Matysek v the Commissioner of Stamp Duties
[1988] TASSC 106
•9 November 1988
Serial No B38/1988
List "B"
COURT: SUPREME COURT OF TASMANIA
CITATION: Matysek & Ors v The Commissioner of Stamp Duties [1988] TASSC106; B38/1988
PARTIES: MATYSEK, ALEX
YEUNG, PATRICK UY FAI
BLYTHE, JOHN HOWELLS
v
THE COMMISSIONER OF STAMP DUTIES
FILE NO/S: LCA 121/1987
JUDGMENT
DELIVERED ON: 9 November 1988
DELIVERED AT:
HEARING DATE:
JUDGMENT OF: Nettlefold J
CATCHWORDS:
REPRESENTATION:
Counsel:
Appellant:
Respondent:
Solicitors:
Appellant:
Respondent:
Judgment Number: B38/1988
Number of paragraphs: 15
Serial No B38/1988
List "B"
File No LCA 121 of 1987
ALEX MATYSEK, PATRICK YU FAI YEUNG and JOHN HOWELLS BLYTHE v THE COMMISSIONER OF STAMP DUTIES
REASONS FOR JUDGMENT NETTLEFOLD J
9 November 1988
Appeal under s.21 of the Stamp Duties Act 1931 from a decision of the Commissioner of Stamp Duties confirmed by letter dated the 22 September 1987 that the applicant pay stamp duty of $10,518 on an agreement dated 28 July 1987 made between Fred Theodorus Julius Terbeek of the one part and the applicants of the other part on a consideration of $297,150 under Item 6 of the Second Schedule of the Stamp Duties Act 1931 in accordance with r.1 of the Fourth Schedule of that Act.
By an Agreement dated 28 January 1987 expressed to be "Between Missionary Sisters of Service of 125 Hawthorn Road, Forest Hill in Victoria ('the Vendor') of the one part and Fred Theodorus Julius Terbeek or his nominees 67 Acton Drive, Cambridge in Tasmania ('the Purchaser') of the other" the vendor agreed to sell and the purchaser to purchase free from encumbrances all the property described in the First Schedule ("the property") together with all fixtures and together with the chattels enumerated in the Second Schedule for $270,000. The property described in the First Schedule was a property situate at and known as 96 Malunna Road, Lindisfarne in Tasmania. In fact there were no fixtures or chattels enumerated in a Second Schedule. The purchaser agreed to pay and did pay a deposit of $27,000. The other terms and conditions do not appear to be material for present purposes.
The agreement the subject of the dispute dated 28 July 1987 was between Mr. Terbeek, in the agreement called "the Nominator" and the applicants, in the agreement called "the Nominees". This agreement recited the following things.
1 the above agreement of 28 January 1987, therein called "the Sale Agreement";
2 that a copy of the Sale Agreement was annexed thereto;
3 pursuant to the power of nomination in the Sale Agreement recorded –
(a) a previous nomination was made and subsequently withdrawn and cancelled; and
(b) subject to the undermentioned terms and conditions the Nominator has agreed to nominate the Nominees who have agreed to accept nomination in his place to complete the Sale Agreement. The operating part of the document is as follows:
"NOW IT IS HEREBY AGREED as follows:
1 In consideration of the nomination fee of FIFTY FOUR THOUSAND ONE HUNDRED AND FIFTY DOLLARS ($54,150.00) agreed under Clause 4 hereof to be paid and pursuant to the power in that behalf set
forth in the Sale Agreement the Nominator hereby agrees –
(a) to nominate the Nominees to complete the Sale Agreement in place of the Nominator;
(b) forthwith –
(i) to communicate the fact of that nomination to the Vendor;
(ii) to procure from the Vendor and to deliver to the Nominees the Vendor's written acceptance of that nomination; and
(iii) to hand to the Nominees the Nominator's counterpart of the Sale Agreement.
