Commissioner of Stamp Duties (NSW) v Henry
(1964) 114 CLR 322(Judgment by: Taylor J)
Between: Commissioner of Stamp Duties (NSW)
And: Henry
Judges:
Dixon CJ
McTiernan J
Kitto J
Taylor JOwen J
Subject References:
Stamp Duties (NSW)
Judgment date: 25 February 1964
Judgment by:
Taylor J
This is an appeal from an order of the Full Court of the Supreme Court which answered certain questions raised by a case stated by the appellant under the provisions of s. 124 of the Stamp Duties Act. The effect of the answers was to hold that the deed of 3rd May 1959, to which the respondents and Vale of Clwydd Colliery Limited were parties, was properly chargeable with duty pursuant to par. (6) under the heading in the Second Schedule to the Act - " Lease or Promise of/or Agreement for Lease or Hire of any property not being a ship or vessel". Paragraph (6) which follows a number of particular specifications of leases, refers to a lease "Of any other kind whatsoever" and the duty prescribed is one pound ten shillings. The contention of the appellant is that the deed is liable to ad valorem duty as a conveyance on sale for a consideration in money or money's worth of not less than the unencumbered value of the property and that the appropriate duty is one pound five shillings for every one hundred pounds and also for any fractional part of one hundred pounds of the consideration "for the period or term of the deed". Further reference will be made to this contention when the terms of the deed have been examined. (at p332)
By the deed the company purported to grant to the respondents a licence to operate the company's mines and to use and operate the pits, tunnels, mine workings, buildings, plant and machinery thereon for the purpose of the getting, working and winning of coal therefrom. As appears from the case stated the licence was to be for an initial term of five years commencing on the 1st January 1958 but it was subject both to termination and renewal as thereinafter specified. Acknowledgment was made by the respondents of the delivery to them of certain specified buildings, plant and machinery, stores, pit timber and other material and they agreed to pay the company for all stores and pit timber used by them during the term of the licence. Thereupon cl. 4 provided that "For the use of the facilities aforesaid and for the use of the company's land, pits, tunnels, mine workings, buildings, plant and machinery the syndicate (i.e. the respondents) shall pay to the company fortnightly a fee at the rate of three shillings per ton and, in addition, a royalty of two shillings per ton for each and every ton of coal won by the syndicate from the said land and such fee and royalty shall be cumulative from fortnight to fortnight during the term of this licence and any extension thereof". During the term of the licence the company was to have the right at all times to enter upon the said land "by its authorized officers and workmen for any purposes whatsoever other than the winning of coal". By cl. 8 the licence was determinable by the company at any time without notice either upon the ground that the respondents had failed to comply with any covenant or condition of the licence or upon the ground that, except when the respondents should be prevented from mining coal by reason of strikes, the average monthly licence fee paid by them over a period of three months had not exceeded the sum of 270 pounds. Clause 9 provided to the appellant an option to renew the licence for a further period of five years. (at p333)
It will be seen that the respondents were not bound to operate the mine and that the undertaking to pay fees and royalties, pursuant to cl. 4, was contingent only. Nevertheless, the licence was subject to the right of the company to determine it upon either of the grounds already specified. (at p333)
It is, I think, desirable, before coming to the relevant provisions of the Stamp Duties Act to consider the nature of the relationship which the deed created. For this purpose, and in view of the conclusion to which I have come, it is unnecessary to draw any distinction between the so-called fees and royalties prescribed by cl. 4 for the payment for which that clause provided was either on account of and for coal won pursuant to the agreement, or, partly on that account and partly on account of and for the use of the specified facilities for the purpose of winning coal. The deed did not, I think, amount to a demise of the mining property and neither party was disposed to argue that it did. But it was common ground both here and in the Full Court that it created a profit a prendre which constituted an interest in land and, therefore, property within the meaning of the Stamp Duties Act. This proprietary interest was subject to the respondents' obligation to make the payments specified in cl. 4 in respect of each and every ton of coal won from the land. Nevertheless, it was a "conveyance" for the purposes of the Act because s. 65 of the Act defines that term to include, inter alia, "every . . . instrument . . . whereby any property in New South Wales is transferred to or vested in or accrues to any person" (cf. Conservators of the River Thames v. Commissioners of Inland Revenue (1886) 18 QBD 279
But it was also a lease for the purposes of the Act as an "instrument . . . whereby a right to use at or during any time or times any property in New South Wales for any purpose whatever is conferred on or acquired by any person" unless it fell within the words of exception contained in s. 76 (1) - "not being an instrument liable to ad valorem duty as a conveyance". But such are the vagaries of the Act that if the deed is not, primarily, such an instrument it is a lease and since the definition of "conveyance" in s. 65 includes any lease it is, nevertheless, ultimately a "conveyance". (at p334)
