Lion Nathan Brewing Investments Pty Ltd v Commissioner for Act Revenue 1997 FCA 1153
[1997] FCA 1153
•28 OCTOBER 1997
FEDERAL COURT OF AUSTRALIA
STAMP DUTY - Marketable security - Definition of value - meaning of “the consideration paid or payable for the marketable security” - Whether the purchaser in a subsale can be assessed for stamp duty on the consideration that moved the head sale - Whether value is the consideration given by the transferee or the consideration given to the transferor - when a non-party to a share sale agreement is liable to be assessed for stamp duty by reference to the consideration paid or payable to the transferor rather than on the unencumbered value of the shares - Stamp Duties and Taxes Act, 1987 (ACT) ss4, 44 and 45 - The Taxation (Administration) Act 1987, ss4 and 99 - Determination No 67 of 1990, cl 1 and 5.
National Land Company Ltd v Comptroller of Stamps (1883) 9 VLR 87 (considered)
Escoigne Properties Ltd v Inland Revenue Commissioners [1958] AC 549 (considered)
War Services Homes Commissioner v Collector of Imposts for Victoria (1920) 27 CLR 334 (distinguished)
Maples v Inland Revenue Commissioners [1914] 3 KB 303 (distinguished)
Roberts v Collector of Imposts [1919] VLR 638 (distinguished)
Property Unit Nominees (No 2) Pty Ltd v Commissioner of Stamp Duties [1981] Qd R 332 (applied)
W M Cory & Son Ltd v Inland Revenue Commissioners [1965] AC 1088 (applied)
Archibald Howie Pty Ltd v Commissioner of Stamp Duties (NSW) (1948) CLR 143 (considered)
Abrahams v Federal Commissioner of Taxation (1945) 70 CLR 23 (applied)
Brisbane Water Country Council v Commissioner of Stamp Duties [1979] 1 NSWLR 320 (applied)
London Founders Association Ltd v Clarke (1888) 20 QBD 576 (applied)
Hichens, Harrison Woolston & Co v Jackson & Sons [1943] AC 266 (applied)
Chang v The Registrar of Titles (1976) 137 CLR 177 (applied)
Trident General Insurance Co Limited v McNeice Bros Proprietary Limited (1988) 165 CLR 107 (considered)
LION NATHAN BREWING INVESTMENTS PTY LIMITED v COMMISSIONER FOR ACT REVENUE
ACT G49 of 1996, ACT G61 of 1996
MILES, COOPER, FINN JJ
CANBERRA
28 OCTOBER 1997
IN THE FEDERAL COURT OF AUSTRALIA
GENERAL DISTRIBUTION
AUSTRALIAN CAPITAL TERRITORY DISTRICT REGISTRY
ACT G49 OF 1996
BETWEEN:
LION NATHAN BREWING INVESTMENTS PTY LIMITED
APPELLANTAND:
COMMISSIONER FOR ACT REVENUE
RESPONDENT
IN THE FEDERAL COURT OF AUSTRALIA
AUSTRALIAN CAPITAL TERRITORY DISTRICT REGISTRY
ACT G61 OF 1996
BETWEEN:
LION NATHAN BREWING INVESTMENTS PTY LIMITED
APPELLANTAND:
COMMISSIONER FOR ACT REVENUE
RESPONDENT
JUDGES:
MILES, COOPER AND FINN JJ
DATE OF ORDER:
28 OCTOBER 1997
WHERE MADE:
CANBERRA
THE COURT ORDERS THAT:
The appeal be allowed.
The orders dismissing the appeal from the Administrative Appeals Tribunal and the order for costs of the proceedings in the Supreme Court be set aside and in lieu thereof the court orders that the decision of the President of the Administrative Appeals Tribunal given on 17 August 1995 disallowing the objection lodged on 8 November 1993 to an amended assessment dated 10 September 1993, be set aside and that the matter be remitted to be heard and determined according to law and these reasons.
The respondent pay the appellant’s costs of and incidental to the appeal and below, including reserved costs, to be taxed if not agreed.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA GENERAL DISTRIBUTION AUSTRALIAN CAPITAL TERRITORY
DISTRICT REGISTRYACT G49 of 1996
BETWEEN: LION NATHAN BREWING INVESTMENTS PTY LIMITED
APPELLANTAND: COMMISSIONER FOR ACT REVENUE
RESPONDENT
IN THE FEDERAL COURT OF AUSTRALIA AUSTRALIAN CAPITAL TERRITORY DISTRICT REGISTRY No. ACT G61 of 1996 BETWEEN: LION NATHAN BREWING INVESTMENTS PTY LIMITED
APPELLANTAND: COMMISSIONER FOR ACT REVENUE
RESPONDENT
JUDGES: MILES, COOPER AND FINN JJ DATED: 28 OCTOBER 1997 PLACE: CANBERRA
REASONS FOR JUDGMENT
MILES J: The background and relevant statutory provisions are set out in the judgment of Finn J., a draft of which I have read. I agree with the conclusions and proposed orders of his Honour. However, I would arrive at the conclusions in a slightly different way. It is as well to give my reasons briefly.
The question in the present appeal arises out of the ambiguity of the term “the consideration paid or payable for the marketable security” in cl.1 of Determination number 67 of 1990. Does it refer to the consideration paid or payable to the transferor or that paid or payable by the transferee? Where the transfer is expressed to be for money or money’s worth the question does not arise because the consideration moving from the transferor/payee is the same as that received by the transferee/payer. However, where the consideration is other than in money or money’s worth, it can hardly be said to be “paid or payable”. In such a case Determination No. 67 of 1990 provides a method of assessing the value of a marketable security, which is an alternative to the method which uses as a yardstick, consideration paid or payable. That alternative method is by reference to the unencumbered value of the marketable security. Where it is possible to use either or both methods and the result of one of the two methods results in a value greater than the other, it is that greater value which is used to determine the amount of stamp duty payable on the transfer. By implication, where there is no consideration paid or payable for the marketable security (either because there is no consideration of any sort or because the consideration is not of a sort that can be paid or payable) then the value for the purpose of determining the amount of stamp duty payable on the transfer is the unencumbered value of the marketable security.
Stamp duty is by its nature payable on an instrument; it is not a tax on a transaction: Roberts v. The Collector of Imposts (1919) VLR 638, per Cussen J. at 646. In the present case the instrument in question is a transfer of a marketable security. “The consideration paid or payable for the marketable security” must mean the consideration that can be seen in some sensible way as attaching to the instrument constituting the transfer of the shares in question (or, as Finn J. puts it, “attributable to the transfer of these particular shares”). It is not the consideration that may attach to any transaction or instrument which may happen in some way or other to relate to the transfer. The instrument constituting the transfer itself in the present case was in evidence. It appears to be on an official printed form. The relevant spaces have been completed except the spaces left for “consideration” and “date of purchase”.
The ACT Revenue Office in its reasons for the amended assessment said that the original assessment was made “on the assumption that no consideration had been or was payable for the share transfer by the transferee”. The amended assessment was issued increasing the stamp duty to what would have been assessed if the consideration paid or payable for the shares were one half of what was paid by Bond to Manchar under the previous share sale agreement. However, in my view, the original assumption was correct. There was no consideration paid or payable for the shares in respect of the transfer to the transferee, Investments, from the transferor, Manchar, and reference to the share sale agreement between Manchar and Bond was irrelevant. The case is not concerned with the question whether stamp duty was payable, and, if so, how assessed, on that share sale agreement between Manchar and Bond.
