MIM Holdings Limited v Commissioner of Stamp Duties
[1998] QSC 292
•23 December 1998
IN THE SUPREME COURT
OF QUEENSLAND
No. APN 810 of 1994
Brisbane
Before White J
[MIM Holdings Limited v Commissioner of Stamp Duties]
BETWEEN:
M.I.M. HOLDINGS LIMITED ACN 009 814 019
Applicant
AND:
THE COMMISSIONER OF STAMP DUTIES
Respondent
REASONS FOR JUDGMENT - WHITE J
Judgment delivered 23 December 1998
CATCHWORDS: Review pursuant to Judicial Review Act - decisions of Commissioner of Stamp duties - prescribed provisions (ss.56FA-56FO) Stamp Act 1884 - majority interest after call - whether an “acquisition” - s.56FH(i) - whether “land-rich” corporation - interest.
Counsel:Mr L Harrison QC for applicant.
Mr R Hanson QC for respondent.
Solicitors:Blake, Dawson Waldron for applicant.
Crown Solicitor for respondent.
Hearing Date: 26 March 1996.
IN THE SUPREME COURT
OF QUEENSLAND
No. APN 810 of 1994
Brisbane
Before White J
[MIM Holdings Limited v Commissioner of Stamp Duties]
BETWEEN:
M.I.M. HOLDINGS LIMITED ACN 009 814 019
Applicant
AND:
THE COMMISSIONER OF STAMP DUTIES
Respondent
REASONS FOR JUDGMENT - WHITE J
Judgment delivered 23 December 1998
Introduction
The applicant, M.I.M. Holdings Limited (“MIM”), has sought review of a decision by the respondent, the Commissioner of Stamp Duties (“the Commissioner”), to issue a notice of default assessment pursuant to s.22A of the Stamp Act 1894 (“the Act”) which assessed duty payable in an amount of $2,898,772.50 (“the Assessment”) and the further decision to disallow in full MIM’s notice of objection.
MIM alleges that there is no basis in law for the Assessment because it did not fail to lodge any document in respect of which stamp duty was chargeable in that it did not make any relevant acquisition within the prescribed provisions (ss.56FA - 56FO) of the Act. Those provisions charge with duty relevant acquisitions of shares constituting a majority interest and, after an acquisition of a majority interest, the acquisition of further interests, in land-holder corporations. Land-holder corporations are unlisted corporations entitled to land in Queensland of value not less than $1M and where the full unencumbered value of all land is 80% or more of the full unencumbered value of all property to which the corporation is entitled other than property directed by the Act to be excluded from the calculation. Where there is such a relevant acquisition a statement in the prescribed form must be prepared and lodged with the Commissioner in respect of the acquisition. It is this statement which may become dutiable. MIM did not prepare and lodge such a statement in respect of the acquisition of shares in Ernest Henry Mining Pty Ltd which the Commissioner contends it was required to do and issued a default assessment which MIM paid under protest.
The Issues
The issues which arise for consideration are:
i)Did MIM acquire a majority interest in Ernest Henry Mining Pty Ltd within the prescribed provisions of the Act?
ii)Was Ernest Henry Mining Pty Ltd a “land-rich” corporation within the meaning of s.56FL of the Act?
iii)The amount of the duty if duty is payable.
iv)If no duty is payable is interest recoverable in respect of the payment of duty made under protest and, if so, at what rate?
Mr Harrison QC for MIM on has contended that certain submissions advanced for the Commissioner ought not be heard because of a position taken on an interlocutory hearing as to the ambit of the points of response. The detailed outlines of submissions were available for some months prior to the hearing and the applicant has suffered no discernable prejudice apart from needing to meet them.
Background
MIM wished to obtain an interest in the Ernest Henry copper- gold deposit in the Mount Fort Constantine area near Cloncurry in north west Queensland. The bulk of the deposit lay within the boundaries of Mining Lease No.2671 (“ML2671") which had been granted to Savage Exploration Pty Ltd, a wholly owned subsidiary of Savage Resources Limited (“Savage Resources”) in 1974. Savage Exploration Pty Ltd changed its name to Ernest Henry Mining Pty Ltd (“EHM”) in October 1993 and it is convenient to refer to it by that name. In 1992 the ownership of (and validity of) ML2671 and other leases was the subject of legal proceedings in the Supreme Court of New South Wales between EHM on the one hand and Western Mining Corporation Limited (“WMC”) and Hunter Resources Limited (“Hunter”) on the other. The latter two corporations were concerned in a joint venture known as the Mount Fort Constantine Joint Venture (“MFC Joint Venture”). WMC held a 70% interest and Hunter a 30% interest in the Joint Venture. They held Exploration Permit 8648 (“EPM8648") which surrounded ML2671. WMC and Hunter asserted that the tenements to which the MFC Joint Venue related included ML2671 to which they alleged they became entitled under an option agreement dated 16 October 1991 with EHM.
In 1992 Hunter was interested in disposing of its 30% interest in the MFC Joint Venture and provided MIM with certain information about the mineral deposits. Mount Isa Mines Limited (“Isa”), a wholly owned subsidiary of MIM, and Hunter entered into an agreement on 1 April 1993 which provided for consideration to be paid by Isa for Hunter’s interest in the MFC Joint Venture, its amount and method of calculation being dependent on the outcome of the legal proceedings.
At the same time MIM and Isa conducted negotiations with Savage Resources and EHM to acquire an interest in ML2671 (and other leases). Isa entered into an agreement (“the Acquisition Agreement”) with Savage Resources and EHM on 19 April 1993 which , as with Hunter, provided for different consideration to be paid depending on the outcome of the litigation in a variety of circumstances. It also granted Savage Resources an option to require MIM (or nominee) to acquire a share holding interest in EHM rather than an interest in the mining leases held by EHM. MIM’s interest was to be a majority (51%) interest. MIM (the holding company of the MIM Group) would have preferred to acquire a direct interest in the mining leases held by EHM for perceived taxation benefits rather than by acquiring a share holding interest in EHM. Savage Resources, however, required the inclusion of an option by which it could require Isa (or its nominee) to acquire a share holding interest in EHM rather than in the mining leases because, it would seem, of capital gains tax liability concerns.
The legal proceedings between EHM, WMC and Hunter were settled on 26 July 1993 with WMC and Hunter abandoning their claim to ML2671 and their challenge to its validity. The Acquisition Agreement was then amended by the Savage Amendment Agreement dated 26 July 1993 which provided for the settlement and altered the purchase price. In particular under cl.11.2(b) of the Acquisition Agreement the subscription price of shares in EHM was altered from $178,570,000 to $153,060,000. The Acquisition Agreement was further amended by an Escrow Deed dated 24 September 1993 extending the completion date. It was again amended by the Third Savage Amendment Agreement dated 9 October 1993 which, inter alia, provided that if Savage Resources exercised its option to require Isa (or nominee) to acquire shares in EHM the shares would be issued on the basis that they were to be partly rather than fully paid.
