Suncoast Milk Pty Ltd v Commissioner of Stamp Duties
[1996] QCA 343
•17/09/1996
| IN THE COURT OF APPEAL | [1996] QCA 343 |
| SUPREME COURT OF QUEENSLAND |
Brisbane
[Suncoast Milk P/L v. The Commissioner of Stamp Duties]
Appeal No. 8 of 1995
| BETWEEN: SUNCOAST MILK PTY LTD | Appellant |
| AND: |
THE COMMISSIONER OF STAMP DUTIES Respondent CASE STATED PURSUANT TO S. 24 OF THE STAMP ACT 1894
Appeal No. 241 of 1994
| BETWEEN: SUNCOAST MILK PTY LTD | Appellant |
| AND: |
THE COMMISSIONER OF STAMP DUTIES Respondent FITZGERALD P. MCPHERSON J.A.
FRYBERG J.
Judgment delivered 17/09/1996
SEPARATE REASONS FOR JUDGMENT BY EACH MEMBER OF THE COURT;
MCPHERSON J.A. DISSENTING IN PART.
In respect of the Case Stated the answers are:
(a) No
(b) Yes
(c) No
(d) Inappropriate to answer.
(e) In part inappropriate and in part unnecessary to answer.
(f) Yes
(g) The costs should be paid by the appellant.
In respect of appeal No. 241 of 1994: respondent Commissioner of Stamp Duties pay the appellant’s costs of and incidental to the proceeding, including the application for leave to appeal and the appeal, to be taxed.
Application for leave to appeal granted.
CATCHWORDS: CASE STATED - stamp duty - duty payable on a “contract to lease” - whether “contract to lease” was a contract for the “sale” of “property” - Stamp Act 1894, ss. 24 and 26.
APPEAL - application for leave to appeal against a decision of a judge dismissing an application by the appellant under the Judicial Review Act 1991 for the review of the respondent’s decision to state the case in its present form.
Acts Interpretation Act 1954
Dairy Industry Act 1993
Dairy Industry (Scheme for Restructuring
Distribution) Order 1993
Dairy Industry Regulations 1993Statutory Instruments Act 1992
Austell Pty Ltd v. Commissioner of Taxation
(W.A.) (1989) 20 A.T.R. 1139
Charles Calthrop Pty Ltd v. Commissioner of
Stamp Duties (Qld.) [1983] 2 Qd.R. 662
Commissioner of Stamp Duties (N.S.W.) v. Yeend
(1929) 43 C.L.R. 235
George Wimpey & Co Ltd v. Inland Revenue
Commissioners [1974] 1 W.L.R. 975; affd. [1975]
1 W.L.R. 995
Inland Revenue Commissioner v. Angus [1889] 23
Q.B.D. 579
Limmer Asphalte Paving Co Ltd. v. Commissioner
of Inland Revenue [1872] L.R. 7 Exch. 211
Queensland Retail Milk Vendors’ Association v.
Deacon [1974] Qd.R. 234
Westpac Banking Corporation v. Commissioner of
Stamp Duties [1994] 2 Qd.R. 212
Counsel: D.G. Russell Q.C. with him J.A. Logan for the
Appellant
K. Dorney Q.C. with him H.L. Alexander for theRespondent
| Solicitors: | Mallesons Stephen Jaques for the Appellant |
Crown Solicitor for the Respondent
Date(s) of Hearing:9 August 1995
IN THE COURT OF APPEAL
SUPREME COURT OF QUEENSLAND
Brisbane
| Before | Fitzgerald P. |
McPherson J.A.
Fryberg J.
[Suncoast Milk P/L v. The Commissioner of Stamp Duties]
Appeal No. 8 of 1995
| BETWEEN: SUNCOAST MILK PTY LTD | Appellant |
| AND: |
THE COMMISSIONER OF STAMP DUTIES Respondent CASE STATED PURSUANT TO S. 24 OF THE STAMP ACT 1894
Appeal No. 241 of 1994
| BETWEEN: SUNCOAST MILK PTY LTD | Appellant |
| AND: |
THE COMMISSIONER OF STAMP DUTIES Respondent
REASONS FOR JUDGMENT - FITZGERALD P.
Judgment delivered 17/09/1996
There are two proceedings before the Court, both broadly relating to the stamp duty payable in respect of a “Contract to Lease” dated 5 July 1993 entered into between the Queensland Dairy Industry Authority and Suncoast Milk Pty Ltd.
One proceeding is a case stated under s. 24 of the Stamp Act 1894 which seeks answers to questions related to the duty payable upon the “Contract to Lease”. The other is an appeal (by leave which was not opposed) against a decision of a Judge of the Trial Division who dismissed an application by Suncoast under the Judicial Review Act 1991 for the review of the Commissioner’s decision to state the case in its present form.
That application was refused under sub-s. 12(b) of the Judicial Review Act on the basis that “adequate provision is made by [the Stamp Act] under which the applicant is entitled to seek a review of the matter by the [Court of Appeal].” I should state immediately that I consider that the decision to refuse Suncoast’s application for judicial review on that basis was incorrect. There is no express provision in the Stamp Act for the form and content of a case stated under s. 24 to be reviewed by this Court (to which the case is stated), and, even if there were some procedure available to deal with inadequacies in the case,[1] it would be inappropriate to permit such a dispute to complicate the already unsatisfactory case stated procedure.[2] It is an inefficient use of judicial resources to submit such an interlocutory dispute to the decision of three judges instead of one, and the postponement of a dispute concerning the form of a case stated to the Court which is to answer the questions asked in the case must create uncertainty and probably confusion in the preparation and presentation of argument on the substantive stamp duty issues.
[1] Compare Commissioner of Stamps (S.A.) v. Telegraph Investment Co. Ltd (1995) 184 C.L.R. 453.
[2] See, e.g., O’Sullivan v. Commissioner of Stamp Duties [1984] 1 Qd.R. 212; Westpac Banking Corporation v. Commissioner of Stamp Duties [1994] 2 Qd.R. 212; Carnation Australia Pty Ltd v. Commissioner of Stamp Duties [1994] 2 Qd.R. 366.
In the present case, an understanding of those issues requires at the outset a broad analysis of the legislation which underpins the contract the subject of the stamp duty dispute: i.e., the Dairy Industry Act 1993, which was assented to on 2 June 1993.
Briefly stated, s. 11 of that Act established the Queensland Dairy Industry Authority (“the Authority”), which is the other party to the “Contract to Lease” to Suncoast, and Division 3 of Part 2 provided for its powers and functions. Part 3 is concerned with “Industry Regulation”, including “Price Regulation” - Division 1, “Vesting of Milk” - Division 2 and “Licensing” - Division 4. Section 38 makes provision for various types of licences, including “vendors’ licences” (sub- s. 38(1)(d)). Sub-section 39(2) and 40(2) empowered the Authority to grant a licence unconditionally or on conditions, and sub-s. 40(1) required a licence “to be granted for a term determined by the Authority in relation to licences of the relevant type and class”. Further, by s. 46 all licences are to expire on 31 December 1998, and, by sub-s. 45(4), it is an offence to carry on business as a vendor without a vendor’s licence and except in accordance with its terms.
Part 3 Division 5 of the Act deals with “Restructuring of Distribution”. Sub-section 47(1)(a) empowered the Authority, “by order”, to “establish a scheme for restructuring the distribution of dairy produce by the holders of vendors’ licences”; sub-s. 47(2) provides that:
“The scheme may -
(a)
authorise the Authority to acquire from vendors who have agreed to participate in the scheme the rights to their milk runs or to parts of their milk runs for a consideration determined by the Authority and to make consequential cancellations of, or variations to, the licences of the vendors from whom the rights are acquired; and
(b)
provide for the restructuring, by amalgamation or division, of the milk runs and parts of milk runs in relation to which rights are acquired under the scheme into the milk runs that the Authority considers appropriate; and
(c)
authorise the Authority to lease the restructured milk runs and, at its discretion, to set the rentals and other consideration to be paid for the leases of the restructured milk runs by competitive bidding or to deal with or dispose of the restructured milk runs in other ways; and
(d)
provide for the reclassification of vendors’ licences, and the cancellation and reissue of vendors’ licences, (whether or not the holders of the licences have agreed to participate in the scheme); and
(e) provide for financing the scheme; and
(f) provide for any incidental or related matter.”
Section 3 of the Act defined the terms “lease”, “milk run” and
“rent” as follows:
“‘lease’, in relation to a milk run, means an agreement (that may be incorporated in a vendor’s licence as conditions of the licence) under which -
(a) the holder of a vendor’s licence is licensed to operate the milk run and, in consideration of the right to operate the milk run, pays to the Authority periodic or other payments in the nature of rent; and (b) the right to operate the milk run reverts to the Authority on termination or expiry of the agreement; ‘milk run’ means the delivery run in respect of which a vendor’s licence is issued and may consist of or include -
(a)
a list of retail outlets to which the vendor is authorised by the licence to sell milk; and
(b)
a list of streets in which the vendor is authorised by the licence to sell milk to householders.
‘rent’ in relation to a milk run, means the periodic payments under a lease of
the milk run.”
The Authority established a scheme for restructuring the distribution of milk and other “dairy products” (as defined in s. 3) by the Dairy Industry (Scheme for Restructuring Distribution) Order 1993,[3] which was made by the Authority on 9 June 1993, notified in the Gazette on 11 June, and laid before the Legislative Assembly on 14 July 1993. The Order divided Queensland into a number of regions, and permitted the Authority to acquire “distribution rights” from “participating vendors” (paras. 6 and 11). The term “participating vendor” is defined by para. 5, and the term “distribution rights” is defined by para. 3. as “the rights conferred by a vendor’s licence to the milk run in respect of which the licence is issued”.[4] Paragraphs 7-10, 12 and 13 provided how the consideration payable by the Authority for a participating vendor’s distribution rights was to be calculated, and for the payment for those distribution rights by the Authority.
[3] By sub-s. 47(3), the Order is subordinate legislation: see the Statutory Instruments Act 1992.
[4] Under para. 3 of the Order, “ ‘licence’ means a vendor’s licence, including a vendor’s licence under the [Dairy Industry Act 1989]”.
Part 3 of the Order is headed “Restructuring of Milk Runs”, and, by para. 15, the authority was required “to restructure the distribution rights acquired under this order to form milk runs of [specified] categories ...”; the “categories” were described by reference to the nature of the customers to whom the “milk run” related; e.g., supermarkets, other businesses, residential areas, etc.
By para. 17 of the Order, which is in Part 4 “Cancellation and Reissue of Vendors’ Licences”, the Authority was required to cancel all vendors’ licences issued before the “restructuring date” from a date or dates determined by the Authority.
Paragraph 16 (Part 3) and para. 18 (Part 4) provided:
“Leasing of restructured milk runs
16.(1) On completing the restructuring of milk runs,
the Authority is to offer the restructured milk runsfor lease.
(2) The term of any such lease is to extend from the
date of the lease until 31 December 1998.(3) The annual rental for leases of the restructured milk runs is to be determined by offering the leases at a public auction but if the bids at the auction for a particular milk run do not reach a reserve determined by the Authority, the Authority may re- offer the lease by public auction or lease the milk run for an annual rental determined by private agreement with a prospective lessee.
(4) However, the annual rental payable by a lessee of a milk run of Category C may be determined by private agreement with the prospective lessee without offering the milk run for lease at a public auction.
(5) The aggregate rental for a milk run is to be payable in advance, in accordance with terms, determined by the Authority, on which the milk run is offered for lease.
...
Reclassification and reissue of licences
18.(1) After the restructuring date, licences are tobe classified as follows -
(a)
Class A - licences issued in respect of Category A milk runs;
(b) Class B - licences issued in respect of
Category B milk runs;
(c)
Class C - licences issued in respect of Category C milk runs;
(d)
Class D - licences issued in respect of Category D milk runs;
(e) Class E - licences of nonparticipating vendors.
(2) The Authority is to reissue licences of the appropriate classes to persons who have agreed to lease the restructured milk runs and to the nonparticipating vendors.”
(The possibility of some licensed vendors not participating in the restructuring scheme was recognised by s. 47 of the Act.)