Another approach leading to the same conclusion in the circumstances of the present case is suggested by Roberts v. The Collector of Imposts. The legislation there provided for duty to be imposed on certain instruments. Those instruments included a “transfer on sale”. The legislation also provided that duty was to be assessed on “the amount of the consideration of the sale”. It was held that these words meant that the consideration in question was the consideration received by the conveying or transferring vendor because of the emphasis in the statutory context of the word “sale”. Every transaction by way of sale by a vendor is also a transaction by way of purchase by the purchaser. If it had been intended that was to be by reference to the consideration moving from the purchaser, then the legislature would have made provision for the consideration “of the purchase” rather than for “consideration of the sale”.
In contrast, Determination No. 67 of 1990 provided for the assessment of the amount of stamp duty on “the consideration paid or payable for the marketable security”. Section 45 of the Stamp Duties and Taxes Act 1987 (ACT) provided that it was the transferee who was liable for the stamp duty. It is of the essence of consideration that it moves from the promisor and that in that sense there is a detriment to the promisor. The consideration from the promisor does not have to move to the promisee and there does not have to be identified a benefit to the promisee: see Greig & Davis: (1987) Law of Contract, 77 ff. I do not think that the basic rule, although “under siege”, has been affected by the decision of the High Court in Trident General Insurance Co. Limited v. McNiece Bros Proprietary Limited (1988) 165 CLR 107 (a case of insurance contracts and privity). Accordingly, the meaning of the term “consideration paid or payable” is, on the face of it, concerned with the consideration paid or payable by the transferee rather than the consideration paid or payable to the transferor. On the facts, no consideration passed from the transferee, Investments. In accordance with Determination No. 67 of 1990, it is the unencumbered value of the marketable securities in question and not the consideration paid or payable which must provide the means of determining the amount of stamp duty payable on the transfer.
I also agree with Finn J. that the ultimate question in the circumstances in this case is one of construction. I do not think that there is any need to address the general question whether the
ACT statutory scheme allows for stamp duty to be apportioned between a contract for the sale of a parcel of marketable securities and a transfer by direction of part only of that parcel.
I certify that this and the four (4) preceding pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Miles.
Associate:
Date: 28 October 1997
IN THE FEDERAL COURT OF AUSTRALIA
AUSTRALIAN CAPITAL TERRITORY DISTRICT REGISTRY
ACT G49 OF 1996
BETWEEN:
LION NATHAN BREWING INVESTMENTS PTY LIMITED
APPELLANTAND:
COMMISSIONER FOR ACT REVENUE
RESPONDENT
IN THE FEDERAL COURT OF AUSTRALIA
AUSTRALIAN CAPITAL TERRITORY DISTRICT REGISTRY
ACT G61 OF 1996
BETWEEN:
LION NATHAN BREWING INVESTMENTS PTY LIMITED
APPELLANTAND:
COMMISSIONER FOR ACT REVENUE
RESPONDENT
JUDGES:
MILES, COOPER AND FINN JJ
DATE:
28 OCTOBER 1997
PLACE:
CANBERRA
REASONS FOR JUDGMENT
Cooper J
I have read the draft reasons of Finn J. As those reasons show, little assistance is to be gained from a consideration of cases decided on statutes other than the Stamp Duties and Taxes Act 1987 (ACT) (“the SDTA”). At best the cases demonstrate that the issue raised on these appeals is real, rather than hypothetical, and one which has led to statutory resolution in other jurisdictions.
The traditional approach to the exaction of stamp duty has been that the duty is payable on instruments and not transactions. This approach has been followed in Division 2 of Part V of the SDTA which deals with stamp duty. It is to be contrasted with Division 1 and Division 3 of the Part, which tax transactions in marketable securities in the circumstances provided for in those Divisions.
Whether or not an instrument is exigible to stamp duty depends on the circumstances which exist when the instrument is executed: Property Unit Nominees (No 2) Pty Ltd v Commissioner of Stamp Duties [1981] Qd R 332 (FC) at 335 - 336. Subject to the provisions of the statute imposing duty, if dutiable, the instrument is to be stamped when it legally takes effect: W M Cory & Son Ltd v Inland Revenue Commissioners [1965] AC 1088 at 1104.
Section 44 of the SDTA imposes stamp duty on the transfer of a marketable security which was, immediately before execution of the instrument of transfer, registered in a register kept in the Australian Capital Territory.
Section 44 of the SDTA imposes stamp duty on a transfer by instrument whether such transfer is for valuable consideration or not. The duty so imposed is payable by the transferee under the instrument (s 45), who must lodge the instrument to be stamped within the times provided in s 47 of the SDTA.
The amount of the duty was determined by the Minister by Determination 67 of 1990 made under s 99 of the Taxation (Administration) Act 1987 (ACT). Where no deemed transfer of land is involved, clause 5 of the Determination provides for the payment of ad valorem duty on a transfer of a marketable security, to which s 44 of the SDTA applies, at the rate of fifteen cents for each $25 or part thereof of the value of the marketable security.
The issue in the present appeals is to determine how, on the facts as found by the Administrative Appeals Tribunal (ACT), the value of the marketable securities transferred was to be determined at the time when stamp duty became payable on the transfer. Resolution of that issue involves the proper construction of the definition of “value” contained in clause 1 of the Determination.
The definition of “value” has two alternative limbs, each of which gives rise to the calculation of a money sum. It is the greater of these two sums which is the value in fact to be used for the calculation of the ad valorem duty.
The first limb is :-
“(i)the consideration paid or payable for the marketable security.”
The second limb is :-
“(ii)the unencumbered value of the marketable security.”
It was submitted by the appellant that the first limb should be construed as if it read :-
“(i)the consideration paid or payable [by the transferee] for the marketable security.”
The respondent submitted that the first limb should be construed as if it read :-
“(i)the consideration paid or payable [to the transferor] for the marketable security.”
The respondent submitted that its construction ought to be accepted because it was the consideration which moved the transfer which was the relevant consideration for the purpose of the definition of “value”. In support of this submission the respondent referred to the judgment of Dixon J in Archibald Howie Pty Ltd v Commissioner of Stamp Duties (NSW) (1948) 77 CLR 143 at 152. That it bore such a meaning in the context of s 66 of the Stamp Duties Act 1920 - 1940 (NSW) does not necessarily mean, however, that it bears the same meaning in the context of clause 1 of the Determination.
The context in which the word “value” is used in the Determination is the establishment of the worth of a marketable security expressed in dollar terms. Ad valorem duty or tax is then levied by application of the relevant formula to the value as determined. Further, the definition of “value” operates in respect of all determinations under the Determination and not simply the value of a marketable security to which clause 5 applies (see clauses 3, 4, 6 and 7).
The evident statutory purpose is that stamp duty will be payable on not less than the unencumbered value of the marketable security.
The unencumbered value of a marketable security which is a share in a company is :-
“... the price which a willing but not anxious vendor could reasonably expect to obtain and a hypothetical willing but not anxious purchaser could reasonably expect to have to pay for the shares if the vendor and purchaser had got together and agreed on a price in friendly negotiation, the basis of the bargaining being that the purchaser would be entitled to be registered as the owner of the shares but when registered would hold them subject to the provisions of the memorandum and articles of association of the company, including any restrictions on transfer which they might contain.”
Abrahams v Federal Commissioner of Taxation (1945) 70 CLR 23 at 29 - 30.
Where there is a general market for the shares to be valued, the value is to be ascertained by reference to the value to a seller of the share in that market as at the date of valuation: Brisbane Water County Council v Commissioner of Stamp Duties [1979] 1 NSWLR 320 at 324. The value calculated in either of the above ways is the value applicable to the second limb of the definition.