On 30 July 1993 Isa, EHM and the MFC Joint Venturers entered into the Ernest Henry Supplemental Deed pursuant to which the MFC Joint Venturers agreed to grant EHM certain rights in the area of EPM 8648 adjacent to ML2671.
A plan of the Ernest Henry deposit site is exhibit 3 and appendix C to the report of Ernst & Young being REL25 to the affidavit of Mr Longland. ML2671 contains the major part of the Ernest Henry copper-gold deposit which is, as mentioned, situated entirely within EPM8648. Without the ability to access some of the area surrounding ML2671 within EPM8648 the Ernest Henry copper-gold deposit which extends to the boundaries of ML2671 could not be exploited fully and by the preferred open pit method.
The Mineral Resources Act 1989 provides that the holder of an exploration permit may have considered for grant mining leases in priority to all other persons in respect of land the subject of the exploration permit, s.5.4(1). Where a person other than the holder of an exploration permit applies for the grant of a mining lease that person must have the consent of the holder of the exploration permit in respect of the land the subject of the application, s.7.13(1).
As at 30 July 1993 there were issues of access to ML 2671, the availability of areas of land for stockpiling and tailings outside ML2671 and of mining in EPM 8648 if the copper-gold deposit was to be fully exploited by the owner of ML 2671. The EHM Supplemental Deed made provision for these matters and it is these contractual rights which MIM contends have a separate value for the purposes of valuing EHM’s property under the prescribed provisions of the Act. Under the Supplemental Deed the MFC Joint Venturers as holder of EPM8648 agreed to consent to any new mining lease application by EHM (and to its grant by the Crown) over any part of EPM8648 which would cover the balance of the Ernest Henry deposit beyond the boundaries of ML 2671 and to consent to the grant of mining leases for service areas over part of EPM8648. EHM could thereby mine the Ernest Henry deposit in such a way as to allow access to all of the ore in the deposit, including any ore contained in surrounding mineral tenements not owned by EHM and could minimise operating costs in respect of infrastructure, tailings, dams and dumps. The agreement gave certain royalty entitlements from the minerals recovered in areas of EPM8648 to the MFC Joint Venturers. EHM has applied for mining leases to mine minerals in the adjacent areas of EPM8648 which contain copper-gold deposits and in respect of a service area in EPM 8648. The MFC Joint Venturers have consented to those applications in accordance with the provisions of the EHM Supplemental Deed.
It is not contested that had those contractual rights not been granted to EHM by the MFC Joint Venturers, the effect on the proposed Ernest Henry mining plans would involve restrictions in mining and pit size and diminution in the life of the reserves of the deposit and reduction of minable ore levels.
The Transactions
Prior to completion under the Acquisition Agreement Isa nominated MIM as the person to whom all but one of the shares to be acquired from Savage Resources should be transferred and as the person who would subscribe for shares in accordance with the Acquisition Agreement.
Completion under the Acquisition Agreement occurred on 9 October 1993. In the course of completion Savage Resources exercised the option contained in clause 11.2 of the Acquisition Agreement and subsequently transferred 12,624 shares in EHM to MIM (as the nominee of Isa), one share in EHM to Isa and those transfers were registered. Subsequently, EHM issued 237,043 shares in its capital to MIM on the terms set out in Schedule 4 to the Articles of Association of EHM, and MIM paid the amounts required to be paid by clause 11.2(a) and (b)(i) of the Acquisition Agreement. The issued shares had a par value of $1.00 but were issued at a premium of $644.71 per share, of which $315.40 per share was payable on issue, the balance payable on call. Pursuant to the Acquisition Agreement EHM lent to Savage Resources the funds ($75,405,000.20) subscribed by MIM for the shares in EHM on terms that the loan would bear no interest and was repayable as and when calls were made in accordance with the Articles of Association.
On 29 October 1993 EHM made a call on MIM in respect of the shares issued to it on 9 October 1993. Pursuant to that call, on 8 November 1993, MIM paid up a further aggregate amount of $714,000 on those shares, in consequence of which the amount paid up on each of those shares for capital and premium was at least $318.00. Pursuant to the terms of issue MIM was then entitled to 51% of the assets of EHM on a winding up of the company.
Dealings with the Commissioner
MIM filed a statement in the relevant form pursuant to s.56FH(4) under objection on 8 December 1993 relating to the acquisition of shares in EHM. It contended that the value of the non-land assets to which EHM was entitled at the relevant dates was in excess of 20% of all EHM’s property. Subsequently valuation of the EHM Supplemental Deed prepared by Ernst & Young for MIM was provided to the Commissioner valuing that asset at $78M. The Commissioner considered that the rights and promises contained in the Deed had no separate value and accordingly altered the figures in MIM’s Form Z and raised a Notice of Default Assessment dated 31 October 1994 which contained the following:
“Land in Queensland $151,714,767
Chattels containing mining information $ 5,147,978
Total Company Assets $156,862,745
·Ernest Henry Mining Pty Ltd was a land owner for the purposes of sub-section 56 FL(2) at the relevant dated based on the following ratio:
“Land $151,714,767 = 96.7% “land-owner” ratio.
Total Assets $156,862,745
·On 8 November 1993 a call was paid and a relevant acquisition of a major interest occurred within the meaning of subs. 56FM(1)(a)(ii) and 56FN(2) respectively.
·The dutiable value of the relevant acquisition of a majority interest has been determined in terms of the provisions of sub section 56FK(2) as being:
51% of $151,714,767.00 = $77,374,531.00
·Stamp duty payable on $77,374,531.00 pursuant
to subparagraph 4(a) under the heading “Conveyance
or Transfer” in the First Schedule amounts to $ 2,898,772.50
TOTAL PAYABLE $ 2,898,772.50"
MIM objected to the notice of default assessment on 25 November 1994 on the ground that it had not failed to lodge any document on which stamp duty was chargeable in that it did not make a relevant acquisition in a land-holder company under the prescribed provisions of the Act and there was no basis for the assessment. MIM set out specific grounds for its objection as follows:
“Specific Grounds
1.Ernest Henry Mining Pty Ltd (“EHM”) was not a landholder as defined in section 56FL at the time of the alleged relevant acquisition because the full unencumbered value of all land to which it was entitled was less than 80% of the full unencumbered value of all property to which it was entitled. The Commissioner of Stamp Duties in Queensland (the ‘Commissioner’) should accept the Valuation Report of Ernst & Young dated 10 March 1994 furnished by the Taxpayer which concluded that only 40.6% of the assets of EHM was represented by land at the time of the alleged relevant acquisition.
