Westpac Custodian Nominees Ltd v Commissioner of State Revenue
[2008] WASCA 18
•31 JANUARY 2008
WESTPAC CUSTODIAN NOMINEES LTD -v- COMMISSIONER OF STATE REVENUE [2008] WASCA 18
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2008] WASCA 18 | |
| THE COURT OF APPEAL (WA) | |||
| Case No: | CACV:98/2006 | 19 NOVEMBER 2007 | |
| Coram: | McLURE JA PULLIN JA NEWNES AJA | 30/01/08 | |
| 13 | Judgment Part: | 1 of 1 | |
| Result: | Appeal allowed | ||
| B | |||
| PDF Version |
| Parties: | WESTPAC CUSTODIAN NOMINEES LTD & ORS COMMISSIONER OF STATE REVENUE |
Catchwords: | Stamp duty Stapled shares Whether 'unlisted WA security' Whether shares 'quoted' on a recognised financial market Whether share transfers dutiable |
Legislation: | Business Tax Review (Assessment) Act (No 2) 2003 (WA), s 84 Corporations Act 2001 (Cth), s 92(1), s 253F Financial Relations Agreement (Consequential Provisions) Act 1999 (WA) Stamp Act 1921 (WA), s 4(1), s 16, s 100, sch 2 Item 4A Stamp Amendment (Marketable Securities) Act 1995 (WA) |
Case References: | R v Hughes (2002) 202 CLR 534 Re Australand Holdings Ltd (2005) 219 ALR 728 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA TITLE OF COURT : THE COURT OF APPEAL (WA) CITATION : WESTPAC CUSTODIAN NOMINEES LTD -v- COMMISSIONER OF STATE REVENUE [2008] WASCA 18 CORAM : McLURE JA
- PULLIN JA
NEWNES AJA
- Appellants
AND
COMMISSIONER OF STATE REVENUE
Respondent
ON APPEAL FROM:
Jurisdiction : STATE ADMINISTRATIVE TRIBUNAL OF WESTERN AUSTRALIA
Coram : BARKER P
Citation : WESTPAC CUSTODIAN NOMINEES LTD and COMMISSIONER OF STATE REVENUE [2006] WASAT 203
File No : CC 2152 of 2005, CC 2153 of 2005
(Page 2)
Catchwords:
Stamp duty - Stapled shares - Whether 'unlisted WA security' - Whether shares 'quoted' on a recognised financial market - Whether share transfers dutiable
Legislation:
Business Tax Review (Assessment) Act (No 2) 2003 (WA), s 84
Corporations Act 2001 (Cth), s 92(1), s 253F
Financial Relations Agreement (Consequential Provisions) Act 1999 (WA)
Stamp Act 1921 (WA), s 4(1), s 16, s 100, sch 2 Item 4A
Stamp Amendment (Marketable Securities) Act 1995 (WA)
Result:
Appeal allowed
Category: B
Representation:
Counsel:
Appellants : Mr C L Zelestis QC & Mr P D Evans
Respondent : Mr G T W Tannin SC & Mr B J Prentice
Solicitors:
Appellants : Freehills
Respondent : State Solicitor for Western Australia
Case(s) referred to in judgment(s):
R v Hughes (2002) 202 CLR 534
Re Australand Holdings Ltd (2005) 219 ALR 728
(Page 3)
1 McLURE JA: The issue in this appeal is whether shares in a listed company that are 'stapled' with units in a listed trust which stapled securities are jointly quoted on the Australian Securities Exchange (ASX) are unlisted securities for the purposes of Item 4A of the Second Schedule to the Stamp Act 1921 (WA) (Act) and thus liable to stamp duty.
The statutory framework
2 By s 16 of the Act, stamp duties are to be charged on instruments specified in the Second Schedule.
3 Item 4A of the Second Schedule relevantly provides:
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Conveyance or transfer of an unlisted WA security ……………………….. | 0.60 for every $100 and every fractional part of $100 of the amount or value of the consideration |
4 Part IV of the Act deals with unlisted WA securities. The term 'security' is defined to mean a marketable security or right in respect of shares (s 100).
5 The expression 'marketable security' is defined in s 4(1) to mean, relevantly -
(a) any stock or share of any corporation …
(b) …
(c) any right or interest, whether described as a unit or otherwise, of a beneficiary under a unit trust scheme -
(i) any of the units of which is quoted on a recognised financial market; or
(ii) that is not a private unit trust scheme within the meaning in s 63(2) …
(Page 4)
6 The expression 'unlisted WA security' is defined in s 100 to mean a security that -
(a) is situated in Western Australia; and
(b) is not quoted on a recognised financial market.
