St Barnabas Nominees Pty Ltd v Stallard Corp Pty Ltd

[2011] WASC 261

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CIVIL

CITATION:   ST BARNABAS NOMINEES PTY LTD -v- STALLARD CORP PTY LTD [2011] WASC 261

CORAM:   EDELMAN J

HEARD:   19-20 SEPTEMBER 2011

DELIVERED          :   22 SEPTEMBER 2011

FILE NO/S:   CIV 2399 of 2009

BETWEEN:   ST BARNABAS NOMINEES PTY LTD

Plaintiff

AND

STALLARD CORP PTY LTD
Defendant

(BY ORIGINAL ACTION)

STALLARD CORP PTY LTD
Plaintiff

AND

ST BARNABAS NOMINEES PTY LTD
First Defendant

CORRIN LINDSAY CAINE
Second Defendant

(BY COUNTERCLAIM)
 

Catchwords:

Evidence - Stamp Act 1921 (WA) - Prohibition in s 27(1) of pleading or tendering an unstamped document - Scope and operation of exception in s 27(3) - Sufficiency of undertakings offered by legal representatives

Legislation:

Stamp Act 1921 (WA), s 27

Result:

Pleading and tender of unstamped documents allowed

Category:    A

Representation:

Original Action

Counsel:

Plaintiff:     Ms K A Vernon

Defendant:     Mr I R Freeman

Solicitors:

Plaintiff:     Butcher Paull & Calder

Defendant:     Haynes Robinson

Counterclaim

Counsel:

Plaintiff:     Mr I R Freeman

First Defendant             :     Ms K A Vernon

Second Defendant         :     Ms K A Vernon

Solicitors:

Plaintiff:     Haynes Robinson

First Defendant             :     Butcher Paull & Calder

Second Defendant         :     Butcher Paull & Calder

Case(s) referred to in judgment(s):

Acemount Pty Ltd v Sunlong Holdings Pty Ltd [2009] WASC 249

Armytage v Wilkinson (1878) 3 App Cas 355

Burt v Commissioner of Taxation (1912) 15 CLR 469

Dimmock v Whymark [1964-5] NSWR 1557

In Re Coolgardie Goldfields Ltd [1900] 1 Ch 475

Kia Ora Gold Corporation NL v Washer [1982] WAR 306

Mackwell v Petkovic (1999) 20 WAR 367

Ralston v South Greta Colliery Co (1912) 13 SR (NSW) 6

Re Eliott Meyer (1906) 23 WN (NSW) 55

Re Ward (1862) 31 Beav 1; (1862) 54 ER 1037

Roderick v Hovil (1811) 3 Camp 103; (1811) 170 ER 1320

Sangora Holdings Pty Ltd v Dunstan (1996) 16 WAR 552

Shepherd v Felt & Textiles of Australia Ltd (1931) 45 CLR 359

Stevens v Pinney (1818) 8 Taunt 327; (1818) 129 ER 409

EDELMAN J: 

The issue

1. A preliminary issue arose during this trial.  The issue concerned whether Stallard Corp Pty Ltd (Stallard Corp) could rely in pleadings or in evidence upon an unstamped copy of a document for a sale of land.

2. Section 27(1) of the Stamp Act 1921 (WA) is a clear prohibition against allowing an instrument chargeable with duty and executed in Western Australia to 'be pleaded or given in evidence'. Courts have historically allowed that provision, and its predecessors in Australia and England, to be circumvented by the giving of particular undertakings by practitioners despite a plain failure to comply with the terms of the statute. This judicial indulgence is an application of the doctrine of the 'equity of the statute', deriving from Roman law and historically invoked where it was considered convenient to depart from the plain words of a statute in favour of rectifying their perceived mischief. Bentham railed against this doctrine and pleaded that 'such a degree of comprehension and steadiness might one day perhaps be given to the views of the legislator as to render the allowance of liberal or discretionary interpretation on the part of the judge no longer necessary': Bentham J, Of Laws in General (ed HLA Hart, 1970) 240.  Bentham's sentiment might be thought to be appropriate in a modern developed, plural democracy.  But his plea was not wholly accepted historically, and a number of established doctrines today owe their existence to the doctrine.  The treatment by courts of s 27(1) and its equivalents is one of them.