2.In the alternative to the first ground, EHM was not a landholder at that time because the uncalled share premium of EHM should be included as property to which EHM was entitled. The amount of the uncalled share premium at the time of the alleged relevant acquisition was approximately $77,346,630.33. The inclusion of that property would, by itself, prevent EHM from being a landholder.
The Valuation Report of Ernst & Young acknowledges that EHM’s right to the uncalled premium may have value to EHM, though not to a prospective third party shareholder. The Taxpayer submits that the Act requires the value of EHM’s assets to be determined from EHM’s perspective as to the putative landholder. The value of the uncalled share premium, even when discounted in view of the probable time frame in which it would be called up by EHM, prevents the value of land to which EHM is entitled exceeding 80% of all its property.
3.There was no relevant acquisition in EHM because:
·the Taxpayer did not acquire a shareholding in EHM which entitled it to participate in a distribution of property of EHM on a winding-up to an extent greater than 50% immediately after the shareholding was acquired;
·the payment of the call by the Taxpayer on 8 November 1993 was not an acquisition under the prescribed provisions; and
·no right pertaining to any share in EHM was altered to enable the taxpayer to acquire any winding-up rights.
Accordingly, there was no “relevant acquisition” under the prescribed provisions.”
By letter dated 13 December 1994 the Commissioner disallowed MIM’s objection in full and gave reasons:
“Specific Ground 1
The Valuation Report of Ernst & Young dated 10 March 1994 furnished by your client is not accepted in respect of the valuation of $78,000,000 attributed to rights conferred upon Savage Exploration Pty Ltd by a deed dated 30 July 1993. Rather, it is considered that the “rights” in question:
·do not create an interest in land;
·are in the nature of a bundle of contractual promises, as the other parties to the deed could, in the absence of any rights held by themselves (other than exploration permits) over land adjoining ML 2671, only “promise” to assist Savage to exploit the mineral deposit;
·are not severable from ML 2671, nor separately assignable;
·enhance the value of that land rather than have a separate value of their own.
Accordingly, it is not accepted that Ernest Henry Mining Pty Ltd, ‘EHM’ (formerly Savage Exploration Pty Ltd), is not a landholder within the meaning of section 56FL(2)(a) by reason of the valuation furnished.
This ground is therefore disallowed.
Specific Ground 2
This is stated as “alternative” to Ground 1 above.
It is not accepted that the “uncalled share premium”, at the relevant time in the amount of approximately $77,346,630.33, should be included as property to which EHM was entitled under the landholding provisions of the Act.
Reference to amended clauses 11.2(b) and 11.7(b) of the Savage Agreement shows that subscription for monies for the A Class Shares in the capital of Savage Exploration payable at call by M.I.M., once paid, are directed to be loaned interest free and repayable as required to Savage Exploration by its associate Savage Resources.
Effectively, therefore, the uncalled subscription monies are earmarked for lending “by the corporation” (Savage Exploration) to an “associated person” (Savage Resources), hence become excluded property under section 56FL(4)(c)(i) and will not participate in the subsection (2) calculation.
This ground is therefore disallowed.
Specific Ground 3
It is not accepted that there was no “relevant acquisition” under the prescribed provisions by reason of the circumstances in which the “majority interest” by M.I.M. in EHM was acquired.
It is however agreed that M.I.M. did not, on initial acquisition at 9 October 1993, acquire an “interest” pursuant to section 56FN(1) of the Act in EHM as it did not at that time acquire a right attaching to its then shareholding to participate in a surplus of EHM assets on a winding up.
However, it is not agreed that there was no “acquisition” of an “interest” when the balance of the purchase price of the EHM shares was subsequently paid by M.I.M. on 8 November 1993. The reasoning behind that conclusion is as follows:
1.Turning firstly to the inclusive definition of “acquire” in section 56A(1), that expression is used in conjunction with the words “in relation to an interest in a corporation” and “includes” ... “to acquire an interest by virtue of ... (c) the variation ... or alteration of a right pertaining to any share ...”. It is considered that at 8 November 1993 such an interest was acquired by reason of para (c) above because when the shares in question were fully paid up, there was an entitlement to participate in a distribution on winding up which did not previously exist.
2.Section 56FN also uses the word “acquire” in conjunction with the words “an interest in a corporation”, so that it combines with the section 56FA(1) definition. Further, section 56FN is concerned with an interest in a corporation as it applies to the rights carried by the shares, and if those rights change (as in this case) a relevant interest is acquired.
Accordingly, it is considered that a “relevant acquisition” has occurred by reason of M.I.M. acquiring a “majority interest” in EHM on 8 November 1993.
This ground is therefore disallowed.”
MIM paid the duty under protest on 14 December 1994.
The Issues
(i) Did MIM acquire a majority interest in EHM within the prescribed provisions of the Act?
The Acquisition Agreement as amended provided in the events which have happened:
·By cl.11.2
“[Isa] hereby ... irrevocably grants to Savage Resources an option to require [Isa] to (by itself or its nominee); ... :
a)acquire from Savage Resources so many of the issued ordinary shares in [EHM] as, immediately prior to the subscription for shares provided for in paragraph (b) constitutes 5 per cent of the issued capital of [EHM] for a consideration of $5,000,000.00; and
b)subscribe for 237,043 A Class Shares in the capital of [EHM] as provided in Article 3.8 of the Proposed Articles of Association on terms that:
i)an aggregate amount of $75,000,405.20 is payable at Completion on account of the full par value of, and part of the premium payable on, those shares; and
ii)an aggregate amount of $78,060,630.33 on account of premium remains to be called and is payable as and when calls are made in accordance with the Proposed Articles of Association.”
·By cl.11.7:
“If as a result of an exercise of the option granted by clause 11.2 [EHM] becomes a joint venture vehicle owned as to 49 per cent by Savage Resources and as to 51 per cent by [Isa]:
b)[EHM] shall at Completion lend the monies subscribed by [Isa] in accordance with clause 11.2(b)(i) for the shares in [EHM] issued to it pursuant to the option to Savage Resources on terms that the loan shall bear no interest and is repayable as and when calls are made in accordance with the Proposed Articles of Association.”