The first limb is intended to bring to account as the relevant value the consideration of money or monies worth paid for the acquisition of the shares where that sum is in excess of the value ascertained in accordance with the second limb.
The transfer or instrument of transfer in the context of clause 1 of the Determination is only relevant to identify the share or shares to be valued.
The relationship between “the consideration paid or payable” and “the marketable security” the subject of the transfer in the first limb of the Definition, is fixed by the preposition “for”. It is the consideration paid or payable to obtain the beneficial interest in the share. That is, to obtain ownership of the share.
So understood, the value of a share, the subject of a transfer for the purposes of the Determination, is ascertained by asking and answering as a matter of fact a number of questions :-
(a)At the time the transfer of the share legally takes effect and becomes exigible to stamp duty, does the beneficial ownership of the share change?
(b)If “yes” to (a), did the person or entity acquiring the beneficial ownership (“the acquirer”), or some other person or entity, pay or agree to pay a consideration in money or monies worth for the acquirer to acquire the beneficial ownership of that share?
(c)If “yes” to (b), is the amount of that consideration greater than the unencumbered value of the share?
If the answer to (a), (b) and (c) is “yes”, the amount paid or payable by way of consideration is the value of the share for the purposes of the Determination.
If the answer to (a), (b) or (c) is “no”, the unencumbered value of the share is the value for the purposes of the Determination.
In the present appeals, the executed transfer by Bond Corporation Holdings Ltd (“Bond”) to the appellant became dutiable when it had legal effect. At that time, who was the beneficial owner of the shares or to whom did the beneficial ownership of the shares pass? The answer to this question lies in two agreements relating to the shares. The one with the most immediate impact, although the later in time, is a joint venture agreement (“the Brewery Joint Venture Agreement”) entered into by Lion Nathan Ltd (“Lion”), Manchar Holdings Pty Ltd (“Manchar”) and Bell Resources Ltd (“Bell”). The other is a share sale agreement (“the Brewery Sale Agreement”) entered into between Bond, Manchar, Bell and others on 29 May 1989 as amended and varied thereafter.
The Brewery Joint Venture Agreement was an agreement in writing made on 13 August 1990. Clause 3.2 of this agreement originally provided :-
“3.2 Constitution
In consideration of the mutual promises of the parties contained in this Agreement, the parties agree that :
(a)upon First Completion, subject to completion of the Brewery Sale Agreement and the other terms of this Agreement:
(i)Manchar shall transfer to LN 600,000,000 BBH Preference Shares, equal to one half of the issued BBH Preference Shares to be acquired by Manchar pursuant to the Brewery Sale Agreement;
(ii)Manchar shall transfer to LN 7,500,001 BBH Ordinary Shares, equal to one half of the issued BBH Ordinary Shares to be acquired by Manchar pursuant to the Brewery Sale Agreement;
(iii)LN shall acquire from Manchar the BBH Preference Shares referred to in paragraph (a)(i);
(iv)LN shall acquire from Manchar the BBH Ordinary Shares referred to in paragraph (a)(ii); and
(b)upon Second Completion:
(i)LN and Manchar shall each apply for the allotment and issue at par of one half of a number of BBH Preference Shares having an aggregate par value equal to the Subscription Price;
(ii)the Subscription Price shall be satisfied by LN in the manner provided for in Clause 12.8.”
In this clause :-
(a)The “Brewery Sale Agreement” has the same meaning as in these reasons;
(b)“LN” means Lion;
(c)“BBH Preference Shares” means the issued preference shares in Bond Brewing Holdings Limited (“Brewing”);
(d)“BBH Ordinary Shares” means the issued ordinary shares in Brewing.
Clause 3.2(a) was later amended to read :-
“(a)upon First Completion, subject to completion of the Brewery Sale Agreement and the other terms of this Agreement:
(i)Manchar shall transfer or cause to be transferred to LN 600,000,000 BBH Preference Shares, equal to one half of the issued BBH Preference Shares to be acquired by Manchar pursuant to the Brewery Sale agreement;
(ii)Manchar shall transfer or cause to be transferred to LN 15,000,002 BBH Ordinary Shares to be acquired by Manchar pursuant to the Brewery Sale Agreement;
(iii)LN shall acquire from Manchar the BBH Preference Shares referred to in paragraph (a)(i);
(iv)LN shall acquire from Manchar the BBH Ordinary Shares referred to in paragraph (a)(ii);”
(The changes are underlined)
By clause 3.4, Lion was given a power of nomination in favour of a wholly owned subsidiary or subsidiaries to acquire the shares in Brewing specified in clause 3.2 of the Brewery Joint Venture Agreement.
It was the objective intention of the parties as a matter of construction of the Brewery Joint Venture Agreement that Lion or its nominee was to obtain beneficial ownership of the shares the subject of clause 3.2.
The consideration for the acquisition of the 600,000,000 preference shares and the 15,000,002 ordinary shares in Brewing by Lion or its nominee from Manchar was the “mutual promises of the parties contained in this Agreement” (clause 3.2 of the Brewery Joint Venture Agreement). The transfer of the beneficial ownership was to be effected by a transfer made by Manchar or which it caused to be made in favour of Lion or its nominee.
Importantly, the Brewery Joint Venture Agreement was subject to completion of the Brewery Sale Agreement dated 29 May 1989 between Bond, Manchar and others. Manchar was not obliged to transfer or cause to be transferred to the appellant the shares provided for under clause 3.2 until Manchar itself had acquired those shares, and control over the disposition of them by transfer, under the Brewery Sale Agreement from Bond.
On 2 October 1990 the Brewery Sale Agreement was completed and Manchar became obliged to perform its obligations under clause 3.2 of the Brewery Joint Venture Agreement.
The obligation of Manchar to Lion and its nominee, if any, under clause 3.2 of the Brewery Joint Venture Agreement was the same as if Manchar was an ordinary vendor of shares in Brewing to Lion. It was a duty to hand to the purchaser the transfer and the share certificates in proper form in exchange for the promised consideration and to do nothing, either before or subsequently, to prevent registration of the purchaser as the legal owner of the shares: London Founders Association Ltd v Clarke (1888) 20 QBD 576. Where the vendor is not itself the transferor it is under a duty to deliver a transfer executed by a transferor who is, and continues to be, ready and willing that the subject matter of the transfer be duly vested in the person named or to be named as transferee in the transfer: Hichens, Harrison Woolston & Co v Jackson & Sons [1943] AC 266 at 275 - 276, 277, 279, 280. In the instant case Manchar discharged its duty under clause 3.2 of the Brewery Joint Venture Agreement by the production of proper transfers from Bond in favour of the appellant together with the relevant share script. These transfers were executed by Bond on 2 October 1990 and delivered on that day to take legal effect as an instrument of transfer from Bond to the appellant.
Where did the beneficial ownership of the shares, the subject of the transfer to the appellant, lie upon completion of the Brewery Sale Agreement?
The Brewery Sale Agreement was entered into on 29 May 1989, but was thereafter amended or varied by a number of later agreements. However by 2 October 1990 its final form was complete. Bond is described in the Brewery Sale Agreement as “BCH”, and “the Purchaser” is Manchar.
The Brewery Sale Agreement in its final form provided by clause 2 :-
“2. SALE AND PURCHASE OF SHARES
Upon the terms and subject to the conditions of this Agreement, BCH agrees to sell the Shares, and the Purchaser agrees to purchase the Shares as from the Balance Date, free of any Security Interest save for the Security Interests specified in Schedule 7.”