3. Section 27 has been amended several times by Parliament, including the introduction of a new subsection, s 27(3), which ameliorated the effect of s 27(1) and provides for circumstances in which s 27(1) does 'not apply'. Courts have also afforded a similar 'discretionary interpretation' to s 27(3) as had previously occurred with s 27(1). The question in this case is whether, consistently with that approach, s 27(3) can apply to permit two unstamped documents to be pleaded and tendered as evidence. During the trial I concluded that it could, although I did not permit the documents to be tendered on the basis of an undertaking which was not in the form historically used to circumvent provisions such as s 27(1).

The background

1. This issue arises in the context of a trial in which the central issue is whether Stallard Corp is entitled to interest from St Barnabas Nominees Pty Ltd (St Barnabas) of $192,500 on the purchase price for the sale of an interest in land.  The interest is said to relate to a period from 19 March 2007 until 18 July 2007.

2. The primary plea, and primary submission, of St Barnabas is that the sale occurred by a written and stamped contract, dated 19 July 2007, between Stallard Corp and a trustee company called Spinaway Parade Pty Ltd.  Hence, St Barnabas submits that it cannot be liable to pay interest to Stallard Corp under the contract for the sale of Stallard Corp's interest in the land.  St Barnabas also submits that under the 19 July 2007 contract, interest runs only from 19 July 2007 and that the issue of interest for the period 19 March 2007 until 18 July 2007 had been settled between the parties prior to the 19 July 2007 contract for $26,000.

3. In contrast, Stallard Corp pleads and submits that the terms of the 19 July 2007 contract for the sale of the land, and the common intention of the parties to that contract, having regard to the factual matrix in which it was made, are to be found in the course of dealing, altered from time to time at the request of Mr Caine.  Stallard Corp relies upon dealings between St Barnabas and its director Mr Caine on the one hand, and Stallard Corp and its director Mr Stallard, on the other.  Relevant to this course of dealing are two contracts relating to a sale of land.  They relate to sales of land (by units in a unit trust) between St Barnabas and Stallard Corp.  The contracts are dated 3 July 2006 and 13 September 2006. 

4. The two contracts are not stamped.  I will refer to them as the Unstamped Contracts.  Stallard Corp also brings a counterclaim for misleading and deceptive conduct by St Barnabas, relying on the Unstamped Contracts.  St Barnabas says that these contracts were never completed or executed and that they were superseded by the 19 July 2007 contract.

5. This trial began on 19 September 2011. Counsel for St Barnabas and Mr Caine opened her case and called her first witness, Mr Caine. Counsel for Stallard Corp began to cross‑examine Mr Caine. After lunch, counsel for Stallard Corp sought to cross‑examine Mr Caine on the Unstamped Contracts. They had been pleaded by Stallard Corp in its amended defence and counterclaim. Counsel for St Barnabas objected to Stallard Corp relying on the Unstamped Contracts, referring to s 27 of the Stamp Act.

6. Although it was common ground between the parties that the Unstamped Contracts had been superseded by the (stamped) 19 July 2007 contract, the Unstamped Contracts were still required to be stamped, even if the stamps were only to cancel the agreements: s 20 Stamp Act; Shepherd v Felt & Textiles of Australia Ltd (1931) 45 CLR 359, 381 (Dixon J).

The submission of Stallard Corp concerning s 27 of the Stamp Act

1. Section 27 of the Stamp Act provides as follows:

   27.Instruments not stamped inadmissible except in criminal proceedings

   (1)Except as otherwise provided by a stamp Act no instrument chargeable with duty and executed in Western Australia, or relating, wheresoever executed, to any property situate or deemed to be situate or to any matter or thing done or to be done in Western Australia, shall, except in criminal proceedings, be pleaded or given in evidence or admitted to be good, useful, or available in law or equity, unless it is stamped in accordance with the law in force at the time when it was first executed.