Following a public auction on 5 July 1993, the Authority entered into the “Contract to Lease” with Suncoast. By cl. 2, the Authority agreed to grant to Suncoast and Suncoast agreed to accept from the Authority a “Lease” of a specified “milk run” in a form contained in the auction catalogue “at the annual rental stated in Item 4 of the Schedule hereto in respect of the whole lease term”. Provision was also made in cl. 2 for the Lease to “commence on a date nominated by the Authority and expire on 31st December 1998", and for the “annual rental” to “remain fixed for the entire lease term”.
Clause 4 of the contract required Suncoast to apply “for the grant of a Vendor’s Licence to enable [it] to lawfully operate the milk run upon commencement of the Lease”, and provided that, if the application was unsuccessful, “this Contract shall ipso facto terminate and the deposit paid by [Suncoast] shall be refunded to [it] in full”. By cl. 8, the contract was also subject to “the acquisitions contemplated by section 47(2)(a) proceeding to completion”. By cl. 3, Suncoast was required to make immediate payment of a deposit “equivalent to ten percentum (10%) of the total rental[5] payable by the intended Lessee under the Lease” and to pay the balance of the total “rental” on completion of the contract. By cl. 5, Suncoast was required also to deliver “the duly executed Lease ...” to the Authority on completion. Clause 7 prohibited Suncoast from assigning its rights or obligations under the Contract without the Authority’s consent. Although time was made “of the essence” (cl. 12), no date was fixed for completion and the contract did not provide any mechanism by which a time for completion could be determined.
[5] $125,382.00
After the vendor’s licence was granted to Suncoast (see cl. 5.1 of the Lease), although it seems on the same day (12 August 1993), the “Contract to Lease” was completed; Suncoast paid the balance “rental” to the Authority in accordance with the “Contract to Lease” and a “Lease” in the agreed form was executed by the Authority and Suncoast. By cl. 2 of the “Lease”, the Authority “leased” and Suncoast took on “lease” the “milk run” described in the Second Schedule, which consisted of a list of businesses in the Hervey Bay area, “for a term ... expiring on ... 31st December 1988". Clause 3 of the “Lease” repeated the requirement in the “Contract to Lease” that Suncoast pay the agreed “annual rental” to the Authority by paying the total of “the annual rentals in respect of the whole of the Lease term” on the date of commencement of the Lease, which coincided with the date of completion of the contract. It was not disputed that the payments made on execution and completion of the “contract to Lease” satisfied this obligation of Suncoast under the “Lease”. By cl. 4 of the “Lease”, Suncoast was also required to pay to the Authority from time to time “during the term of this Lease” “a contribution to be utilised by the Authority in the discharge by the Authority of its financial obligations incurred in the restructuring scheme” related to “the market milk price payable by [Suncoast] to processors as contemplated by Section 28(5) of the Act”. The “Lease” was assignable by Suncoast to another holder of a vendor’s licence only with the Authority’s consent, which was not to be unreasonably withheld.
Clause 6 of the “Lease” should also be noted. It provided:
“6. MILK RUN
6.1 The Lessee acknowledges that the milk run is based on information obtained by the Authority from Vendors as at 31st December 1992 and may not be accurate.
6.2 The Authority does not warrant the accuracy of the milk run and the Lessee hereby expressly releases the Authority from any liability whatsoever in respect thereto.
6.3 The Lessee confirms that no representations have been made by the Authority or anyone on its behalf in respect to the milk run and that the Lessee has entered into this Lease upon its own investigations and has satisfied itself as to the characteristics of the milk run.
6.4 Subject to subclause 6.5 no adjustment will be made in respect to the milk run in the event that the milk run should subsequently prove inaccurate, for example, where customers are specified, some or all of the specified customers are no longer participating in the milk run.
6.5 The Lessee acknowledges and confirms that the Authority reserves the right to allocate specified customers or streets described in the milk run to another Lessee in the event of:-
6.5.1 Dispute arising between the Lessee and
such customer(s), leading to a breakdown
in the customer relationship; or6.5.2
Failure by the Lessee to service the specified customers or streets reliably.
6.6 The Authority shall be the sole arbiter in
determining:-
6.6.1 Whether there has been or there is a breakdown in customer relationship; or 6.6.2 Whether the Lessee has failed to
service the customer(s) or street(s)
reliably.
6.7 If pursuant to Clause 6.5 written notice is given by the Authority to the Lessee that:-
6.7.1 a specified customer(s) or a specified
street(s) has been removed from the milk
run; or6.7.2 a specified customer(s) or a specified
street(s) has been allocated to the milk
run;THEN such notice shall be accepted by the Lessee as constituting an amendment to the milk run and the notice shall be deemed to be incorporated in the Second Schedule hereto forthwith upon receipt of the notice by the Lessee.”
Unfortunately, this is another instance in which the case stated procedure has proved unsatisfactory. There is no further information available. For example, there is no explanation of the factual circumstances in which the Order, “Contract to Lease” and “Lease” operated, such as the arrangements under which the group of customers constituting Suncoast’s “milk run” were supplied with milk prior to the “Contract to Lease” or between that contract and the “Lease”.
It is necessary to make assumptions, including the basic assumption that there was no interruption to the supply of milk to those customers between the Order establishing the restructuring of distribution and the “Lease” to Suncoast.
Presumably, the Authority coordinated the steps required or permitted by the Order so that some licensed vendor (or vendors), perhaps including Suncoast, had the “right” to sell to the customers constituted by Suncoast’s “milk run” until the “Lease” commenced on 12 August 1993; briefly stated, I take it that the effective date of the Authority’s acquisition and restructuring of “distribution rights” and cancellation of earlier vendors’ licences was the day on which the Authority issued to Suncoast its vendor’s licence and granted its “Lease” of the subject “milk run”. Even so, the “right” to “operate” that “milk run”, i.e. to sell milk to the group of customers constituting that “milk run”, did not pass directly from another holder (or holders) of a vendor’s licence to Suncoast, but was first acquired by the Authority and then made the subject of its “Contract to Lease” and “Lease” with Suncoast.
The position is further complicated because the terminology is inappropriate and, arguably, the legislative scheme was not followed.
Whatever the orthodox legal analysis of the transaction between the Authority and Suncoast, the legislation under which it was entered into could have declared or deemed the instrument described as a “Lease” to be a lease for all or any purposes. However, that was not done; the Dairy Industry Act simply ascribed the term “lease” to a transaction of the type which it authorised as an abbreviated means of referring to and identifying those transactions within its own structure and scheme. Any other term could have been chosen, but it has been common to speak of “leases” of “milk runs” (see Queensland Retail Milk Vendors’ Association v. Deacon [1974] Qd.R. 234), and I assume that “lease” was used to connote that the “right” to “operate” a “milk run” was only provided for a limited period in return for periodic payments. Likewise, I assume that it was the use of the word “Lease” to describe that transaction which led to the use of the word “rental” to describe the periodic payments required to be made for the “right” obtained under the “Lease”. Clause 16 of the Order which empowered the Authority to “lease” “milk runs” at an “annual rental”, permitted the Authority, by sub-cl. 16(5), to require advance payment of the aggregate of the annual rentals. Such a provision was incompatible with the statutory definitions of “lease” and “rent” in s. 3 of the Act. The position was then exacerbated because the “Contract to Lease” required payment of the total “rent” on its completion, which logically preceded the commencement of the “Lease”, which similarly required such a payment on its commencement; the same payment was treated as the consideration for two separate, sequential contracts, the “Contract to Lease” and the “Lease”.
After stating the Commissioner’s opinion that “the full unencumbered value of the restructured milk run referred to in the contract and/or the ‘Lease’ was the amount of $125,382.00 paid to the Authority in respect of the same”, the case stated asked the following questions:
“(a) is the contract chargeable with duty pursuant to s.56 of the Stamp Act 1894;
(b)
further, or alternatively, is the contract chargeable with duty pursuant to sub-section 54(1) of the Stamp Act 1894?
(c)
further, or alternatively, is the contract chargeable with duty as a conveyance or transfer under that heading in the First Schedule to the Stamp Act 1894?
(d) further, or alternatively:
(i)
was the transaction evidenced or effected by the contract an agreement to acquire a business or an acquisition of a business for the purposes of s.54A of the Stamp Act 1894?
(ii)
if so, is the assessment dated 20 August, 1993 a default assessment of duty for the purposes of s.22A of the Act?
(iii) if not, should the Court itself assess
the duty chargeable pursuant to s.22A of
the Act?(e)
further, or alternatively, is the contract, or any instrument in question, chargeable with duty or is the Appellant assessable to duty in respect of the contract, or any instrument in question, pursuant to some other (and which) provision of the Stamp Act 1894?[6]
(f)
is the assessment of the Commissioner correct and, if not, what amount of duty is payable?
(g)
how should the costs of and incidental to the stating of this case and of the appeal be borne and paid?”
[6] See, for example, sub-s. 57(3).
Having regard to the wide-ranging nature of those questions, it is important to emphasise that the instrument which was stamped (with ad valorem conveyance duty) was the “Contract to Lease”, and Suncoast’s objection and appeal relate only to that assessment: see Stamp Act, s. 24. Further, by sub-s. 24(3), the Court’s task is to answer questions referable to the dutiability of the instrument stamped, the “Contract to Lease”, and, if it is “chargeable with any duty”, to “assess the duty with which it is chargeable”. Question (d), and the portion of question (e) which is not confined to the dutiability of the “Contract to Lease”, are outside the proper limits of this proceeding. That was effectively the determination sought by Suncoast on its application under the Judicial Review Act.
The presently material sections in the Stamp Act provide as follows:
“Meaning of ‘conveyance or transfer’ and provisions
affecting the same
49. (1) For the purposes of this Act -
‘conveyance’ and ‘transfer’ include every
instrument and every decree or order of
the court -
(a) whereby property is conveyed, transferred or assigned to or is vested in a person; ... ... ‘Transferee’, in respect of a conveyance or transfer, means the person to whom property is conveyed, transferred or assigned or in whom property is vested.
‘Transferor’, in respect of a conveyance or transfer, means the person who conveys, transfers, or assigns or vests the property to which the instrument relates.”
(“instrument” is given a wide meaning by s. 2.)
“Certain contracts to be chargeable as conveyances 54. (1) Any contract or agreement for sale of any
property or any contract or agreement whereby a person becomes entitled or may, provided the terms and conditions thereof are met, become entitled to the conveyance or transfer of any property shall be charged with the same duty as if it were an instrument of conveyance of the property.
...”
“As to sale of an annuity or right not before in
existence
56. Where, upon the sale of any annuity or other
right not before in existence, such annuity or other
right is not created by actual grant or conveyance,
but is only secured by ... contract, or otherwise,
the ... other instrument, or some 1 of such
instruments if there be more than 1, is to be
charged with the same duty as an actual grant or
conveyance, and is, for the purposes of this Act, to
be deemed as instrument of conveyance on sale.”
It is agreed by the parties, as question (c) suggests, that the material heading in schedule 1 to the Stamp Act is “Conveyance or Transfer”, and that the material provision under that heading is:
“(4) Of any property ... -
(a)
upon a sale for a consideration in money or money’s worth of not less than the full unencumbered value of the property -
Duty calculated on the amount or value of the
consideration at the following rate -
...”
Although there seems no reason to doubt the applicability of s. 49 of the Stamp Act to the heading “Conveyance or Transfer” in Schedule 1, it is convenient to note at this point s. 32A of the Acts Interpretation Act, which provides:
“Definitions to be read in context
32A. Definitions in or applicable to an Act apply
except so far as the context or subject matter
otherwise indicates or requires.”
Questions (a), (b) and (c) seek to complement each other and exhaust the possible stamp duty categories applicable to the “Contract to Lease”, leading by one means or another to the Commissioner’s conclusion that the contract is subject to ad valorem conveyance duty. The foundation of each question is that the contract effects or provides for a “sale”; questions (b) and (c) require that what was sold was “property”, while question (a) requires that the “sale” was of a “right” (other than an annuity) “not before in existence”; for question (c) to be answered in the affirmative, the contract must itself have “conveyed, transferred or assigned [the property] to or ... vested [it] in” Suncoast; for question (b) to be answered affirmatively, it is sufficient that, upon execution of the contract or satisfaction of its terms and conditions, Suncoast “[became] entitled to the conveyance or transfer of [the] property”;[7] for an affirmative answer to question (a), the “right not before in existence” must not be “created by actual grant or conveyance, but ... only secured by ... contract, or otherwise ...”, and the material contract must be “the ... other instrument, or some 1 of such instruments if there be more than 1" by which the “right not before in existence” is “secured”.