The purchase price payable by Manchar was to be calculated in accordance with clause 3.1 and a deposit of A$1.196 billion on account of the purchase price was payable under clause 3.2. If the deposit ultimately proved to be more than the purchase price, the excess was repayable (clause 3.4).
The Brewery Sale Agreement provided for completion in clause 7. That clause, so far as is relevant, provided :-
“7 COMPLETION
7.1 DateSubject to the prior satisfaction or waiver of the conditions set out in Clauses 4.1 and 4.1A, completion of the sale and purchase of the Shares shall occur at Level 17, Forrest Centre, 221 St George’s Terrace, Perth (or such other address as the Parties may in writing agree or, failing agreement, as the Purchaser shall specify by notice in writing to BCH) on 6 September 1990 (or such later date as the Parties may in writing agree or, failing agreement, such date, no later than 4 October 1990, which the Purchaser shall specify by notice in writing to BCH).
7.2 Transactions
(a)...
(b)(BBH Shares): BCH shall deliver to the Purchaser or as it may direct in writing a transfer of all the BBH Shares duly executed by BCH in favour of the Purchaser or as it may direct in writing together with the share certificates relating to the BBH Shares and share certificates for all issued shares in the capital of each BBH Subsidiary.
...
(g)(Purchase Price): subject to Clause 3.4 and the Deed of Intercompany Indebtedness the deposit of $1,196,000,000 paid by the Purchaser pursuant to Clause 3.2 shall vest absolutely in BCH on account of the Purchase Price and the balance of the Purchase Price shall be paid to BCH or its nominee in cash cleared funds or such other method as BCH and the Purchaser shall agree.”
The BBH shares were defined by clause 1 of the Brewery Sale Agreement :-
“‘BBH Shares’ means 15,000,002 fully paid ordinary shares of $1.00 each, being 50 per cent of the issued ordinary share capital of BBH, and 1,200,000,000 fully paid preference shares of $1.00 each in the capital of BBH and all such other preference shares in the capital of BBH which may be in issue as at Completion.”
The money paid by Manchar to Bond under the Brewery Sale Agreement was the purchase price payable by Manchar for it to obtain from Bond ownership of the issued share capital of Brewing, being 15,000,002 fully paid ordinary shares and 1.2 billion fully paid preference shares. Bond for its part was to perform its obligations as vendor of the shares by delivering to Manchar transfers in favour of Manchar or as it directed, and script to the shares.
The consideration paid or to be paid by Manchar under the Brewery Sale Agreement was to discharge its obligations under that agreement as purchaser and to thereby obtain the beneficial ownership of the BBH shares as defined in the Brewery Sale Agreement.
Upon completion of the Brewery Sale Agreement the beneficial ownership of the BBH shares was in Manchar, it having paid to Bond the price under the Brewery Sale Agreement subject to possible adjustment at a later date. Bond, although remaining the legal owner of the shares until registration of the transfers, held the shares as a constructive trustee for the beneficial owner Manchar: Chang v The Registrar of Titles (1976) 137 CLR 177 at 185; R v Australian Broadcasting Tribunal Ex parte Hardiman (1980) 144 CLR 13 at 31; KLDE Pty Ltd v Commissioner of Stamp Duties (Qld) (1984) 155 CLR 288 at 301; and see generally Palmer’s Company Law 24th Ed para 40-05.
The delivery by Bond of transfers of the shares to Manchar was tendered as performance of its obligation under clause 7.2(b) of the Brewery Sale Agreement. Beneficial ownership of the shares the subject of that agreement passed to Manchar on completion upon the concurrent performance of the obligations of vendor and purchaser under the Brewery Sale Agreement. The executed instruments of transfer were delivered in a form which enabled Manchar to deal with the beneficial ownership of the shares as it saw fit.
Immediately the Brewery Sale Agreement was completed, the obligation to transfer to the appellant the BBH shares under clause 3.2 of the Brewery Joint Venture Agreement fell due for performance. The beneficial ownership of those shares was transferred to the appellant by the operation of clause 3.2 and the delivery of the share transfer and share certificates thereby enabling the appellant to be registered as the legal owner of the shares.
So analysed, the beneficial ownership of the shares the subject of the relevant transfer, for the purpose of s 44 of the SDTA, vested in the appellant on 2 October 1990 when the transfers were delivered in performance of Manchar’s obligation under the Brewery Joint Venture Agreement and it was at that point in time the instruments became dutiable and s 45 imposed upon the appellant the liability for the duty.
What consideration, if any, did the appellant pay to obtain that beneficial ownership? The consideration which passed to Manchar for the beneficial interest in the shares was that expressed in clause 3.2 of the Brewery Joint Venture Agreement. It was not a payment of money or monies worth and thus was not within the first limb of the definition of “value” in the Determination. Accordingly, the value of the shares, for the purpose of assessing the stamp duty payable on the transfer, was the unencumbered value of the shares.
The Commissioner has treated the consideration paid under the Brewery Sale Agreement as the consideration paid for the shares the subject of the transfer from Bond to the appellant. In affirming the decision of the Commissioner, the President of the Administrative Appeals Tribunal (ACT), Professor Curtis, said :-
“53 ... The determination is not ambiguous or unclear in this respect. There is nothing particularly uncommon or unusual about a sale of property in which the property sold is transferred to a third party at the direction of the purchaser under the contract of sale. There is nothing inherently unfair or unreasonable in requiring the transferee in such a case to pay duty on the instrument of transfer in accordance with the consideration paid by the purchaser under the contract of sale, even though the transferee may have been a stranger to the contract. If there were, then there might be a case for reading the determination in the way for which the applicant contends. The transferee takes the benefit of the shares and there is nothing inherently unreasonable in subjecting the transferee to the same duty as would have been payable by the purchaser of the shares. The case is clearly distinguishable from War Service Homes Commissioner v Collector of Imposts (Vic) (1920) 27 CLR 334. In that case, land the subject of a contract of sale was directed by the purchaser under the contract to be conveyed to a third party. The legislation in question in that case expressly imposed on the purchaser an obligation to pay duty in respect of the sale, calculated on the consideration for the sale. No such provision is made in the determination under which duty is assessed in this case. Section 45 of the Stamp Act as it stood at the relevant date provided that stamp duty on a dutiable transfer of a marketable security is payable by the transferee.
54. I think the plain language of the 1990 Determination must be allowed to speak for itself. I therefore am of the view that the determination has the effect that Lion Nathan Brewing, as the transferee of the shares, is liable for duty assessed on the basis of the consideration determined in accordance with the Brewery Sale Agreement notwithstanding that it was not a party to the agreement.”
With respect to the learned President, the error in the reasoning is to ignore the transaction whereby the appellant became entitled to a transfer of the shares the subject of the instrument of transfer. It is an attempt to assess the transferee to duty on an instrument in respect of a transaction to which it was not a party and under which it was entitled to nothing nor received anything. The relevant acquisition occurred when the second transaction was performed and the appellant thereby acquired the beneficial interest in shares. The approach taken in the Tribunal was to seek to tax the transaction between Bond and Manchar rather than to identify the instrument to which it was sought to assess duty, and to identify at what point in time that instrument had effect as a transfer of a marketable security to which s 44 of the SDTA applied and thereby became dutiable.
