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SUPREME COURT OF TASMANIA

BURBURY v. COMMISSIONER OF STAMP DUTIES

Nettlefold, J.

13 July 1972 - Hobart

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Nettlefold, J    : This is an appeal by the appellant against an assessment of Stamp Duty made by the respondent on a Transfer of Shares dated 19 January 1972 which the appellant executed in favour of her son, Charles Stenhouse Burbury.

   The transfer states the consideration as $4250. The respondent concedes that that consideration is adequate having regard to the market value of the shares.

   However, the respondent contends that the transfer should be assessed under Item 36(b) of Part III of the Second Schedule to the Stamp Duties Act 1931 and he assessed it accordingly. The appellant, on the other hand, contends that the transfer should have been assessed under Item 36(a) of Part III of the Second Schedule. That is the dispute which must be determined in this appeal.

   I am satisfied that the facts are as follows:-The appellant wished to give the shares, the subject of the Transfer, to her son. The shares in question are one thousand shares in a company known as Bowsden Pty Ltd Her solicitor advised her that she should not give the shares to her son but sell them to him at their full market value. The solicitor said that she could, if she wished, give her son the money to pay for the shares.

   The appellant accepted this advice and the parties then proceeded as follows:-

  1  The appellant and her son attended at the office of her solicitor. She was advised that the value of the shares in question was $4250 approximately. The appellant then offered to give to her son $4250 for the purpose of enabling him to pay for the shares. He accepted the offer.

  2  The appellant wrote out a cheque for that sum and handed it to her son. The cheque is dated 19 January 1972 and is for $4250. The cheque was debited against the appellant's account at her Bank on that day.

  3  The appellant then completed a Gift Duty Return disclosing a gift to her son of the sum of $4250. In the space in the Return which is provided for insertion of a description of the gift the word "cash" appears as the only entry therein. The appellant instructed her solicitor to lodge the return with the Deputy Commissioner of Taxation (Commonwealth).

  4  The appellant then signed the Transfer of Shares referred to above and instructed her solicitor to cause it to be stamped and registered when her son had signed it and paid to her solicitor the purchase price of $4250.

  5  The appellant's son then signed the Transfer of Shares as purchaser and handed the appellant's solicitor a cheque for $4250 which the solicitor handed to the appellant.

  6  The son's cheque was banked to the credit of the appellant's account at her Bank on 19 January 1972.

  7  The solicitor lodged the Gift Duty Return with the Deputy Commissioner on 19 January 1972.

   Item 36(b) deals with transfers of marketable securities. To isolate the true dispute between the parties it is only necessary to set out the words of sub-item (a) and sub-item (b):

   

"(a) Upon a sale for a consideration in good faith adequate to the value thereof …"

   

"(b) by way of gift, either voluntarily or for a consideration other than a consideration in good faith adequate to the value thereof …"

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   The actual imposition of a liability to pay duty is not, of course, effected by the Second Schedule. It is effected by s 9 of the Act.

   Section 9 reads as follows:-

   "(1) There shall be raised, levied and paid for and towards the Consolidated Revenue in respect of the several instruments, matters, and things enumerated in the second schedule duty at the rates set forth in figures against the same respectively or otherwise specified in that schedule.

   

"(2) Such duty shall be calculated and assessed and such rates applied, in accordance with the rules set forth in the fourth schedule where the same are applicable and subject to the exemption specified in the third schedule."

   Applying that section to this case, it imposes a duty on the instrument of Transfer. It does not impose duty on a transaction as such; but on the instrument which effects a transaction, the transaction effected by the instrument being determined in accordance with the true legal operation of the instrument. In considering this matter, one cannot ignore the legal operation of the instrument and assess the alleged realities behind it; in law the reality of the document is what, in law, it effects.

   In this case, the appellant had a choice. She could benefit her son in the way she wished by giving him shares or by giving him the money to pay for the shares. The choice belonged to her and to her alone. She could give shares to her son and accept the taxation liabilities consequent upon that transaction or she could give him money and sell him the shares and accept the taxation liabilities consequent upon those transactions. There is nothing in the Stamp Duties Act which authorises the Court to ignore the legal effect of an instrument which operates in such a way as to lessen the amount of duty which would be payable if the transaction were effected in another way. I refer to what Donovan, LJ, said speaking of the English Stamp Duties legislation in Henty & Constable (Brewers) Ltd v. Inland Revenue Commissioners, [1961] 3 All ER 1146, at p. 1150: "If one assumes the intention to save stamp duty, still the documents by which the transaction was effected cannot be given something other than their legal effect in order to defeat that intention."