The Proposed Articles of Association were adopted by EHM at completion under the Acquisition Agreement, and provide in part:
by Article 1.1:
“1.1Definitions
In these Articles, unless the context otherwise requires:
...‘Called Sum’ means the amount required to be paid or contributed by a Member from time to time in accordance with Article 4 ...”
by Article 3.8:
“3.8New Issues
Immediately following the adoption of these Articles, MIM shall subscribe for, and the Company (EHM) shall issue to MIM, 237,043 ... Shares at a premium of $644.71 per Share paid at the time of issue to $316.40 (being par value and premium). ... Any Shares issued at a premium any portion of which is unpaid at the time of issue (including those to be issued to MIM in accordance with this Article) are to be issued on the terms and conditions set out in Schedule 4.”
by Article 4:
“4.FUNDING
4.1Determination by Management Committee
Where the Management determines by resolution:
(a)at any time prior to 1 February 1994, that the expenses incurred by the Company prior to that date, projected expenditure up to that date and reasonable provision for working capital require an injection of funds into the Company; or
(b)at any time after the first Approved Operating Capital Programme and Approved Budget are adopted, that the proper and businesslike conduct of the Operations Programme and Approved Budget (and/or any permitted expenditure under Article 24.9) and/or reasonable provision for working capital requires an injection of funds into the company,
and that the injection of funds should be made wholly or partly by the Members, the Management Committee may give notice (the ‘Call Note’) to the Members registered in the books of the Company as the holder of the majority of each class of shares ... in accordance with Article 4.2.
4.2Call Notice
A Call Notice must:
...
(c)specify the total amount of funds which are required to be injected by Members to cover expenses incurred or projected to be incurred ..., and ... reasonable provision for working capital;
...
4.4Character of Funds
Where a Call Notice is given in accordance with Articles 4.1 and 4.2, unless otherwise agreed by the Members:
(a)at any time during which any part of the capital or premium on any Class of Shares or any of them (including the Shares to be issued to MIM in accordance with Article 3.8) remains unpaid, a Call Notice served on the Member holding Shares of that Class shall operate as a Call upon that Member ... to pay up the unpaid balance of the capital or premium on those shares to the extent of the Member’s Called Sum;”
by Schedule 4:
“SCHEDULE 4
TERMS OF ISSUE
(1)Any Shares issued at a premium any portion of which is unpaid at time of issue are issued on the terms and conditions set out in this Schedule.
(2)Calls in respect of the unpaid premium on the Shares described in clause (1) may only be made by way of Called Sums for Operations and reasonable provision for working capital and for no other purpose and shall not be made prior to the expiration of 7 days after the issue of Shares.
(3)No payments in respect of the unpaid premium may be made to the Company unless and until a call in respect of the moneys is made by the Board in accordance with these terms of issue and the Articles.
(4)Until an aggregate amount of at least $318.00 on account of capital and premium has been paid on each of the Shares (including amounts paid at the time of issue), the Shares shall not carry any entitlements to participate in a distribution of the property of the Company on a winding up.
(5)Following the call for and payment of the amount described in paragraph (4) in accordance with these terms of issue and the Articles, the Shares shall entitle the holder to participate in any surplus payable on a winding up in the proportion that the amount of capital (but not premium) paid up on the Shares bears to the total amount of capital paid up on issued Shares of the Company.
...”
The Commissioner accepts that on initial acquisition of the shares on 9 October 1993 MIM did not acquire a right to participate on a winding up in any surplus of the company’s assets and therefore did not acquire a majority interest within the meaning of s.56FH(i). However, since the right to participate in a distribution on a winding up occurred when MIM responded to the call on 8 November 1993 by taking the amount paid on each share beyond $318.00, the Commissioner maintains that that event varied or altered a right pertaining to those shares and thus falls within the definition of “acquire” in s.56FA of the Act. It provides:
“56FA(1)In the prescribed provisions -
“acquire”, in relation to an interest in a corporation to which the prescribed provisions apply, includes, without limiting the generality of the expression, to acquire an interest by virtue of -
...
(c)the variation, abrogation or alteration of a right pertaining to any share;
...
(5)For the purposes of the prescribed provisions, the entitlement of a person to participate ... in the distribution of the property of a corporation on a winding-up of the corporation is an entitlement to an amount calculated -
(a)as if the winding-up were carried out in accordance with the memorandum and articles of association of the corporation and any law relevant to the winding-up, as the memorandum, articles and law exist at the time of the winding-up;”
It is convenient to set out here other relevant provisions of the Act. Section 56FH provides:
“56FH(1)Where by a relevant acquisition a person acquires a majority interest ... in a corporation to which the prescribed provisions apply, the person shall prepare and lodge a statement in respect of that acquisition within 30 days of the acquisition.
...
(6)A person who is required to lodge a statement under subsection (1) ... is liable to pay the duty chargeable under the prescribed provisions on the statement.”
Section 56FK(1) provides:
“56FK(1)A statement lodged under section 56FH is chargeable with duty -
(a)where the statement relates to a relevant acquisition within section 56FM(1A) - equal to the amount calculated in accordance with the provisions of schedule 1, under the heading ‘Conveyance or transfer’, paragraph (4)(a), applied to the dutiable value determined under subsection (2), as if that value were the value of the consideration;
...
(2)Where, by a relevant acquisition a person acquires a majority interest in a corporation, the dutiable value is the amount which bears to the full unencumbered value of the land in Queensland to which the corporation is entitled, ..., at the time of the acquisition, the same proportion as the value of the property of the corporation to which the person ... would be entitled, bears to the value of all the distributable property of the corporation if the corporation were to be wound up, immediately after the acquisition.
...”
Section 56FM provides:
“56FM(1)For the purpose of the prescribed provisions, an acquisition is a relevant acquisition -
(a)if a person -
(i)by that acquisition, acquires a majority interest in a corporation;
...
Section 56FN provides:
“56FN(1)For the purposes of the prescribed provisions, a person acquires an interest in a corporation if the person - acquires a share holding in the corporation that would entitle the person ... (if the corporation were to be wound up immediately after the share holding was acquired) to participate ... in a distribution of the property of the corporation.
...
(2)For the purposes of the prescribed provisions, a person acquires a majority interest in a corporation if the person ... acquires a share holding in the corporation that would entitle the person ... if the corporation were to be wound up immediately after the share holding was acquired to participate ... in a distribution of the property of the corporation to an extent greater than 50% of the value of the property distributable to the holders of shares in the corporation.”