7 Recognised financial market means a financial market prescribed for the purpose of the definition (s 4(1)). The ASX is prescribed as a recognised financial market.
8 Item 6(d) of the Second Schedule excludes from duty 'a marketable security, or right in respect of shares, that is quoted on a recognised financial market'.
Background
9 At all material times until 4 December 2003 Mr John Roberts was registered as the owner of all the issued share capital in Multiplex Ltd (formerly Multiplex Constructions Pty Ltd) (Multiplex). Mr Roberts proposed to establish and register a managed investment scheme to be known as the Multiplex Property Trust (Trust), the responsible entity of which would hold and manage investments in property and would issue units in the Trust. It was also proposed to staple one ordinary share in Multiplex to each unit in the Trust and offer the stapled securities for sale to the public. The responsible entity of the Trust is Multiplex Funds Management Ltd (responsible entity).
10 The stapling was given effect to by clauses in the constitutions of Multiplex and the Trust and a Stapling Deed dated 20 October 2003 between Multiplex and the responsible entity. Clause 2 of the Stapling Deed provided that on and from the 'stapling commencement date' (the date as determined by a resolution of the board of the responsible entity) each unit issued by the Trust had to be stapled to a Multiplex share. Stapling commenced on 4 December 2003 for all shares and units save for those allocated to certain cornerstone investors. Stapling commenced on 8 December 2003 for those cornerstone investors.
11 A product disclosure statement and prospectus dated 23 October 2003 (PDS) was issued by the responsible entity and Mr Roberts. The offer made in the PDS related to 292.5 million units in the Trust and 292.5 million ordinary shares in Multiplex which were to be stapled together and quoted on the ASX. Investors were required to apply for an equal number of ordinary shares in Multiplex and units in the Trust. The issue price of the units in the Trust was $2.20 and the sale price of the
(Page 5)
- shares in Multiplex was $1.85. Mr Roberts was the vendor of the ordinary shares in Multiplex and the responsible entity was to issue units in the Trust.
12 Multiplex and the Trust were admitted to the official list of the ASX on Monday 1 December 2003. Trading of the stapled securities on a deferred conditional settlement basis began on 2 December 2003 at noon eastern summer time. The relevant conditions were the transfer of shares in Multiplex from Mr Roberts to successful applicants and the issue of units in the Trust to successful applicants. Trading of securities on the ASX cannot occur without their quotation.
13 Two master share transfers were executed to effect the transfer of shares in Multiplex from Mr Roberts to the applicants. The first master share transfer was executed on 2 December 2003 at 3.30 pm eastern summer time. A second master share transfer was executed at around the same time. On 4 December 2003 the directors of Multiplex resolved to register the two master share transfers. On 4 December 2003 the directors of the responsible entity resolved to issue units in the Trust to the applicants.
14 By an assessment dated 5 December 2003 the respondent assessed the two master share transfers to total stamp duty of $3,246,195.60. Mr Roberts paid the amount of the assessment under protest.
15 The ASX provides for the joint quotation of stapled securities which has the effect that the stapled securities cannot be traded separately as they are treated as a unit (ASX Guidance note 2). The individual securities comprising the stapled securities are not separately priced on the ASX.
16 The appellants contend in the appeal, as they did in the Tribunal, that at the time of the transfer, the shares in Multiplex were quoted on the ASX and were not liable to duty under Item 4A of the Second Schedule. The appellants rely on the legislative history in support of their submission.
17 The respondent contends in the appeal, as it did in the Tribunal, that 'quoted' in the definition of unlisted WA security is the price stated on the ASX for an individual security from time to time. The learned President of the State Administrative Tribunal accepted the respondent's contention and found that the shares in Multiplex the subject of the master share transfers were not quoted on the ASX and thus were liable to stamp duty.
(Page 6)
Grounds of appeal
18 The appellants' grounds of appeal are that:
1. The learned trial judge erred in failing:
(a) to construe the relevant provisions of the [Act] in accordance with the purposes of the legislature, in amending the [Act] by the Financial Relations Agreement (Consequential Provisions) Act 1999 [(WA)], namely to implement the Intergovernmental Agreement on Reform of Commonwealth State Financial Relations, to reduce the cost of share market trading in Western Australia and to improve the competitiveness of financial markets in Australia; and
(b) to construe s 100 and Items 4A and 6(d) of the [Act] as not imposing duty on transactions which related to or involved securities which were quoted on a recognised stock exchange and were issued by an entity listed on a recognised stock exchange.
