WILD ACRE METALS LIMITED and COMMISSIONER OF STATE REVENUE
[2011] WASAT 173
•2 NOVEMBER 2011
JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL
STREAM: COMMERCIAL & CIVIL
ACT: TAXATION ADMINISTRATION ACT 2003 (WA)
CITATION: WILD ACRE METALS LIMITED and COMMISSIONER OF STATE REVENUE [2011] WASAT 173
MEMBER: JUDGE T SHARP (DEPUTY PRESIDENT)
HEARD: DETERMINED ON THE DOCUMENTS
DELIVERED : 2 NOVEMBER 2011
FILE NO/S: CC 1888 of 2010
BETWEEN: WILD ACRE METALS LIMITED
Applicant
AND
COMMISSIONER OF STATE REVENUE
Respondent
Catchwords:
Duty - Agreement for transfer of mining tenements - Royalty payment as part of the consideration - Royalty payment contingent on a number of events - Whether the maximum amount of the royalty can be ascertained when liability for duty on the transaction arises - Whether a royalty payable at regular periods, contingent on events, is an amount payable periodically
Legislation:
Duties Act 2008 (WA), s 3, s 10, s 11, s 11(1)(b), s 15, s 15(a), s 19(1)(b), s 26(1)(a), s 27, s 27(a), s 27(b), s 30(2), s 32
Interpretation Act 1984 (WA), s 18, s 19
Stamp Act 1921 (WA), s 65, s 65(1) s 75A(1)
Stamp Act 1981 (Eng), s 56
Taxation Administration Act 2003 (WA), s 40(1)
Result:
Application dismissed
Category: B
Representation:
Counsel:
Applicant: Ms C Lovitt
Respondent: Ms R Panetta
Solicitors:
Applicant: Blakiston & Crabb
Respondent: State Solicitor's Office
Case(s) referred to in decision(s):
Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue [2009] 239 CLR 27
Ansett Transport Industries (Operations) Pty Ltd v Comptroller of Stamps (Vic) (1980) 10 ATR 845
Glenepping v Commissioner of Stamp Duties [1985] 3 NSWLR 365
Hill 50 Gold Mine No Liability v Commissioner of State Taxation (WA) (1993) 93 ATC 4880
Pacific Fair Shopping Centres Pty Ltd v The Commissioner of Stamp Duties [1979] Qd R 410
Underground Electric Railways Company of London Limited v Commissioners of Inland Revenue [1906] AC 21
REASONS FOR DECISION OF THE TRIBUNAL:
Summary of Tribunal's decision
Wild Acre Metals Limited, the applicant, purchased a number of mining tenements for a consideration, including a royalty to be paid by the applicant to the vendor of the tenements on gold recovered in the future from the tenements up to a maximum amount of $500,000. The royalty is to be calculated and payable quarterly, but was of course contingent upon gold actually being recovered from the tenements.
The respondent, the Commissioner of State Revenue, included the maximum amount of the royalty of $500,000 in the dutiable value of the transaction and assessed duty on it. The applicant objected to the inclusion of the royalty in the calculation of the dutiable value. The Commissioner disallowed the objection and the applicant applied to the Tribunal for a review of the decision to disallow the objection.
The Tribunal considered the relevant provisions of the Duties Act 2008 (WA), the principles of statutory interpretation and a number of cases which dealt with the issue of amounts payable on a contingency or more than one contingency and whether those amounts were ascertainable for stamp duty purposes.
The Tribunal concluded that the Commissioner was correct in treating the maximum amount of the royalty as being ascertained for the purposes of s 27 of the Duties Act 2008 (WA) and including that amount in the dutiable value of the transaction.
The Tribunal therefore dismissed the application.
The application
Wild Acre Metals Limited (applicant) has applied to the Tribunal under s 40(1) of the Taxation Administration Act2003 (WA) for a review of a decision of the Commissioner of State Revenue (respondent). The decision of the respondent was to disallow the objection of the applicant to a duties assessment notice issued by the respondent under the Duties Act 2008 (WA) (Duties Act) on 18 January 2010 in the amount of $23,939.50. The assessment was in respect of a Deed of Sale and Purchase of Tenements dated 31 August 2009 (Deed) made between Regal Resources Limited (Vendor) as vendor and the applicant as purchaser. The assessment was based on a dutiable value of $583,000, comprising a royalty (Regal Royalty) of $500,000, cash of $5,000, a contingent cash payment of $25,000 and 10% GST on the total of those amounts.
