Dixon v. Chief Commissioner of Stamp Duties (N.S.W.).

Judges:
David Hunt J

Court:
Supreme Court of New South Wales

Judgment date: Judgment handed down 22 November 1985.

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David Hunt J.

These are two appeals by way of case stated pursuant to sec. 124 of the Stamp Duties Act, 1920.

The plaintiff had in each case been appointed pursuant to the Bankruptcy Act 1966 as the trustee of the property of a bankrupt person who was either the registered proprietor or one of the registered proprietors of land under the provisions of the Real Property Act 1900. Section 58(1) of the Bankruptcy Act provides that, where a debtor becomes a bankrupt, his property vests forthwith in the trustee of his estate. (I shall refer later to the terms of the qualification to that provision, in sec. 58(2).) In each case, the plaintiff executed an application to be registered as the proprietor of the estate or interest of the bankrupt in that land. Section 90 of the Real Property Act permits such applications by a trustee claiming to be entitled to land under the provisions of that Act by virtue of the operation of the Bankruptcy Act.

In the proceedings numbered 748/1985 (where the bankrupt is one Anthony Michael Simons), the application was made expressly pursuant to sec. 90. In the proceedings numbered 727/1985 (where the bankrupts are John King Lam Lo and Josephine Lo), the application was made without reference to sec. 90, and was treated by the Registrar-General as an application pursuant to sec. 46C, which similarly permits, upon written request, the registration as proprietor of a person in whom land under the provisions of the Act has vested ``by the operation of a statute''. I was informed that it has been the practice of the Registrar-General to treat such applications by trustees in bankruptcy as having been made pursuant to sec. 46C where reference is not made expressly to sec. 90. If such be the practice, it appears to me to be wrong. Section 17 of the Interpretation Act 1897 provides that all references to matters in a New South Wales statute are to be taken, unless the contrary intention appears, as relating to such matters in New South Wales. The reference in sec. 46C to ``a statute'' should thus be taken as relating to a New South Wales statute rather than to a Commonwealth statute such as the Bankruptcy Act. No contrary intention appears. Indeed, the specific provision in sec. 90 relating to the Commonwealth Bankruptcy Act indicates the clearest legislative intention that the reference in sec. 46C should not be taken as a reference to the same Commonwealth Act. Accordingly, it was agreed by the parties before me that the application in the proceedings numbered 727/85 (Lo) should be treated by me as if it had also been made to the Registrar-General pursuant to sec. 90.

In each case, the Chief Commissioner of Stamp Duties assessed the document by which the application for registration was made as liable to ad valorem duty as a conveyance of property. It is against those assessments that the appeals are taken.

Section 65 of the Stamp Duties Act defines a ``conveyance'' as including, so far as is here relevant:

``every... instrument (except a will)... whereby any property in New South Wales is transferred to or vested in or accrues to any person...''

Section 66(1) provides that:

``Subject to the provisions of this Act every conveyance is to be charged with ad

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valorem duty in respect of the unencumbered value of the property thereby conveyed.''

The plaintiff argues that the application which he made for registration is not the instrument whereby the property was vested in him, nor is it the instrument by which the property was thereby conveyed. What is liable to duty, he emphasises, is not the transaction or the transmission but rather the instrument whereby the transaction or the transmission is effected:
I.R.C. v. G. Angus & Co. (1889) 23 Q.B.D. 579 at p. 589;
Outred v. I.R.C. (1960) A.C. 206 at p. 238. See also
McCaughey v. Commr of Stamp Duties (N.S.W.) (1914) 18 C.L.R. 475 at p. 487. The vesting of the property, the plaintiff says, was effected by virtue of sec. 58 of the Bankruptcy Act, not by virtue of the application for registration.

The Chief Commissioner does not dispute the proposition from I.R.C. v. G. Angus & Co. as I have stated it, although he would place a gloss upon other statements by Lord Esher M.R. in that case. As I have not relied upon those other statements, it is unnecessary for me to refer to his suggested gloss. The Chief Commissioner argues that the application for registration was the instrument whereby the legal estate in the property vested in the plaintiff as trustee in bankruptcy because, he says, such a vesting took place only upon and by virtue of the registration which the instrument requested.

This issue requires a closer examination of the effects of sec. 58 of the Bankruptcy Act. So far as is here relevant, that section provides:

``58(1) Subject to this Act, where a debtor becomes a bankrupt -

• (a) the property of the bankrupt... vests forthwith in the Official Trustee or... (the) registered trustee (who) becomes the trustee of the estate of the bankrupt
• ...

(2) Where a law... of a State... requires the transmission of property to be registered and enables the trustee of the estate of a bankrupt to be registered as the owner of any such property that is part of the property of the bankrupt, that property, notwithstanding that it vests in equity in the trustee by virtue of this section, does not so vest at law until the requirements of that law have been complied with.''

The parties are agreed upon the obvious consequence that an equitable interest in the land is transmitted to the trustee by virtue of sec. 58. The issue is whether the legal estate in the land is also transmitted only by virtue of that section, or whether the transmission was also effected by virtue of the application for registration.