2. The learned trial judge erred in law and in fact in failing to find that, on the proper construction of the applicable provisions, the relevant shares in [Multiplex] were not unlisted WA securities and were not assessable to duty under the [Act] when they were conveyed on 2 December 2003.
19 The respondent abandoned a cross-appeal.
Legislative history
20 In about 1995 Queensland reduced the rate of duty in respect of conveyances of listed marketable securities to 15 cents per $100 on both the buy and sell sides of the transaction. In response, the Act was amended to make a corresponding reduction of duty in Western Australia on conveyances of listed marketable securities: Stamp Amendment (Marketable Securities Duty) Act 1995 (WA) (Marketable Securities Amendment Act). The purpose of that Act was identified in the second reading speech as follows:
The purpose of this Bill is to amend the [Act] to reduce the rate of stamp duty on transfers of listed marketable securities. It is proposed that the rate of duty in the case of on-market trades will be reduced from 30 cents per $100 or part thereof, to 15 cents per $100, on both the buy and sell sides of the transaction. Furthermore, the rate of duty in the case of off-market trades of listed securities will be reduced from 60 cents per $100 or part thereof, to 30 cents per $100.
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21 As foreshadowed in the second reading speech, Item 4A of sch 2 to the Act thereafter differentiated between listed and unlisted marketable securities and in relation to listed marketable securities, differentiated between on-market and off-market trades.
22 With effect from 1 July 2001 the Financial Relations Agreement (Consequential Provisions) Act 1999 (WA) (Financial Relations Act) removed ad valorem stamp duty from the conveyance of all marketable securities quoted on a recognised financial market (s 30). The Financial Relations Act implemented the Intergovernmental Agreement on the Reform of Commonwealth-State Financial Relations (Intergovernmental Agreement) which was set out in a schedule to the Financial Relations Act.
23 The Intergovernmental Agreement was part of the Commonwealth Government's national tax reform package, the centrepiece of which was the introduction of the goods and service tax. An objective of the reforms in that agreement was the 'elimination of a number of existing inefficient taxes which [were] impeding economic activity' (cl 2(i)). Clause 5 of the Intergovernmental Agreement provides that:
The Parties will undertake all necessary steps to have appropriate legislation enacted to give effect to the following reform measures.
…
(vi) The States and Territories will cease to apply the taxes referred to in Appendix A from the dates outlined below and will not reintroduce them or similar taxes in the future.
…
Stamp duties on quoted marketable securities from 1 July 2001.
A2. The following State and Territory taxes will cease to apply from 1 July 2001:
…
(ii) Stamp Duty on Marketable Securities
Stamp duty levied on turnover (ie sale price times quantity traded) on the transfer of marketable securities quoted on the ASX or another recognised stock exchange.
- This excludes transfers of marketable securities in private companies and trusts, and in public companies and trusts where the securities are not quoted on the ASX or another recognised stock exchange.
25 Associated with the amendments abolishing stamp duty on transfers of shares quoted on a recognised stock exchange, the Financial Relations Act also removed from the Act the charging provision for securities quoted on a recognised stock exchange; the broker return arrangements which allowed brokers to pay duty by return in respect of their on-market trades; and the CHESS provisions which allowed participants to pay duty by return for off-market trades of quoted marketable securities.
26 The Commonwealth identified the rationale for the abolition of stamp duty in a policy paper entitled 'Tax Reform: Not a New Tax, a New Tax System' (August 1998). It said:
Stamp duties on marketable securities increase the cost of share trading in Australia. Many Australian companies are listed on stock exchanges in the US, New Zealand and Canada where there are no equivalent stamp duties. Foreign companies are also more inclined to list their shares in countries where such duties do not exist instead of trading on the Australian Stock Exchange … [S]tamp duties on marketable securities adversely affect Australia's ability to develop as a financial centre in competition with others in our region and around the world.
27 Stamp duty on transfers of unlisted securities was abolished in Western Australia with effect from 1 January 2004 by the Business Tax Review (Assessment) Act (No 2) 2003 (WA), s 84.
Rules of the ASX
28 The ASX market is governed by Listing Rules and Market Rules. The Market Rules were known as the Business Rules prior to 11 March 2004. Chapter 1 of the ASX Listing Rules as they applied at the relevant time sets out the requirements that had to be satisfied for an entity to gain admission to the official list, defined in ch 19 as the 'official list of entities that ASX … has admitted and not removed'. An entity relevantly includes a corporation and a registered managed investment scheme. It is a condition of admission to the official list that the entity apply for and be granted permission for quotation of all the securities in its main class of securities.