[7] This statement is adequate for present purposes, although, in some circumstances it would be an over-simplification of sub-s. 54(1): see Oughtred v. Inland Revenue Commissioners [1960] A.C. 206; Fitch Lovell Ltd v. Inland Revenue Commissioners [1962] 1 W.L.R. 1325; Henty & Constable (Brewers) Ltd v. Inland Revenue Commissioners [1961] 1 W.L.R. 1504.
Question (c) must obviously be answered in the negative. It is self-evident that the “Contract to Lease” conveyed, transferred, assigned or vested nothing: cp. I.R.C. v. Angus [1889] 23 Q.B.D. 579; George Wimpey & Co. Limited v. Inland Revenue Commissioners [1974] 1 W.L.R. 975, affd. [1975] 1 W.L.R. 995, 998.
In essence, what the “Contract to Lease” provided was that, after Suncoast became authorised to sell milk for a limited period (by it’s vendor’s licence), the Authority would, in return for an agreed payment, grant it the “right” (by further “licence”) to “operate” the subject “milk run”, i.e., sell to a particular group of customers during that period. At least if the temporary nature of the “right” to sell to that group of customers be ignored for the moment, it was of the nature of, and perhaps technically, goodwill or a component of goodwill, in that concept’s basic sense of a probability that the customers constituting its “milk run” will resort to Suncoast for their purchases of milk (cf. Pearson v. Pearson [1884] 27 Ch.D. 145), or as it was put by McHugh J.A. (as his Honour then was), with whom Samuels J.A. agreed, in
Commissioner of Stamp Duties (N.S.W.) v. J.V. (Crows Nest) Pty
Ltd [1986] 7 N.S.W.L.R. 529, 539, “... the connection of the business ... which brings in custom ...”. Support for this view of Suncoast’s “right” under the “Lease” is to be found in Queensland Retail Milk Vendors’ Association v. Deacon at p. 242.
It is convenient to postpone further consideration of that “right” for the moment, and in particular to pass over whether or not it constitutes “property” for material purposes. I have already referred to the deficiencies in the stated case and the assumptions which I think it necessary to make. It is necessary also to say something more concerning the operation of the Dairy Industry Act and the Order pursuant to it under which the Authority entered into the “Contract to Lease” and “Lease” with Suncoast. The possibility that no holder of a vendor’s licence would pay for the “right” to “operate” a particular “milk run”, or sell milk to a particular group of customers, does not seem to have been contemplated. On one view, the Authority could itself have sold milk to those customers; on another, it could not itself sell milk to those customers because its only material power was to authorise holders of vendors’ licences to do so. On balance, the better view seems to me to be that the Authority’s functions and powers were sufficient to permit it to sell milk to customers itself, even if only in circumstances in which no holder of a vendor’s licence would pay to do so, or perhaps do so without payment: see, for example, sub-ss. 12(a), (b), (e) and (f) and 13 (a), (b) and (d) of the Dairy Industry Act. If that is correct, the “right” to sell milk to the customers constituting the “milk run” for which Suncoast paid was “in existence” (and vested in the Authority) before the “Contract to Lease” was entered into between the Authority and Suncoast, and accordingly s. 56 of the Stamp Act has no material operation. However, even if the Authority could not itself have sold milk to customers but relevantly only had power to authorise holders of vendors’ licences to do so, s. 56 of the Stamp Act does not seem to me to avail the Commissioner.
There is nothing in the Dairy Industry Act or Order to indicate that “distribution rights” ceased to exist when “acquired” by the Authority and were subsequently recreated by a “Contract to Lease” or “Lease”. In other words, I can find no basis for a conclusion that Suncoast’s “Contract to Lease” concerned a “right ... not before in existence”. The indications are to the contrary; see, for example, the definition of “lease” in s. 3 of the Act, which provides for the “right to operate the milk run to revert to the Authority on termination or expiry of the agreement”. [Underlining
added.] Although the legislative scheme might be obscured to
some extent by the terminology, essentially the Authority was to acquire “distribution rights”, rearrange those “rights” into different “milk runs”, permit individual licensed vendors to “operate” those “milk runs” for an agreed period in return for an agreed consideration, following which the “rights” to “operate” the “milk runs” (cf. “distribution rights”) are to “revert” to the Authority.
Further, the fact that the “Contract to Lease” did not relate to a “right not before in evidence” is not the only reason why s. 56 is inapplicable in this case.
The judgment which most favours the Commissioner in relation to s. 56 is that of the majority in Westpac Banking Corporation v. Commissioner of Stamp Duties [1994] 2 Qd.R. 212. In a joint judgment, Pincus J.A. and Demack J. expressed the opinion that what was described as the “franchise” would have been dutiable on the basis of s. 56 except that the document was beyond the territorial operation of the Stamp Act.
Shortly stated, an agreement between the Commonwealth and Westpac under which Westpac was required to make a large payment to the Commonwealth (i) vested in Westpac certain mortgages and term sale contracts under which the Defence Service Homes Corporation was respectively mortgagee or vendor and (ii) provided Westpac with the “franchise”, which was an exclusive right to make certain loans in respect of which the Commonwealth would pay Westpac a subsidy. Macrossan C.J. held that Westpac’s rights did not derive from the agreement but “came ... as a result of subsequent Commonwealth legislation”: p. 217. On the same page, his Honour expressed the further view that the franchise was not caught by s. 56 “because there is no sale and no relevant right, within the meaning of that section”, adding a reference to Commissioner of Stamp Duties (N.S.W.) v. Yeend (1929) 43 C.L.R. 235, 243. Again on the same page, his Honour later added: “To hold the right in consequence of a statute is not to hold it secured by contract or by any of the other means specifically set forth in s. 56".
In their joint judgment, the majority, after expressing the opinion at p. 225 that the “franchise clauses” constituted a part of the agreement between the Commonwealth and Westpac relating to a distinct matter and hence were to be separately charged with duty as if a separate instrument in accordance with sub-s. 15(a) of the Stamp Act, held, at pp. 225-226, that Westpac’s rights under those clauses were not required by the majority judgment in Yeend to be rights “of a proprietary kind” to bring s. 56 of that Act into operation.[8] However, in the course of discussing that issue, their Honours had noted at p. 226 that, in Yeend (at p. 241), the majority had said that the New South Wales analogue to s. 56 was not wide enough to cover rights arising under an “ordinary simple contract, executory on both sides”, and later on the same page (226) added that “s. 56 cannot apply to all contracts under which one party acquires rights”. In any event, for reasons which will appear, it would not matter in the present case if s. 56 was concerned only with proprietary rights.
[8] cf. Bailey v. The Uniting Church in Australia Property Trust (Qld.) [1984] 1 Qd.R. 42, 57; J.V. (Crows Nest) Pty Ltd v. Commissioner of Stamp Duties (N.S.W.) (1985) 85 A.T.C. 4198,
The majority judgment in Westpac then went on, at pp. 226-228, “to consider whether, within the ordinary meaning of the language of the section, the various conditions were satisfied”. In first addressing the question “Was there a sale?”, their Honours referred to the “special context”, namely, that s. 56 applies only to “a ‘sale’ of rights ... not in existence before the ‘sale’,” and went on: “The instrument both creates the right and sells it. Further, the ‘sale’ must be of a right which is not actually granted or conveyed but ‘only secured by ... contract or otherwise’. This implies that the ‘sale’ ... must not effect a transfer of property; nor need it provide for a transfer of property in the future”.
After reference to the fact that “a promise to pay an annuity for good consideration is a ‘sale’ ...”, their Honours said that they could “see no reason why the acquisition of rights by Westpac under the agreement should not be regarded as a sale. ... In short, within the wide and unusual concept of ‘sale’ which appears to be contemplated by s. 56, we think there was a sale of the franchise.” As will be seen, there is authority which indicates that “sale” in s. 56 bears the same meaning as in other provisions of the Stamp Act: see George Wimpey & Co., which was cited with approval by two members of the Full Court in Charles Calthrop Pty Ltd v. Commissioner of Stamp Duties (Qld.) [1983] 2 Qd.R. 662. In any event, as again will be seen below, it would not matter in the present case if the “Contract to Lease” effected a “sale”.
The majority in Westpac next stated that Westpac’s “franchise” rights had not previously been “in existence”, a conclusion dependent on the particular features of that transaction, and the joint judgment then continued at p. 227 that there was “nothing in this agreement which could be described as being a grant or conveyance in the proper sense of those terms.”
Later, the franchise clauses of the agreement, which were dependent on subsequent legislation, were described as “[a] merely potential creation of rights ...”. Finally, at pp. 227-228, it was held that Westpac’s franchise was “secured by ... contract”, because the “expression ‘secured’ ... implies the existence of a document the terms of which set out the rights and may be relied on to enforce them.”
I can find nothing in Westpac which is inconsistent with what I have said above in relation to the inapplicability of s. 56 to the “Contract to Lease” between the Authority and Suncoast.
In particular, the passage last quoted from Westpac does not warrant the conclusion that Suncoast’s “licence” to “operate” the subject “milk run” was secured by the “Contract to Lease”, which did not, by itself or in conjunction with the “Lease”, “secure” the “right” to sell milk to the customers constituting the “milk run” for which Suncoast paid; on the hypothesis that such “right” was not “in existence” before the “Contract to Lease”, it was at best for the Commissioner only agreed to be granted by the “Contract to Lease” and later actually granted by the “Lease”, so that it had no “existence” before the “Lease”.
In the circumstances, I do not propose to discuss further possible obstacles to the Commissioner’s reliance upon s. 56 present by Yeend, which is discussed below in relation to sub- s. 54(1) of the Stamp Act, or Great Northern Railway Co v. Commissioner of Inland Revenue [1901] 1 Q.B. 416. If the latter case is correct, s. 56 might also be unavailable to the Commissioner on the ground that the “right not before in existence” is not one the sale of which is capable of being completed by “actual grant or conveyance” in the sense in which those words are used in s. 56, at least if the meanings are the same there as in the earlier statutory provisions on which s. 56 is based. However, it is necessary to note that “conveyance” is defined in sub-s. 49(1)(a).
Nonetheless, for the reasons given, s. 56 does not apply to the “Contract to Lease”. Question (a) should also be answered in the negative.
The only remaining provision in the Stamp Act expressly referred to in the questions which the Commissioner was entitled to include in the case stated in the present proceeding is sub-s. 54(1); for sub-s. 54(1) to operate, the “Contract to Lease” must have constituted a “contract or agreement for sale of ... property whereby” Suncoast became “entitled to the conveyance or transfer of [the] property”.[9]
[9] See pervious footnote.
In other words, according to the Commissioner, the “Contract
to Lease” is, in law, a contract to sell.
The difficulties in determining whether a particular right is
“property” either according to ordinary concepts or in a
specific statutory context has been frequently noted and is
illustrated by the recent decision of the High Court of
Australia in Cummings v. Claremont Petroleum NL & anor.
(unreported, 20 June 1996).[10] However, goodwill has
consistently been held to be property for the purposes of the
Stamp Act: see Potter v. Commissioners of Inland Revenue
(1854) 23 L.J. Ex. 345; Benjamin Brooke & Co. Ltd v. The
Commissioner of Inland Revenue [1896] 2 Q.B. 356; West London
Syndicate Ltd v. The Commissioner of Inland Revenue [1898] 2
Q.B. 507, 513; Danubian Sugar Factories Ltd v. Commissioner of
Inland Revenue [1901] 1 Q.B. 245, 251; The Commissioner of
Inland Revenue v. Muller & Co’s Margarine Ltd [1901] A.C. 217;
Eastern National Omnibus Co Ltd v. Commissioners of Inland
[10] See also Hepples (Vic) v. Federal Commissioner of Taxation (1990) 22 F.C.R. 1; Uniting Church in Australia Property Trust (N.S.W.) v. Immer (No. 45) Pty Ltd (1991) 24 N.S.W.L.R. 510; Halwood Corporation Ltd v. Chief Commissioner of Stamp Duties (N.S.W.) (1992) 33 N.S.W.L.R. 395; Mutual Pools & Staff Pty Ltd v. Commonwealth (1994) 179 C.L.R. 155; Health Insurance Commission v. Peverill (1994) 179 C.L.R. 226; and Arco Resources Ltd v. Commissioner of Stamp Duties [1996] 1 Qd.R. 1.