By way of a preliminary point, the plaintiff says that sec. 90 of the Real Property Act is not a law which ``requires'' the transmission of property to be registered. It merely permits or enables the trustee to whom the land is transmitted to apply to be registered as the proprietor, he says, and he points out that the wording adopted is ``requires... and enables'' not ``requires or enables''. The Chief Commissioner replies that the word ``requires'' should not be interpreted in the sense of producing an obligation under the threat of a penal sanction.

In my opinion, sec. 90 is a law which requires the transmission of property to be registered. It requires such transmission to be registered in the sense that the transmission is for all practical purposes ineffective until registered. No dealing with the land by the trustee is effective to pass any estate or interest in that land unless or until the transmission to him has been registered. This appears to be a necessary consequence of the provisions of sec. 41 of the same Act: see The Torrens System in New South Wales, Woodman & Nettle (1985), at para. 93.3. In
Re Bermingham (decd); Ex parte Official Receiver (1936) 9 A.B.C. 6 at pp. 10-11, the word ``requires'' in the predecessor to sec. 58 (sec. 103 of the Bankruptcy Act 1924) was interpreted in the sense of ``renders it essential'' rather than in the narrower sense of ``insists upon'' or ``enforces''. The plaintiff seeks to distinguish that decision upon the basis that the word ``requires'' is now to be found in a different context in the 1966 Act. Section 103(4) was in these terms:

``... where any Act or State Act requires the transmission of property to be registered, and makes provision for the registration of the Official Receiver or trustee as the owner of the property vested in him under this Act...''

However, despite the wider import of the phrase ``makes provision for'' (in lieu of ``enables''), the difference in wording does

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not, in my view, create any valid distinction. I adopt the construction of ``renders it essential'' for the word ``requires'' in sec. 58(2).

Such a conclusion that sec. 90 of the Real Property Act is a law to which sec. 58(2) of the Bankruptcy Act applies does not, however, lead to a rejection of the plaintiff's principal argument. The legal estate in the land does not, by reason of sec. 58(2), vest in the trustee until the registration requirements of sec. 90 have been complied with. But, once those registration requirements have been complied with, the vesting in my view is still effected by virtue of sec. 58, not by virtue of the application for registration. There are two reasons why. Firstly, sec. 58(2) itself so provides: it provides that, although the property vests in equity in the trustee by virtue of the section forthwith, it ``does not so vest at law'' until the registration requirements have been complied with - that is to say, the legal estate in the property also so vests in the trustee by virtue of the section as soon as the registration requirements have been complied with. Secondly, the requirements of sec. 90 are complied with when the transmission has been registered by the Registrar-General, not when the application for registration is itself executed by the trustee. Thus, even though registration is necessary in order to give effect to the transmission of the legal estate, that transmission is still effected by virtue of sec. 58 and not by the execution of the application for registration. The application for registration is not upon its execution the instrument whereby the property is vested in the trustee.

It follows, in my judgment, that the application by the plaintiff as trustee of the property of bankrupt persons for registration as the proprietor of the land of those persons under the provisions of the Real Property Act is not a ``conveyance'' within the meaning of sec. 65 of the Stamp Duties Act. The same conclusion would follow whether the application for such registration were to be made pursuant to either sec. 90 or 46C of the Real Property Act.

Each stated case seeks to have resolved also the question of whether the application for registration was chargeable to duty as an instrument which under the provisions of a statute is given the operation or effect of a deed: para. (2) of the head of charge ``Deed'' in the Second Schedule. The Chief Commissioner did not seek to argue that it was, so perhaps little need be said.

Section 36(11) of the Real Property Act provides that, upon registration, a dealing shall have the effect of a deed duly executed by the parties who signed it. A ``Dealing'' is defined by sec. 3(1) as being:

``Any instrument other than a grant or caveat which is registrable or capable of being made registrable under the provisions of this Act, or in respect of which any recording in the Register is by this or any other Act or any Act of the Parliament of the Commonwealth required or permitted to be made.''

The instrument in question here is an application by the trustee to be registered as the proprietor of the land of a bankrupt. What is registered by the Registrar-General is the fact of transmission to the trustee; it is not the application for registration itself which is registered. It is in respect of that fact of transmission to the trustee that sec. 90 permits a recording to be made in the Register; it is not in respect of the application for registration itself that the recording is made. In my opinion, therefore, the application for registration was not chargeable as a deed.

The plaintiff's appeal must accordingly be allowed in each case.

The plaintiff put forward an alternative argument in the event that it should be held that the application for registration fell within either the definition of a conveyance or the statutory description of a deed. The plaintiff says that the instrument in question in any event falls within the exemption provided in the Second Schedule, under the head of charge ``Real Property Act 1900'':

``(b) Any application for transmission other than an application for transmission to a devisee who is also the sole executor or administrator.''

It is conceded by the Chief Commissioner that such exemption would apply to documents otherwise chargeable as either a conveyance of property or a deed, but he disputes that the vesting of the land in the trustee by virtue of both the Bankruptcy Act and (it must be assumed for the purpose of considering this point) the application for registration under the Real Property Act is a ``transmission'' for the

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purposes of that exemption. He says that, upon its true construction, the exemption applies only to applications for transmission on death.