   (2)Any document executed in Western Australia, or relating, wheresoever executed, to any property situate or to any matter or thing done or to be done in Western Australia, which -

   (a)affords any evidence of -

   (i)an acquisition to which section 31B applies;

   (ii)a transfer to which section 31C applies;

   (iii)a disposition to which section 73DAA(1) applies; or

   (iv)a transaction referred to in section 77A(1);

   and

   (b)is a document -

   (i)relating to an acquisition, transaction, disposition or transfer for which a dutiable statement is required to be lodged under section 31B, 31C, 73DAA(1) or 77A; but

   (ii)which is not itself chargeable with duty,

   shall not, except in criminal proceedings, be pleaded or given in evidence or admitted to be good, useful, or available in law or equity, unless a dutiable statement has been lodged under section 31B, 31C, 73DAA(1) or 77A in respect of the acquisition, transaction, disposition or transfer to which that document relates and the duty with which the dutiable statement is chargeable has been paid.

   (3)Sections 29 and 30 and this section do not apply to an instrument or a document relating to an acquisition, transaction or transfer for which a dutiable statement is required to be lodged under section 31B, 31C or 77A, and this section does not apply to an instrument or a document relating to a disposition for which a dutiable statement is required to be lodged under section 73DAA(1), where the instrument or document is pleaded in a pleading filed in any court, or tendered as evidence in any court, on behalf of a party (not being a person who is liable to pay the duty in respect of the instrument or dutiable statement, as the case requires) -

   (a)in the case where the instrument or document is pleaded, if before the pleading is filed in the court, the person -

   (i)has informed the Commissioner of the name of the person liable to pay the duty in respect of the instrument or dutiable statement; and

   (ii)has lodged -

   (I)the instrument or a copy of the instrument; or

   (II)the document or a copy of the document,

   as the case requires, with the Commissioner;

   and

   (b)in the case where the instrument or document is tendered, if the court is satisfied that the person -

   (i)has informed, or will in accordance with arrangements approved by the court, inform the Commissioner of the name of the person liable to pay the duty in respect of the instrument or dutiable statement; and

   (ii)has lodged, or will in accordance with arrangements approved by the court, lodge -

   (I)the instrument or a copy of the instrument; or

   (II)the document or a copy of the document,

   as the case requires, with the Commissioner.

2. The section has an unfortunate history.  Many cases have been lost by the prohibition imposed by the Scylla of s 27(1) and its predecessors.

3. Counsel for Stallard Corp submitted that the clear terms of s 27(1) did not apply to the Unstamped Contracts. His principal submission was based upon the terms of s 27(3). The submission was, initially, that it was sufficient for him to give an undertaking that the steps required by s 27(3)(a) and s 27(3)(b) would be taken. For reasons I explain below, I doubted whether such an undertaking would be sufficient (ts 76).

4. At the start of the second day of the trial counsel informed the court, and provided letters to show, that the steps required by s 27(3)(a) and s 27(3)(b) had been satisfied. The solicitors acting for Stallard Corp had sent by facsimile a letter to the Commissioner of State Revenue and a copy of the Unstamped Contract as well as a second unstamped contract which was also pleaded in these proceedings. The letter informed the Commissioner that Stallard Corp proposed to plead the two contracts and to tender them in evidence and informed the Commissioner that the person liable to pay the duty in respect of each of the contracts was St Barnabas. The letter purported to be in compliance with the requirements of s 27(3)(a) and (b).

5. The question which arose was whether s 27(3) could be construed in a way which would permit the Unstamped Contracts to be pleaded and tendered. The answer to this question cannot be divorced from the manner in which courts have treated s 27(1), to which I turn first. In considering s 27(1), I also explain why I doubted whether the undertaking proffered by counsel for Stallard Corp was sufficient to comply with the terms of s 27.