29 Quotation is defined in ch 19 of the Listing Rules to mean official quotation by the ASX. Security is relevantly defined in ch 19 to include a security within the meaning given to that expression by s 92(1) of the
(Page 9)
- Corporations Act 2001 (Cth) and a financial product traded under ASX rules. 'Main class of securities' means ordinary securities of the entity and ordinary security is defined to mean ordinary shares or ordinary units.
30 Listing Rule 2.1 lists the conditions which must be met to the ASX's satisfaction for quotation of the main class of securities of an entity seeking admission to the official list.
31 The evidence established that in its listing application Multiplex applied to the ASX for the quotation of its ordinary shares. In a separate listing application the Trust sought quotation of its units. The uncontradicted evidence of Mr John Moran, a senior analyst with the ASX, was that conditional approval was given to, inter alia, the quotation of each of the Multiplex shares and the Trust units but as a stapled security.
The primary judge's reasons
32 The only question in the appeal is whether or not the quotation of the stapled securities on the ASX at the time of the transfer of the Multiplex shares meant the Multiplex shares were 'quoted' on the ASX. The term 'quoted' is not defined in the Act. Neither party relied in the appeal on the fact that the shares and units were not stapled at the time of the transfer of the shares the subject of the assessment or that, at the time of the said transfer, trading of the stapled securities was on a deferred conditional settlement basis.
33 The primary judge accepted the submissions advanced on behalf of the respondent, the Commissioner of State Revenue (Commissioner), who largely relied on the meaning of 'quoted' adopted by Barrett J in Re Australand Holdings Ltd (2005) 219 ALR 728, 734 - 735.
34 In Australand, a scheme of arrangement was proposed in which shares in a company (AHL) and units of a managed investment scheme (APT) which were stapled together would be further stapled to units in two other managed investment schemes. An issue arose as to the voting rights attached to the existing stapled securities (a share in an AHL and a unit in APT). Section 253F of the Corporations Act relevantly provided:
The value of an interest in a registered scheme is:
(a) if it is quoted on a prescribed financial market - the last sale price on that market on the trading day immediately before the day on which the poll is taken; or
(Page 10)
- (b) [if not quoted on a prescribed financial market]; or
(c) in any other case - the amount that the responsible entity determines in writing to be the price that a willing but not anxious buyer would pay for the interest if it was sold on the business day immediately before the day on which the poll is taken.
35 Barrett J said:
The units or interests in APT may, in their own right, be regarded as 'quoted' on a prescribed financial market at least in one sense: the stapled securities of which they form part are so quoted. But there is no separate and identifiable quotation of units of APT as a discrete form of security. One could not go to a prescribed financial market and purchase or sell a unit of APT as a distinct and discrete item. One could purchase or sell such a unit only in company with and as part of a combined parcel represented by shares in AHL and interests in APT.
The Corporations Act contains in s 9 definitions of 'quoted ED securities' and 'quoted security'. There is also a definition of 'quotation'. The expression 'quoted' is itself not defined but it is clear, in my opinion, that its meaning is to be gathered by reference to the concepts reflected in the definitions. The most illuminating of them, in that respect, is the definition of 'quotation':
'quotation', in relation to financial products or in relation to a financial market, includes the displaying or providing, on a financial market, of information concerning:
(a) if offers to dispose of, purchase or exchange the financial product at particular prices, or for particular consideration, are made or accepted on that financial market - those prices or that consideration; or
(b) if offers or invitations are made on that financial market, being offers or invitations that are intended, or may reasonably be expected, to result in the making or acceptance of offers to dispose of, purchase or exchange the financial products at particular prices, or for particular consideration - those prices or that consideration; or
(c) in any case - the price at which, or the consideration for which, particular persons, or particular classes of persons, propose, or may reasonably be expected, to dispose of, purchase or exchange the financial products.
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- sold and purchased. Because units or interests in APT, standing alone and disconnected from shares in AHL, are not, in a market context, capable of being sold and purchased and no prices applicable to them as separate items are provided to persons resorting to the market, it seems to me that those units or interests, viewed alone, cannot be regarded as the subject of 'quotation', with the result that they should not be regarded, for s 253F purposes, as being 'quoted on a prescribed financial market' [24] - [26].
36 The primary judge, following Australand, said:
[T]he most that can be said is that the Multiplex share and the unit in the [Trust] are able to be traded on the ASX, but only as a 'stapled security' under the ASX rules. They cannot be separately traded under the rules.
