TYNTE (1986) PTY LTD v COMMISSIONER of STAMPS No. SCGRG 95/854 Judgment No. 5214 Number of Pages - 7 Stamp Duties - Exemptions (1995) 95 ATC 4571 (1995) 65 SASR 188

[1995] SASC 5214

COURT IN THE SUPREME COURT OF SOUTH AUSTRALIA PERRY J

CWDS
Stamp duties - exemptions - the appellant appealed against the assessment to duty of a contract for the sale of grape vines and a grape crop standing on land the subject of a separate contract of sale between the same parties, claiming that the vines and crop were within the definition of stock, implements or other chattels used in connection with a business of primary production and therefore entitled to an exemption from liability for duty pursuant to s3lA of the Stamp Duties Act 1923 - held that both the vines and the grapes were fructus naturales and not fructus industriales with the result that they were part of the land and not within the definition. Stamp DutiesAct 1923 s3lA and s67(2), referred to. Re Roose, Evans v Williams (1881) 17 Ch D 696; Cox v Godsalve 6 East 604; West v Moore 8 East 338; Blake v Gibbs 5 Russ 13; Vaisey v Reynolds (1828) 5 Russ 12; Warren v Nut Farms (1981) WAR
134; Saunders v Pilcher (1949) 2 All ER 1097; Graves v Weld (1833) 5 B and Ad 105, considered.

HRNG ADELAIDE, 19 July 1995 #DATE 18:8:1995 #ADD 20:9:1995

Counsel for appellant:     Mr D Black

Solicitors for appellant:    David Black and Co

Counsel for respondent:     Dr N Manetta

Solicitors for respondent: Crown Solicitor

ORDER
Appeal dismissed.

JUDGE1 PERRY J This is an appeal against an assessment by the Commissioner of Stamps of duty payable with respect to a contract.

2. By a memorandum of agreement dated 16 February 1993 ("the grape contract") Geoffrey Jasper Pridham and Ursula Emma Marie Pridham ("the Pridhams") agreed to sell the "grape vines and the grape crop" situated on a parcel of land ("the land") situated at McLaren Vale to Charles Roderic Simpson "and/or his nominee" for the sum of $230,000.

3. The first recital appearing in the grape contract refers to the contemporaneous execution by the same parties of a contract for the sale and purchase of the land ("the land contract").

4. By the land contract the Pridhams agreed to sell the land, together with various items set out in the schedule to the contract, which included all chattels, and separately, "all improvements, fixtures and fittings other than the grape crop situated thereon" to Simpson "and/or his nominee" for the sum of $770,000. Simpson nominated the appellant, Tynte (1986) Pty Ltd ("Tynte") as sole purchaser under both contracts.

5. A month later, on 16 March 1995 the parties executed a transfer of the land in registrable form, naming the Pridhams as transferors and Tynte as transferee. Consistently with the terms of the land contract, in the transfer the consideration was expressed to be $770,000.

6. The transfer was assessed for duty by the Commissioner of Stamps in the sum of $29,630, being ad valorem duty applicable to the stated consideration. That duty was paid on 16 March 1995.

7. On 29 March 1995, Tynte lodged with the Commissioner an application for opinion in respect of the grape contract.

8. On 30 March 1995 the grape contract was assessed to duty in the sum of $9,200.

9. This assessment was reached by adding the consideration expressed in the land contract ($770,000) to the consideration expressed in the grape contract ($230,000), a total of $1 million. The ad valorem duty on that sum was $38,830. The Commissioner deducted the $29,630 already paid with respect to the land contract, yielding a balance of $9,200, being the duty assessed on the grape contract.

10. It appears that the duty of $9,200 was paid on 16 April 1995.

11. It is the assessment of that duty, that is, the duty on the grape contract, which is the subject of the appeal. The appeal is brought pursuant to s24 of the Act. Tynte seeks orders, inter alia, that:
    1. The agreement (being the grape agreement) is exempt from
stamp duty pursuant to s31a of the Stamp Duties Act; and

2. A refund of the amount of duty paid be made, together
    with interest on that amount from the 20 April 1995 at the
    rate fixed under s24(10).

12. At the request of Tynte, pursuant to ss24(4) and (5) of the Act, the Commissioner prepared and stated a case setting forth the question upon which his opinion was required. In the case stated the Commissioner poses the question as follows:
"The question for the opinion of the Court is whether s31a
    applies to the Contract so as to exclude it from dutiability
under s67(2)(b) of the Act."

