METRO TAXI MANAGEMENT PTY LTD v COMMISSIONER OF STATE TAXATION (WA)

Members:
Scott J

Tribunal:
Supreme Court of Western Australia

Decision date: Judgment handed down 20 September 1995

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Scott J

This appeal comes before the court as a transmission of objection from the decision of the State Commissioner of Taxation to disallow an objection to stamp duty assessments in relation to certain letters written by Metro Taxi Management Pty Ltd, the appellant in this appeal.

Shortly stated, the agreed facts of the matter are that Metro Taxi Management Pty Ltd (``Metro'') was a company which managed taxi-cars for the owners of the taxis. In late April and early May 1993 Metro wrote a number of letters to those taxi owners (``the owners'') in relation to the management of

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these taxis. Certain negotiations between Metro and each owner as to the terms of management of the owners' taxis occurred prior to the letters being written. Metro leased the vehicles to various drivers pursuant to written leases which were registered with the Taxi Control Board in accordance with the provisions of s 47 of the Taxi-Car Control Act (WA) 1985.

The letters were not presented to the respondent for stamping but came to the respondent's attention during the course of an investigation carried out by officers of the State Taxation Department into the taxi-car industry. It was determined by the respondent that the letters were instruments of security dutiable under Item 13(1)(b) of the Second Schedule to the Stamp Act (WA) 1921 (``the Stamp Act'') and assessments issued to the appellant.

Notices of assessment were issued on or about 31 January 1994. On 24 February 1994 Metro's solicitors gave the respondent a written notice of objection in relation to each of the ten assessments. The objections were disallowed, and Metro's solicitors notified by letter dated 3 January 1995. Subsequently, Metro's solicitors requested the respondent to treat the objection as an appeal pursuant to s 33(1) of the Stamp Act.

The Commissioner's statement filed pursuant to O 77 r 6(1)(d) of the Rules of the Supreme Court, raises the following questions:

• ``(a) whether Respondent erred in characterising the instruments as instruments of security and in assessing them to duty under item 13(1)(b) of the Second Schedule to the Act;
• (b) whether Respondent erred in not characterising the instruments as instruments for the hiring of any goods, wares or merchandise and as such exempt from duty under item 7(1)(a) of the Third Schedule to the Act;
• (c) how the costs of the Appeal should be borne and paid.''

The appellant's grounds of objection are firstly, that the letters do not effect a transaction, but rather evidence an oral transaction, and are not of a type which is liable to duty if not effected by an instrument, see s 31B of the Act. The second ground of objection is that even if the letters do effect a transaction, the transaction is not one which is liable to duty, but is one of hiring and is therefore exempt under item 7(1)(a) of the Third Schedule to the Stamp Act.

The first ground of objection

Metro wrote the letters to ten owners. It appears from evidence given by Stanley Elson, the managing director of Metro, that Metro came into possession of the taxis owned by those ten owners at some stage subsequent to 16 April 1993 as the result of the failure of another taxi management company. In an affidavit sworn 17 April 1995, Mr Elson deposed to having conversations with all of the owners prior to the letters being sent. These conversations encompassed aspects of the agreement between Metro and the owner. The detail discussed in the conversation appears to have varied as between different owners. However, the letters sent subsequent to these discussions varied from owner to owner but were very similar in both form and content.

The letters are generally expressed as being to ``confirm our agreement'' and set out various terms of the agreement including the length of the agreement, the amount of money per taxi which would be forwarded by Metro to the owner each month, and if applicable a statement to the effect that where vehicle replacement would be considered in the near future, Metro would be pleased to assist in the purchase of a new vehicle.

All but one of the letters included a statement to the effect that ``The management of the vehicles will cover ALL expenses occurring in the operation of these taxi cars to include, licencing (sic), insurance, all mechanical repairs and associated expenses as they occur''.

Mr Elson deposed in his affidavit that the conversations he had with the owners included specific mention of the amount to be paid by Metro to the owner, and at what time, and the expenses that Metro would meet in relation to each particular vehicle.

In determining whether or not a document effects or evidences a transaction, it is not material that the document in question is signed by only one party to the transaction:
Fleetwood- Hesketh v Commissioners of Inland Revenue [ 1936] 1 KB 351 at 359. Fleetwood-Hesketh is authority for the proposition that if the parties to an agreement intend that the agreement should be recorded, then the recording document will be equally liable to duty as if it had been the original effecting document, per Lord Hanworth

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MR at 358-359. As to that matter, Mr Elson was of the opinion that the letters served two purposes; as a public relations exercise and to confirm the terms of the oral agreement. Mr Elson wanted to ensure that those terms were clearly understood so as to avoid conflicts at a later date; in cross-examination he stated that one of the purposes of the letters was to ``maintain in their minds what they intended to agree''. I have reached the conclusion that Mr Elson intended that the agreement should be recorded.

The respondent, in its written submissions, submitted that the letters were so proximate in time to the discussions that they must be considered as part of the transactions. The conversations were held at various different times between the 21 April and 1 May 1993. The letters were sent out at various times between the 27 April 1993 and 5 May 1993. It appears that the average gap between discussion and letter was approximately one week, and sometimes less than that. In my opinion, the letters were sufficiently proximate to the transactions to be said to constitute part of them.

I note that the forms ``Notification by Owner of Change of Control or Management of Taxi- Car'' annexed to the affidavit of Michael John Feinas sworn 30 May 1995, show that the change of management of the cars from the owner to Metro was recorded as having been pursuant to a written agreement. For the purposes of these reasons, however, that is of little significance.

On the evidence before me, I have reached the conclusion that these letters did form part of the transaction. That is, they effected rather than evidenced the transaction. If the transaction they effected is liable to duty, then the letters are dutiable.