For this reason, in my view, it is not open to say that Multiplex shares at the material time were 'quoted' on the ASX [184] - [185].
37 The trial judge accepted the rationale advanced by the Commissioner for this conclusion which was that a market value can easily be ascribed where a particular security is individually traded but that is not the case where that security forms part of a stapled security. Both parties in the appeal accepted that this rationale is flawed. The statutory criterion of being quoted on a recognised financial market is for the purpose of excluding the transfer from stamp duty not for the purpose of valuing the transaction. That materially distinguishes the statutory context in this case from that considered in Australand. In those circumstances it is unnecessary to determine the correctness of the analysis in that case.
Analysis
38 The appellants contended in the appeal that the term 'quoted' is concerned with the relationship between the security and the market; it refers to the status of a security as authorised to have buy and sell prices for it displayed in the market.
39 The respondent contended that quotation necessarily involved stating the price of the security in question, in this case the Multiplex shares. Quotation, according to the respondent, is the disclosure of the price for the relevant security and that is a question of fact to be determined from time to time.
40 The meaning of the term 'quoted' in the Act cannot be ascertained directly from the definition or use of the term (or derivatives thereof) in the ASX Listing or Business Rules. On the other hand, the statutory term must be intended to reflect the technical meaning derived from its traditional use in recognised financial markets such as the ASX. Indeed,
(Page 12)
- the Intergovernmental Agreement specifically refers to marketable securities quoted on the ASX (or another recognised stock exchange) (appendix A, cl A2). In those circumstances I propose to consider the position by reference to the practice and procedures of the ASX.
41 The ASX displays to the market the buy and sell prices of securities that have been granted official quotation by the ASX. The buy (or bid) price is the price at which someone is prepared to buy the security. The sell (or offer) price is the price at which someone is prepared to sell the security. Only members of the ASX can make or accept on-market bids or offers. According to the respondent, if for any reason a price is not displayed for a security, it is not quoted notwithstanding the security has been granted official quotation by the ASX. On that reasoning, a buy or sell price must as a matter of fact be displayed by the ASX at the time of the alleged dutiable transfer in order for the security to be quoted.
42 An alternative meaning for the purposes of the Act is that a quoted security means a security that has been granted official quotation by a recognised financial market, in this instance the ASX; that is, the ASX has authorised the quotation of the security on the ASX. The grant of official quotation affects the status of a security; the consequence of the grant is that members of the ASX can thereafter make or accept on-market bids and offers for the securities and otherwise trade in them in accordance with the terms of the grant and the Listing and Business Rules. A security is 'quoted' in this sense if it has been granted official quotation notwithstanding that a price is not displayed for that security.
43 I am satisfied that the expression 'quoted marketable securities' in the Act is intended to be a reference to the status of the securities as having received authority from the relevant financial market for the quotation of the securities in that market (or in ASX terms, having been granted official quotation). I favour that construction because the price at which securities are displayed to the market is of no relevance to the legislative scheme or purpose. The criterion is the basis for exempting the transfer from stamp duty not for assessing the value of the transaction. Moreover, both on-market and off-market trades are exempt from duty.
44 As the Act is not concerned with whether there is in fact a price nominated for a security at any particular time there is no basis for imputing a legislative intention that the security must be priced separately. That being so, there is no warrant for the further conclusion that a security must be quoted as a stand alone security rather than jointly with another security. The terms on which the ASX granted official quotation of the
(Page 13)
- Multiplex shares was that they be quoted and traded jointly with units in the Trust. The Multiplex shares are for the purposes of the Act quoted marketable securities on the ASX notwithstanding they can only be bought and sold as part of a package with units of the Trust.
45 This construction is consistent with the legislative purpose of the Intergovernmental Agreement and the Financial Relations Act which gives effect to it. That purpose is as identified in the policy paper which forms part of the relevant context of the Financial Relations Act to which regard may properly be had (see R v Hughes (2002) 202 CLR 535 [1]). The obligation imposed on and accepted by the State to abolish stamp duty on quoted marketable securities was to give effect to the Commonwealth purpose. However, the outcome would be the same even without reference to that source.
46 For these reasons I conclude that the Multiplex shares the subject of the assessment were quoted on the ASX. Accordingly I would allow the appeal and set aside orders 1 and 3 made by Barker J on 24 July 2006 in State Administrative Tribunal proceedings CC 2152 of 2005 and CC 2153 of 2005. I would hear from the parties on the balance of the orders sought by the appellants.
47 PULLIN JA: I agree with McLure JA.
48 NEWNES AJA: I agree with McLure JA.
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