by the Commissioner in determining the sum on which duty was assessed; we reiterate that there is nothing in the stated case to say whether or not the sum fixed is the value of the dutiable property. The deed provides for a purchase price consisting of a first instalment and a final instalment. The first instalment is a sum of $44.5M adjusted up or down according as a valuation of assets for which the deed provides is more or less than the sum of $35M. The asset valuation is to include the value of the stock, which for reasons we have given must be excluded for duty purposes, and it does not include all the other assets acquired, but only the plant, equipment and leasehold improvements; it is unnecessary to explain the way in which these are to be valued, under the deed.

The final instalment is calculated in accordance with a formula:

“ A X 7 - B - $3,000,000

2

where:

A =	the EBIT for the Combined Business for the financial year ending 30 June 1996 calculated in accordance with clause 3.5;
B =	the amount required to be paid to the Vendors in accordance with clause 3.1(a),

provided that notwithstanding any other provision herein (or the amount arrived at in accordance with the above formula), the amount of the Final Instalment under no circumstances shall be less than $2,500,000 or more than $27,500,000."

The expression “EBIT” is defined fairly elaborately by the deed; the acronym refers to earnings before interest and income tax. However, the earnings referred to are of a “Combined Business” which is defined so as to include the business sold by the deed and also another business altogether, conducted under the name “Watson & Crane and Glitheroe”. Further, it will be noticed that the relevant year taken for calculation of the EBIT is the financial year ended 30 June 1996, whereas the deed is dated 12 January 1994 and the transaction was completed on 28 January 1994. That is, the price to be paid depends in part upon the performance of the business in a financial year 2 years after the financial year in which the sale occurred, and it also depends upon the performance of another, quite separate, business in that same year.

It may possibly be the case that the value of the dutiable assets, less the value of the stock, can be calculated from the price as ascertained in accordance with the terms of the deed, making appropriate allowances including allowance for the fact that the final instalment is not payable until after 30 June 1996: see cl. 4.1(e). But for reasons which hardly require elaboration, one would not be surprised if the value at the relevant date turned out to be some other figure; apart from anything else, if the profits of the Combined Business turned out to be unexpectedly dismal in the year ended 30 June 1996, that would reduce the price but could hardly reduce the value of the business sold, in 1994.

What the Commissioner has done, in assessing duty, overlooks the peculiarity of subs. 5 as charging duty on a figure equal to value, not on the price agreed to be paid. The Commissioner has assessed duty as if subs. (5) charged duty on the consideration for the sale of the business, which it does not. The difference, in the present case, is important and one importance it has is that what has come to be called the “contingency principle”, used by the Commissioner in assessing duty, can have no application where duty is charged on value, not price. The calculation of the figure on which duty was assessed included an assumption that the final instalment would be the larger figure in the range ($2.5M - $27.5M) within which the final instalment was agreed to fall. This process was, it appears, thought to be justified by the contingency principle.

The appellant contends that the circumstance that the parties have agreed on $27.5M as the maximum payable as the final instalment does not justify the conclusion that the value of the dutiable assets included that maximum sum. Where a price is variable within a range, dependent upon events subsequent to the sale (and dependent, in this case, upon the performance of a business other than that sold) there is little reason to think that the value of what is sold is the figure which, in the events which occurred, happens to be the price; there is absolutely no reason to pick any arbitrary point within that range - e.g. the top or the bottom - as the value. The beginning of the contingency principle appears to have been a rather modest one, in Lord Canning v. Raper (1852) 1 E. & B. 164, 118 E.R. 400. The question decided was whether stamp duty on a security for the liability of a guarantor might be assessed on the basis of the guarantor's contingent liability; the answer given was yes. From that beginning the principle has grown so as to authorise exacting duty on a sum agreed as a “prima facie or basic payment”: Independent Television Authority & Anor. v. Inland Revenue Commissioners [1961] A.C. 427 at 443. So a sum prima facie payable, even if it might be varied down, is treated as the price. What if the price is a variable sum, not to exceed a certain figure? The contingency principle has been extended so as to permit the exaction of duty on the maximum stipulated, as the consideration: Pacific Fair Shopping Centres Pty Limited v. The Commissioner of Stamp Duties [1979] Qd.R. 410. No doubt it was this extension that inspired the Commissioner's approach in the present case. But that approach is in our view plainly wrong because here it is the value of the property, not the consideration, which matters.

Other Issues

For simplicity of discussion we have omitted to go into an important detail of the case, which is that the business sold extended beyond the boundaries of this State and it was necessary to apply those provisions of s. 54A which provided for apportionment of value: see subs. 10 and 11, and note that it is value, not price, which is (consistently with subs. (5)) to be apportioned. There is no dispute in the present case with respect to the mode of apportionment.

There is, however, a dispute about the scope of the Commissioner's power to alter a s. 54A(2) statement, under s. 22A, referred to above. The Commissioner has acted on the basis that there is a right to alter the statement more than once; that is not disputed and we make no comment upon its correctness. Then, the Commissioner asserts an entitlement to alter the statement so as to make it a statement by a person (Postruby) additional to the persons who delivered it. The appellant argued that s. 22A(2) gives the Commissioner no right to do that and we find it unnecessary to decide that issue.

Lastly, we reiterate that the value of the dutiable assets (which exclude the stock) must be fixed, either by agreement or on evidence. In fixing that value the price arrived at by the curious method we have described may be of assistance, but no doubt other facts especially the performance of the business in the years leading up to the sale, would also be of importance. It will be necessary to make a provisional order for fixation of the value; one would hope that the parties might, with such assistance as these reasons provide, agree upon it.

Answers and Order

The question submitted and the answers are as follows:

(a) is the Commissioner empowered, and permitted, to assess duty pursuant to s. 54A of the Stamp Act by adopting the maximum contingent sum payable for goodwill under the Deed as the amount of the Final Instalment of the Purchase Price?

Answer:  No.

(b) was the acquisition of the Stock under the Deed an acquisition from a person other than the owners of the business which was the subject of the transaction falling within s. 54A of the Stamp Act?

Answer:  Yes.

(c)         were all the alterations made by the Commissioner to the Form S(a) required to be made in order to satisfy the requirements of the Stamp Act?

Answer:  No.

(d)         if “no” to (c), were any alterations, and if so which, required to the Form S(a) so as to satisfy the requirements of the Stamp Act?

Answer:  None of them.

(e)         if “yes” to (c), was the duty assessed on the Form S(a) by the Commissioner in the Amended Default Assessment issued 7th February, 1995, correct?

Answer:  No.

(f)          if “yes” to (d) or “no” to (e), what amount of duty is payable on the Form S(a)?

Answer:  The material does not disclose the value of the dutiable assets and therefore the
amount of duty cannot presently be assessed.

(g)         how should the costs of and incidental to the stating of this case and of the appeal be borne and paid?

Answer:  By the Commissioner of Stamp Duties.

It will also be ordered that, unless the parties within 60 days reach agreement on the amount of duty payable:

(1)	The appeal is, on the basis of the reasons and answers given, remitted to the Trial Division for determination by trial;
(2)	Such directions may be given in the Trial Division as are necessary for the proper and expeditious determination of the appeal, included but not limited to an order that an expert be appointed to advise the Court on any issue or issues arising, on such terms as to costs and otherwise as the Court thinks fit.