Agreed facts
The parties have agreed the following facts for the purpose of the determination of the issue the subject of the application.
1.The Deed was executed between the Vendor and the applicant on 31 August 2009.
2.By cl 2.1 of the Deed, the Vendor agreed to sell certain 'Mining Assets' to the applicant for the consideration set out in cl 2.2 of the Deed.
3.'Mining Assets' was defined in cl 1 of the Deed to mean 'the Tenements'.
4.The 'Tenements' is in turn defined in c 1 of the Deed to mean 'the tenements listed in Part 1 of Annexure A and any renewals, extensions, modifications, substitutions or variations thereof whether extending over a greater or lesser area than that of the Tenements and includes all ore located on the Tenements'.
5.Part 1 of Annexure A listed the following tenement numbers: M31/67, P31/1816, P31/1817, P31/1818, P31/1819, P31/1820, P31/1821, P31/1822, P31/1823, P31/1824, P31/1825, P31/1826, P31/1827, P31/1828, P31/1829, P31/1830, P31/1831.
6.Clause 2.2 of the Deed provides that:
'In consideration for the sale referred to in cl 2.1 [the applicant] shall pay the cash to the Vendor and agree to pay the Regal Royalty to the Vendor on the Tenements.'
7.Clause 2.3 of the Deed provides that:
'In addition to the payment of cash, [the applicant] shall pay to the Vendor $25,000 in cash should [the applicant] achieve a listing of its securities on ASX'.
8.'Cash' is defined in cl 1 of the Deed to mean '$5,000'.
9.'Regal Royalty' is defined in cl 1 of the Deed to mean 'the royalty payable to the Vendor in accordance with cl 3 of this agreement'.
10.Clause 3 of the Deed states:
'3.1[The applicant] shall pay to the Vendor the Regal Royalty on all gold recovered from the Tenements from the date of completion to an aggregate amount of five hundred thousand dollars ($500,000).
3.2The Regal Royalty shall be calculated quarterly and payable not later than 28 days after conclusion of the quarter in which the gold in question was produced, payable into such bank accounts as the Vendor from time to time notifies [the applicant].
3.3The Regal Royalty shall be calculated as follows:
Tenement M31/67
Grade (grams of gold recovered per tonne of Ore Processed)
Price per Ounce of Gold AU $
Up to 2.00
$2.50
2.00 to 10.00
$5.00
Over 10.00
$5.00
Tenements P31/1816 to P31/1831
One percent (1%) Net Smelter return from gold produced.
…'
11.The respondent calculated the 'dutiable value' of the agreement for the transfer of the mining tenements pursuant to the Deed on the basis outlined in s 27(a) of the Duties Act, namely 'the consideration for the dutiable transaction'.
12.The respondent included the Regal Royalty payable as 'consideration for the dutiable transaction' for the purposes of s 27(a) of the Duties Act.
13.The applicant objected to the inclusion of the Regal Royalty as part of the consideration for the dutiable transaction under s 27(a) of the Duties Act.
The statutory framework
Section 10 of the Duties Act imposes transfer duty on dutiable transactions. It is common ground that the agreement for the transfer of the mining tenements specified in the Deed (Transaction) is a dutiable transaction for the purpose of the Duties Act.
Section 19(1)(b) of the Duties Act provides that liability for duty arises on the date on which the Deed was signed.
Under s 26(1)(a) of the Duties Act, duty is chargeable by reference to the dutiable value of a dutiable transaction.
Section 27 of the Duties Act provides:
Unless otherwise provided in this Chapter, the dutiable value of a dutiable transaction is -
(a)the consideration for the dutiable transaction; or
(b)the unencumbered value of the dutiable property the subject of the transaction when liability for duty on the transaction arises if -
(i)there is no consideration for the transaction; or
(ii)the consideration cannot be ascertained when liability for duty on the transaction arises; or
(iii)the unencumbered value is greater than the consideration for the transaction.
Finally s 30(2) of the Duties Act provides:
If the consideration, or any part of the consideration, for a dutiable transaction on which duty is chargeable consists of an amount payable periodically and the total amount to be paid can be ascertained, the consideration or part of the consideration is the total amount.