There is no unfairness in restricting the inquiry as to any consideration paid or payable to the transaction by which the transferee acquires beneficial ownership of the share the subject of the instrument of transfer. For it is only in this way, where the consideration paid or payable on the second transaction is higher than either the consideration paid on the first transaction or the value of the marketable security at the date of the execution of the instrument of transfer, that the Commissioner can assess on the higher consideration paid or payable. If the approach of the President is correct, when A purchases from B 1000 shares at $100 per share, and directs B to execute an instrument of transfer to C to satisfy an obligation to C to transfer 1000 shares at $500 per share, whether arising under an earlier or later agreement to sell, the relevant consideration is $100 per share because it moves the transfer and not the $500 paid to acquire each share.
The reasoning below on the appeals from the Tribunal to the Supreme Court of the Australian Capital Territory was that it is self-evident that the payment by Manchar to Bond was that which moved Bond to effect transfers of shares to Manchar and the appellant. That payment was therefore the relevant “consideration” for the purpose of the Determination. I take this to mean that the payment by Manchar to Bond was the reason why Bond executed the transfer and therefore it was the consideration for the shares. For the reasons stated above I do not accept that it is a correct test. What moves the transfer, in the sense of why Bond executed the instrument of transfer in favour of the appellant, is irrelevant for the purposes of both s 44 of the SDTA and the definition of “value” in clause 1 of the Determination. What was paid or is payable as consideration for the transferee under the instrument to acquire the share the subject of the transfer is the test in the first limb of the definition of “value”. That consideration may, but not necessarily must, be paid to the transferor. Similarly, that consideration may, but not necessarily must, be paid by the transferee.
For the above reasons I would allow the appeals, set aside the orders dismissing the appeals from the Administrative Appeals Tribunal and the order for costs of the proceedings in the Supreme Court. In lieu thereof I would order that the decisions of the President of the Administrative Appeals Tribunal given on 17 August 1995 disallowing the objection lodged on 8 November 1993 to an amended assessment dated 10 September 1993, and the objection lodged on 20 January 1994 to the further amended assessment dated 23 November 1993, insofar as the objections are disallowed with respect to the amount of duty payable, be set aside and that the matter be remitted to be heard and determined according to law. I would further order that the respondent pay the appellant’s costs of and incidental to the appeals and below, including reserved costs, to be taxed if not agreed.
I certify that this and the preceding twelve (12) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Cooper
Associate:
Dated: 28 October 1997
IN THE FEDERAL COURT OF AUSTRALIA GENERAL DISTRIBUTION
AUSTRALIAN CAPITAL TERRITORY
DISTRICT REGISTRY ACT G49 of 1996
BETWEEN:LION NATHAN BREWING INVESTMENTS PTY LIMITED
APPELLANT
AND: COMMISSIONER FOR ACT REVENUE
RESPONDENT
IN THE FEDERAL COURT OF AUSTRALIA
AUSTRALIAN CAPITAL TERRITORY
DISTRICT REGISTRY ACT G61 of 1996
BETWEEN:LION NATHAN BREWING INVESTMENTS PTY LIMITED
APPELLANT
AND:COMMISSIONER FOR ACT REVENUE
RESPONDENT
COURT:MILES, COOPER, FINN JJ
DATE: 28 OCTOBER 1997
PLACE:CANBERRA
REASONS FOR JUDGMENT
FINN J
These are two appeals from a decision of a judge of the Supreme Court of the Australian Capital Territory (“the ACT”) dismissing appeals from the Administrative Appeals Tribunal of the ACT. Each raises a single, but common, issue of law. For this reason it is convenient to deal with the two in a composite way. Put briefly and somewhat inaccurately, that issue arises as follows.
A and B contract that B will purchase from A all of the shares A holds in X Co. B then enters into a joint venture agreement with C under which it agrees to cause to be transferred to C or C’s nominee, half of the shares B has purchased from A. C nominates D as the transferee of the shares under the joint venture agreement. B, under a power in the A-B contract, directs A to transfer to D half of the shares B has bought from A, the remaining half to be transferred to B. Transfers to this effect are executed. The Commissioner for ACT Revenue assesses the A-D transfer for duty, that assessment being computed by reference to half of the purchase price paid by B to A under the A-B contract. D, the party liable to pay the assessment, was not a party to the A-B contract and only became the transferee from A directly as a means of putting into effect B’s obligation to C under the B-C contract. The bare question is whether, consistent with the statutory scheme for assessing stamp duty, the assessment was properly so computed.
Before detailing the facts - and it will be necessary to recite them at a little length - it is appropriate to set out that part of the statutory scheme that is of present relevance.
The Statutory Scheme
Stamp duty on share transfers was imposed by the Stamp Duties and Taxes Act, 1987 (ACT) (“the Act”). Section 45 of the Act provided that:
“Stamp duty on a dutiable transfer of a marketable security is payable by the transferee.”
The Act, s4 defined (i) “marketable security” to mean, relevantly, “a share in the capital of a company”; and (ii) “dutiable transfer” to mean “a transfer of the [marketable] security on which stamp duty is payable by virtue of Division 2 of Part V”. That Division included s45 as also s44.
Section 44 in turn provided at the relevant time that:
“The determined amount of stamp duty is payable on a transfer of a marketable security, being a marketable security that was, immediately before the instrument of transfer was executed, registered in a register kept in the Territory by a company or under a unit trust.”
The Act, s4 defined “determined amount” as having the same meaning as it had in the Taxation (Administration) Act 1987 (“the TA Act”).
The TA Act, s4 provided that “determined amount” in relation to a duty meant:
“(a)the amount determined under subsection 99(1) for the purposes of the provision in which the expression appears; or
(b)the amount calculated at the rate determined by the Minister under subsection 99(1) for the purposes of the provision in which the expression appears.”
For its part s99(1) empowered the Minister by notice in the Gazette to determine (inter alia):
“(a)the amount of tax, duty or a licence fee payable under a relevant tax law;
(b)the rate or differential rates at which, or the method by which, an amount of tax, duty, a licence fee or interest payable under a relevant tax law, is to be calculated.”
The s99(1) determination that applied to the transfers in this matter was Determination No 67 of 1990. Insofar as its terms provided for the transfers of present concern that Determination provided in cl 5 that:
“5.For the purposes of section 44 of the Act, the determined amount of stamp duty payable on a transfer to which the section applies of an unlisted marketable security is ... -
(b)an amount calculated at the rate of 15 cents for each $25.00 or part of $25.00 of the ... value of the marketable security.”
“Value” in relation to a marketable security is defined in cl 1 of the Determination to mean:
“(i)the consideration paid or payable for the marketable security; or
(ii)the unencumbered value of the marketable security - whichever is the greater.”
To translate this scheme back to the issue in these appeals as outlined at the outset, the Commissioner for ACT Revenue (“the Commissioner”) assessed the duty payable on the A-D transfer by reference to the consideration paid on the A-B contract.
The Factual Setting
On 29 May 1989 Bond Corporation Holdings Ltd (“Bond”), Manchar Holdings Pty Ltd (“Manchar”) and Bell Resources Ltd (“Bell”) entered into a share sale agreement. Under it Manchar, a wholly owned subsidiary of Bell, agreed to buy all of the shares in Bond Brewing Holdings Ltd (“Brewing”). Bond was the beneficial owner of these which comprised 1.2 billion fully paid preference shares of $1 each and 15,000,002 ordinary shares.
The sale agreement underwent several iterations. In its final form the purchase price for the shares was the aggregate of $1.8 billion and certain additions less certain debts as certified by the firm of accountants, Arthur Andersen & Co.
On 26 November 1993 Arthur Andersen & Co informed the solicitors for Manchar that they had calculated the purchase price in accordance with cl 3.1 of the sale agreement at $691,082,000. That sum was accepted by the parties to the agreement. I would note in passing that that figure provided the “consideration paid or payable” for the shares by reference to which the stamp duty on the share transfers was assessed by the Commissioner.