13. In that question, the Contract refers to the grape contract. In both the notice of appeal and in the case stated the reference to s31a should read s31A.

14. In calculating the duty payable with respect to both contracts, the Commissioner applied s67 of the Act, pursuant to which contracts which are what might be loosely described as "interrelated" are chargeable with duty on the sum of the amounts by reference to which ad valorem duty would have been assessed if it were not for the section. One of the circumstances giving rise to that method of assessment is where two or more instruments "together form, or arise from, substantially one transaction or one series of transactions" (s67(3)(b)).

15. Here, both the grape contract and the land contract were part of one transaction, as it was clearly to be inferred from their terms that neither was to operate independently of the other. It could never have been intended that the sale of the grape vines and the grape crop was intended to take effect in the absence of a sale of the land.

16. The potential applicability of s67 to the two contracts was not placed under challenge during the hearing of the appeal. I use the expression "potential" as s67(2) provides that the section does not apply to certain categories of instrument, amongst them:
    "(b) a conveyance of stock, implements or other chattels in
    a case where section 31A applies:"

17. It is to the terms of s31A that I should now turn, as the fate of the appeal turns on the question of its applicability to the two contracts in question.

18. S31A appears within Part 3 of the Act headed "Special Provisions with respect to certain Stamp Duties".

19. S31, which falls within the same Part of the Act, provides for certain contracts or agreements for sale to be charged with ad valorem duty as if they were actual conveyances on sale "of the estate or interest contracted or agreed to be sold" (s31(1)).

20. S31A defines certain exceptions to the operation of s31. It is in the following terms:
    "31A Notwithstanding section 31, if-
    (a) a contract or agreement in writing provides for the sale
    as a going concern of land used wholly or in part for the
    business of primary production, together with stock,
    implements and other chattels held or used in connection
    therewith; and
    (b) the contract or agreement sets out separately the
    consideration payable for the land and the consideration
    payable for stock, implements and other chattels; and
    (c) the Commissioner certifies in writing on the contract or
    agreement that he is of the opinion that the consideration
    specified as being payable for the land represents the value
    of that land,
    then the contract or agreement in writing shall be
    chargeable with stamp duty as if it related solely to the
    land mentioned therein and not to the stock, implements and
    other chattels."

21. Both parties argued the appeal on the basis that the two contracts should be read as one for the purposes of s31A, and further that, read in that way, they amounted to "a contract or agreement in writing" providing for the sale "as a going concern of land used wholly or mainly for the business of primary production" within the meaning of the section. By consent, the land contract which was not included in the documents accompanying the case stated, was directed by me to be included in it.

22. It was also common ground between the parties that the sale evidenced by the transactions was for the sale of land "together with stock, implements and other chattels held or used" in connection with the business of primary production conducted on the land.

23. The central question in the case was whether the "contract or agreement" (reading the two contracts together) set out "separately the consideration payable for stock, implements and other chattels" within the meaning of s31A(b). The contention of the appellant was that the grape contract related only to "stock" and therefore the consideration stated in it was "separate" from the consideration payable for the land under the land contract and therefore exempt from duty.

24. Counsel for the Commissioner, on the other hand, contended that neither the grape vines nor the grape crop were "stock, implements or other chattels", with the result that the requirement of s31A(b) was not satisfied. Of course, if either the grape vines or the grape crop did not answer to that description, the section would not be satisfied.

25. Stock is defined in the Act by s4 which states:
    "In this Act, unless it is otherwise provided or there is
    something in the context repugnant thereto ... 'stock' means
    any share in the stocks or funds of any State or government,
    or in the capital stock or funded debt of any company,
    corporation or society (whether incorporated in this State
    or elsewhere)".

26. Clearly this definition is not of application to the use of the word "stock" in s31A.

27. In that section the word "stock" appears in the phrase "stock, implements or other chattels". No doubt, whether with or without the assistance of the maxim noscitur a sociis, in s31A the "stock" which is referred to is that class of stock which answers to the description of a chattel.

28. The Oxford English Dictionary defines stock as:
    "53.a. A collective term for the implements (dead stock) and
    the animals (live stock) employed in the working of a farm,
    an industrial establishment, etc. See also Rolling Stock."

29. Animals and implements are chattels. If, in s31A(b) the word "stock" stood alone, no doubt it would comprehend both dead stock and live stock. Implements, however, are separately referred to, as are "other chattels". This might give rise to a weak inference that in the subsection, "stock" is intended to refer to "livestock". But s31B, where the word "goods" is defined, expressly exclude "livestock" from the definition. It will be seen that eventually I come to the view that the vines and grapes are neither "stock" in its more extended meaning, nor "chattels". Accordingly, I assume, without deciding the point, in favour of the appellant that in s31A the word "stock" includes live and dead stock.