Issue
The parties accept that the Regal Royalty constitutes part of the consideration for the agreement to transfer the Tenements. The question for the Tribunal is whether the respondent is correct in including the Regal Royalty in the dutiable value of the Transaction at the maximum amount of such payment provided for in the Deed, or whether the respondent should have formed the view that the consideration could not be ascertained at the time when the liability for the duty arose.
The applicant contends that duty cannot be ascertained on 31 August 2009, and that the dutiable value of the Transaction is the unencumbered value of the dutiable property under s 27(b) of the Duties Act. The respondent contends that the dutiable value of the Transaction is the consideration for the dutiable transaction under s 27(a) because the consideration can be ascertained on 31 August 2009.
Is the Regal Royalty 'consideration' upon which duty may be levied under the Duties Act?
The Regal Royalty is contingent upon two events. First, gold must be recovered from the Tenements and, second, the maximum amount to be paid, $500,000, has not been paid.
Under the common law principle applicable to duty law in Australia known as the 'contingency principle', instruments were said to be dutiable on the consideration specified in the instrument, even though payment of some part of the consideration may be contingent on the happening of some future event. Stamp duty has been assessed, for example, on the basis of a guarantor's contingent liability, even though the guarantor may not be called upon to make any payment.
If the price of a property is a variable sum, not to exceed a maximum amount, the contingency principle has been extended to allow duty on the maximum amount stipulated as the consideration; see Pacific Fair Shopping Centres Pty Ltd v The Commissioner of Stamp Duties [1979] Qd R 410 (Pacific Fair).
In Hill 50 Gold Mine No Liability v Commissioner of State Taxation (WA) (1993) 93 ATC 4880, at 4882, Nicholson J said that 'a contingency will be dutiable and, where a maximum is stated for the contingency, duty will be levied on that amount'. However, he said that this was 'subject to the statutory regime creating liability'.
It is therefore necessary for the Tribunal to consider whether, under the Duties Act, the Regal Royalty can be included in the dutiable value of the Transaction.
Is the Regal Royalty an 'amount payable periodically' under s 30(2) of the Duties Act?
Hill 50 concerned an agreement for the sale of mining tenements with a purchase price of $3.75 million plus royalty payments to be paid at a rate of $1 per metric tonne of iron ore mined after the first 700,000 to a maximum of $3 million. One of the issues in that case was whether, even though a royalty may not have fallen for payment on all the regular periods at which it became payable, the royalty was 'money payable periodically' within the meaning of s 65 of the Stamp Act 1921 (WA).
In Hill 50 Nicholson J (at 4882) referred to Underground Electric Railways Company of London Limited v Commissioners of Inland Revenue [1906] AC 21 (Underground Electric) in which it was held that the words 'money payable periodically' in s 56 of the Stamp Act 1981 (Eng) applied to bring to assessment part of the consideration for the sale of the assets of a company even though payable on a contingency or more than one contingency and then went on to state:
The Royalty is nonetheless 'money payable periodically' because it might not fall for payment on all of the regular periods at which it becomes payable. The fact that regularity may not be established because the point may not be reached at which the Royalty becomes payable is subsumed in the principle relating to contingencies enunciated in Underground Electric ….
He held that the royalty was 'money paid periodically'; see Hill 50 at 4882.
The applicant contends that the circumstances of the Regal Royalty can be distinguished from the circumstances of the royalty in Hill 50 and that the Regal Royalty is not an 'amount payable periodically' for the purposes of s 30(2) of the Duties Act because the Tenements the subject of the Deed only include one mining lease and the payment of the Regal Royalty will be subject to multiple contingencies, including whether any of the tenements are ever converted to mining leases. However, it is unclear to the Tribunal why these differences in fact are sufficient to distinguish the finding in Hill 50.
The Tribunal therefore adopts the principle set out in Hill 50 that a royalty, payable at regular periods and even though contingent upon certain multiple events happening, falls within the term 'amount payable periodically', even if it may not fall for payment on all of the dates when it is payable. The Tribunal therefore finds that the Regal Royalty is an 'amount payable periodically' under s 30(2) of the Duties Act.
Is the Regal Royalty an amount 'to be paid' within the meaning of s 30(2) of the Duties Act?
The applicant contends that the words 'to be paid' in s 30(2) of the Duties Act should be interpreted as requiring certainty of payment and that because of the contingencies, including whether mining ever takes place on the one mining lease the subject of the Deed and whether any of the other Tenements the subject of the Deed are ever converted to mining leases, it is not possible to say that any amount will ever be paid pursuant to the Regal Royalty.