In summary, an obligation to lodge a dutiable statement arises when there is an acquisition of a majority interest in a corporation to which the prescribed provisions apply. A person acquires a majority interest in a corporation if the person acquires a shareholding in the corporation which would entitle the person, if the corporation were to be wound-up immediately after the shareholding was acquired, to participate in a distribution of the property of the corporation to an extent greater than 50%. The resolution of this question depends upon the meaning given to “acquire” in s.56FA(1) because on its ordinary meaning, no such majority interest as defined in s.56FN was acquired when the shares were subscribed for on 9 October 1993. The question then becomes, whether any rights pertaining to the shares were varied or altered when the call was answered on 8 November and which then entitled MIM, by virtue of the Articles of Association of EHM, to participate in a distribution of the property of EHM on a winding-up. It is not contested that MIM’s entitlement was then to 51% of the assets of EHM.
Mr Harrison submitted that the entitlement to participate in a distribution on a winding-up were rights conferred by the Articles and not inherent in the nature of the shares themselves. In other words, the rights of the shareholders in the sense of their entitlements as against the company could be affected without the rights pertaining to the shares themselves being altered since the shares always carried those rights. Passages from House of Fraser Plc v ACGE Investments Ltd [1987] 1 AC 387 were relied upon by both Mr Harrison and Mr Hanson QC for the Commissioner. In that case a special resolution was passed reducing a company’s capital by paying off and cancelling the cumulative preference shares. No class meetings of preference shareholders were held to approve or disapprove the reduction. The company sought a confirmation of the reduction of capital which was objected to by the holders of a number of preference shares. They contended, inter alia, that the failure to hold class meetings of the preference share holders was in contravention of their rights under the articles of association of the company, article 12 of which provided for such a meeting if the shares were “modified, commuted, affected or dealt with”. The Court of Session confirmed the reduction of capital and, on appeal to the House of Lords, Lord Keith of Kinkel (with whom their Lordships agreed) said at p.394:
“The reduction of capital now proposed to be made gives effect to that right [that the second preference shareholders were entitled to priority of repayment after certain preferences shares and before any other shareholders on a reduction of capital]. This necessarily involves, of course, that all other rights attached to the shares will come to an end, but that is something to which the holders of the shares must be taken to have agreed as a necessary consequence of their right to prior repayment receiving effect. Upon no view of the matter can it be said that as a result any of the special rights attached to the shares has been “modified, commuted, affected or dealt with” within the meaning of article 12. These words all contemplate that after the relevant transaction the shareholders in question will continue to possess some rights, albeit of a different nature from those which they possessed before the transaction. The proposal for reduction of capital involves complete cancellation of the shares.”
His Lordship referred to a passage (relied upon by both Mr Harrison and Mr Hanson) from the court below at [1987] SLT 273, 278:
“In our opinion the proposed cancellation of the preference shares would involve fulfilment or satisfaction of the contractual rights of the shareholders, and would not involve any variation of their rights. Variation of a right presupposes the existence of the right, the variation of the right, and the subsequent continued existence of the right as varied. A different situation obtains where a right is fulfilled and satisfied and thereafter ceases to exist.”
In the course of his reasons Lord Keith approved a statement by Buckley J in In re Saltdean Estate Co Ltd [1968] 1 WLR 1844 at 1849-50. In that case the company proposed reducing its share capital by paying off its preference shareholders. The articles of association required the consent of a class meeting to any proposal which was such as to “affect, modify, deal with or abrogate in any manner” the rights and privileges of that class of shareholders. The preferred shareholders argued that cancellation of their shares would constitute an abrogation of all the rights attached to those shares and could not be effected without a separate class meeting. Buckley J held at p.1850:
“The liability to prior repayment on a reduction of capital, corresponding to their rights to prior return of capital in a winding up ... is part of the bargain between the shareholders and forms an integral part of the definition or delimitation of the bundle of rights which make up a preferred share. Giving effect to it does not involve the variation or abrogation of any right attached to such a share.”
See also observations to similar effect by Ryan J in Re A Frost & Co Ltd (1993) 1 Qd R 1.
The distinction between rights of a shareholder and rights pertaining to shares is supported by the distinction made between the expression “right pertaining to any share” in s.56FA(1) which, like the words in the definition of “disposition” in s.56C looks to the share, and the expression “a shareholding ... that would entitle the person ...” in s.56FN(2) which looks to the rights of a shareholder. Mr Harrison argues that the definition of “acquire” does not include the present transaction because “acquire ... includes ... to acquire ... by virtue of”. This is not apt to include something which is not of itself an acquisition and may be contrasted with the definition of “disposition” in s.56C which contains no similar limiting words.
Mr Hanson contended that the substance of the transaction should be looked at. He characterised the right to participate on a winding-up on the acquisition of the shares as a conditional right but that upon further subscription the right became absolute. That, he submitted, constitutes a variation or amendment or an alternation of rights. In my view that is not so. The right inhered in the shares from their issue and was realised by the payment up to the required amount. It did not arise “by virtue of” any variation of any right pertaining to the shares themselves. There was therefore, in my view, no relevant acquisition within the meaning of the Act such as to require a statement to be lodged pursuant to s.56FH, and accordingly the Commissioner erred in deciding to the contrary.
Should that conclusion be found erroneous, the other basis of obligation should be considered.
(ii)Was EHM a “land-rich” corporation within the meaning of the Act?
In order to be liable to duty under the prescribed provisions of the Act not only must there be a relevant acquisition of a majority interest, the corporation must be one to which the prescribed provisions apply.
Section 56FL(1) provides:
“56FL(1)The prescribed provisions apply to a corporation that is -
(a)a [n unlisted] corporation ...; and
(b)a land-holder within the meaning of subsection (2).
A corporation is a land-holder for the purposes of the prescribed provisions if at the time of a relevant acquisition -
“(a)it is entitled to land in Queensland ... and the full unencumbered value of the land ... is not less than $1,000,000, and the full unencumbered value of all land to which the corporation is entitled ... is 80% or more of the full unencumbered value of all the property to which it is entitled, other than property directed to be excluded by subsection (4);
...
(4)The following property of a corporation ... shall not be included in the value of property to which the corporation is entitled for the purpose of calculating the value of property under subsection (2) -
...
(c)money lent by the corporation ... to -
(i)a person who, in relation to the corporation, is an associated person; ... ”
MIM agreed to pay $158,061,035.53 for 51% of the shares in EHM to be acquired in part by purchase and in part by subscription. It was the expectation of MIM and EHM, subject to unforseen difficulties, that the deposit would be fully mined expeditiously and that the unpaid premiums on the shares would be fully paid over the following years. One of EHM’s assets was ML2671 which, pursuant to s.56FA(1) of the Act was “land” for present purposes. There is no dispute that the value of ML2671 at all material times exceeded $1M. The question is whether the value of land owned by EHM equalled or exceeded 80% of the value of all of its property.