It is the appellant's contention that the instrument is a conveyance as defined by s. 65 and, what is critical to his argument, that the consideration for the conveyance is constituted by the fees and royalties which the subsequent course of events may show have become payable pursuant to it. Fees and royalties to the extent of 9,766 pounds have been paid by the respondents and the appellant has assessed interim duty at the sum of 122 pounds 10s. Od. being at the rate of one pound five shillings per centum of the sum of 9,766 pounds. He, further, seeks to invoke the provisions of s. 42 (7) of the Act by claiming that the full amount on which ad valorem duty is payable cannot immediately be ascertained but will become payable as soon as it is ascertained or assessed. By this it is meant that duty will, from time to time, become payable at the rate above specified on such amounts of fees and royalties as, in fact, become payable, from time to time, under the deed. To say the least, the result contended for is curious for if the deed were chargeable as a lease it is quite clear that under s. 79 (2) the duty chargeable would be merely nominal. (at p334)
However, the instrument is clearly enough a conveyance within the extended meaning given to that term by s. 65. But it must be remembered that it is only in its capacity as a conveyance of property that it is chargeable pursuant to ss. 65 and 66. So much is clear from the provisions of s. 66. Sub-section (2) (a) makes it clear that in the case of a conveyance on sale of any property ad valorem duty is to be calculated on "the amount or value of the consideration for the sale". And this must mean the consideration for the sale of the property conveyed. Likewise, sub-s. (2) (b) provides that if the amount or value of the consideration is less than the unencumbered value of the property the duty is to be charged on the unencumbered value of the property ascertained in accordance with s. 68. Again, in this sub-section, the property must mean the property conveyed and the same notion is apparent in the other numerous sub-sections of s. 66. It is, therefore, necessary to enquire what "property" was conveyed by the deed and then to ascertain what, if any, consideration in money or money's worth was given for it. (at p335)
What was conveyed or granted by the deed was, as I have already said, a profit a prendre. But more particularly it was a right to operate the mining property and its appurtenances and to win coal therefrom. But it was not an absolute right to do so; it was a right to do this subject to the payment of a fee and royalty totalling five shillings per ton for each and every ton of coal won. Furthermore, it was subject to determination in the event of failure to pay such fees and royalties. In a very real sense, therefore, it may be said that the "property" conveyed was a right to operate the mine and win coal subject to the payment of five shillings per ton as aforesaid. The question then is - treating the deed as a conveyance - what consideration was provided by the deed for the conveyance of this interest? In my view the answer to this enquiry is that no consideration was provided. Clearly enough, payments pursuant to cl. 4, if and when made, cannot be regarded as the consideration for the grant of such a right; they constitute both in form and substance payment for the actual use of the "facilities . . . and . . . the Company's land, pits, tunnels, mine workings, buildings, plant and machinery" and for the coal actually removed. And although it may be said that the respondents' covenants, including that contained in the cl. 4, constituted consideration in a general sense, this could not be said to be the consideration for the conveyance of a right to operate the mine and win coal subject to the payment in respect thereof of five shillings per ton. In other words, the stipulated rate of payment was, in much the same way as rent under a lease, intended by the way of "retribution or compensation" for the use of the mining property and for the coal won and so, in part, it delimited the character and extent of the right conveyed.
It is true that the provisions of the Act which deal specifically with leases do in a general way purport to identify the rent payable under a lease with consideration for the lease but the schedule draws a clear distinction between the rent reserved and "any consideration by way of premium, fine or foregift" in that, in the case of a lease "in consideration of a sum of money by way of premium, fine or foregift" the same duty is imposed as that imposed upon a conveyance on sale whilst, in the case where no premium has been given, the duty imposed is calculated at the specified rate upon the yearly rent only. Where the lease provides both for a premium and for rent two calculations are necessary to ascertain the total duty - one, by applying the specified rate to the yearly rent and one, treating the premium as the consideration for the demise, as upon a conveyance on sale. It would be a strange result if, in view of those provisions, the respondent should be held to be at liberty to treat a lease as a conveyance and, consistently with his contention in this case, assess ad valorem duty on the whole of the rent payable during the term as the consideration for the "conveyance". The reality of the matter is that the parties to the deed in question in this case were content to conclude an arrangement in the form which it took in the deed and no consideration was provided for the actual "conveyance" of such a conditional right. (at p336)
Accordingly, the deed, if it be regarded as a conveyance for the purposes of the Act, operated as a voluntary assurance of what may be called the conditional right which it created and, if chargeable as such, was chargeable as a conveyance made without consideration in money or money's worth. That is to say the duty chargeable would be calculated upon the value of the property conveyed. But if the rates of fees and royalties for which the deed provided were the best that could be obtained - and there is no suggestion that they were not - then the conditional right which the deed granted could have no independent value. In that event the deed would not be an instrument liable to be chargeable with ad valorem duty as a conveyance and, that being so, it would fall within the definition of lease in s. 76. As a lease it would be precisely covered by the provisions of s. 79 (2) and by those of item (6) under the heading in the Schedule - " Lease or Promise of or Agreement for Lease or Hire of any property not being a ship or vessel" - and the duty properly chargeable would, as prescribed by those provisions, be one pound ten shillings. Accordingly I am of the opinion that the appeal should be dismissed. (at p336)