Revenue [1939] 1 K.B. 161; J.V. (Crows Nest) Pty Ltd at p. 537. Suncoast’s “right” to “operate” its “milk run”, i.e., sell milk to the specified group of customers, which has been granted to it by the Authority under its legislative power to do so, is plainly “property” according to ordinary concepts; even if technically not goodwill, it consists of a right analogous to goodwill: cp. Queensland Retail Milk Vendors’ Association v. Deacon. See also the wide view of “property” taken in Bailey v. The Uniting Church in Australia Property Trust (Qld.) [1984] 1 Qd.R. 42 at p. 58, and the decision that a licence to operate a taxi-cab was “property” in Banks v. Transport Regulation Board (Vic.) (1968) 119 C.L.R. 222. The stamp duty cases referred to in this paragraph, together with George Wimpey & Co. and Charles Calthrop Pty Ltd, which are discussed below, demonstrate that “property” is a broad concept for stamp duty purposes and, in my opinion, Suncoast’s “right” to “operate” its “milk run” is clearly “property” within the meaning of sub-s. 54(1) of the Stamp Act.
Two other issues remain for consideration in relation to sub- s. 54(1); the first is whether the “Contract to Lease” is a “contract or agreement” (which it plainly is) “for sale” of Suncoast’s “milk run”; the other is whether the “Lease” is a “conveyance or transfer” of the “milk run”, i.e., an “instrument ... whereby [the ‘milk run’ was] conveyed, transferred or assigned to or ... vested in” Suncoast: see sub-s. 49(1)(a).
It is convenient to discuss George Wimpey & Co. and Charles Calthrop Pty Ltd at this point. Before doing so however, a further brief passage from the majority judgment in Westpac should be noted. At p. 229, their Honours said:
“... it is impossible to treat the deemed separate instrument consisting of the franchise sale as caught by s. 54(1). What was agreed upon in the deemed separate instrument was not a sale in the ordinary sense (although it was one within the special meaning which s. 56 requires one to adopt for its purposes). What was agreed, in essence, was that under a subsidy scheme, the Commonwealth would pay moneys to Westpac and not pay such moneys to others, nor did the deemed separate instrument entitle Westpac to any conveyance or transfer of property. The point seems to us too clear to require more elaborate discussion, but attention should be drawn to the circumstance that if s. 54 did catch the deemed separate instrument, the difficulty with respect to ascertaining a consideration, discussed above, would arise.”
However, in my opinion, George Wimpey & Co. and Charles Calthrop support the Commissioner’s reliance on sub-s. 54(1) in the present case.
George Wimpey & Co. entered into a written agreement with the owner of land whereby for a consideration of £15,000 it acquired an option to purchase the land. It was held that the agreement was liable to ad valorem conveyance duty by reference to the heading “Conveyance or Transfer on Sale, of any Property ...” in Schedule 1 to the Stamp Act 1891 (Imp.) and the definition of the expression “conveyance on sale” in s. 54 of that Act, which included “every instrument ... whereby any property, or any estate or interest in any property, upon the sale thereof is transferred to or vested in a purchaser ...”.
At first instance, Brightman J. said at p. 979 ([1974] 1
W.L.R.):
“The requisites of section 54 are these. First, there must be an instrument ... . Secondly, the instrument ... must be one which affects property or any estate or interest in any property. Thirdly, there must a sale of that property or estate or interest. Fourthly, it must be upon that sale that the property, estate or interest is transferred to or vested in a purchaser ... .
There is no dispute that the ... agreement is an instrument, and that therefore the first requisite is satisfied. ...”
After noting Wimpey’s assertion that the instrument was not “one whereby any property or estate or interest in any property, upon the sale thereof, is transferred to or vested in a purchaser ...”, his Lordship said, still on p. 979:
“I deal with one preliminary point about which there can, I think, be no dispute. Although section 54 speaks of an instrument whereby property or an estate or interest in property is transferred to or vested in a purchaser, the section applies as much to an instrument which creates an interest in property de novo as to an instrument which transfers an estate or interest previously created. This proposition was submitted to and clearly accepted by the Court of Exchequer in Limmer Asphalte Paving Co Ltd v. Inland Revenue Commissioners [1872] L.R. 7 Exch. 211 under section 70 of the Stamp Act 1870, which was the precursor of s. 54 of the Act of 1891.
In Mersey Docks & Harbour Board v. Inland Revenue Commissioners[1897] 1 Q.B. 786, a Divisional Court of the Queen’s Bench Division considered that the grant de novo of an annuity by the Mersey Docks and Harbour Board on the security of its rates came within section 54 as well as section 60 of the Act.
The brief judgments in the Court of Appeal [1897] 2 Q.B. 316, 317, do not specifically mention section 54, but there is no reason to suppose that they disagreed with that view.”
At pp. 979-980, his Lordship went on:
“... The crucial question ... is whether the option in the present case is property or an interest in property within the meaning of section 54. If it is, I do not see that there is room for disputing that such property or interest was created by the ... agreement and thereby vested in the taxpayer company, and that the option so acquired by them was granted to them in consideration of the sum of £15,000 and therefore sold to them at that figure.”
At p. 981, his Lordship said that “to deny an option to purchase land the status of ‘property’ or, if preferred, ‘an interest in property’ would seem to me to run counter to the clear current of authority”, and then went on to “deal with
Muller & Co.’s Margarine Ltd v. Inland Revenue Commissioners
[1901] 1 Q.B. 310, which appears to stand on its own”. At p. 983, Brightman J. said that Muller & Co’s Margarine Ltd “was considered and analysed by Collins L.J. in the later case of
Danubian Sugar Factories Ltd v. Inland Revenue Commissioners
[1901] 1 K.B. 245" at 251 and, at pp. 983-984 his Lordship
went on to say:
“In the light of that explanation of the Muller case, and having regard also to the fact that London and South Western Railway Co. v. Gomm [1882] 20 Ch.D. 562 was not mentioned either in the Muller case or in the Danubian case, I think that I am bound to treat an instrument which, in consideration of money, creates an option to purchase land as an instrument whereby property, or an option in property, upon the sale thereof is vested in a purchaser. I accordingly hold that the ... agreement is liable to ad valorem duty under section 54. It is not necessary for me to consider the possible alternative liability under section 60.”
An appeal to the Court of Appeal was dismissed. At p. 998
[[1975] 1 W.L.R.], Russell L.J. said:
“The Judge, quite rightly on authority, held that section 54 is applicable in an appropriate case though the instrument creates for the first time the property or the estate or interest in property; and, as a general proposition, that is not challenged.
In my judgment, the answer to this case is a short one. The instrument in question granted the option to purchase the land pursuant to the recited agreement so to do. The option to purchase is, in my view, within the scope of the word ‘property,’ which is more than once in the context of the Stamp Act 1891 been described as a word of wide import.
The option was granted for a consideration paid of £15,000. In my view, it is correct to say that the option was sold for that sum ... and bought for that sum by the taxpayer company. Accordingly, the instrument was one by which property upon the sale thereof was vested in the purchaser of that property, and it was consequently within the expression ‘conveyance on sale’ by force of section 54 and fell to be stamped accordingly.
In argument it was proposed that it was impossible to describe this as a sale, and reference was made to language of Lord Greene M.R. in In re V.G.M. Holdings Ltd [1942] Ch. 235. ...”
After discussing that case, his Lordship continued on p. 998:
“I have no complaint about the generality of those words in the context of the subject matter then under discussion. But it seems to me that, granted that an option to purchase is ‘property’ within the Stamp Act 1891, and granted that a property can be the subject matter for the purposes of the Stamp Act 1891 of a sale at its first creation, it is correctly said to be a sale and purchase of the option.
Inland Revenue Commissioners v. Angus & Co. [1889] 23 Q.B.D. 579 was much relied upon by the taxpayer company; but it does not, in my view, assist. It was a case of a purely executory contract for the sale of property, a contract which would be specifically enforceable. But it was not a transaction of sale complete in itself, as in the present case in relation to the subject matter in the present case, namely, the option. To argue, as was argued, that Angus should be followed in this case a fortiori is, in my view, to confuse the subject matter in the two cases. In Angus there was a transaction which was only an executory contract to sell thereafter the subject matter. In the present case we have an executed transaction in which the subject matter was the granted option.”
At p. 999, Lord Russell said that Muller & Co.’s Margarine Ltd, as explained by Collins L.J. in Danubian “... gives, in my view, no indication at all to the contrary of the views I have so far expressed”, and, after discussion of W.M. Cory & Son Ltd v. Inland Revenue Commissioners [1965] A.C. 1088, concluded that the decision of Brightman J. was correct.
Stamp L.J. said at p. 1000:
“I agree. I would at the outset emphasise that it is no part of the Crown’s case that the instrument is an agreement for sale, or operates as a conveyance on sale, of [the] land. Clearly it is not. What is said is that, applying the words of section 54 to the facts of the case, the instrument here is an instrument whereby property, namely, an option to purchase land, upon the sale thereof is vested in a purchaser, namely, the taxpayer company.
We are concerned with what is claimed was a sale of an option to purchase land which it is said was, by the instrument in question, vested in the purchaser upon the sale thereof.
It cannot, in my judgment, be doubted that the chose in action called an option to purchase, or an option to purchase land, is ‘property’. It must, in my judgment, follow that the revenue’s contention that the agreement is, within the words of section 54, an instrument whereby property (namely, the option) was vested in the taxpayer company, is well founded: for the agreement is not executory and nothing remained to be done to vest the option in the taxpayer company or complete its title to that property.
Was the option then vested in the taxpayer company upon a sale thereof? In this connection, the passage in Brightman J.’s judgment where he said that section 54 applies as much to the instrument which creates and vests an estate or interest in property de novo as to an instrument which transfers an estate or interest previously created is, in my judgment, well founded ... . I think that if this was otherwise in doubt, that doubt is removed by section 60, which clearly contemplates that there may be, within the Stamp Act, a sale of something which was not before in existence. There may be a ‘sale’ in the sense that the word is used in s. 54, of a chose in action which is brought into existence by the very instrument which vests it in the purchaser. Hence the use of the word ‘vested’ as well as ‘transferred’ in section 54. I think that really concludes the matter. The option was granted to the taxpayer company for a money price and so the subject matter of a sale. Upon the sale of the option, the option was by the instrument vested in the taxpayer company.”
At p. 1001, Sir John Pennycuick expressed his agreement with the judgments which had been delivered but added “a few comments on the position, for the purposes of ss. 54 and 60, of a right not before in existence”.
“Apart from section 60 and apart from judicial decision, I should myself feel very great doubt as to whether section 54 was apt to embrace the creation of a right not before in existence. The essential attributes of a sale are concisely set out by Viscount Simonds in Littlewoods Mail Order Stores Ltd v. Inland Revenue Commissioners [1963] A.C. 135, 152 in these terms. After a quotation from Benjamin on Sale, he says:
‘Hence it follows that, to constitute a valid sale, there must be a concurrence of the following elements, viz.:- (1) parties competent to contract; (2) mutual assent; (3) a thing, the absolute or general property in which is transferred from the seller to the buyer; and (4) a price in money paid or promised.’
See also In re V.G.M. Holdings Ltd [1942] Ch. 235,
241, where Lord Greene M.R. says:‘Putting it in a nutshell, the difference between the issue of a share to a subscriber and the purchase of a share from an existing shareholder is the difference between the creation and the transfer of a chose in action. The two legal transactions of the creation of a chose in action and the purchase of a chose in action are quite different in conception and in result.’
I should not myself have thought that the creation by one party to a contract of a new right in favour of the other party, although it involves the vesting of that right in the other party, could properly be said to represent such a vesting upon sale of the right, in the ordinary meaning of the word ‘sale’.
The doubt which I have expressed is, however, completely set at rest by section 60 of the Act and also by judicial decision. I do not propose to enter into a detailed analysis of the two sections.
It is sufficient to say that section 60 quite unequivocally contemplates that a right not before in existence may be sold and that an actual grant or conveyance of such a right represents the conveyance or vesting on sale of the right. ...”
Later, at pp. 1001-1002, his Lordship said:
“... I feel some doubt about the statement of Wills J. [in Mersey Docks & Harbour Board v. Inland Revenue Commissioners [1897] 1 Q.B. 786; [1897] 2 Q.B. 316] that the same instrument may fall both within section 54 and section 60. I should have thought the two sections were mutually exclusive.