   I also refer to the following observation of the Privy Council in Minister of Stamps v. Townsend, [1909] AC 633, at pp. 638-9: "A mortgagor owing money to Mr Moore pays it to his daughter, with his consent, and she relends the money to the mortgagor. This transaction, although carried out by two deeds is carried out by deeds which do not themselves convey anything to the daughter. What does convey something to her is the authority emanating from Mr Moore that his daughter might have for herself moneys received by her under his power of attorney, and this authority, being verbal, could not be stamped. The learned Chief Justice puts it in the most concise way when he says that the statute taxes instruments and does not tax transactions. Here there was no gift by any document and therefore there is no duty payable."

   I also refer to the observation of Lord Reid in Inland Revenue Commissioners v. Littlewoods Mail Order Stores Ltd, [1962] 2 All ER 279, at p. 285: "The result was a bizarre series of six deeds. But none of these deeds was a sham. Each had the effect it purported to have, and if the parties chose to proceed in this way they were quite entitled to do so. There is no question of any of these deeds purporting to do something different from what the parties had agreed to do. So each must be stamped according to what it purported to do and in fact did."

   Returning to the facts of this case, what did the Transfer purport to do and what in fact did it do?

   It purported to transfer the shares for a consideration of $4250 and that is what it did. It was not a fictitious or colourable transaction but a real and genuine one (compare Attorney-General v. Richmond, [1909] AC 466, at p. 472).

   And, in my opinion, the consideration was "a real and genuine" consideration. One could not find otherwise without denying legal effect to the payment which the son made to the appellant. One cannot deny the reality of that payment by assuming that the transactions in question here were still in an executory stage and examining how matters would stand if that were so. The payment is an executed transaction which had the legal effect which the parties intended it to have, namely, a payment of the price for the shares.

   The cheque which the appellant drew in favour of her son purported to pay to her son $4250. And it had that legal effect. Her account was debited accordingly.

   The cheque which the son paid to the appellant purported to pay to the appellant $4250. And it had that legal effect. Her account was credited accordingly.

   In my opinion, nothing turns on the precise moments in time when the cheques achieved their intended effects. For, on any view, these effects were achieved before the Transfer operated to transfer the legal title to the shares to the son.

   And the Transfer of Shares purported to transfer to the son the legal title in the shares for the sum of $4250. And it took effect accordingly, the property in the shares passing, in due course, to the son and the property in the money passing to the appellant.

   To treat the Transfer as a transfer by way of gift falling within Item 36(b), it would be necessary to treat the payment by the son as a mere fiction. But this cannot be done because the cheque operated in law to produce the effect which it purported to have. It cannot be lawfully treated as a fiction save by the operation of a statutory provision designed to produce that result. But there is no such provision in the law.

   For the same reason, the payment by the appellant to her son cannot be treated as a fiction. Indeed, it is far from that as she will pay gift duty on the gift which it effected pursuant to the relevant Commonwealth Statute.

   One could not treat the Transfer as operating in law by way of gift, without giving this series of legal acts effects different from those which the law gives them and different from those which the parties intended them to have. That course cannot be taken except pursuant to a statutory provision authorizing it. No such provision exists.

   Stamp Duty on the document should have been assessed according to the legal operation of this series of transactions or acts in the law; and not according to any notion of their total and ultimate financial result conceived without regard to the true legal effect of the various acts of the parties.

   For these reasons, I am of the opinion that the document should have been assessed under Item 36(a), as the appellant contends, and not in accordance with Item 36(b).

   It was suggested at the hearing that Item 13 should be applied. But this is incorrect. The shares were "marketable securities" falling within the definition of that term in the Act. That being so, Item 36 is the appropriate item and the real question is only as to which sub-item should govern the assessment.

   I shall make an order varying the assessment from $141.25 to $17.20. And I shall order repayment to the appellant of the excess of duty, namely, $124.05.