The total value of EHM’s property at the relevant time was, according to the Commissioner:
Land in Queensland $151,714,767
Chattels containing mining information $ 5,147,978
Total Company Assets $156,862,745
According to MIM:
Land (mining tenements) $ 56,300,000
Contractual rights under agreements with the
holders of adjacent tenements $ 78,000,000
Mining information contained in its books
and records $ 5,700,000
Uncalled premiums on shares held by MIM $ 77,400,000
TOTAL $217,400,000
The items in dispute are the “contractual rights” which the Commissioner contends are worth nothing as separate property and which MIM contends are worth $78M and of the uncalled subscription on shares which the Commissioner contends has no value for the purposes of the Act and which MIM contends is worth $77,400,000. Even if the “contractual rights” and the “uncalled subscription” do have a value, the Commissioner contends that they are not “property to which the company is entitled” within the meaning of the prescribed provisions of the Act.
MIM accepts the Commissioner’s contention that the rights conferred by the Ernest Henry Supplemental Deed do not create an interest in land and are in the nature of a bundle of contractual promises. It contends, however, that that does not lead to the conclusion that they enhance the value of the land to the extent of the value which has been placed on them, but that they have a separate and identifiable value as distinct property.
By s.56FA(1) “land” includes:
“(a)any estate in land; and
(b)anything fixed to the land that is or may be taken to be the subject of ownership separate from the ownership of the land.”
The contractual rights clearly do not fall within either sub paragraph and the issue is whether they have a value which ought be attributed to the mining leases.
Ernst & Young were asked to value certain of EHM’s assets as at 9 October and 8 November 1993 for the purpose of submission to the Office of State Revenue. Mr Bruton, who prepared the report, was cross examined extensively by Mr Hanson as to whether any value could be separately ascribed to the contractual rights provided for in the Ernest Henry Supplemental Deed. Miss Parikka, a senior Treasury advisor with MIM, was also extensively cross examined concerning the brief to Ernst & Young and the value attributed by MIM to EHM’s assets. She was a particularly impressive witness with a clear grasp of all the issues put to her. I accepted her evidence unreservedly as to the changing value ascribed by MIM to its interest in EHM as negotiations proceeded and that Ernst & Young were not instructed to approach the valuation other than independently.
Ernst & Young were asked to value:
·the contractual rights of the Ernest Henry Supplemental Deed;
·the chattels containing mining information (for example, assays,
samples drill core, and other physical items of a geographical, etc. data);
·the right to the uncalled share premiums;
·the mining leases.
MIM management provided Ernst & Young with a Base Case Valuation of the EHM project. This was an internal assessment of the viability of the acquisition of an interest in EHM on a “stand alone” basis. Certain assumptions were made for this valuation model which essentially remained unchanged between 9 October and 8 November 1993. MIM management’s Base Case Valuation was $140M. The Commissioner, for the purposes of these proceedings, does not take issue with the quantum of that valuation. Ernst & Young valued the assets of EHM on a “fair market value” basis which represented the price which could be expected to be achieved from a sale of the assets to a third party on a stand alone basis. It valued the contractual rights of the Ernest Henry Supplemental Deed at $78M, the chattels, books and records of EHM on 9 October at $5.1M, and on 8 November at $5.7M. It ascribed a nil value to the right to the uncalled share premium but noted that it may have a value to EHM under certain assumptions, as opposed to a third party shareholder. It valued the mining leases at 9 October at $56.9M and on 8 November at $56.3M. The minor difference in the value was said to be due to expenditure which had been incurred between those dates. Mr Bruton used the discounted cash flow methodology as the most appropriate for valuing a mining project or asset with a finite life and with costs and revenues which could be estimated with a reasonable degree of accuracy. Mr Ronald Higham, a partner with Coopers & Lybrand, who valued the uncalled share premium, agreed, and I accept that that is an appropriate way to proceed to value this project.
Mr Bruton valued the contractual rights of the Ernest Henry Supplemental Deed by determining the increment in value between the value of the project with the Supplemental Deed, that is, the Base Case Valuation of the EHM project, and the value of the project without the benefits of the rights attaching to the Supplemental Deed. As discussed above the major benefit which accrued to EHM as a consequence of the Supplemental Deed was the agreement to consent to a new mining lease and a service area lease to be applied for by EHM in the area of EPM 8648. Based on evidence from MIM’s staff, without the Supplemental Deed, the value of ML 2671 and the deposit would be significantly reduced. The minable ore levels would reduce from 84 million tonnes to 50 million tonnes. Mr Bruton noted that if ML 2671 could be mined as efficiently without the rights contained in the Supplemental Deed as it would with those rights, then the Supplemental Deed would have no value. In order to ascertain a value for the rights given by the Supplemental Deed engineers at MIM prepared a revised mine plan, which assumed that ML2671 would be mined without the rights contained in the Supplemental Deed. ML2671 on that basis was valued at $62M. Since the Base Case valuation of the project was $140M the value of the Supplemental Deed was said to be $78M.
As part of the settlement with WMC and Hunter, EHM received all the books and records and chattels associated with the preliminary work undertaken by the MFC Joint Venturers to identify and outline the Ernest Henry deposit. The costs of undertaking the extensive preliminary work, for example salaries and wages, laboratory and field services, drilling, and so on, were ascertained, together with the methodology utilized to ascertain its cost effectiveness. According to Mr Bruton, industry practice would have been to sell the chattels, books, and records to a third party acquiring the project. On that basis the valuation as at 9 October 1993 was $5,147,978 and on 8 November $5,668,831. That amount was added to the value of the rights acquired under the Supplemental Deed to assess the non-land value of EHM’s assets.
As a cross-check a further model of the project was prepared by MIM which excluded both the Supplemental Deed and the books and records. Based on that model the value of the EHM mining leases at 9 October and 8 November 1993 was assessed as $56.9M and $56.3M respectively. The process involved reaching these figures has not been challenged for this hearing.
The Commissioner contends that the Ernest Henry Supplemental Deed contractual rights have no separate value of their own but merely enhance the value of ML 2671 by making it more profitable and that the rights are neither severable or assignable.