30. Stroud's Judicial Dictionary (5th ed, Sweet and Maxwell 1986) defines farming stock as:
    "p.959 'FARMING STOCK. (1) A bequest of 'farming stock'
    includes not only all moveable property upon or belonging to
    the farm (Wms Exs. (9th ed) 1051; Harvey v Harvey 32 Bea
    441), but also growing crops (per Jessell MR, Re Roose,
Evans v Williamson 17 Ch D 696, following Cox v Godsalve 6
East 604, n; West v Moore 8 East 339; Blake v Gibbs 5 Russ
    13, n; and dissenting from Vaisey v Reynolds 6 LJOS Ch 172).
    In Re Roose, the MR said, 'The reasoning of Vaisey v
    Reynolds is quite untenable in the face of the previous
    decisions."

31. In Re Roose, Evans v Williams (1881) 17 Ch D 696 the crops which passed under the words "farming stock" were simply described as "growing crops".

32. In Cox v Godsalve 6 East 604, the words "stock of my farms" in a bequest passed a crop of corn that had not been severed from the land.

33. In West v Moore 8 East 338, the words "stock upon my farm" in a bequest passed "standing corn".

34. In Blake v Gibbs 5 Russ 13, the words "farming stock" in a bequest passed "growing crops".

35. The only exception to these authorities is in Vaisey v Reynolds at (1828) 5 Russ 12 where Sir John Leach MR held that the words "all my farming stock" did not include crops on the ground.

36. In Re Roose, Evans v Williams (supra) the Master of the Rolls said of Sir John Leach's decision (699): "I must say I think he was entirely wrong."

37. All of the crops described above fall within the class of fructus industriales, "being fruits produced by the annual labour of man in sowing and reaping, planting and gathering": see Benjamin on Sale (8th ed, Sweet and Maxwell) at 175

38. Further, fructus industriales -
    "are chattels, for at common a growing crop, produced by the
    labour and expense of the occupier of lands, was, as the
    representative of that labour and expense, considered an
    independent chattel". (Benjamin on Sale at 175.)

39. The other class is fructus naturales, which are "the natural growth of the soil, as grass, timber, fruit on trees". They are not chattels but are part of the soil and are defined as an interest in land: see Benjamin on Sale at 175.

40. In Warren v Nut Farms (1981) WAR 134, Brinsden J held that pecan, black walnut and chestnut trees, remaining in the soil, were fructus naturales.

41. In Saunders v Pilcher (1949) 2 All ER 1097, Jenkins LJ cited Graves v Weld (1833) 5 B and Ad 105 for the proposition that fruit trees did not come within the designation of fructus industriales.

42. In my opinion, grape vines should for this purpose be treated in the same way as nut or fruit trees. It follows that they fall within the classification of fructus naturales. They are, therefore, part of the land and are neither stock nor chattels.

43. It follows that the grape contract does not "set out separately the consideration payable for the land and the consideration payable for stock, implements and other chattels", and accordingly does not qualify for exemption from duty pursuant to s31A.

44. Although that conclusion renders it strictly unnecessary to decide the question whether a grape crop as opposed to a grape vine is stock, for the sake of completeness, I will consider it.

45. In Saunders v Pilcher (1949) 2 All ER 1097 the taxpayer purchased land comprising a cherry orchard. The sale was expressed to include "this year's fruit crop". The taxpayer claimed the cost of the cherries as a tax deduction. The legitimacy of the tax deduction depended in part on whether the cherries, still on the trees, were chattels. This was held to depend in turn on whether or not the cherries should be classified as fructus industriales. Singleton LJ held that they were fructus naturales and not fructus industriales: see at 1103:
    "It is sufficient for this purpose to repeat that no case
    can be found in which fruit growing on trees has been
    treated as fructus industriales."

46. Jenkins and Turner LJJ agreed. The cherries on the trees were, therefore, part of the land.

47. I think that one should approach grapes still on the vines in the same way. They are fructus naturales and not chattels, and therefore cannot be classed as stock within the meaning of the section.

48. I would answer the question from the Commissioner of Stamps in the case stated as follows:
    S31A of the Act does not apply to the grape contract so as
to exclude it from dutiability under s67(2)(b) of the Act.

49. The appeal is dismissed.

50. I will hear the parties as to costs.