Collector of Imposts (Victoria) v Cuming Campbell Investments Pty Ltd
63 CLR 619(Decision by: Dixon J)
Between: Collector of Imposts (Victoria)
And: Cuming Campbell Investments Pty Ltd
Judges:
Latham CJ
Starke J
Dixon JEvatt J
McTiernan J
Subject References:
TAXATION AND REVENUE
STAMP DUTY
Instrument of transfer of real property
No adequate consideration
Legislative References:
Stamps Act 1928 (Vic) No 3775 - Third Schedule, Headings VI and IX
Judgment date: 19 August 1940
Sydney (heard in Melbourne)
Decision by:
Dixon J
The Victorian Stamps Act 1928, Third Schedule, par. IX., gives an artificial definition of the expression "Deed of Settlement or Gift" and imposes a high stamp duty upon instruments falling within it. The definition was adopted nearly fifty years ago and many attempts have been made to explain its meaning and effect. But to apply it remains often difficult. The reason for this is plain enough. The definition seeks to enlarge the denotation of the word "gift" by a partial denial of an attribute which to many seems indispensable to the conception. The definition includes gifts notwithstanding that they are not voluntary but are made upon a good or valuable consideration unless it be a bona-fide adequate pecuniary consideration. Blackstone distinguishes gifts from grants by theabsence or presence of consideration. "Gifts are always gratuitous, grants are upon some consideration or equivalent" (Blackstone's Commentaries, vol. 2, p. 440).
But the essential idea of gift is the transfer of property by way of benefaction, and benefaction may be the intended effect of an assurance of property, notwithstanding that the transferor receives some benefit or recompense. Revenue legislation, for that reason, sometimes requires "that property shall be treated as taken under a `gift,' although such gift may have been made under a contract by which the donor takes the benefit" (Attorney-General v Johnson, [F28] at p. 624). No doubt to allow any transaction for value to be placed under the category of gift is to abandon a definite discrimen and to make the classification depend upon matters of degree and perhaps to compel an inquiry into purpose. But the difficulty is not a new one. Roman law faced it in distinguishing between the institution of donatio and those of emptio venditio and locatio conductio. In the latter it was necessary that the price should be real.
"This rule was intended to prevent evasion of rules on donatio by making the transaction look like a sale. It was no sale if the price was named, but there was no intention to exact it; it was donatio governed by the rules of donatio. There was some difficulty where the price was absurdly low. Where the price was derisory, `nummo uno' or the like, there was, no doubt, no sale but a masked donatio, but this is not stated for sale, though it is for locatio. But where the price was merely low here, whatever the object, it was sale, if the price was to be exacted unless the parties were husband and wife, when it was more severely scrutinized. ... There was no rule that the price must be adequate" (Buckland, Text Book of Roman Law, 1st ed. (1921), p. 483).
The present appeal seems to me to be based upon a contention on the part of the Collector of Imposts to the effect that the Victorian Stamps Act does lay down a rule that, for a transaction to be dutiable as a sale and not as a gift, the price must be adequate. In this he is, in my opinion, mistaken. The only rule it lays down as to the adequacy of consideration is the contrary. It says that if the consideration for the transaction is pecuniary, adequate and bonafide, then the instrument which embodied it cannot be dutiable as a gift. I need not set out the statutory definition. It is the first clause of it that contains the material part and what it does may be stated thus. It puts on one side wills and codicils and instruments made before and in consideration of marriage. They are excluded. Then, as I understand the paragraph and the construction which has been placed upon it, a test or criterion of its application is expressed by the words "any instrument ... whereby any property is settled or agreed to be settled ... or is given or agreed to be given." That is to say, the transaction must come within the general conception of "settlement or gift," whether executed or executory; otherwise the instrument is not dutiable under that heading.
But the conception of gift or settlement intended is a wide one. The words "in any manner whatsoever" are added to show that no unexpressed conditions are implied. A parenthesis is introduced in order to exclude mere absence of consideration as a criterion:"any instrument whether voluntary or upon any good or valuable consideration other than a bona-fide adequate pecuniary consideration." I understand this parenthesis as meaning that the existence of consideration is consistent with the transaction being a gift; that it may be a gift notwithstanding that the instrument is made upon a good or valuable consideration, provided that it is not a bona-fide adequate pecuniary consideration. But I do not understand the parenthesis as meaning that the transaction must be a gift unless the instrument is made upon a bona-fide pecuniary consideration.
The provision was construed in the way I have stated in Collector of Imposts (Vict.) v Peers. [F29]
"In our opinion, the effect of clause IX. (1) is to enlarge the meaning of the phrase `deed of gift' so as to make it cover transactions which it would not ordinarily include. In order to render an instrument taxable under it, it is necessary to establish that the instrument does not depart from the nature of a deed of settlement or a deed of gift further than is permitted by the words of the sub-clause"
(per Knox C.J., Gavan Duffy and Starke JJ.). [F30]
Those learned judges quote from the judgment of Hood J. in Atkinson v Collector of Imposts [F31] a passage which includes the following:
"The real meaning of the schedule is that a deed of gift shall not escape taxation merely because there is some good or valuable consideration therefor. But the instrument, to be taxable, must be one by which property is `given,' though it is not easy to reconcile the idea of a `gift' with there being good or valuable consideration."
