Matthews v. Timothy.Judges:
Supreme Court of Tasmania
This is an appeal against an assessment of duty made by the Commissioner of Stamp Duties. The original assessment was made on 6 May 1986 and was reviewed and amended by the Commissioner on 11 June 1986. The assessment related to a lease agreement ("the lease"), dated 25 July 1984, made between Camellia Farms Pty. Ltd. as lessor ("the landlord") and the applicant and Barbara Maree Dodd as lessees ("the tenant" (sic)).
By a further agreement made on 28 February 1986 (but erroneously dated 28 February 1985) Barbara Maree Dodd assigned her interest in the lease to the applicant.
In reviewing and amending his original assessment, the Commissioner took the view that the lease fell for assessment under Item 13(a) of the Second Schedule of the Stamp Duties Act 1931. On this basis, he calculated the duty payable at $270. He also imposed a penalty of $270 for late stamping of the instrument pursuant to sec. 13 of the Act. The current appeal is brought under the provisions of sec. 21 and 22 of the Act.
The Commissioner took the view that the lease constituted a "conveyance" within the meaning of Item 13 of the Second Schedule which was not exempted from duty by the provisions of Item 13 of the Third Schedule. That item has the effect of exempting from duty as a conveyance "any lease, except in respect of any foregift or fine payable or paid on the granting thereof". Clauses 1 and 2 of the lease read as follows:
"1. The Landlord lets and the Tenant takes of (sic) all that the residential dwelling shown as house two (2) on the Plan attached hereto such Plan relating to the land comprised in C/T 3982/23 together with the access thereto as shown surrounded by red boundary lines on the Plan for a term of 15 years with such term commencing on the 25th day of July 1984 but which shall determine on the 25th day of July 1999.
2. The consideration for the demise hereby created shall be the capital sum of SIXTEEN THOUSAND DOLLARS ($16,000) paid by the Tenant to the Landlord the receipt whereof the Landlord does hereby acknowledge."
There is no provision in the lease for the tenant to pay any periodical sum by way of rent. The landlord is obliged to pay all rates and taxes. The agreement makes no provision for a refund of any kind to the tenant in the event of the forfeiture or termination of the lease before 25 July 1999.
The appellant submits that the payment of $16,000 at the commencement of the term, although described as a capital sum, and being provided for in terms appropriate to a fine, premium or foregift, is in reality a cash payment in advance of rental and as such, it is dutiable only under Item 20 of the Second Schedule of the Act.
It is clear from the authorities that no matter how described in the instrument itself, the true character of any payment provided for in a lease is to be determined having regard to the actual nature of the transaction. See, for example,
Samuel v. Salmon & Gluckstein Ltd. (1946) 1 Ch. 8 per Uthwatt J. at pp. 12-13.
For present purposes it may be taken that the expressions "fine", "premium" and "foregift" are synonymous.
King v. Earl Cadogan (1915) 3 K.B. 485 at p. 492, Warrington L.J. said:
"I need not say anything about the meaning of the word rent but `premium' as I understand it, used as it frequently is in legal documents, means a cash payment made to the lessor, and representing or supposed to represent, the capital value of the difference between the actual rent and the best rent that might otherwise be obtained. It is a very familiar expression to everybody who knows the terms and powers of granting leases. It is in fact the purchase money which the tenant pays for the benefit which he gets under the lease.
There is, however, another sense in which the expression `bonus' or `premium' may be used. In this sense it is to be distinguished not only from the periodic rent payable under the lease but also from such a capital sum as has just been referred to. The conception of `requiring' some money payment as a `condition' of the grant of a tenancy is well understood. To my mind, there is a real distinction between such a requirement as a condition precedent to the grant of a tenancy (on any terms) on the one hand, and on the other hand, the provision in the lease or contract of tenancy for
ATC 4608payment of some lump sum by way (as in the present case) of compounding of rent and in addition to the periodic rent. It is the former, and the former only, which is prohibited and made the subject of criminal proceedings [that is, by the (English) Landlord and Tenant (Rent Control) Act 1949]. The latter, for reasons which I have already stated, if not in truth a disguised premium required as a condition of the grant, might, at least, be properly regarded as a disguised part of the rent. [
Woods v. Wise (1955) 2 Q.B. 29 per Lord Evershed M.R.] In this view of it, a premium is a `personal promise in consideration of the lease being granted' (
Hill v. Booth (1930) 1 K.B. 381 at 387 per Scrutton L.J.), as distinct from rent which is a payment for the use of the land. Provision that the unpaid balance of a `premium' agreed to be paid by instalments is to become immediately due and payable in the event of the term being determined by re-entry is an indication that the premium is `a consideration for which the lease itself is granted' (per Slesser L.J. at 391) and in such a case the balance of the instalments remains payable notwithstanding the extinguishment of the term by merger. So too, there is a premium in this sense where the covenant to pay a premium by instalments is a purely personal covenant not running with the land, as appearing from a provision in the lease that, on assignment or underletting, it shall be a condition of the lessor's granting consent that all remaining instalments of premium are paid by the lessee to the lessor;
Regor Estates Ltd. v. Wright  1 K.B. 689 at 698. On the other hand, if there is provision whereby liability to pay a `premium' is to cease on determination of the lease prior to its expiring by effluxion of time - if the parties' intention was that `the `rent' and the `premium' were to march together' (Samuel v. Salmon and Gluckstein Ltd.  Ch. 8 at 12, 13) - or if there is a right in the lessee of pro tanto recoupment on premature determination of the lease (Woods v. Wise at 46), these are indications that the sum in question is not really a premium but is in truth and substance an additional rent."