... I mention the point principally in order to make clear that in the case of a right not before in existence the transaction must otherwise, i.e. apart from the circumstance that the right was not before in existence, possess the attributes of a sale in order to be within section 54. In particular, there must, as in the present case, be a price in money or at any rate money’s worth. Obviously there is a vast range of transactions - mostly executory commercial transactions, I imagine - under which new rights are created for valuable consideration and vested in one party or the other to the transaction, but which do not possess the attributes of a sale in respect of those rights.”
Charles Calthrop Pty Ltd turned directly upon sub-s. 54(4) of the Stamp Act as it appeared at the material time, and much of the discussion centred upon the inadequate drafting of that provision in its then form, which first appeared in 1979 and was altered again in 1981. It is unnecessary for present purposes to trace the statutory changes or to discuss in detail the relatively complex facts of the transaction which led to an assessment of ad valorem conveyance duty in that case. It was not in dispute that Calthrop had acquired the beneficial ownership of trust property in Queensland for a consideration in money or money’s worth or that it did not execute a contract or agreement for sale or an instrument of conveyance in respect of the acquisition. By sub-s. 54(4), in the circumstances there present, the memorandum of association of Charles Calthrop Pty Ltd was “deemed to be the instrument of conveyance of such property for the purposes of ... s. [54]”. It was the latter words which gave the difficulty, literally confining the operation of sub-s. 54(4) to “the purposes of” s. 54, not the Act, which underpinned the argument that ad valorem conveyance duty was not payable.
A majority of the Full Court, Sheahan and Macrossan JJ., upheld the assessment. Although he dissented, D.M. Campbell J. accepted the correctness of Wimpey and said at p. 666:
“..., the mere fact that an interest in property is created by an instrument for the first time does not mean that the instrument whereby the interest in the property is vested in the purchaser will not attract ad valorem duty.”
However, at p. 667, his Honour said:
“The conferring of an interest in a trust does not, in my opinion, amount to the sale of a right not before in existence secured by contract. The right acquired is to have the lawful directions of the settlement carried out subject to the Trusts Act 1973. It is not to be equated with the grant of an enforceable option to purchase land. Accordingly, I think the Commissioner was in error ...”
Sheahan J. said at p. 674 “...that, having treated or deemed the acquisition of property as a sale, the sub-section deems the memorandum of association to be the instrument of conveyance on that sale.”
After identifying the relevant part of Schedule 1 to the Stamp Act as the heading “Conveyance on Sale” Macrossan J. (as his Honour then was) said at p. 678:
“... The point to be decided is whether the issue by trustees of units under a unit trust scheme, in return for consideration, can be regarded as a ‘sale’ either on ordinary concepts or within any different meaning that the word may have where it appears in the Act under the relevant part of the Schedule.”
At pp. 680-683, his Honour continued:
“Apart from particular considerations introduced by special usages of words within the Act, it may be thought that not every acquisition of property by a company necessarily involves the concept of conveyance. Rights brought into existence for the first time at the moment of acquisition come to mind in this context and certain attention was devoted to that category in the course of argument. But sec. 49 of the Act is effective to add to the meaning which might otherwise have been given to the phrase ‘conveyance or transfer’. It includes instruments whereby property is not only transferred to a person but is vested in a person and presumably it thereby covers cases where a transfer is not involved. In the present case we are concerned with a transaction whereby the trustees issued to the appellant units under the unit trust scheme for consideration in money’s worth. The property comprised by the units in question was no doubt brought into existence for the first time on the issue of the units to the appellant since those units were not transferred from any previous holder. However, it seems to me that the property comprised by the units became ‘vested’ in the appellant under the transaction.
This conclusion would establish that the relevant acquisition of the units becomes assessable to duty under the heading of ‘conveyance or transfer’ in Sch. 1 to the Act or at least that it would be so assessable if the views which I have previously expressed as to the scope of the subsection and its construction are correct. Even this conclusion, however, leaves it to be determined which of the subheadings of ‘conveyance or transfer’ in the Schedule the transaction can be brought under. ... To decide that for the purposes of subsec. 54(4) there can be a conveyance of rights not already in existence does not itself determine that there can be a sale of rights or property not already in existence within the meaning of the subsection and within the meaning of the relevant head of charge.
This must also be read as applicable if it is to be determined that there is a conveyance or transfer on sale.
...
Words appearing in the Stamp Act are not necessarily used with their ordinary meanings. The transaction pointed to by the opening words of subsec. (4) is one in which there is an acquisition of property for consideration in money or money’s worth. The words immediately following assume that a contract or agreement ‘for the sale’ may not be executed and so lend some support to the proposition that the word ‘sale’ is being used merely to mean an acquisition of the type referred to. There is under subsec. (4) a twin case where the subsection is brought into operation, that is when an instrument of conveyance is not executed or produced and it might be objected that it is not completely clear that the basic assumption indeed is that an acquisition of property for value constitutes a sale. It might in the eyes of the subsection be either a sale or a conveyance.
In this situation the parallel provisions of subsec. (5) give assistance. The early reference to ‘such sale’ in the latter subsection makes it obvious that it is contemplated that it is an acquisition of property for value which is regarded as a ‘sale’ for the purposes of that subsection.
The argument is strengthened that similar
considerations apply in respect of subsec. (4).Cases on stamp duty legislation support the view that an acquisition of property for value constitutes a sale and it is no objection that the property or right in question may not have been in existence prior to the transaction of acquisition.
A recent authority in the Court of Appeal in England is George Wimpey & Co. Ltd v. I.R. Commrs. (1975) 1 W.L.R. 995 ... Both Stamp L.J. and Sir John Pennycuick seemed prepared to think that the matter was disposed of by previous judicial authority but they were assisted by the consideration that the English equivalent of sec. 56 spoke of ‘sale’ of a ‘right not before in existence’. I would agree that this is a further consideration assisting the conclusion at which their Lordships arrived and equally it supports the contentions advanced on behalf of the Commissioner in the present case.
In argument we were referred to the view of Latham C.J. in C. of T. (Qld.) v. Camphin (1937) 57 C.L.R. 127 at p. 133 that it was not correct to think in terms of a ‘sale’ of a right not before in existence but the Court’s decision there was given under different legislation and it is not to be transposed in application to the Stamp Act where particular meanings may apply.
I think that in truth a large measure of the awkwardness that might at first appear to be associated with an application of the concept of
‘conveyance on sale’ to a transaction like the present is disposed of by the fact that the conveyance portion of the formula does not necessarily involve any transfer but may be satisfied by a vesting without transfer. If this point were to be reached the appellant did not contend that if the transaction was truly on ‘sale’ it did not fall within subheading (2). The Commissioner’s argument supported an assessment made under subheading (2). Accordingly I would conclude that the Commissioner’s assessment should be sustained. ...”
D.M. Campbell J. had also referred to George Wimpey & Co. with approval in his judgment.
I have already expressed the opinion that Suncoast’s “right” to “operate” its “milk run” is “property”, and, subject to one qualification referrred to below, the cases leave me in no doubt that the “Contract to Lease” was a contract for the “sale” of that “property” by the Authority to Suncoast. I am of that view irrespective of whether the payment of the total “rental” should be seen as made simultaneously under both instruments on completion of the “Contract to Lease” and commencement of the “Lease”, or as paid under the “Contract to Lease”, although also serving to satisfy the payment of “rental” required of Suncoast by the “Lease”.
It has been convenient to this point to substantially confine references to licences in these reasons to vendors’ licences to sell milk generally, and to refer to Suncoast’s “right” to “operate” a “milk run” or sell milk to specified customers under the “Lease”. However, it must be remembered that the transaction between the Authority and Suncoast occurred in a statutory setting in which a “lease” is defined by s. 3 of the Act as “an agreement ... under which ... the holder of a vendor’s licence is licensed to operate the milk run” for a period in return for payment; further, that additional “licence” was permitted to “be incorporated in a vendor’s licence as conditions of the licence”. [Underlining added.] In
short, the “right” to “operate” a “milk run” is a “licence” to sell milk to specified customers. When the “Lease” by which the Authority “leased” the “milk run” to Suncoast became operative on completion of the “Contract to Lease”, the Authority granted Suncoast another “licence”, additional to its vendor’s licence, which additional licence permitted (or licensed) it to sell milk to the specified group of customers constituting the “milk run” for the agreed period in return for the agreed payment (which had already been made).
It is appropriate to return to the question whether the “Contract to Lease” involved a “sale”. In my opinion, it did.
However, it is necessary to note that the “property” sold was not a permanent “right” to “operate” Suncoast’s “milk run”, but only a “licence” to do so for an agreed period.
It is now possible to identify the fundamental issue remaining with respect to sub-s. 54(1) of the Stamp Act. The “Contract to Lease” was a “contract or agreement” (initially conditional but later unconditional) for the “sale” of the “Lease” of a particular “milk run” by the Authority to Suncoast; i.e., the “sale” of a “licence” to “operate” the “milk run”, or sell milk to specified customers. The Authority granted the “Lease” to Suncoast on performance of the “Contract to Lease” in return for the payment required by that contract. The Commissioner is entitled to rely on sub-s. 54(1) if, and only if, the “Lease”, in the sense of the “Lease” document, was an “instrument ... whereby” the “licence” to “operate” the “milk run” (or sell milk to the specified customers) was “conveyed, transferred or assigned to, or vested in ...” Suncoast: Stamp Act, sub-s. 49(a).
Suncoast’s argument to the contrary is that the “Lease” merely operated as a contract under which Suncoast acquired a “right”, its licence to “operate” the “milk run”, in return for a money payment, and that Yeend and, for example, Limmer
Asphalte Paving Co. Ltd v. Commissioners of Inland Revenue
[1872] L.R. 7 Exch. 211 are against a conclusion that such a contract operates to convey, transfer, assign or vest property. However, in my opinion, neither Yeend nor Limmer, nor other cases which can be found in which sub-s. 54(1) and similar provisions have been held not to apply, goes so far.
The fact that the “instrument” relied on by the Commissioner is contractual in nature plainly does not, in itself, mean that it does not, or cannot, convey, transfer, assign or vest property. George Wimpey & Co. Limited, to take one example, is clearly against such a generalisation; there, the material contract by which an option to purchase land was sold was held to vest the “property”, the option, in the purchaser. Where the instrument relied on as a conveyance or transfer for the purpose of sub-s. 54(1) is a contract, it is necessary to ascertain the nature and effect of that contract in order to determine whether it conveys, transfers, assigns or vests property in the purchaser, or whether it is outside sub-s. 54(1) because it does not do so in the relevant sense because, for example, it is for material purposes merely the source of a personal contractual right to enforce executory obligations: cp. Yeend at pp. 241-243.
Limmer Asphalte Paving Co. was clearly in the latter category; the promisor company had no pre-existing custom in the area over which it granted an exclusive licence, as was explained in Eastern National Omnibus Co. at pp. 171-172.
It does not seem to me to matter whether Yeend can be explained on such a basis, or for that matter whether any common thread can be found linking all the various cases in which revenue authorities’ attempts to rely on provisions such as sub-s. 54(1) have been unsuccessful. The various texts on stamp duty are replete with examples of contracts which fall on one side of the line or the other. However, so far as I am aware, we were not referred to, and I have not found, any authoritative statement which would support a conclusion that a contract under which goodwill, or a right akin to goodwill, is exchanged for a money payment is not a “conveyance or transfer” of that property for the purpose of sub-s. 54(1).
Accordingly, in my opinion, question (b) should be answered in Court of Appeal either held or accepted without question that ad valorem conveyance duty was payable upon provisions of a contract which granted a franchise to carry on a business in return for a money payment: see 85 A.T.C. 4198-4199 and [1986] 7 N.S.W.L.R. at pp. 530-531 and 535.
the affirmative.
In conclusion, I note, without comment, that in J.V. (Crows
In summary, therefore, I would answer the questions asked in
the case stated as follows:
(a) No.
(b) Yes.
(c) No.
(d) Inappropriate to answer.
(e) In part inappropriate and in part unnecessary to answer.
(f) Yes.
(g) The costs should be paid by the appellant.
In appeal no. 241 of 1994, I would grant the application for leave to appeal and allow the appeal, but make no further order except that the respondent Commissioner of Stamp Duties pay the appellant’s costs of and incidental to the proceeding, including the application for leave to appeal and the appeal, to be taxed.