There are several terms of the sale agreement that require mention (i) Clause 3.2 required Manchar to pay Bond “the sum of $1,196,000,000 by way of deposit on account of the Purchase Price”; (ii) Clause 3.4 provided for the contingency (which eventuated) of the purchase price being less than the deposit; (iii) Clause 7.2(b) provided (inter alia) that on completion Bond was to deliver to Manchar “or as it may direct in writing” a transfer of all the Brewing shares duly executed by Bond in favour of Manchar or “as it may direct in writing”. I note here that it was in consequence of a direction given by Manchar that Bond transferred to Lion Nathan Brewing Investments Pty Ltd (“Investments”) the shares the subject of the disputed assessments.
Before turning to the quite separate contract that led to that direction it is convenient to note these additional matters concerning Brewing and the value of its business. Bell required an independent expert’s report on Brewing’s business for the purpose of a general meeting of Bell’s shareholders on 15 August 1990.
Grant Samuel & Associates Ltd prepared that report. The net value it attributed to Brewing was between a negative worth of $77.8 million and a positive worth of $90.2 million. Valuations prepared at much the same time by other organisations concluded that Brewing had a negative worth of far greater magnitude than suggested in the Grant Samuel Report. I do not have to express any view on Brewing’s likely net value. All I would note is the contrast between the valuations mentioned and the purchase price of the shares in Brewing.
On 13 August, two and a half months after the Bond-Manchar sale agreement, Bell and Manchar entered into a joint venture agreement with Lion Nathan Ltd (“Lion”). The recitals to that agreement noted that Manchar had agreed to purchase Bond’s Brewing shares and continued:
[Lion] has substantial expertise in the management and operation of breweries and has discussed with Manchar and [Bell] a proposal whereby a joint venture would be established between Manchar and [Lion] in relation to the Australian Brewing Business, with [Lion] to appoint the management of such venture ...”
The agreement put that proposal into effect.
As later modified it provided (inter alia) that:
(a)in cl 3.2, subject to completion of the sale agreement -
“(i)Manchar shall transfer or cause to be transferred to [Lion] 600,000,000 [Brewing] Preference Shares, equal to one half of the issued [Brewing] Preference Shares to be acquired by Manchar pursuant to the ... Sale Agreement;
(ii)Manchar shall transfer or cause to be transferred to [Lion] 15,000,002 [Brewing] Ordinary Shares”; and
(b) in cl 3.4 -
“The parties acknowledge that [Lion] may prior to First Completion nominate a wholly owned subsidiary or subsidiaries to acquire the [Brewing] Sale Shares and the [Brewing] issue Shares. If so, [Lion] shall procure that subsidiary or subsidiaries to perform the obligations of [Lion] pursuant to this Agreement to acquire the [shares] referred to in Clause 3.2 and all references in this Agreement to [Lion] shall be construed accordingly.”
I would note that the joint venture agreement apparently did not provide for any consideration for the share transfer other than Lion’s entry into the agreement.
Sometime prior to 2 October 1990 Lion nominated Investments (then named Categorical Pty Ltd) as the subsidiary to acquire the shares under cl 3.4 of the joint venture agreement. For convenience Investments/Categorical will be referred to in these reasons only as Investments.
On 2 October 1990 the completion of the sale agreement occurred. Pursuant to “Pre-Completion Nominations” sent to Bond on that day Manchar, under cl 7.2(b) of the sale agreement, directed Bond on completion to transfer 600,000,000 of the Brewing preference shares and all 15,000,002 of the ordinary shares to Investments. The appropriate share transfer forms were executed by Bond and Investments the same day. Those are the two transfers the subject of these appeals.
The Stamp Duty Assessments
On 26 November 1990 the Commissioner assessed the stamp duty payable on the two transfers to Investments. It was accepted that the ordinary shares were of nominal value only. The duty on the preference shares was based on their market valuation (the second of the two bases of evaluation in the 1990 Determination). The figure used for that purpose (ie $45.1 million) was based on the highest value (ie $90.2 million) placed on Brewings business in the Grant Samuel Report. The duty payable was determined to be $270,600.15.
On 10 September 1993 the Commission issued an amended assessment to Investments under s22 of the Taxation (Administration) Act 1987 (ACT). The amendment was to the assessment of the value of the preference shares and of the duty assessed on their transfer. That value was put at $345,541,000 and the duty thereon at $2,073,246. Allowance was made for the duty previously paid but interest was charged resulting in an overall assessment of $2,412,582.38 to be paid.
The reasons later given for the amended assessment were, relevantly, as follows:
“Our assessment dated 26 November 1990 assessed the value of the 600 Million convertible “A” class preference shares in Bond Brewing Holdings Limited (the Shares) transferred from Bond Corporation Holdings Limited to Categorical Pty Limited [Investments] on the unencumbered value of the marketable security. This assessment was made on the assumption that no consideration had been or was payable for the share transfer by the transferee.
After further investigation and a review of the case, the ACT Revenue Office is of the opinion that $345,541,000 was paid to Bond Brewing Holdings Limited in consideration for the Shares transferred to Categorical Pty Ltd. The above amount represents 50% of the consideration paid by Manchar Holdings Ltd to Bond Corporation Holdings Ltd, under the share sale agreement, as amended, dated 29 May 1989, for the transfer of 1,200,000,000 convertible “A” class shares in Bond Brewing Holdings Limited (600 Million to Manchar and 600 Million to Categorical).
A further amended assessment was issued on 23 November. It effected a variation in the interest charged on the unpaid duty.
Investments lodged objections to both amended assessments. These having been dismissed by the Commissioner’s delegate two appeals were made to the Administrative Appeals Tribunal of the ACT. For present purposes it need merely be said that that Tribunal confirmed the Commissioner’s assessment (save in relation to interest). An appeal to the Supreme Court of the ACT from that decision was dismissed.
The Appeal to this Court
Only one ground of appeal has been pursued. Put briefly, it is that the Supreme Court erred in finding that Investments, though not a party to the Bond-Manchar sale agreement, was nonetheless liable to be assessed for stamp duty be reference to the consideration paid or payable by Manchar under that agreement rather than on the basis of the unencumbered value of the shares. The issue this raises is a narrow but important one. Given that “value” in the 1990 Determination is defined to mean (inter alia) -
“the consideration paid or payable for the marketable security” -
is the Commissioner entitled or required under the Act in ascertaining the determined amount to consider the matter only from the standpoint of the transferor (Bond) and of the “consideration paid” for its disposal of - hence transfer of - the shares? Or, consistent with the Act, is the Commissioner in circumstances such as the present required to consider the matter from the standpoint of Investments which acquired the shares, not from Bond, but from Manchar in “consideration” of Lion’s entry into the joint venture agreement?
While it may seem somewhat surprising that a party taking in virtue of a transaction for value with B should nonetheless be liable for duty in respect of a transaction between B and A, such may well have been the legislative intent. It is with the Act one must begin: Commissioner for Stamp Duties v Gales (1958) 101 CLR 96 at 108.
The Statutory Scheme
It needs to be said at the outset because of its importance to the disposition of this appeal that, while stamp duty statutes of different jurisdictions may bear close similarities (conceptual and linguistic) with each other, each in the end falls to be construed according to its own terms.
It is the case that recurrent patterns in this form of taxing legislation can be found across jurisdictions. One that is clear and obvious in the context of the sale and purchase of property has been to compute the duty payable on a transfer of that property by reference to the amount of the consideration for its sale. The present legislation conforms partially at least to this in Determination No 67 of 1990.