The meaning of the word "rent" in a lease is, for present day purposes, to be regarded as a payment by a tenant to his landlord for the use and enjoyment of the land comprised in the lease. See
Property Holding Co. Ltd. v. Clark (1948) 1 K.B. 630 at p. 648;
United Scientific Holdings Ltd. v. Burnley Borough Council (1978) A.C. 904;
Frazier v. Commr of Stamp Duties (N.S.W.) 85 ATC 4735. The facts of the last-mentioned case bear a certain similarity to those involved in the current appeal. However in Frazier's case, the lease in question contained the very important provision that in the event of termination of the lease before the expiration of the 20-year term provided for, a portion of the prepaid lump sum of $30,998 would be refundable to the lessee.
Lee J. regarded this as being of crucial significance and determined that the prepaid lump sum was to be treated as rent paid in advance and thus the lease was not dutiable upon the basis of that payment being a premium. It was also not without significance that the lease itself expressed the prepayment to be "rent in advance as a lump sum".
In Samuel v. Salmon & Gluckstein Ltd. (supra), Uthwatt J. also appears to have attached considerable significance to the fact that "the obligation to pay sums by way of premiums ceases with the determination of the lease before its expiry by effluxion of time, and there is a provision for apportionment in respect of any broken year".
None of these factors is present in the current case.
The applicant Matthews swore an affidavit in support of the present appeal. This affidavit was not objected to and was accordingly admitted into evidence and read. It contained (inter alia) the following material:
"2. I personally negotiated the lease with Mr S. Evans whom I understand is a director of Camellia Farms Pty. Ltd. (referred to in the lease agreement as `the Landlord') on behalf of myself and Barbara Maree Dodd the other tenant named in the lease. I was not experienced in these matters and I did not at the time have the benefit of any legal advice. I and the said Barbara Maree Dodd were content at the time with a tenancy for fifteen years. We were happy to commit ourselves to a residential lease for that term.
3. THE payment of $16,000.00 provided for in Clause 2 of the lease is the only
ATC 4609payment which has even been made pursuant to the lease and was paid by way of $2,000.00 in cash and $14,000.00 obtained by way of a loan from Westpac Banking Corporation in St Helens which loan I am repaying over a four and one half year term.
4. AT the time when the lease was negotiated I understood that the sum of $16,000.00 was the amount calculated to be rental over the period of the tenancy. There was no mention of any other sum with which we were to be charged or any other payments which were or might become due and owing to the Landlord. It was simply understood to be the amount charged by way of rental for the term of the lease. I was not aware that I might in any way be prejudiced by agreeing to make payment by way of a lump sum in place of a periodic rental or that this would make the lease any different from any other lease for a term of years.
5. AT the time of executing the lease I did not expect to receive any other rights other than the right of occupation of the premises referred to in the Lease subject to the terms and conditions set forth therein. That sum was considered by me to be rent for the term of the Lease. I do not know how the Landlord calculated that amount."
There was no affidavit by the landlord explaining the basis upon which he calculated the lump sum payment of $16,000. There is no basis upon which I could be satisfied that that sum represented a payment of so much per week or per month, whether simply extrapolated over the period of the lease, or discounted in consideration of immediate payment in advance.
Counsel for the applicant submitted that the absence of any provision in the lease for payment of periodic rent should, of itself, lead to the conclusion that the lump sum payment represented rent in advance. However, I cannot agree with this contention. Whilst the absence of such a provision is, no doubt, a relevant factor to be considered, it is, upon an issue of the kind now before me, almost neutral in my opinion.
As this is an appeal against an assessment by the Commissioner, I take it that the onus of persuasion is upon the applicant to satisfy me to the normal civil standard that the assessment was erroneous. This he has failed to do. Indeed, both on the material place before the Commissioner and the material before me on this appeal, the Commissioner's characterisation of the payment appears to be correct.
Accordingly, the appeal is dismissed.