2 On and after the satisfaction of the matters required by Clause 1(b) hereof the Nominees shall –
(a) assume all rights of the Nominator under the Sale Agreement and be entitled to the benefit of all payments heretofore made and all acts heretofore performed by the Nominator thereunder; and
(b) assume all unsatisfied liabilities of the purchaser under the Sale Agreement and indemnify the Nominator against all future claims including interest payable thereunder since the date of the Sale Agreement.
3 The Nominator warrants to the Nominees that –
(a) The copy of the Sale Agreement annexed hereto is complete and accurate;
(b) At the date on which all matters required by Clause 1(b) hereof have been performed the Sale Agreement will be valid and in full force and effect and in no way void or voidable and all obligations agreements and provisions theretofore to be performed by the purchaser thereunder shall have been paid performed and observed; and
(c) The Nominator will bear and pay and will indemnify the Nominees against all and any liability for stamp duty whether payable on this agreement or the Sale Agreement which is attributable to the matters referred to in Recital 3(a) hereof.
4 The nomination fee of Fifty four thousand one hundred and fifty dollars ($54,150.00) shall be paid by the Nominees to the Nominator as to the sum of Twelve thousand one hundred and fifty dollars ($12,150.00) on the date on which the Nominator completes the matters required by Clause 1(b) hereof and as to the balance of Forty two thousand dollars ($42,000.00) on the Twenty eighth day of January One thousand nine hundred and Eighty eight.
IN WITNESS whereof these presents were executed the day and year first hereinbefore written."
By letter dated 22 July 1987 the Missionary Sisters of Service consented and accepted the nomination of the applicants as the purchasers under the Contract of Sale dated 28 January 1987.
Mr Lovett, at the conclusion of his helpful submissions on behalf of the respondent, gave a very brief summary of his primary argument in support of the assessment. That summary is as follows:–
1 The first step is to ascertain the nature of the second agreement, that is, the nomination agreement. The true nature of that agreement is a contract of sale by way of novation.
2 That that contract of sale amounted to a sub–sale within r.1(e) in Schedule 4.
3 One would assess it under Schedule 2 items 6 and 7 on a consideration of $297,150 calculated as follows: $243,000 – being the purchase price under the first agreement $270,000 less the deposit paid by Mr. Terbeek under that agreement, $27,000 – plus the consideration for the nomination agreement, $54,150.
4 It falls within item 6 of Schedule 2 because it is a contract of sale as defined in s70. And item 6 specifies the duty as being "as on a conveyance" and, hence, directs that duty is to be calculated by using item 7.
I now turn to consider that argument. "The Act taxes documents not transactions. The application of the principle so stated is now somewhat eroded but the statement is still substantially correct. It has also been observed that in determining the liability of an instrument to duty, regard should be had to the substance of the transaction rather than its form", Halsbury: Laws of England, 4th ed, vol 44, par601. Thus, in Eastern National Omnibus Co Ltd v IRC [1939] 1 KB 161 an agreement by a company carrying on the business of operating public transport to discontinue business in a specified area and not to compete in consideration of a money payment was held to be an agreement for the sale of goodwill although not so worded. For a restatement of the doctrine of substance in tax matters see WT Ramsay Ltd v IRC, Eilbeck (Inspector of Taxes) v Rawling [1982] AC 300. The court can look at extrinsic evidence to determine the true nature of the transaction to which the instrument relates and to ascertain the amount of duty payable – The Commissioner of Stamp Duties (Queensland) v. Hopkins (1945) 71 CLR 351; Comptroller of Stamp Duties v. Buckland [1959] VR 517 at 529.