Where such a consideration-based approach to the computation of duty has been adopted, it has long been a feature of English and then of Australian colonial and State stamp duty legislation that express provision has been made to accommodate the contingency of sub-sales of previously sold property - sub-sales that are completed by a direct transfer or conveyance from the original vendor to the sub-purchaser of whole or part of the property previously purchased but “on-sold”. Illustrative of this are the provisions of s68(3) and (4) of the Stamps Act, 1915 (Vic), these provisions having both an earlier colonial (see eg 43 Vic No 645, s68(3) and (4)) and Imperial provenance (see s33 & 34 Vict c 97, s74; see also Sergeant and Sims on Stamp Duties and Capital Duty and Stamp Reserve Tax, 139 ff, Butterworths, London, 9th Ed 1988). I note these in particular as some of the authorities to which I have been referred are based upon legislation containing these or like provisions.
The sub-sections provide:
“(3) Where a person having contracted for the purchase of any property but not having obtained a conveyance thereof contracts to sell the same to any other person and the property is in consequence conveyed immediately to the sub-purchaser, the conveyance is to be charged with ad valorem duty in respect of the consideration for the sale by the original purchaser to the sub-purchaser. (Emphasis added)
(4) Where a person having contracted for the purchase of any property but not having obtained a conveyance contracts to sell the whole or any part or parts thereof to any other person or persons and the property is in consequence conveyed by the original seller to different persons in parts or parcels, the conveyance of each part or parcel is to be charged with ad valorem duty in respect only of the consideration moving from the sub-purchaser thereof without regard to the amount or value of the original consideration.” (Emphasis added)
The present ACT legislation has no such “sub-purchase” provision nor any variant on it at all. Yet the need for such a provision has been variously identified. In The National Land Company Ltd v Comptroller of Stamps (1883) 9 VLR 87 at 92, Stawell CJ referred to that need in the following way when commenting on the counterpart sub-purchase provisions to those quoted above, of Act No 645:
“As no consideration passes between the parties to a deed of conveyance from the first vendor to the sub-purchaser, some legislation was required to determine on what consideration, whether that between the first vendor and his purchaser, or that between the sub-vendor and his purchaser, the duty should in such a case be imposed.”
In Escoigne Properties Ltd v Inland Revenue Commissioners [1958] AC 549 at 563, in contrast, Lord Somerville commented of the then equivalent English sub-purchase provision:
“In the present case the conveyance and other instruments come within section 58(4). But for that subsection, it might have been suggested or held that double duty was payable, first on the completion of the sale to the purchaser and secondly on the completion of the sale to the sub-purchaser although carried out by the same instrument. Both transfers are covered by the one conveyance and the one stamp.”
Though differently identified in these two instances, the difficulty so pointed up requires resolution in this appeal. Before turning directly to that matter there are several additional comments I ought make.
First, because of the reliance placed by the respondent on a decision of the High Court in War Services Homes Commissioner v Collector of Imposts for Victoria (1920) 27 CLR 334 to which I will later refer, it is appropriate to note that sub-purchaser provisions in this country have not necessarily adopted the particular model used in s68 of the Victorian Act of 1915: for a quite different treatment of the matter see the legislation discussed in Lake Victoria Ltd v Commissioner of Stamp Duties (1949) 49 SR(NSW) 262; and see eg Stamp Act 1894 (Qld), s53(8) and (8A) and the commentary thereon in Mann, Stamp Duties (Queensland), para 3770. Indeed sub-sections (3) and (4) of that very provision were repealed in Victoria in the Stamps Act 1918 and were replaced (insofar as presently relevant) by the provision that:
“Every sale of real property shall be chargeable with ad valorem duty upon the consideration therefor, and such duty shall be paid on the conveyance which seeks to give effect whether directly or indirectly to every such sale.” (Emphasis added)
I simply note that it was the applicability of this provision that was in issue in the War Service Commissioner case.
Secondly, as I have indicated, the scheme of the ACT legislation does not make express provision for sub-purchases.
The Construction Issue
For practical purposes the issue between the parties turns on the proper construction and application of the definition of “value” in Determination No 67 of 1990. It is appropriate to reiterate here that, in relation to a marketable security, the term “value” is defined to mean:
“(i)the consideration paid or payable for the marketable security; or
(ii)the unencumbered value of the marketable security - whichever is the greater.”
Apart from what I consider to be the substantial matter of contention between the parties in the construction of this clause, the appellant has advanced an alternative submission that can be dealt with briefly.
This submission starts with the proposition that, in the Bond-Manchar agreement, the consideration was “paid or payable” in respect of the entire parcel of Brewing shares. There was no consideration “paid or payable” under that agreement for the different parcel of shares transferred to Investments. The Bond-Manchar sale agreement did not contemplate a sale of that parcel, and it was not acquired under that agreement.
So it is submitted that there was no agreement under which any person agreed to acquire from anyone the shares in question for the consideration which the Commissioner has assessed the transfer. “Consideration” where used in the Determination is a reference to something which is either real or actual. It does not encompass a notional consideration which is attributed to a transaction but which itself is not the product of an agreement.
Given the view I take of the proper construction to be given the definition of “value” in Determination 67, it is unnecessary - and probably undesirable - to express a view on this submission. It is appropriate, though, to say this much. Assuming (contrary to my view) that Determination 67, on its proper construction, required that the duty payable on the transfer of shares from Bond to Investments was to be computed by reference to the consideration paid by Manchar, was it properly open to the Commissioner to apportion that consideration so as to take account of the number of shares actually acquired by, and transferred to, Investments?
The ACT legislation does not in express terms allow for an apportionment. This said, there is a body of authority both in this country and in England in which original purchasers of property who have on-sold part of that property, have been assessed for a proportion of the consideration paid for the original purchase when the vendor has transferred the remnant of the property to them: see National Land Company Ltd v Comptroller of Stamps, above; Bastow v Collector of Imposts [1917] VLR 81; Maples v Inland Revenue Commissioners [1914] 3 KB 303. It probably is the case, as Cussen J indicated in Roberts v Collector of Imposts [1919] VLR 638 at 647, that this conclusion worked some “extension” of the language of the statutes in question in those cases.
Whether a like “extension” to the ACT legislation is necessary to be made - or should be made - in cases either (as here) of sub-purchasers or (for that matter) of original purchasers, is a matter upon which I think it desirable not to express a concluded view. It is unnecessary to my decision but it would have direct bearing on the question of the duty properly payable on the shares purchased by Manchar but not on-sold to Investments: cf Maples v Inland Revenue Commissioners, above, at 308.
I turn now to the construction question proper. Reduced to their essentials, the respective submissions of the parties on this matter require in effect an implication - albeit different in each case - to be made into the definition of “value” in the Determination. The implication the appellant requires to be made is that “value” means:
“(i)the consideration paid or payable [by the transferee (or its nominor)] for the marketable security; or
(ii)the unencumbered value of the marketable security whichever is the greater.”
The respondent’s implication is that it means:
“(i)the consideration paid or payable [to the transferor (or its nominor)] for the marketable security; or
(ii)the unencumbered value of the marketable security whichever is the greater.”
I observe in passing that these submissions simply highlight the conundrum, pointed out by Stawell CJ in the National Land Company case, that was said to require the enactment of provisions dealing with sub-purchase. I would also note in passing that the Commissioner in this case has not advanced an alternate construction which would, as Lord Somerville suggested in the Escoigne Properties case, above, lead to the conclusion that double duty was payable by Investments.