IN THE COURT OF APPEAL
SUPREME COURT OF QUEENSLAND
Brisbane
| Before | Fitzgerald P. McPherson J.A. Fryberg J. |
[Suncoast Milk Pty. Ltd. v. Commissioner of Stamp Duties]
Appeal No. 8 of 1995
BETWEEN
SUNCOAST MILK PTY. LTD. Appellant
AND
THE COMMISSIONER OF STAMP DUTIES Respondent
CASE STATED PURSUANT TO S.24 OF THE STAMP ACT 1894
Appeal No. 241 of 1994
BETWEEN
SUNCOAST MILK PTY. LTD. Appellant
AND
THE COMMISSIONER OF STAMP DUTIES Respondent REASONS FOR JUDGMENT - McPHERSON J.A.
Judgment delivered the 17th day of September 1995
This is a case stated under s.24 of the Stamp Act 1894 to test the validity of an
assessment of stamp duty made by the Commissioner of Stamp Duties in respect of an
instrument described as a contract to lease a milk run, which is identified in the contract as
Lot 69. The contract is dated 5 July 1993 and was entered into between the Queensland Dairy Industry Authority and Suncoast Milk Pty. Ltd., which is the appellant before us. The
contract was executed following a successful bid at an auction conducted by the Authority
resulting in an agreement by which the appellant paid a deposit of $12,538.00 and agreed
to pay the balance of what is called the "rental" of $125,382.00 at settlement, together with
the duly executed lease and counterparts.
To understand the points at issue on the appeal, it is helpful to say something about
the delivery of milk in Queensland. In times past milk was delivered, usually at night, to the
homes of householders in urban areas by milk vendors, who deposited a bottle or carton
on the doorstep and collected in return the money left there by the householder. The
system was not the subject of any direct statutory control; but there was a voluntary
association named the Queensland Retail Milk Vendors' Association, which regulated the
affairs of members by designating as "milk runs" particular residential areas bounded by
identified streets. Those runs were then "leased" to milk vendors, who were regarded by
their fellow members as having the exclusive right to sell and deliver milk in that area. In
Queensland Retail Milk Vendors' Association v. Deacon [1974] Qd.R. 234, 242, Hart J.
held that in those circumstances a right arose that was capable of protection by injunction.
His Honour considered a milk run to be "valuable property, which can be bought or sold",
adding that it was in effect a lawful monopoly to sell milk in a particular area.
Subsequently, the system of delivery was provided with a partial statutory
foundation. Section 114 of the Dairy Industry Act 1989 made it an offence to carry on
business as a vendor of milk without having a licence issued under Part IV of the Act by the
Queensland Dairy Industry Authority. The Act was repealed by the Dairy Industry Act 1993,
which in s.45(4) maintained the prohibition against carrying on business as a vendor without having a vendor's licence granted by the Queensland Dairy Authority under s.39(2)
of the 1993 Act.
The current statutory scheme. Under the 1993 Act the Authority was authorised
by order to establish a scheme for "restructuring" the distribution of dairy produce
(including milk) by the holders of vendors' licences: s.47(1)(a). Under s.47(2)(a), such a
scheme might authorise the Authority to acquire milk runs from participating vendors; and
might also authorise the Authority to lease those restructured milk runs, setting the rentals
and other consideration to be paid for leases by a system of competitive bidding.
Vendor's licence. Acting under the power so conferred, the Authority made an
order entitled the Diary Industry (Scheme for Restructuring Distribution) Order 1993. At
the time the legislation was promulgated many householders had transferred their custom
from home delivery milk vendors to other retail milk sales outlets. Section 17(1) of the
Order provided for cancellation of all vendors' licences issued before a specified date.
Section 18 introduced a classification of licences according to the type of milk run involved.
According to s.15(1)(b), Category B was to consist of a list of businesses (not including
supermarkets) to which a licenced vendor was authorised to sell milk. From the material
in other proceedings (Application no. 495 of 1994) heard with the present appeal, it
appears that it was a licence of this kind (category B) that was issued in favour of the
appellant in this instance. It refers to "milkshops other than supermarkets prescribed by
Order under the .... Act", and is dated 12 August 1993, which is the day on which the lease
was made between the Authority and the appellant consequent upon the contract to lease
dated 5 July 1993.
The lease. The lease dated 13 August 1993 recites that the Authority agrees to lease to the appellant (which is described as the Lessee) the restructured milk run described in the second schedule to the lease. The schedule refers to Run No. B0069 and
contains a list of various named businesses (Lot 69), mainly in the Hervey Bay area, which
by cl.2.1 of the lease the Authority leases to the appellant for a term commencing on 12
August 1993 and expiring on 31 December 1989, in return for the stated rent of
$125,382.00 payable in full on the commencement date. Clause 5.1 confirms that the
Authority has granted a vendors' licence to the appellant; and cl.5.1 contains a covenant
by the appellant that it will strictly comply with the conditions and restrictions of that licence.
The contract to lease. It was the contract to lease, and not the lease itself, that
was assessed to duty. Primarily, the head of charge in the schedule to the Stamp Act
under which it was assessed was "Conveyance or transfer ... on the sale of any property",
read in conjunction with one or more of the provisions in the Act notably s.54 and s.56,
which, for stamp duty purposes, invest it with an expanded meaning. Before us the
Commissioner also relied on s.54A(2) of the Act, which creates a liability to account for
duty upon a transfer of business. There was disagreement between the parties about her
right to invoke that provision in these proceedings, there having as yet been no
assessment under that section. For the present, however, it is enough to say that on the
material now before us there is nothing to show that, before or even at the time the contract
to lease was entered into on 5 July 1993, there ever was, within the meaning of s.54A(2),
a "business" existing in Queensland of selling milk to the milkshops identified in the lease
which, within the meaning of s.54A, was acquired by the appellant. The Authority did not
conduct any such business, and until the appellant was licensed to sell milk, it could not
have been doing so. The immediate question is, however, whether there was an actual
conveyance or transfer on sale; or, if not, there was a conveyance on sale within the
meaning of one of the statutory extensions referred to.
Conveyance on sale. To my mind there never was an actual conveyance or
transfer on sale. The instrument of 12 August 1993 describes itself as a lease and uses
expressions such as a "lease", "rent" and "term"; but the liability of an instrument to stamp
duty falls to be determined not simply by the words used, but according to its real character
and meaning: Limmer Asphalt Paving Co. Ltd. v. Commissioners of Inland Revenue
(1872) L.R. 7, Ex.211, 215. On any view, it does not amount to a lease in any legally
accepted sense of that word. It does not confer, or even affect to confer, a right to exclusive
possession of land, which is now the settled common law test for determining whether a
lease exists. See Radaich v. Smith (1959) 101 C.L.R. 209; Street v. Mountford [1985]
A.C. 809. Nor is it a leasing agreement, in the sense in which those words are commonly,
if inaccurately, used in referring to an agreement of the hire of a chattel. Its subject matter
is not a chattel, but something having its genesis in statute.
The effect of s.45(4) of the Dairy Industry Act 1993 is to prohibit persons from
carrying on business as a milk vendor unless they are licensed under the Act. On the same
day as it leased Run B0069 to the appellant under s.47(2)(c), the Authority also issued the
appellant with a Category B vendor's licence. Taken together, the two instruments
combined to exempt the appellant from the prohibition in s.45(4) and to invest it with what,
in practical terms, was a statutory monopoly to sell milk to the milk shops specified in the
schedule to the lease. Neither the statute nor the lease expressly provides that the authority
to sell to those shops is exclusive, although it would probably not be difficult to imply that
such is the intention. However, even if the authority to sell to those shops had been
expressed to be exclusive, or if the Authority has specifically covenanted that it was, it
would not follow that the lease involved a conveyance or transfer on the sale of property. In Limmer Asphalt Paving Co. v. Commissioner of Inland Revenue (1872) L.R. 7 Exch.
211, a company agreed by indenture to ship asphalt from Germany and to sell it to the
taxpayer Hetherington, at the same time covenanting to grant to him the sole and exclusive
right to use and sell the asphalt in two English counties for a specified period of time. In
giving judgment for the Court of Exchequer, Martin B. said (at 216):
"The effect of the instrument is probably a covenant by the company that no asphalt shipped by them to England should be used in Lancashire or Cheshire except by Mr Hetherington, and for a breach of this covenant Mr Hetherington might possibly maintain an action; and it may also amount to a covenant on the part of Mr Hetherington that he is not to use the asphalt except in the two named countries."
Despite this conclusion, it was held that, as regards that covenant conferring the sole right
to use the asphalt, the indenture did not amount to conveyance or transfer of property.
Nearer home and closer in time is the decision of the High Court in Commissioner
of Stamp Duties (N.S.W.) v. Yeend (1929) 43 C.L.R. 241. It concerned the right to sell
refreshments in two reserved enclosures at race meetings at Warwick Farm racecourse,
for which one Smith was the successful tenderer, at a consideration of £300 per race day
payable by him to the race Club. After Smith died, the agreement was extended for three
years and his rights under it were by novation vested in the taxpayer Yeend. In dismissing
an appeal from a decision holding the agreement not dutiable as a conveyance of any
property, Knox C.J., Gavan Duffy, Rich and Dixon JJ. said that, although the definition and
operation of "property" in the Stamp Duties Act (N.S.W.) was very wide, it seemed
"unnatural to apply its words to a document which does no more than describe mutual
promises although they result in contractual rights"; and furthermore:
"... the section relates to instruments by which the right is vested in or accrues to any person. This expression is appropriate enough to proprietary rights, but not one which may aptly be applied to the right to enforce an executory contract contained in the document."
The effect of that decision seems, with respect, to be that a contract which brings
into existence merely personal rights is not by itself ordinarily capable of being considered
a conveyance of property or, as it is under the Queensland Stamp Act, a "conveyance or
transfer on the sale of any property", even if a consideration is given in exchange for those
rights. It should be added that, although the New South Wales enactment contained a
definition of property which was much more detailed and specific than anything in the
Queensland statute, s.49 of the local Act contains a definition or enlargement of
"conveyance or transfer" to include "every instrument and every decree or order of any
Court whereby any property ... is transferred to or vested in any person"... It was these
words that their Honours treated as critical to their decision in C.S.D. v. Yeend.
A similar view of the decision in Yeend was adopted in Austell Pty. Ltd. v.
Commissioner of Taxation (W.A.) (1989) 20 A.T.R. 1139, 1147-1148, where, in relation
to a statutory fishing licence, Brinsden J. said (at 1148) that Yeend's case was authority
for the proposition that the license created by the appropriate authority in order to license,
in consideration of a fee, the particular vessel in that case "would not be subject to stamp
duty since there would be conferred only a personal right in the owner of the boat to exploit
that authorisation". His Honour went on to hold that an agreement to purchase the vessel
with the benefit of the licence involved a dutiable conveyance of the licence, which suggests
that the distinction is between a contract creating a personal right, which is not ordinarily
a conveyance of property, and a contract that transfers that right, which is or may often
involve such a conveyance.
Contract for sale and conveyance. In the present case the Commissioner did
not, in any event, assess duty as on an actual conveyance on sale. She acted under s.54,
or alternatively s.56, of the Stamp Act, assessing not the lease itself but the contract to
lease. Section 54(1) was enacted to overcome the decision in Commissioners of Inland
Revenue v. Angus (1889) 23 Q.B.D. 579, holding that an agreement for sale of goodwill
was not a conveyance on sale because it was not an instrument "whereby" the goodwill
was conveyed, but one that required a decree of specific performance before it was
perfected as a conveyance. It was because of that decision that s.54(1) now provides that
a contract for sale of any property whereby a person becomes, or may become, entitled
to the conveyance or transfer of property is to be charged with the same duty as if it were
an instrument of conveyance of that property.