The respondent contends that given the decision in Hill 50 whereby royalty payments based on contingencies fell within the description 'moneys payable periodically', a similar construction ought to be given to the term 'to be paid' in s 30(2) of the Duties Act. On this construction the term 'to be paid' is not intended to require certainty of payment, but rather is intended to point to the liability to discharge an obligation should it arise.
In support of that contention, the respondent refers to the decision in Glenepping v Commissioner of Stamp Duties [1985] 3 NSWLR 365 in which Lee J found that the phrase 'loan … to be made' did not imply that a loan must necessarily be made, stating that:
[T]here is no reason why, for stamp duty purposes, the expression 'loan … to be made' [in the relevant subsection] should not be taken merely to be a reference to a future loan without any regard to whether that loan will or will not necessarily come into existence.
The Tribunal accepts the contentions of the respondent and finds that the Regal Royalty is an amount 'to be paid' within the meaning of s 30(2) of the Duties Act.
Is the total amount of the Regal Royalty an amount that 'can be ascertained' under s 30(2) of the Duties Act?
The applicant refers to the statement by Nicholson J in Hill 50 mentioned previously in these reasons that, subject to the statutory regime creating liability, a contingency will be dutiable and, where a maximum amount is stated for the contingency, duty will be levied upon that amount.
The applicant then contends that s 27(b) of the Duties Act, being the statutory regime creating liability, provides for the situation where the consideration cannot be ascertained on the date when liability on the transaction arises, and therefore displaces the contingency principle.
The respondent, on the other hand, relying on Pacific Fair and Ansett Transport Industries (Operations) Pty Ltd v Comptroller of Stamps (Vic) (1980) 10 ATR 845 at 855, (Ansett) says that case law has recognised that, if a maximum sum is expressed which may or may not be payable according to the happening of a contingency, ad valorem duty is to be assessed by reference to the maximum sum contingently payable. It is possible to ascertain from the Deed that the parties had agreed on a specified sum.
The Tribunal agrees with the respondent's contention in this regard.
The applicant then refers to the purposive approach to interpreting a written law set out in s 18 of the Interpretation Act 1984 (WA) and says that s 32 of the Duties Act provides that in certain circumstances where a contingency does not occur, a person may apply for the return of money on that part of the consideration. If s 27(a) of the Duties Act applies to the Regal Royalty, the applicant says, then unless the Tenements the subject of the Deed are surrendered or the Regal Royalty is otherwise rendered incapable of payment, the applicant will be incapable of applying for a reassessment pursuant to s 32 and this appears to the applicant to be inconsistent with the purpose of the Duties Act.
The applicant also refers the Tribunal to s 19 of the Interpretation Act 1984 (WA) which provides for the explanatory memorandum relating to the Duties Act to be considered for the purpose of determining the meaning of the term 'can be ascertained'. The applicant quotes an example provided in the explanatory memorandum for the Bill which became the Duties Act. However, as the applicant points out, that example is not consistent with the facts of this case.
The Tribunal recognises the statement of the High Court in Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue [2009] 239 CLR 27 at [46] [47] as a statement of the relevant principles of statutory interpretation to be applied:
… the task of statutory construction must begin with a consideration of the text itself. Historical considerations and extrinsic materials cannot be relied on to displace the clear meaning of the text. The language which has actually been employed in the text of legislation is the surest guide to legislative intention. The meaning of the text may require consideration of the context, which includes the general purpose and policy of a provision, in particular the mischief it is seeking to remedy.
The Tribunal considers that there is no need to resort to extrinsic materials to determine the meaning of s 30(2) of the Duties Act because the text itself and the context of the relevant provisions in the Duties Act show the legislative intention is to include contingent payments within the concept of ascertaining 'consideration' for the purposes of s 27 of the Duties Act.
Section 32 of the Duties Act clearly contemplates that any consideration for the transfer of dutiable property which is contingent on the happening of a future event will be part of the dutiable consideration for the transaction because it provides for the Commissioner to reassess the liability to duty to exclude that part of the consideration in the circumstances set out in s 32.
If the applicant is not able to apply for a reassessment pursuant to s 32 of the Duties Act, it can only be because there is still the possibility of the Regal Royalty being paid and it will therefore continue to be part of the dutiable consideration for the Transaction. That is entirely consistent with the purpose of the Duties Act to impose duty on the maximum ascertainable consideration even though it may be contingent on one or more events occurring.