The Stamp Duties Act does not contain any special definition of ``transmission'', and it is correctly conceded by the Chief Commissioner that in its context in the ``Real Property Act'' head of charge the word ``transmission'' should be construed in the sense in which it is defined in that Act. Section 90 of the Real Property Act is, of course, to be found within Pt XI (``Transmissions''), and the side note to sec. 90 is ``Transmission on bankruptcy'', but those two facts are not of permissible assistance in resolving the problem of construction which is raised in this case. Section 3(1) of the Real Property Act defines ``transmission'' as:

``The acquirement of title to or interest in land consequent on the death, will, intestacy or bankruptcy of a proprietor.''

The only other references to transmission applications in the ``Real Property Act'' head of charge in the Second Schedule are to be found in para. (1), (8) and (14). Paragraph (1) is of general application. Paragraphs (8) and (14) and the exception to exemption (b) are all concerned with applications for transmission on death. However, I do not accept that the omission of any express reference elsewhere in this head of charge to transmission consequent upon bankruptcy can narrow the proper construction of the word ``transmission'' in exemption (b) in the light of that definition in the Real Property Act. The Chief Commissioner also argues that a vesting by virtue of sec. 58 of the Bankruptcy Act is not an ``acquirement of title... consequent on the... bankruptcy of a proprietor''. It was never explained to me why it was not. In my view, it clearly is: cf.
Holt v. D.F.C. of Land Tax, N.S.W. (1914) 17 C.L.R. 720 at p. 725.

Had I not accepted the plaintiff's principal arguments that the application for registration was not a conveyance within the meaning of sec. 65 of the Stamp Duties Act and not a deed within para. (2) of the head of charge ``Deed'', I would have upheld his alternative argument that the document fell within exemption (b) under the ``Real Property Act'' head of charge and was thus (as conceded by the Chief Commissioner) exempt from duty under both of the other heads of charge.

The plaintiff also put forward another alternative argument, that - even if the application for registration was a conveyance or a deed, and even if it did not fall within exemption (b) - as an equitable interest had already been transmitted by virtue of sec. 58 of the Bankruptcy Act alone, all that was conveyed by the application for registration (as it must be assumed that it was, for the purposes of considering this point) was the bare legal estate in the property. Such an interest could have had no value, the plaintiff says, and the duty should thus have been no more than $6.

This argument was attacked by the Chief Commissioner in a long and detailed reply, with references to a great deal of authority. However, efficiency in the use of the available judicial time for writing judgments demands (dare I say ``requires'') that I should not deal with more than is reasonably necessary to dispose of the precise point raised by the appeal. It is quite unnecessary for me to resolve this third argument, and I do not propose to do so.

The questions raised by the case stated in each case are answered by me as follows:

748/1985 (Simons)

• (a)(i) Whether the application is exempt from or not chargeable with stamp duty?
• Answer: The application is not chargeable with duty. Alternatively, it is exempt from such duty upon the basis that exemption (b) applies.
• (a)(ii) Whether the application is chargeable as a conveyance of property in accordance with para. (2) of the head of charge ``Conveyance of any Property'' in the Second Schedule to the Stamp Duties Act 1920?
• Answer: No. Alternatively, it is exempt from duty upon the basis that exemption (b) applies.
• (a)(iii) Whether the application is chargeable as a deed in accordance with para.(2) of the head of charge ``Deed'' in the Second Schedule?
• Answer: No. Alternatively, it is exempt from duty upon the basis that exemption (b) applies.

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• (a)(iv) Whether the application is chargeable upon some other and if so, what basis?
• Answer: No.
• (b) Whether the stamp duty in respect of the said application ought to be (i) nil; (ii) $1,700; (iii) $6; (iv) some other and if so, what amount?
• Answer: Nil.
• (c) By whom should the costs of the proceedings be paid?
• Answer: The Chief Commissioner as the unsuccessful defendant.

727/1985 (Lo)

• (a)(i) Whether the application is chargeable to stamp duty as a conveyance of property in accordance with para. (2) of the head of charge ``Conveyances of any Property'' in the Second Schedule to the Stamp Duties Act 1920?
• Answer: No. Alternatively, it is exempt from duty upon the basis that exemption (b) applies.
• (a)(ii) Whether the application is chargeable to stamp duty as a deed in accordance with para. (2) of the head of charge ``Deed'' in the Second Schedule?
• Answer: No. Alternatively, it is exempt from duty upon the basis that exemption (b) applies.
• (a)(iii) Upon some other and if so, what basis?
• Answer: No.
• (b) Whether the stamp duty in respect of the said application ought to be (i) $1,500; (ii) $6; (iii) some other and if so, what amount?
• Answer: Nil.
• (c) By whom should the costs of the proceedings be paid?
• Answer: The Chief Commissioner as the unsuccessful defendant.

I direct the entry of judgment accordingly in each appeal.