Was that the effect of the contract to lease dated 5 July 1993? In my respectful
view, it was not. By cl.2.1, the Authority agreed to grant to the intended lessee, and the
intended lessee agreed to accept, a lease of the milk run on the terms and conditions of
the lease at the specified annual rental in respect of the whole term. By cl.4.1 the appellant
was required to apply to the Authority for the grant of a vendor's licence; and in the event
of its not being successful, the contract was (as it is expressed in cl.4.3), to "terminate ipso
facto". But although on its face the contract looked forward to execution of a "lease"
between the Authority and the appellant, the contemplated lease was, as I have already
said, not itself a conveyance of any property but simply another contract by which at most
that property was created: cf. C.S.D. v. Yeend (1929) 43 C.L.R. 235, 242. Section 54 of
the Act cannot elevate the contract of 5 July 1993 to a higher status than if the "lease" itself
had already been executed. It is no more than an agreement to enter into a further contract which, when executed, produces statutory consequences. It may well be correct to say that
the contract to lease dated 5 July 1993 is one by which the appellant, subject always to the
fulfilment of other conditions, became entitled to a right under the statute. The appellant
might perhaps, if the need had arisen, have succeeded in obtaining specific performance
of that contract to lease; even so, it would then have been entitled simply to have that right
created in its favour by the Authority, which does not mean that it would be entitled to have
it conveyed or transferred. The contract to lease is, as Fryberg J. suggested in the course
of argument on this appeal, no more than an agreement by the Authority to exercise its
statutory powers in favour of the appellant. It cannot be considered a contract for the sale
of goodwill because goodwill is the tendency of customers to continue dealing with their
former supplier or place of supply; and here there was no such tendency until the contract
to lease was made.
Sale of right not in existence. Section 54, therefore, did not make the contract
to lease chargeable to duty as if it were an instrument of conveyance of the property.
However, the main foundation of the Commissioner's assessment was s.56 of the Stamp
Act, which provides:
"56. As to sale of an annuity or right not before in existence. 56 & 55 Vic. c.39, s.60. Where, upon the sale of any annuity or other right not before in existence, such annuity or other right is not created by actual grant or conveyance, but is only secured by bond, warrant of attorney, covenant, contract, or otherwise, the bond or other instrument, or some one of such instruments if there be more than one, is to be charged with the same duty as an actual grant or conveyance, and is, for the purpose of this Act, to be deemed an instrument of conveyance on sale."
The section can, as Mr Russell Q.C. for the appellant reminded us, be traced back as far
as the Probate and Legacy Duties Act 1808; 48 Geo.3, c.149, s.17, where its original
purpose was to prevent understatements of the value of property being assessed. From there it was incorporated into Part I of the schedule to the Stamp Act 1815; 55 Geo.3,
c.184. In Warren v. Howe (1823) 2 B. & C. 281; 107 E.R. 388, it was held not to apply to
the assignment by indenture of a judgment debt. The decision has not escaped criticism;
but it has never been suggested that the section applies to every acquisition of a right in
consideration of a money payment, and, indeed, successive editions of Sargeant on
Stamp Duties have long contended to the contrary. A statement to that effect continues to
appear in Sergeant & Sims (9th ed. 1988), at 149. In the form in which s.56 is retained in
the stamp duty legislation of various jurisdictions, it has received little judicial analysis.
However, in Great Northern Ry. Co. v. C.I.R. [1901] 1 Q.B. 416, 426, Collins L.J. said that
to bring an instrument within the comparable English section (s.60), there must be: (a) the
sale of an annuity or other right; (b) that right must not be an already existing right, but must
take its origin from the sale itself; and (c) the right must be one the sale of which is capable
of being completed by grant or conveyance. If the instrument in question failed to meet any
one of these conditions, it was, his Lordship said, not within the section.
The decision in Great Northern Ry. Co. v. C.I.R. was apparently not cited in Yeend
v. C.S.D, or more recently in Westpac Banking Corporation v. C.S.D. [1994] 2 Qd.R. 212.
In Yeend's case, a submission founded on the relevant section, which was s.71 of the New
South Wales Act, was rather briefly disposed of by the majority. Their Honours said the
critical words in the section are "sale of a right", which was an expression "which could not
be properly used to describe the promises made by the Club, although part of the
consideration for which they were given was a promise to pay sums of money. There was
neither a sale nor a right, within the meaning of the section". As appears from the case
stated in that instance, the promises made by the Club were that the caterers should have the sole right of supplying refreshments within the two reserves at the racecourse, together
with the implied right to use of the Club's refreshment rooms, but with no right to exclusive
use of any of the Club premises.
On the facts it is not easy to distinguish Yeend v. C.S.D. from the present case.
Here too the contract to lease, in exchange for the payment or promise of payment of a
money sum or sums, arguably conferred on the appellant a sole or exclusive right of
supplying a commodity, namely milk, to customers in a defined area, but without a right to
use of any of the premises at which the supply was to take place. It would of course have
been quite beyond the power of the Authority to grant any such use of premises that were
not its property but belonged or were in the possession of persons over which it has no
control. The only other difference is that in Yeend's case the right granted was purely
contractual, whereas here it has its origin in statute. The difference is one which would, if
anything, operate in favour of the appellant's argument in this case. Even if for some
purposes a statutory right may be considered property, as in Banks v. Transport
Regulation Board (1968) 119 C.L.R. 222, it is difficult to view the contract to lease here
as involving a sale of that right. What the appellant acquired was an authority to sell milk
to particular purchasers, which is the consequence not of a sale of anything by the
Authority, but of an exercise of its statutory power to license the appellant to do an act or
acts which it would otherwise be precluded by law from doing at all. It is, properly
speaking, not a right as such but a liberty; and, although the transaction is artificially
dressed up as a "lease", preceded by a "contract to lease", its true character is not a
conveyance of property but a permission, given by the authority in return for payment of a
fee, to sell. It is the licence rather than the lease or the contract to lease that gave that permission; and it was the lease and not the contract that identified the persons or
businesses to whom or to which such sales were permitted.
The result is, in my opinion, that the contract to lease was not assessable to duty
under s.56 of the Act. That remains so whether regard is had only to it as the instrument
assessed, or to it as well as the licence and lease in conjunction. Taken singly or together,
they do not amount to a conveyance or transfer of property on sale within the meaning of
any of the sections relied on by the Commissioner.
The questions in paragraph 13 of the stated case should in my opinion be answered
as follows:
| (a) | No. |
| (b) | No. |
| (c) | No. |
| (d) | On the material now before the Court, it is inappropriate to answer any of the |
questions numbered (i), (ii) and (iii).
| (e) | On the material now before the Court, it is inappropriate to answer this question. |
| (f) | The assessment is not correct. No duty is payable. |
| (g) | The costs of and incidental to stating this case and of this appeal should be borne |
and paid by the respondent Commission.
I have not found it necessary to reach a decision on the matters subject to the
appellant's appeal in App.No. 241 of 1994. However, I consider that, in relation to the
decision in that matter, the appellant had reasonable ground for complaint and a fair
prospect of success on the appeal. Acting under O.91, r.16, and on the authority of R. v.
Gold Coast City Council, ex parte Raysun Pty. Ltd. [1971] Q.W.N. 16, I would order that
the respondent Commission pay the appellant's costs of and incidental to that appeal.
IN THE COURT OF APPEAL
SUPREME COURT OF QUEENSLAND
Brisbane
| Before | Fitzgerald P. McPherson J.A. Fryberg J. |
[Suncoast Milk P/L v Commissioner of Stamp Duties]
Appeal No. 8 of 1995
BETWEEN:
SUNCOAST MILK PTY LTD
Appellant
AND:
COMMISSIONER OF STAMP DUTIES
Respondent
CASE STATED PURSUANT TO S.24 OF THE STAMP ACT 1894
Appeal No. 241 of 1994
BETWEEN:
SUNCOAST MILK PTY LTD
Appellant
AND:
COMMISSIONER OF STAMP DUTIES
Respondent
REASONS FOR JUDGMENT - FRYBERG J
Judgment delivered 17/09/1996
The relevant facts in the stated case have been set out in the other judgments.
First Schedule
For the reasons stated by the President, question (c) in the stated case should be answered in
the negative.
Section 54
Question (b) asks whether the contract is chargeable with duty pursuant to sub-s.54(1) of the Stamp Act 1894. Counsel for the respondent identified the two limbs of that section. As regards the first limb, his only submission was:
"Alternatively if the contract did not itself convey or transfer a new equitable interest, it was chargeable under sub-s.54(1) as an agreement for the conveyance or transfer of that new equitable interest."
That submission was neither amplified nor explained orally. However one analyses the equitable interest referred to in it, it seems to me that the submission is redundant: its appeal to equity seems simply to attempt to introduce into the first limb the same arguments as are relevant to the second limb. If the respondent is successful in relation to the second limb, there is no need to consider the first limb. If it is unsuccessful, it cannot succeed in relation to the first limb either.
Was the contract one "whereby a person becomes entitled or may, provided the terms and conditions thereof are met, become entitled to the conveyance or transfer of any property?" No problem arises by reason of the conditional nature of the contract, and it was not argued that the Authority became entitled to the conveyance or transfer of any property. The question is whether the contract was one whereby the appellant might have become so entitled.
There was only one clause in the contract by which it could even be argued that the appellant became entitled to anything:
"2. AGREEMENT TO LEASE 2.1
The Authority agrees to grant to the Intended Lessee and the Intended Lessee agrees to accept a Lease of the milk run upon the terms and conditions of the Lease and at the annual rental stated in Item 4 of the Schedule hereto in respect of the whole lease term. This annual rental shall remain fixed for the entire lease term.
2.2 The Lease shall commence on a date nominated by the Authority and shall
expire on 31st December 1998."
The definitions clause provided as follows:
"1.1 In this Agreement (including the recitals) unless the context otherwise requires:- ... 1.1.5 ‘the catalogue’ means the document distributed by the Authority to all parties expressing an interest in leasing the restructured milk run which was provided to the Intended Lessee prior to the auction referred to in Recital B.
... 1.1.8. ‘the Lease’ means the document to be entered into by the Authority and the Intended Lessee setting out the terms and conditions of Lease of the restructured milk run in the form contained in the catalogue."
No date was fixed for completion. Clause 5 provided:
"5. COMPLETION 5.1 On the date of completion, settlement shall take place at the office of the
Authority or such other place nominated by the Authority.5.2 At settlement, the Intended Lessee shall deliver to the Authority or its nominated
agent the following:-
5.2.1
the balance of the rental (less the deposit paid) stated in Item 4 of the Schedule hereto either by way of legal tender or by cheque issued by a bank carrying on business in Queensland.
5.2.2 the duly executed Lease and counterparts thereof. 5.3
The Intended Lessee irrevocably authorises the Authority's Solicitors upon the date of completion or as soon thereafter as is practicable to complete the Lease by inserting the commencement date of the Lease nominated by the Authority."
The contract also contained clauses making it conditional. These clauses were satisfied on or before 12th August 1993. On that date, the appellant complied with cl.5.2. Thereafter, at a time unspecified, the Authority executed the "lease". That document complied with the proforma terms and conditions in the auction catalogue.
It is clear that by cl.2 of the contract, the appellant became conditionally entitled to have the Authority enter into an agreement with it in the form described as a "lease". For the reasons given by Mr Justice McPherson that agreement is plainly not a lease. It is however the form of agreement expressly referred to by cl.2. That being so, it cannot be argued (and it was not argued) that it did not comply with cl.2. Despite its use of the terminology of tenancy, that clause never contemplated the execution of a lease at all. It contemplated the execution of an agreement in a particular form.
The contract is therefore not sufficiently described as a bare agreement by the Authority to exercise its statutory powers in favour of the appellant. It was a contract to enter into a specific form of agreement. That may have involved the exercise or purported exercise of statutory powers.
However that is beside the point. The question is whether by the contract the appellant became entitled (albeit conditionally) to the conveyance or transfer of any property. Was the entitlement to have the Authority enter into the agreement - the so called "lease" - an entitlement to the conveyance or transfer of property? In the present case, it seems to me that that question is to be answered by ascertaining whether, in the circumstances contemplated by the contract, the making of the "lease" agreement by the Authority would effect a conveyance or transfer of property.
On behalf of the appellant Mr Russell QC submitted that the "lease" agreement neither created nor gave any rights at all. In essence he submitted that within the meaning of s.49 of the Stamp Act 1894 it did not convey, transfer or assign anything to the appellant, nor did it vest anything in the appellant. It was not a question of whether it did those things with respect to property; it simply did not do those things at all.
If the "lease" agreement is viewed in isolation, that submission is correct. The only part of it which could conceivably effect a conveyance or transfer is cl.2:
"2. LEASE TERM 2.1
On and from the commencement date stated in Item 3 of the First Schedule hereto, the Authority shall lease to the Lessee and the Lessee shall take on the Lease from the Authority the milk run for a term commencing on and from the date of commencement and expiring, on 31st December 1998."