Then their Honours say:
"We agree to this statement, and we think that the only effect of sub-clause 1, so far as deeds of gift are concerned, is to include in that category instruments which might otherwise have been excluded from it because of the existence of some consideration". [F32]
The instrument in Peers' Case [F33] was a transfer made by a husband to a wife after marriage, in pursuance of an oral agreement between them entered into on the treaty for the marriage that he would transfer the land to her on the solemnization of the marriage. Decisions of the Supreme Court had attached to the words "gift" or "given" a meaning by which they implied "benevolence or something akin to it." Acting upon these decisions the Supreme Court had held that the transfer was not dutiable as a deed of gift "since there was nothing in the nature of benevolence, either in the original oral agreement or in the transfer made in pursuance of it". [F34] The High Court reversed this decision. Knox C.J., Gavan Duffy and Starke JJ. referred to the expression found in earlier decisions of the Supreme Court, "the gift must be an act of benevolence or something akin to it," and said:
"The phrase ... is not very precise, but if it means more than this-that the donor must not receive consideration from the donee-we cannot accept it. There may be a good gift although no feeling of benevolence exists between donor and donee, a gift is no less a gift because by its means the donor intends to compass the moral or physical destruction of the donee". [F35]
This statement plainly excludes, as essential attributes of gift, kindness or goodwill towards the donee as the motive. But it goes no further. Indeed, the reference to the donor's not receiving consideration from the donee appears to concede that there can be no gift where recompense or consideration from the transferee formsthe basis or foundation of the transaction. The ground of their decision is expressed by their Honours in a sentence. They refer to the view of the Supreme Court as to the absence from the transaction of anything in the nature of benevolence and say: "This is a somewhat harsh criticism on the transaction, but it is enough to say that, had there been no consideration of marriage, the instrument would undoubtedly have been a deed of gift in the ordinary acceptance of that term, and as it is not executed before the marriage the effect of sub-clause 1 is to make it taxable as a deed of gift notwithstanding the presence of such consideration". [F36] The actual decision thus expressed does not touch the present case, but the observations I have quoted appear to me to govern it. For the transfer now under consideration carries into effect a business transaction, one of a not unfamiliar kind, and it has nothing about it to suggest a gift or settlement.
An owner of land and investments decided to form a company, transfer to it the land and investments in exchange for the issued share capital of the company and to parcel out the shares among his sons. He registered a company with articles of association giving him control of its management. He entered into an agreement with the company for the sale to it of the land and investments for the sum of PD80,000. The agreement apportioned the purchase money among the various items of property and fixed PD50,000 as the consideration for the land.
In satisfaction of the total purchase money the company issued and allotted to him 80,000 shares of PD1 each. At the same time he executed documents by which trusts were declared of nominal sums of money in favour of his sons and other members of his family, and the trustees of the respective trusts agreed to buy the PD1 shares in the company from him at a price of five shillings each. All this was done on the same day as the registration of the company.
The object of the whole transaction is said to have been to confer a benefit on the sons. The documents constituting the trustees and parcelling out the shares to them as on a sale of five shillings only, may or may not have formed a cloak for a transaction by way of bounty. If it amounted to a settlement or gift perhapssome of the instruments carrying it out may have been liable to stamp duty as a deed or deeds of settlement or gift. But this seems quite irrelevant to the question whether the transfer of the land to the company is a deed of settlement or gift. That document transfers the land to the company and expresses the consideration as PD50,000, that is to say, it carries out the agreement. The documents constituting the trusts and purporting to sell the parcels of shares to the trustees are concerned with the shares. The question whether a settlement or gift of the shares was effected in favour of the sons does not seem to me to affect the question whether a gift of the land was made to the company within the meaning of the definition. One object of forming a company may possibly have been to obtain shares so that they could be distributed for the benefit of the family. But if so this makes it more likely, not less likely, that the company would be required to issue shares to the value of the assets it receives and that the assets would not be "given" to the company.
The real ground upon which the collector claims that the transfer is said to amount to a gift is that the consideration is stated at PD50,000 whereas, according to the statement of the collector, the land transferred was worth PD89,515 at the date of the agreement and PD101,718 at the date of the transfer nearly six years later. The collector considers accordingly, that there is not an adequate pecuniary consideration for the transfer, and for that reason says that it falls within par. IX. (1) of the schedule defining deed of settlement or gift. For the reasons given in the beginning, I am of opinion that the ground is insufficient to support the conclusion. Neither the transfer nor the transaction to which it gives effect bears any resemblance to a gift or to a settlement.
The instrument is dutiable as a transfer on sale and not as a deed of settlement or gift.
A further question has arisen. Is the amount of stamp duty to be calculated on the money sum of PD50,000 expressed as the consideration of the transfer or on some greater amount representing the value of the shares? As an alternative to his main contention the collector puts forward the view that the transfer should be regarded as made in consideration of the 50,000 shares and not ofthe money sum expressed therein. The case stated does not appear to be pointed to this question and I do not think that it contains facts which really raise it. For it all depends upon the suggestion that the true value of the shares as marketable securities substantially exceeded their face value. There is nothing to support this suggestion except the collector's statement as to the value of the land. The date at which it would be necessary to inquire into the value of the shares is September 1931. Even assuming that we can make inferences, it would indeed be a rash conclusion that because the land was, according to the opinion of the collector, of greater value than stated, therefore at that date the value of the shares of the company as marketable securities were substantially above par.
In my opinion the decision of Gavan Duffy J. is right and the appeal should be dismissed.