It is clear that the contractual rights are not attached to ML2671. I do not think that they are quite in the nature of, for example, a water works licence as was the case in The Chief Executive Department of Lands v Webster, unreported decision of Court of Appeal of 15 March 1995 (CA No. 88 of 1994; CA 95/063) where the essential works, the subject of the licence, were situated off the property. The licence pursuant to the Water Resources Act 1989 operated for the benefit of the owner of the land for the time being, and although requiring renewal, there was a reasonable expectation of indefinite continuity. The issue was the unimproved value of the land. Since the major benefit of the licence was the right to take the water, the court concluded that a purchaser would pay more for the land, that is, the value of the land was thereby increased (joint reasons of Davies JA and Thomas J at p.8). Such a right was described by Murray CJ in Basey and Howie v Commissioner of Taxes [1919] SALR 53 at 71 as a legal right conferred by the legislature which increases the value of the land. So too, a sugar assignment is regarded as running with and binding the land in question, Drysdale Brothers & Co. v The Federal Commissioner of Land Tax (1931) 46 CLR 308 per Dixon J at 316. By contrast a liquor licence is generally held to be associated with the buildings which constitute the premises and not as running with the land, Toohey’s Limited v The Valuer-General [1925] AC 439.
The present contractual rights are not to be equated with an easement. A purchaser of ML2671 would not be entitled to the benefit of the EHM Supplemental Deed by virtue only of that purchase. Those rights were granted to EHM by WMC and Hunter as a result of commercial negotiations. Any subsequent purchaser of ML 2671 would have to negotiate with the then owners of EPM 8648 for similar rights. The rights are given by the Deed to the Savage Joint Venturers who are defined to mean the parties from time to time to the joint venture constituted by cl.8.6 of the Savage Agreement or any other joint venture agreement including their respective substitutes, successors and permitted assigns. This provision does not encompass successors in the ordinary course of commercial dealings, these are successors within the Savage Joint Venture. Commercial reasons might be envisaged whereby the holders of EPM8648 might choose not to enter into relations with a subsequent purchaser of ML2671. The reality is that commercial commonsense would suggest that any sale of ML2671 would necessarily involve negotiations about the contractual rights if a prospective purchaser was not to become a member of the Savage Joint Venture and thereby a successor to those rights. The practicalities of exploitation of the resource clearly suggest that a sale without the contractual rights would be so unlikely as to be discounted.
The further difficulty is whether any separate value may be attributable to these contractual rights. MIM contends that the value envisaged in the Act is the value to the taxpayer. I do not accept that contention. Although Mr Bruton maintained that his valuation was, in reality, based on the concept of fair market value, it was based upon its value to MIM. He engaged in the exercise of severing the contractual rights from the project as a whole and in valuation terms, this is artificial. He utilized the project models developed internally by MIM engineers and other staff. It is a useful and, indeed, necessary methodology to undertake in order to decide on the value of the acquisition to a purchaser. The long accepted approach to the value of property was established in Spencer v The Commonwealth (1907) 5 CLR 418 particularly at 432 per Griffith CJ. The market value of property is sometimes described as the value in exchange being the amount which the owner of property would accept and which a desirous purchaser would pay for it on a given day, Emerson v Custom Credit Corporation Limited (1994) 1 Qd R 516 and the cases mentioned in the joint judgment of Davies JA and Williams J at 521. In Peko-Wallsend Operations Ltd v Commissioner of State Taxation (WA) (1989) 89 ATC 4569 a similar approach to valuing iron ore sales contracts separately from the whole project did not find favour, at 4587-8 per Kennedy J.
I would conclude that the contractual rights have no separate value from the mining leases but that they enhance the value of those leases.
Uncalled Subscription for Shares
Is the unpaid premium on the “A” Class shares in EHM held by MIM “property to which [EHM] is entitled” pursuant to s.56 FL(2) of the Act? MIM subscribed for the shares in EHM pursuant to article 3.8 of EHM’s Articles of Association:
“Immediately following the adoption of these Articles, MIM shall subscribe for, and the Company shall issue to MIM, 237,043 A Class Shares at a premium of $644.71 per Share paid at the time of issue to $316.40 (being par value and premium). ... Any Shares issued at a premium any portion of which is unpaid at the time of issue (including those to be issued to MIM in accordance with this Article) are to be issued on the terms and conditions set out in Schedule 4.”
The circumstances in which a call may be made are set out in article 5.1:
“The Management Committee may only make calls upon a Member in respect of any money unpaid on a Share held by him (whether in respect of the nominal value of the Share or of any premium) in accordance with the terms of issue of that Share (which in the case of Shares issued to MIM in accordance with Article 3.8 are as set out in Schedule 4) and may not revoke or postpone any call ...”.
Schedule 4 has been set out in full above. It relevantly provides:
“(2)Calls in respect of the unpaid premium on the Shares described in cl.(1) may only be made by way of Called Sums for Operations and reasonable provision for working capital and for no other purpose and shall not be made prior to the expiration of 7 days after the issue of the Shares.”
MIM contends that the uncalled premiums constitute an asset of EHM which had a value at 8 November 1993 of $77.4M. The Commissioner contends that it was not property to which EHM was entitled when MIM acquired the shares, being uncalled. Alternatively, if it is found to be property the Commissioner contends that such an entitlement was to a mere contingency and had no value. In the further alternative, if a value is attributed to that fund the Commissioner contends that it is excluded property pursuant to s.56 FL (4)(c)(i) of the Act being money lent by the corporation to a person who in relation to the corporation, is an associated person.
Mr Higham, who has had extensive experience in a range of commercial valuations, including mining operations, considered the status of EHM’s right to the uncalled share premium on the A Class shares issued to MIM under two scenarios. The first, that at 8 November 1993 it was certain that the EHM project would proceed as expected with resulting calls on the uncalled share premium, alternatively, or that at 8 November 1993 “it was probable beyond reasonable doubt” that the EHM project would proceed as expected with resulting calls on the uncalled share premium. He considered the second scenario more realistic, and concluded that the uncalled share premium provided a clearly defined and valuable stream of future receipts for EHM. This flow of future benefits was, in substance, he thought, the same as that to be provided to EHM by the repayment of the loan owed by Savage Resources and that both could be valued. He utilised the discounted cash flow methodology to give a present value of an existing right to future cash flows at $54.84M. There is no dispute about his discount rate or calculations. Mr Higham conceded that the right to uncalled share premiums is not usually recognised as an asset in company balance sheets but would be disclosed in notes as a contingent asset. Nonetheless, he contended that such an asset embodied some benefits which had a value for the entity holding that right.