"Milk run" was defined to mean the restructured milk run described in the second schedule to that agreement. The second schedule consists simply of a list of business names and addresses11. It was not suggested that the Authority was leasing those businesses to the appellant - such an argument would be nonsensical. There was no suggestion the list of names and addresses was confidential information. The appellant was not granted a monopoly12. Apart from statute the appellant (and anybody else) would have been at liberty to sell milk to any business on the list if it wanted to. Apart from statute, the appellant needed nobody's permission so to trade. The Dairy Industry Act 1993 did restrict its right to carry on business as a vendor13 but taken by itself, the "lease" agreement did not affect that restriction. That restriction could be overcome only by obtaining a licence, a point recognised by the "lease" agreement14.
Consequently, in my judgment, if it is correct to regard the "lease" agreement in isolation, it cannot be said that it effected a conveyance or transfer of any property; so that on that basis, it cannot be said that the contract the subject of the stated case was one whereby the appellant became entitled to the conveyance or transfer of any property.
However, that approach ignores what actually happened. The Dairy Industry Act 1993 commenced on 2nd June 1993. The contract was made on 5th July, after an auction that day. On 30th July the Dairy Industry Regulation 1993 commenced. Section 9 of that regulation provided for six classes of vendor's licence, called Class A to Class F. Relevantly, it provided that a Class B vendor's licence was the licence issued for a Category B milk run. A Category B milk run was defined as a milk run consisting of a list of businesses (other than supermarkets) to which the vendor who holds a vendor's licence for the milk run is authorised to sell dairy produce. On 5th August 1993 the Authority signed conditions for a licence for the appellant and a Class B vendor's licence was subsequently issued to it, dated 12th August 199315.
The licence was not included in the stated case. It was however included in the record in Appeal No. 241/94, which was heard concurrently with the stated case. Neither party objected to our referring to it for the purposes of the stated case - indeed, counsel for the appellant specifically asked us to do so. It was headed "CLASS B VENDOR'S LICENCE"16. It expressly authorised the appellant to sell pasteurised milk and cream from a vehicle on a milk run, subject to the terms and conditions attached to it. The conditions provided (inter alia):
"(p)
the holder shall not, except with the consent, in writing, of the Authority previously obtained, sell pasteurised milk and pasteurised cream to any milkseller other than:
(i)
in the case of a milk run which is the subject of a Lease between the Authority and the holder, a milkseller specified in the description of the milk run constituting the Second Schedule to that Lease; and
(ii)
in any other case, a milkseller specified in the description of the milk run included in the relevant application for a grant or renewal of a vendor's licence.
(q)
with the exception of sales to sellers of milk referred to in clause (p) above, the holder shall not, without the consent, in writing, of the Authority previously obtained, sell pasteurised milk and pasteurised cream other than:-
(i)
in the case of a milk run which is the subject of a Lease between the Authority and the holder, to a customer in a street or a portion of a street, or to a customer otherwise specified, in the description of the milk run constituting the Second Schedule to that Lease; or
(ii)
in any other case, to a customer in a street or portion of a street, specified or to a customer otherwise specified, in the relevant application for a grant or renewal of a vendor's licence."
No list of businesses was annexed to or incorporated by reference in the licence. It is arguable that it was invalid under s.9 of the regulation. However neither party advanced such an argument and it should therefore be assumed for the purposes of this appeal that it was valid.
The effect of the appellant's obtaining the licence was to enable it lawfully to carry on business as a vendor, provided it carried on the business in accordance with the terms and conditions of the licence17. By reason of condition (p) however, its apparent right to sell pasteurised milk and cream to milk sellers was curtailed. Condition (p) is somewhat elliptical; but I take its effect to be that the appellant was prohibited from selling pasteurised milk and cream (except with the Authority's written consent in advance) to milk sellers not specified in a "lease" between the Authority and the appellant.
The subsequent execution of the "lease" agreement thus gave operative effect (or additional effect) to the licence. Coupled with the licence it conferred upon the appellant the right or liberty to carry on as a vendor a business which involved the sale of milk to the businesses set out in the second schedule. Taken together, the licence and the "lease" agreement thus conferred a right (or granted a liberty) for which the appellant was prepared to pay (and did pay) $125,382.00. Between them, the two instruments18 vested the right to carry on a business involving the sale of pasteurised milk and cream to the nominated milk sellers in the appellant.
The extended definition of the expressions "conveyance" and "transfer" in the Stamp Act 189419 does not require for its satisfaction that the right therein referred to exist prior to the execution of the instruments20, but it does require that it be able to be characterised as "property". There is no doubt that some rights created by statute can constitute a property21. The President has referred to a number of the cases and there is no need for me to repeat his references. However in the light of ss.41 and 109 of the Dairy Industry Act 199322, and cl.12 of the "lease" agreement23, I would add references to Western Mining Corporation Ltd v Commonwealth24 and Pennington v
McGovern25. In my judgment, the right (or liberty) conferred by the two instruments together was property within the meaning of s.49 of the Stamp Act 189426.
It is trite law that where two documents together operate to convey property to a person, each is an instrument whereby property is conveyed in accordance with s.49, and each is therefore included in the expressions "conveyance" and "transfer". That being so, the "lease" agreement constitutes a conveyance or transfer of property within the meaning of s.54 of that Act.
Under the contract the subject of the stated case, the appellant was entitled to the "lease" agreement subject to the condition (inter alia) that it be successful in an application for a vendor's licence. Upon the satisfaction of that condition (and the other conditions) it became entitled to the "lease" agreement. Looking at the matter at the time the contract was executed, the contract was one whereby the appellant might, provided its conditions were met, become entitled to the "lease" agreement which would, if those conditions were met, be a conveyance or transfer of property. The contract is therefore caught by s.54 of the Stamp Act 1894.
Consequently, I would answer question (b) in the affirmative. It follows that question (f) should also be answered in the affirmative, there being no challenge to the quantum of the assessment.
Section 56
I observe to begin with that there is considerable force in the argument that s.56 of the Stamp Act 1894 was intended to deal with transactions which were capable of implementation by grant or conveyance. That was an approach suggested in the judgment of Collins L.J. in Great Northern Railway Co. v Commissioners of Inland Revenue27. However I would prefer not to rest the answer to question (a) on this ground. Section 56 gives rise to a number of difficulties. If all of its words were given their widest meanings, a good deal of the remainder of the Act would be redundant. The present case can be decided without formulating any general propositions about the application of the section.
A useful starting point in the consideration of the section is the identification of the right referred to in it. In the present case that process is linked to the identification of the transaction said to constitute the sale of the right. Both parties approached these questions with alternative arguments. Mr Russell argued that if the sale was limited to the transaction embodied in the contract the subject of the proceedings, then the right being sold was no more than a right to have the "lease" agreement executed; or in other words, a promise to enter into a further agreement. Mr Dorney QC for the Commissioner contended that on this view of the sale, the relevant right was the right to approach the businesses named in the list constituting Lot 69 with a view to selling them pasteurised milk and cream. He did not argue that the assessment could be sustained if the only relevant right was the one identified by Mr Russell. He further argued that if one had regard to the contract, the "lease" agreement and the licence as collectively constituting the sale within the meaning of s.56, then the relevant right was the business and goodwill of the milk run together with the permission to sell milk to the businesses constituting the run. Mr Russell argued if the three instruments were to be regarded, then the sale could not be described as one where the right is not created by actual grant or conveyance, since it culminated in the execution of a lease. He further argued that on this basis, the case was indistinguishable from Commissioner of Stamp Duties (N.S.W.) v Yeend28.
In my judgment Mr Russell's argument is correct. If regard is had only to the contract, then plainly the only right conferred is the right to have the Authority enter into the "lease" agreement. It does not matter whether this right is described simply as a promise in exchange for another promise, nor whether it would or would not be capable of being the subject of an order for specific performance. On the other hand, if all three instruments are taken into account, the situation is indistinguishable from that in Yeend. Given the wide scope which has been allowed to terms such as "sale" and "property" it is admittedly difficult to articulate the rationale underlying the limited meaning there attributed to "right" in the analogue of s.56 by the High Court. If the purpose is to restrict the ambit of s.56 for reasons of general policy then perhaps the approach adopted by Collins L.J. in the Great Northern Railway case (which gained some support in the judgment of Isaacs J. in Yeend) would be preferable.
I would answer question (a) in the negative.
Remaining questions
As regards questions (d), (e) and (g), I agree with the answers proposed by the President and with his reasons for them.
Dairy Industry Restructuring
In reaching the above conclusions, I have not taken into account the Restructuring Scheme devised by the Authority under s.47 of the Dairy Industry Act 1993. No argument was addressed to us on the validity of that scheme or on the question whether its validity could affect the outcome of this case. Aspects of the Scheme might be challenged either on the grounds suggested by the President or under the Trade Practices Act 1974. It is undesirable that the Court should deal with such questions in the absence of argument and in the absence of any party with an interest in propounding the argument.
I would say only this. Assuming the Scheme to be valid, it does not seem to me as presently advised that the instruments considered in this case could be regarded as transferring pre-existing property to or vesting it in the appellant. In my judgment the provisions of the Scheme relating to milk runs do not provide either for the acquisition of property by the Authority or for the disposition of property vested in the Authority. Nothing in the Dairy Industry Act 1993 suggests that the Authority acquired the licences of the participating vendors. On the contrary, the Act provided for licences in force when it commenced to continue as if they had been granted under it29. In the absence of ministerial approval, the Authority had no right itself to carry on business as a vendor of dairy produce30.
Judicial review appeal
As far as the second appeal is concerned, I agree with the orders proposed by the President
and with his reasons for those orders. I also agree that the whole case stated procedure is completely
unsatisfactory. It is expensive, inefficient, time consuming and error prone. It is suitable only for simple
cases with easily defined points of law. It is an archaic procedure which has been abolished in most
areas (at least as the sole method of bringing matters before the Court of Appeal). It remains in theory
the sole method of appeal under the Stamp Act 1894 and the Medical Act 1939. Its replacement
under those Acts is long overdue31.
11 The context implies that the businesses at these addresses sold milk.
12 It would seem that while the Authority was empowered to grant monopoly rights, it had to do so by licence: Dairy Industry Act 1993, s.46(3). Moreover, nothing in the stated case suggests that the Authority "granted" the milk run only to the appellant, or agreed to do so. I am not prepared to infer a monopoly merely from the use of the word "lease".
13 Section 45(4).
14 Clause 5.1 provided, "The lessee confirms that the Authority has granted a vendor's licence to
the lessee or a person authorised by the lessee described in Item 6 in the schedule hereto."
15 For some unexplained reason, each of the pages of the conditions bore the date 25 August
1993.
16 Somewhat curiously it purports to allow sales to all classes of outlet from Class A through to Class E; but this is probably a mistake caused by the failure to strike out the classes not intended to be covered.
Dairy Industry Act 1993, s.45(4).
18 There is no doubt that the two documents are instruments within the meaning of the Stamp Act
19 Section 49(1)(a)(i).
George Wimpey & Co Ltd v Inland Revenue Commissioners [1975] 1 W.L.R. 995.
Cummings v Claremont Petroleum NL (1996) 70 A.L.J.R. 616 at p.619 n. 13.
22 Section 41 provides:
"41. The holder of a licence may, subject to conditions prescribed by regulation,
transfer, deal with or dispose of the licence."
No conditions have been prescribed. Section 109 provides:
"109.(1) If the holder of a licence grants a security for the payment of a debt or the performance of any other obligation over the licence, the holder of the licence must, within 30 days of granting the security, lodge a copy of the instrument creating the security with the Authority."
23 Which provides for the assignment or subletting of the "lease" agreement.
24 (1994) 50 F.C.R. 305.
25 (1987) 45 S.A.S.R. 27 (Full Court).
26 It was submitted that this right was a right in the nature of goodwill. It is unnecessary to decide
that question; but as presently advised I would be inclined to doubt that proposition.
27 [1901] 1 Q.B. 416.
28 (1929) 43 C.L.R. 235.
Dairy Industry Act 1993, s.119(1).
Ibid, s.36(1).
31 In addition to the criticisms in cases cited by the President, see the criticisms in Brisbane City
Council v Valuer-General for Queensland (1978) 140 C.L.R. 41 and Medical Board of
Queensland v Cooke [1992] 2 Qd.R. 608.
1