The Tribunal finds that the total amount of the Regal Royalty is an amount that can be ascertained under s 30(2) of the Duties Act.
Is duty to be assessed on the maximum sum?
Case law has recognised that if a maximum sum is expressed which may or may not be payable according to the happening of a contingency or contingencies, duty is to be assessed on that maximum sum payable as a sum that is 'ascertainable' or can be ascertained; see Pacific Fair and passages cited in Ansett at 855.
However, the applicant contends that Pacific Fair and Ansett may be distinguished from the present case for two reasons.
Firstly, the applicant contends that the true ratio decidendi of those cases is not the expression of a maximum amount but rather that the contingent nature of an amount of consideration does not prevent it falling within a relevant charging provision. The applicant says it does not submit that the Regal Royalty should be regarded as nil consideration in the assessment of duty, but rather that the respondent should have assessed duty on the Transaction in accordance with s 27(b) of the Duties Act.
The Tribunal does not accept the applicant's contention that s 27(b) applies to the Transaction. Whilst the facts of Pacific Fair and Ansett may be distinguished from the present case, these cases clearly establish that if there is a sum which is ascertainable from the dutiable instrument which may not in fact become payable except upon contingencies, then that sum is dutiable.
Secondly, the applicant contends that in Ansett there was a 'prima facie' or basic' amount, which might be increased, not a maximum amount of consideration and it was the prima facie or basic amount which was assessable. This contention is misconceived in that the respondent is not relying on the decision in Ansett, but rather on the passages cited in that case (at 855) which Tadgell J says provide authority for the following proposition:
In the case of instruments liable to ad valorem duty by reference to a scale dependent upon an amount which may or may not be payable according to the happening of a contingency, the Revenue is entitled to ad valorem duty in the maximum amount payable in any contingency. However - [and this is the passage which is more relevant here] - where an instrument refers to a specified sum which is neither a maximum nor a minimum but is variable upwards or downwards in certain circumstances, duty is to be charged on the specified sum.
In this case, the Deed provides for a maximum amount of $500,000 which may or may not be payable according to the happening of a number of contingencies rather than a specified sum which is neither a maximum nor a minimum, but is variable upwards or downwards in certain circumstances. Therefore, on the authority of the above proposition, the respondent is entitled to duty on the maximum amount payable in any contingency.
Maximum amount as a proportion of the consideration
The applicant makes the point that in Pacific Fair, although the maximum amount of the consideration was used in the assessment, the variable part of the consideration was approximately 20% of the fixed part of the consideration, but in this case the maximum amount of the Regal Royalty is 10,000% of the fixed part of the consideration.
However, the Tribunal considers that the proportion which the amount of the fixed consideration bears to the maximum amount of the variable consideration is not relevant. The legal principle in PacificFair (at 414) is that where the maximum sum is ascertainable from the instrument itself, the duty is assessable on that sum even though it may never may become payable and it can not be determined at the date of the instrument whether that sum, or any lesser sum, or any sum at all will in fact be payable. The amount of that sum and the likelihood that it will be payable is not relevant to the application of that principle. All that is necessary is to be able to ascertain from the instrument a fixed sum which may become payable though on contingencies and if that is the case, then duty is payable on that amount.
Conclusion
For the reasons set out above, the Tribunal has concluded that:
1)The agreement for the transfer of the Mining Tenements under the Deed is a dutiable transaction.
2)The Regal Royalty is part of the consideration for the dutiable transaction.
3)The Regal Royalty is an 'amount payable periodically' for the purposes of s 30(2) of the Duties Act. The total amount of the Regal Royalty of $500,000 is the 'total amount to be paid' for the purposes of s 30(2) of the Duties Act. The total amount of the Regal Royalty of $500,000 is an amount which can be ascertained for the purposes of s 30(2) of the Duties Act.
4)Section 27(a) of the Duties Act applies to the dutiable transaction and the total amount of the Regal Royalty of $500,000 is part of the consideration which is dutiable.
5)The respondent was correct in including that amount in the dutiable value of the agreement for the transfer of the Tenements and in deciding to disallow the applicant's objection to that decision.
Orders
1.The decision of the respondent to disallow the applicant's objection is affirmed.
2.The application for review is dismissed.
I certify that this and the preceding [48] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
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JUDGE T SHARP, DEPUTY PRESIDENT
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