The respondent sought to justify its preferred construction by reference to the decisions of the Victorian Full Court in Roberts v The Collector of Imposts [1919] VLR 638 and of the High Court in War Service Homes Commissioner v Collector of Imposts for Victoria, above.
I would have to say I derive no particular assistance from either decision. In Robert’s case, there was no question of a sub-sale at all (see above at p646 per Cussen; at 653 per Schutt J), the circumstances being ones in which Robert’s purchased property and then directed the vendor to transfer it to his wife, the transfer to the wife being made “in consideration of the sum of 9751L 3s 6d paid ... by RF Roberts ... and of the natural love and affection of the said RF Roberts towards his wife ... at the request and by the direction of the said RF Roberts”. The transfer was charged with duty both as on a transfer on sale and as on a deed of gift. On a case stated raising the question whether the transfer was chargeable with duty in respect of the consideration paid by Roberts, the Victorian Full Court by a majority held that it was.
Though Cussen J (in his own view “perhaps unnecessarily”: above at 648) considered the possible effect of provisions of the 1918 Act (in part referred to earlier in these reasons) that repealed and replaced the sub-purchase provisions of the 1915 Act, his Honour regarded the matter as one requiring construction of the Act. Of this he said:
“... the instrument comes within the provisions of sec.17 of the Stamps Act 1915, and Division VI. of the Third Schedule to that Act, and that there is no enactment exempting it from the duty imposed by those provisions. Sec.17 enacts that there shall be charged upon the several instruments specified in the Third Schedule the several duties and additional duties therein specified. One would expect in a Stamps Act that the charge would be imposed on “instruments,” but the exact words of sec.17 will be used hereafter to point a contrast. One of the instruments specified in the Third Schedule is a “transfer on sale,” or “a transfer of land on a sale,” and the Third Schedule commences by saying that - “There shall be charged and paid . . . upon and for the several instruments hereinafter specified the several stamp duties hereinafter specified, etc.” It should be noticed that the Third Schedule alone supplies, in a case such as this, the measure, and in all cases the rate of what is called ad valorem duty, and that by sec.18 the Third Schedule is to be read as part of Part II. of the Act. The measure is afforded by taking “the amount or value of the consideration for the sale”. In the present case this means “the amount of the consideration for the sale.” I regard the ascertainment of the meaning of the words “the consideration for the sale” as being of prime importance in the present case, and I feel no doubt that, except so far as the contrary is expressly provided, they mean “the consideration for the sale by the conveying or transferring vendor.””
What I would emphasise was his Honour’s concern with the particular language - “the consideration for the sale” - of the then Victorian Act. I would, with respect, agree with the conclusion arrived at, and this because of the inference properly to be drawn from the words “the sale” in the statutory formula used.
The language used in the ACT legislation suggests no such inference. It makes stamp duty payable on a dutiable transfer of a marketable security. And, as already noted, insofar as the duty payable can be computed by reference to “consideration”, that is expressed to be the “consideration paid or payable for the marketable security”. Significantly the definition of “value” does not refer to the consideration “paid or payable for the sale of the marketable security.”
The War Service Homes Commissioner case can be dealt with more briefly. The Commissioner was assessed for duty for the full consideration paid by a purchaser of land, the dutiable transfer providing insofar as presently relevant that the vendor:
“... in consideration of the sum of £720 paid to me by Gilbert James Williams and in further consideration of the sum of £648 paid to the said Gilbert James Williams by War Service Homes Commissioner, a body corporate by the War Service Homes Act 1918-1919 of the Commonwealth of Australia, do hereby at the request and by the direction of the said Gilbert James Williams transfer to the said War Service Homes Commissioner all my estate and interest in all that piece of land.”
Given the terms of the amendment made in 1918 to the Stamps Act 1915 (Vic) s68(3), the sole question for decision was whether the vendor’s conveyance to the Commissioner at the direction of Williams sought “to give effect directly or indirectly” to the vendor’s sale of the property: Stamps Act 1918, s3(3). Unsurprisingly, all members of the High Court considered it “abundantly clear” (per Isaacs J at 338) that it did. That conclusion, given the statutory provision involved, provides no guidance at all in resolving the particular question of construction here.
Having referred in these reasons to decisions and controversies born of differently worded statutes, it is, perhaps, appropriate to be reminded that the ACT Act is “to be construed and applied according to its terms, not under the influence of ‘muffled echoes of arguments’ concerning other legislation”: Federal Commissioner of Taxation v Spotless Services Ltd (1996) 141 ALR 92 at 96.
It is not in dispute that the “marketable securities” the subject of the “dutiable transfer” were the 600 million preference shares. If one asks the question whether consideration was paid or payable for those actual shares - and the definition of “value” in cl 1 of the Determination requires that this question be asked - the answer, in my view, must be “no”. The consideration given for them was Lion’s participation in the joint venture with Manchar. A literal reading and application of the legislation does, in other words, produce the conclusion contended for by the appellant.
A construction that would produce the result contended for by the respondent requires significant manipulation of, and licence being taken with, the wording of the definition of “value”. Notwithstanding that no actual consideration was paid or payable for the shares the subject of the transfer as such - though real consideration was given for them - this fact is to be disregarded. Instead the consideration paid in an earlier transaction for a different and larger number of shares (a) is to be regarded as attributable to the transfer of these particular shares; and (b) because it did not in fact relate solely to those shares, is to be apportioned correspondingly notwithstanding that the statute makes no express provision for apportionment.
I can see no reason why the definition should be manipulated in the way the respondent’s submissions would so require. In particular I see no justification at all for disregarding the fact that consideration was given for the very shares transferred and provided the explanation for that very transfer.
I would note in particular two consequences of this conclusion.
(a) There is no requirement in the definition, or for that matter in the terms of the Act more generally, that where consideration for the marketable security is paid or payable, this is to be to the transferor of the shares. Where, for example, A holds shares as B’s nominee and B sells those shares to C for a consideration payable to B, A’s subsequent transfer of the shares to C will be for a consideration paid or payable - but not to A.
(b) Likewise there is no requirement that, if consideration is paid or payable for the shares, this is to be by the transferee. Where, for example, B purchases shares from A but directs that they be transferred to a nominee C, consideration will have been paid for the shares transferred - but not by C.
The one matter upon which it is unnecessary for us to express a conclusion, and I refrain from doing so, relates to a variant on (b) above. That is where B purchases shares from A but directs that only a proportion of those shares is to be transferred to C. This example raises the same issue of principle in relation to apportionment to which I adverted earlier in these reasons. That issue does not arise in the circumstances of this case given the construction I have placed on the definition of “value”.
It follows from what I have said that the Tribunal erred in computing the “determined amount” of stamp duty payable, by reference to the consideration paid under the Bond-Manchar agreement. The only transaction to which it could properly look in the circumstances to ascertain the “consideration paid or payable” (if at all) for the shares was the Manchar-Lion joint venture agreement. In dismissing the appeals from the Tribunal, the Supreme Court of the ACT likewise was in error.
In my view the appeals should be allowed and the orders of the Supreme Court of the ACT made on 12 July 1996 in the two appeals to it be set aside. I agree with the orders proposed by Cooper J.
I certify that this and the preceding 19 pages are a true copy of the Reasons of the Honourable Justice Finn.
Associate:
Dated: 28 October 1997
Counsel for the applicant: Mr P G Hely QC with Mr N Perram
Solicitors for the applicant: Mallesons Stephen Jaques
Counsel for the respondent : Mr I V Gzell QC with Dr H R Sorensen
Solicitors for the respondent ACT Government Solicitor
Date of hearing: 16 May 1997
Date of judgment 28 October 1997
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