Section 27(1) of the Stamp Act

1. The origins of s 27 of the Stamp Act derive from s 11 of the 1654 Imperial statute of 5 & 6 Will & Mary c21, the statute which first introduced stamp duty.  That statute and its successors were held to have the effect that an unstamped document was a nullity:  Roderick v Hovil (1811) 3 Camp 103; (1811) 170 ER 1320; Stevens v Pinney (1818) 8 Taunt 327; (1818) 129 ER 409.

2. However, by the time of the Stamp Act 1854 (17 & 18 Vict c 83) and the Common Law Procedure Act 1854 a new rule had developed to ameliorate the consequences of the statute. In similar terms to s 27 of the Stamp Act, the Common Law Procedure Act 1854 (XXVIII) provided that it was the duty of an officer of the court to draw the attention of the judge to an unstamped document which

   shall not be received in Evidence until the... Deficiency of the Stamp Duty, and the Penalty required by Statute, together with the additional Penalty of One Pound, shall have been paid.

3. Judges refused to give effect to the strict terms of this legislation.  In In Re Coolgardie Goldfields Ltd [1900] 1 Ch 475, 478 Cozens‑Hardy J described the approach of Sir John Romilly, then the Master of the Rolls, which permitted cases to proceed on an undertaking that the proper stamp shall be paid and affixed, provided that the stamped document was produced to him before drawing up the decree.

4. In 1862, in the course of his famous decision in Re Ward (1862) 31 Beav 1; (1862) 54 ER 1037, Sir John Romilly also considered this issue of undertakings in relation to stamp duty legislation. His Lordship referred to the approach of requiring an undertaking where the court 'accepts the undertaking of solicitors ... to pay the penalty for not stamping an agreement and various other acts': Re Ward (8) (1039).  He continued (8) (1039 ‑ 1040):

   I am never informed whether [the undertakings] are performed or not, I have not the slightest doubt that they are performed in every case; but if it afterwards came to my knowledge that the act, without the performance of which the case could not have properly been heard, had not been performed, or that the money had not been paid, I should compel the solicitor, at the instance of anybody interested in the matter, to make good his undertaking or assertion, on the faith of which the Court had acted.

5. This Westminster legislation was repealed, re‑enacted, repealed, and re‑enacted.  But the practice of permitting a case to proceed on the undertaking of a solicitor continued.  One justification given for the practice was that it was unjust for a litigant to be prevented from obtaining relief by the failure of the litigant's opponents, or the opponent's solicitors, to stamp documents upon which the litigant sought to rely:  In Re Coolgardie Goldfields Ltd (480).  Another justification was that the practice was an acknowledgement by the courts of the reality that use was often made of unstamped documents outside the court:  Sangora Holdings Pty Ltd v Dunstan (1996) 16 WAR 552, 555 (Rowland J).

6. The practice of allowing an undertaking to ameliorate the strict provision of a Stamp Act was received in Australia and became well established.  Australian Stamp Acts were enacted, and re‑enacted against this history:  Dimmock v Whymark [1964-5] NSWR 1557, 1558 (Manning J). See also Re Eliott Meyer (1906) 23 WN (NSW) 55; Ralston v South Greta Colliery Co (1912) 13 SR (NSW) 6.

7. The same practice was received when s 27(1) was first incorporated in Western Australia in the Stamp Act 1881 (WA). In Kia Ora Gold Corporation NL v Washer [1982] WAR 306, Kennedy J traced some of this history and concluded that the rule which allows undertakings to be given is a 'settled practice' (309) but one which

   does not exist for the benefit of the other party.  It is a rule of convenience which, at the same time, protects the revenue.  This is reflected in the English rule that, save in revenue cases it is unprofessional that a counsel should object to the admissibility of any document on the ground that it is not sufficiently stamped, unless it goes to the validity of the document.