It appears to be the position that Mr Terbeek, without the use of the words "or his nominees" in the original purchase agreement and without any formal nomination agreement, could have required his vendor to convey to any third party nominated by him provided always, of course, he discharged his obligation to his vendor under the original agreement. Reference should be made to the following statement of the principle by Aickin J in Lord v Trippe (1977) 51 ALJR 574 at 582:
"It is a common enough practice in real estate transactions for the contract itself to provide that the transfer is to be made to the purchaser or his nominee, but that gives a power to substitute or nominate a different transferee, not a different contracting party. The vendor becomes bound to transfer to the nominee upon the purchaser paying or procuring the payment of the purchase money and otherwise complying with the terms of the contract. Indeed a purchaser under a contract of sale which contains no such express provision may, in the absence of special circumstances, require the vendor to transfer to some third party nominated by him. As Jessel MR said in Egmont v Smith (1877), 6 ChD 469, at p.474, 'An ordinary contract of sale is not only to convey to the purchaser, but to convey as the purchaser shall direct'. Moreover a purchaser under a contract of sale may, in the absence of special circumstances, assign his interest in the contract and the assignee then becomes entitled to all the rights of the purchaser upon notice being given to the vendor. The vendor has, in this sense also, a right to nominate a transferee to take the transfer of the property comprised in the contract."
(See also Tambly v Silk Pemberton Ltd [1976] 2 NZLR 427 at 432; Tonelli v Komirra Pty Ltd [1972] VR 737 at 740.)
It is not correct to say that the nomination agreement constituted a novation. A "novation" – a term derived from the civil law – means that, there being a contract in existence, some new contract is substituted for it, either between the same parties or between different parties; the consideration mutually being the discharge of the old contract (Stroud's Judicial Dictionary, 4th ed, vol 3, p1790). Here the old contract was not to be discharged. It remained on foot until it was discharged by performance. Mr Terbeek received an indemnity from the applicant for the very reason that it did remain on foot until discharged by performance, a performance for which the vendors could could look to Mr Terbeek.
But I am satisfied that the Nomination Agreement was a "contract of sale" within s70(1) of the Act which reads as follows:
"(1) For the purposes of this section and of item 6 in Schedule 2 'contract of sale' means a contract of sale being an agreement for the sale, conveyance, or transfer of real property in this State and includes an assignment of the purchaser's rights under such a contract."
It falls within that provision because it is an assignment of the purchaser's rights under the original contract (see Halsbury's Laws of England, 4th ed, vol. 6, pars26 to 38). That being so item 6 of the Second Schedule applies.
In order to interpret r.1(e) in the Fourth Schedule correctly one must advert to the learning on the subject of what constitutes a sale. One must do that because the rule uses the term "resells". "'Sale' undoubtedly in our law imports the exchange of some commodity or some article of property for money, and it will be found so defined in Mr Benjamin's book on Sale, and in Lord Blackburn's book also." (per Wills J in J and P Coats Ltd v Commissioner of Inland Revenue (1897) 1 QB 778 at 783; and see Davies v. Collector of Imposts [1908] VR 272 at 276 ff; Robshaw Brothers Ltd v Mayer [1956] 3 WLR 1049; Young v Markworth Properties Ltd. [1965] 1 All ER 834; Doyle v East [1972] 2 All ER 1013 and see Inland Revenue Commissioners v Littlewoods Mail Order Stores Ltd. [1963] AC 135 at 152. Sale is correlative with purchase (West London Syndicate v. Inland Revenue Commissioners [1898] 1 QB 226 at 238 per Channell J).
One is entitled to look at the substance of the transaction. Doing so, the applicants purchased the property 96 Malunna Road for a price of $297,150 payable as to $243,000 to the original vendors, the Sisters of Service, and as to $54,150 to Mr Terbeek. In substance Terbeek sold the property for that price payable as stated above. Notwithstanding that the nomination agreement in form provides only for a consideration of $54,150 in cash and an indemnity and hence, prima facie, does not effect a sale, one can look behind the form to the substance and find a resale of the property.
I wonder whether the Commissioner really needs to rely on r1(e) of Schedule 4. I wonder whether he cannot justify his decision by relying on items 6 and 7 of Schedule 2 without regard for 1(e). On that basis, the indemnity is "other consideration" within the meaning of that term in r7, which consideration can be valued at $243,000 using the reasoning set out in Commercial Banking Co of Sydney Ltd v Controller of Stamps [1965] VR 297 at 303 – 304.
For these reasons the appeal is dismissed.
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