Mr Bruton calculated the value of the right to the uncalled share premium as nil because a hypothetical purchaser would pay nothing for the right. Mr Higham suggested that this approach did not take into account that EHM was a separate entity nor value its rights separately from the corresponding share holder’s obligation. He could envisage a situation where EHM might give a charge over its right to the uncalled capital. Although property is a somewhat nebulous concept, Smith Kline and French v Secretary Department of Community Health (1990) 22 FCR 73 per Gummow J at 119, it is not clear that the right to uncalled premiums would satisfy any accepted test, National Provincial Bank Limited v Ainsworth (1965) AC 1175 at 1247. It is difficult to contemplate any other than a balancing exercise, that is, that the benefit of the calls would be offset by the obligation to pay such calls or an increased value for the shares. Further the uncalled capital can only be called up and used for the specific purposes set out in Schedule 4 of the Articles of Association and for no other purpose.
Section 56 FL(4) lists certain property that shall not be included in the value of property to which the corporation is entitled for the purpose of calculating the value of property under subs.(2). Mr Harrison submitted that this would give some assistance in discerning the nature of the property which is encompassed by subs.(2). A consideration of that subsection suggests rather that the legislature was concerned to exclude obvious devices for defeating the prescribed provisions than assisting to establish any general meaning of property. It excludes, inter alia, cash or money in an account or at call, negotiable instruments, money lent by the corporation to an associated person, or lent to a person at call or repayment within 12 months of the loan.
The uncalled premium becomes payable pursuant to the contract entered into by subscribing to the Articles of Association, and by s.180(2) of the Corporations Law is a debt which may be sued for, Re Vedelago [1993] 2 Qd R 110. The question is whether the phrase “property to which [the company] is entitled” admits of contingent rights. In my view, as long as there is no call on the shares then those premiums cannot be retrieved or liquidated and cannot be characterised as property for the purposes of s.56FL(2).
The uncalled premium does not fall within excluded property in s.56FL(4)(c)(i) in that those funds could only be applied as called sums for operations pursuant to the Articles of Association and the Commissioner erred in excluding the premium on that basis.
Accordingly the uncalled capital is not property to which EHM is entitled within the meaning of the Act and it has no value of a relevant kind.
Amount of the Assessment
The Commissioner’s assertion as to the value of the land for the purposes of assessment relies upon an early valuation in the course of complex and protracted negotiations between the parties. The dynamics of the acquisition changed and, as I have said, I accept Ms Parikka’s evidence. The Commissioner has not otherwise sought to establish the value of the land and if I am incorrect in my conclusion that the Commissioner erred in holding that MIM fell within the prescribed provisions of the Act, duty must be assessed by the Commissioner on the basis of MIM’s figures of $134.3M.
Interest
Should MIM be successful, Mr Harrison has submitted that interest should be awarded at the rate fixed pursuant to the Supreme Court Act 1995 from the date of payment under protest. Mr Hanson on the other hand contended that s.31(d) of the Judicial Review Act 1991 was not an apt source of jurisdiction for an order for interest but that if it were, the rate ought to be that fixed by the regulations to the Act.
Section 31(d) of the Judicial Review Act provides:
“On an application for a statutory order of review in relation to a decision, the Court may make all or any of the following orders:
...
(d) An order directing any of the parties to do, or to refrain from doing, anything that the court considers necessary to do justice between the parties.”
In respect of the analogous provision of the Administrative Decisions (Judicial Review) Act 1977 (Cth.), the High Court said:
“The legislative purpose to be discerned in the conferral by s.16(1)(c) and (d) of power to grant declaratory and injunctive relief in addition to the power to quash or set aside (with effect from a specified date) an impugned decision is clear. It is to allow flexibility in the framing of orders so that the issues property raised in the review proceedings can be disposed of in a way which will achieve what is “necessary to do justice between the parties” (s.16(1)(d)) and which will avoid unnecessary re-litigation between the parties of those issues. The scope of the powers to make orders which the subsection confers should not, in the context of that legislative purpose, be constricted by undue technicality. In particular, the phrase “any matter to which the decision relates” in s.16(1)(c) should be construed as encompassing any matter which is so related to, in the sense of connected with, the impugned decision that it is appropriate that it be dealt with by the grant of declaratory relief in judicial proceedings for the review of the propriety of that decision.”
In Comptroller-General of Customs v Kawasaki Motors Pty Ltd (1991) 32 FCR 243 Beaumont J held that the provision was sufficiently wide to allow interest to be awarded in respect of the payment of duty erroneously imposed. Hill and Heerey JJ held that interest could not be awarded but this was due largely to the construction of a provision of the Customs Act (1901) (Cth) rather than any limitation in s.16(1)(d). The NSW Court of Appeal distinguished Kawasaki in Collector of Customs v Gaylor Pty Ltd (1995) 35 NSW LR 649 and awarded interest. So too has interest been awarded by single Justices of this Court, for example in Dean v Commissioner of Stamp Duties unreported decision of Fryberg J No. 619 of 1994 delivered 1 March 1996 at 26 and Campbells Hardward & Timber Pty Ltd v Commissioner of Stamp Duties unreported decision of Byrne J No. 400 of 1995 delivered 22 April 1996.
In most circumstances when money has wrongfully been retained or been required to be paid under protest to do justice between the parties will require an award of interest from the date of payment, Hungerfords v Walker (1989) 171 CLR 125 at 144 per Mason CJ and Wilson J. Since the Commissioner erroneously required payment of duty, MIM would suffer loss if it did not receive interest on the sum paid and there is no reason advanced for not exercising the discretion to award interest.
The legislature has considered the question of the rate of interest to be paid by the Commissioner in respect of the refund of duty in s.24(4A) of the Act. Although the mode of appeal against dissatisfaction with the Commissioner’s decision on objection is here pursuant to the Judicial Review Act and not by the case stated procedure of s.24, the effect is the same, at least for the purpose of the rate. There is no reason to look to the general provision as to interest in the Supreme Court Act (1995) in the present case.
Interest should be awarded on the amount required to be refunded at the rate prescribed in the Regulations to the Act from the date of payment on 14 December 1994.
Conclusion
The Commissioner erred in issuing a notice of default assessment dated 31 October 1994 pursuant to s.22A of the Stamp Act 1894 and disallowing MIM’s notice of objection for the reasons which I have set out above. Within that assessment the Commissioner erred in valuing the taxpayer’s land at $151,714,747 rather than $134.3M for the reasons set out above.
MIM is entitled to interest on the amount paid under protest from the date of payment at the rate set by the regulations to the Act.
The formal orders are:
1.Allow the statutory application of review;
2.Set aside the Assessment to Stamp Duty dated 31 October 1994;
3.Declare that the Commissioner of Stamp Duties has no power to issue a default assessment in the circumstances which gave rise to the decision;
4.Order the Commissioner of Stamp Duties to pay interest on the stamp duty paid under protest by the applicant at the rate prescribed by the regulations to the Stamp Act from the date of such payment.
I will hear submission as to costs.
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