8. Kennedy J described the form of the undertaking as one to have the document duly stamped (309).  That undertaking imports an obligation to comply with any requisitions which may be issued by the Commissioner to enable him properly to assess the duty.  It is an undertaking that the document will be stamped:  Sangora Holdings v Dunstan (555) (Rowland J).  This involves an express or implied undertaking to ensure that the Commissioner is paid the amount of the duty:  Re Eliott Meyer (55); Ralston v South Greta Colliery (13); Dimmock v Whymark (1558).

9. The undertaking offered by counsel for Stallard Corp was to lodge the Unstamped Contracts and to notify the Commissioner of the name of the person liable to pay the duty.  The undertaking complied with the terms of s 27(3), but it fell well short of an undertaking which would comply with the 'practice of convenience' which historically developed to ameliorate s 27(1).  Although a similar undertaking to the one offered by Stallard Corp was accepted in Acemount Pty Ltd v Sunlong Holdings Pty Ltd [2009] WASC 249, that case turned upon very different, and unique, circumstances.

10. As I expressed at the hearing, I have serious doubts whether such a liberal undertaking could be sufficient for a party seeking to rely upon an unstamped document to bring itself within the terms of s 27(3). Section 27(3) was enacted against a history of undertakings being given to ameliorate s 27(1). Section 27(3)(b) provided for one particular circumstances in which an undertaking might be sufficient, namely in the case of tender of a document. But no such provision is made for the separate, and independent, circumstance where an unstamped document is pleaded: s 27(3)(a). It may take the liberal interpretation of a Stamp Act a step too far for this court to accept an undertaking in place of the requirements of action provided in s 27(3)(a). However, since there was subsequent compliance with the actual terms of s 27(3)(a), it was unnecessary for me to decide this point.

Section 27(3) of the Stamp Act

1. Against the history of s 27(1) of the Stamp Act which I have discussed above, a new subsection, s 27(3), was introduced by the Stamp Amendment Act 1995 (WA).

2. The new s 27(3) introduced by the 1995 amendments initially excluded from the s 27(1) prohibition cases involving the payment of duty on statements in the absence of a dutiable instrument (a situation regulated by s 31B).  This exemption from the s 27(1) prohibition required the court to be satisfied of two conditions:  (1) that the Commissioner had been informed (or would be informed) of the person liable to pay the duty and (2) that the instrument or document (or a copy of it) had been lodged or would be lodged with the Commissioner.  In relation to instruments or documents other than those where there was not a dutiable instrument involved, s 27(1) still applied.

3. Section 27(3) was again amended in 1997 by the Revenue Laws Amendment (Assessment) Act 1997 (WA). The amendment required separate conditions to be satisfied in relation to circumstances where a party wishes to plead the instrument or document and where a party wishes to tender the instrument or document. These are the two conditions set out above at [10] in s 27(3)(a) and s 27(3)(b). As Malcolm CJ explained in Mackwell v Petkovic (1999) 20 WAR 367, 379, '[s]ection 27(3)(a) provides for a regime different to and separate from that in s 27(3)(b)'. This is the regime which applies to this case.

1. The first issue concerning the application of s 27(3) in this case is whether the Unstamped Contracts are 'instrument[s] or a document[s] relating to an acquisition, transaction or transfer for which a dutiable statement is required to be lodged under section 31B, 31C or 77A'.  If not, the second issue is whether they are 'instrument[s] or document[s] relating to a disposition for which a dutiable statement is required to be lodged under section 73DAA(1)'.

2. It was common ground that the Unstamped Contracts were not documents relating to transactions with which s 31B, s 31C or s 77A are concerned.  However, in Mackwell v Petkovic, the Full Court of the Supreme Court of Western Australia held that the reference in s 27(3) to 'instrument' is to a separate category from a 'document' which might fall within s 31B, s 31C or s 77A:  (377) (Malcolm CJ).  The reference to 'instrument' is a reference to all instruments which fall within s 27(1) (which used only the word 'instrument' and not 'document').  This also appears to have been the implicit assumption of the Full Court of the Supreme Court in Sangora Holdings v Dunstan.  As Malcolm CJ observed, this interpretation is confirmed by the stated purpose of the introduction of s 27(3), which was to 'apply to all documents that are not stamped':  Western Australia, Parliamentary Debates, Legislative Assembly, 31 August 1995, 7537 (The Hon R Court, MLA); Mackwell v Petkovic (376).

3. The Unstamped Contracts are, therefore, 'instruments' which fall within the terms of s 27(3). In these circumstances it is unnecessary to decide whether, by virtue of the subject matter being units in a unit trust, rather than a direct transfer of land, they 'relat[e] to a disposition for which a dutiable statement is required to be lodged under section 73DAA(1)'. In either event, they are instruments or documents which fall within s 27(3), provided that the conditions of s 27(3)(a) or s 27(3)(b) are satisfied, if the documents are sought to be, respectively, pleaded or tendered.

4. It was common ground that, with one exception, the conditions of s 27(3)(a) and (b) were satisfied by the morning of the second day of the trial. Counsel for St Barnabas submitted that the conditions of s 27(3)(a) must be satisfied, as the subsection provides 'before the pleading is filed in court' (emphasis added). Stallard Corp had filed its pleadings which relied upon the Unstamped Contracts prior to satisfying the conditions in s 27(3)(a). Counsel submitted that it was impossible for Stallard Corp now to comply with the s 27(3)(a) requirement because any refiling of the pleading would technically be an amendment to the pleading rather than a new pleading. Hence, she argued, s 27(3)(a) could never be satisfied once a pleading of an unstamped document had already occurred (ts 86 ‑ 87).

5. For four reasons, I do not accept that a proper construction of s 27(3)(a) requires the words 'pleading is filed' to be construed in so narrow a manner. First, an ameliorating provision such as s 27(3), designed to avoid frustration of litigation whilst maintaining protection for the Revenue, would be seriously undermined if compliance with the preconditions were satisfied but a repleading in this manner were not possible.

6. Secondly, s 27(3) was enacted against a background where s 27(1) had been construed as making an instrument a nullity, yet retrospectively validating that instrument, from the beginning, once it is stamped:  Shepherd v Felt & Textiles of Australia (383) (Dixon J).

7. Thirdly, it is well established that any doubt concerning the interpretation of an exception in tax or duty legislation should be resolved in favour of the person who would be disadvantaged:  Armytage v Wilkinson (1878) 3 App Cas 355, 370 (Sir James Colville); Burt v Commissioner of Taxation (1912) 15 CLR 469, 482 (Barton J); Mackwell v Petkovic (376). There is, at least, doubt concerning whether s 27(3)(a) should permit the refiling of a pleading in satisfaction of the requirement that the conditions be fulfilled before the pleading is filed.

8. Fourthly, the narrow construction urged by counsel for St Barnabas is inconsistent with Mackwell v Petkovic, where the Full Court considered that the learned magistrate had a discretion to adjourn the proceedings to allow the appellants to comply with s 27(3) and then to file particulars of claim, even though a pleading of the unstamped instrument had already occurred.  See also Acemount v Sunlong Holdings.

9. For these reasons, I consider that s 27(3) of the Stamp Act was enlivened and that the requirements of s 27(3)(a) and s 27(3)(b) were satisfied, permitting Stallard Corp to plead and to tender the Unstamped Contracts.

Conclusion

1. These are the reasons for my decision at the start of the second day of this trial that Stallard Corp could tender the Unstamped Contracts, and plead those contracts once a new pleading had been filed with the court.  This repleading subsequently occurred before counsel for Stallard Corp opened his case.

2. Although s 27 of the Stamp Act was amended in 2008, by the Duties Act 2008 (WA), that new legislation is not retrospective, so the difficulties caused by s 27 in the form set out above at [10] may still apply for some time. It may be that under the terms of the new legislation there will be no scope for an 'equity of the statute' to apply so that the statute can be interpreted in a manner to increase the focus upon what Fuller described as 'structural integrity': L Fuller 'Positivism and fidelity to law - a reply to Professor Hart' (1958) 71 Harv Law Rev 630, 670.