As submitted by counsel for the Appellant, the decision in
Commissioner of Stamps v Frost (1926) 28 WALR 81 is binding authority of long-standing application. However, the present case is distinguishable on the facts from the decision in Frosts' case. Frost involved a transaction between husband and wife, in which the husband purported to gift to his wife the whole of his business (a shop) by going with her into the shop, handing her an article and saying to her ``I give you this in the name of the whole''. The husband then signed an instrument in the following terms: ``This will serve to place on record the fact that I have this day made a free gift to you of the whole of my business carried on at the above address, together with all its assets, and that I have delivered physical possession of same to you...''.

The Full Court held that the document was merely a record of what had taken place and did not transfer anything to the wife. Draper J, delivering the judgment of the court, held that the instrument before the court contained no words of present gift and that the instrument did not pass the property in the chattels to the wife. In contrast, in this case, the letters contain important terms of the agreements between the two parties.

I note that the effect of the decision in Frost was to enable circumvention of revenue statutes, but this was remedied by the legislature in 1941 when amendments to the Stamp Act were passed which rendered records of certain transactions liable to duty - s 73 of the Act. The decisions in
Garnett v Inland Revenue Commissioners (1899) LT 633 and
Cohen & Moore v Inland Revenue Commissioners [1933] 2 KB 126 both concerned instances where a written document was held not to evidence but effect a transaction; Garnett was cited to the court in Frost but held not to be of any application to that case.

I am bound by the decision in Frost, a decision of the Full Court of the Supreme Court of Western Australia. I note that even if I were not so bound, I would follow that decision as I have decided that documents in this case effect rather than evidence the transaction, and thus the two are distinguishable.

The second ground of objection

This ground related to the substance of the transaction itself. The appellant submits that the transaction is one for hire and is therefore exempt under Item 7(1)(b) of the Third Schedule to the Stamp Act. The respondent submits that the instrument is one for security and is therefore dutiable under Item 13(1)(b) of the Second Schedule to that Act.

As set out earlier in these reasons, Metro was under an obligation to make regular payments to the owners. It was under a duty to make payments to the owners in an agreed amount whether or not it was able to find a driver for the taxi. Metro undertook, as noted earlier, to

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pay for and arrange all mechanical upkeep and Taxi Board and Road Traffic Act licensing requirements, save for two cases where the repair and upgrading of the cars to Taxi Board standards was to be paid for by the owners.

The payments to owners were to be made monthly, with a review of the payment one year later. None of the letters provided for the return of possession of the vehicle to the owner, nor a termination date for the agreement. The agreements expressed that they were to run ``until further notice''.

The appellant ``leased'' the car to drivers, and for the purposes of the 1985 Taxi-Car Control Act completed a standard form provided by the Taxi Board which purported to lease the taxi to the driver. Metro was styled ``the Lessor'' in this agreement. In my opinion these documents, whilst expressed to be leases, were not. Metro was not the owner of each vehicle and so did not have title to support a lease. In my view these agreements could more properly be described as licences to use rather than leases.

The agreement did create an obligation to pay an amount of money. However, the present case can be distinguished from the facts in
National Mutual Life Nominees Limited v Commissioner of State Taxation (WA) 91 ATC 4309; (1991) 4 WAR 226. That case involved a written agreement whereby IHC Pathology Pty Ltd (``IHC'') effectively hired its business as a going concern to the appellant. National Mutual Life Nominees Limited paid a licence fee to IHC and in addition paid all moneys due to the staff by way of salary and leave entitlements as well as payments in connection with the rent of the premises and the leasing of equipment. The NML case involved the hire of the business under a licence agreement. As the taxi licences cannot be transferred, all that was being hired from each owner in the present case was the taxi. Each agreement was therefore one for the hiring of goods and as such is exempt under Item 7(1)(a) to the Third Schedule. Wallwork J in the NML case held that the agreement in that case constituted an instrument of security within the meaning of Item 13 of the Second Schedule to the Stamp Act.

Wallwork J examined the authorities and held at ATC 4315; WAR 233 that the instrument in question in the NML case was one by which the obligation to pay was originally created and that the authorities:

``... have decided that an instrument of the nature of the one in this case, is `an instrument of security of any other kind whatsoever' within the meaning of the words in the heading to Item 13.''

Counsel for the respondent relied upon the decision in
Neon Signs (Australia) Limited v Commissioner of Stamps [1963] WAR 167. In that case what was in question was a standard form of hiring agreement. The appellant, a manufacturer of neon signs, adopted a standard form agreement by which the manufacturer/ owner would construct, install and maintain a sign on the premises of the hirer, the hirer undertaking to pay monthly instalments of hire during the term, to wire the sign and pay all electrical charges relating to it.

Virtue J held at 169 that:

``The provisions of the hiring agreement, imposing as they do obligations on the owner to construct, install and maintain the chattel the subject of the agreement, to my mind clearly take it out of the category of a mere hiring agreement over chattels and would prevent it being regarded as such for the purposes of stamp duty.''

Such considerations are not present in this case. The agreement in this case did not involve both parties in long term and ongoing obligations in relation to the cars. Where obligations were imposed on both parties (for example if the taxi-cars were required to be brought to Board standards), they were on a one-off basis.

As submitted by counsel for the appellant, the mere fact that a hiring agreement requires the hirer to do more than merely pay money does not, by itself, take the agreement out of the realm of being a hiring agreement. It is to be expected that other obligations will be laid upon the hirer in relation to the upkeep of the chattel.

The licensing of the taxis has a particular significance in this case. Taxi-car licences are personal to the licensee. Whilst the taxi-car itself may be hired by the appellant, the licence cannot be (see ss 25 and 26 of the Taxi-Car Control Act (WA) 1985). In this particular instance, although Metro was to be responsible for the licensing of the taxis, it did not hold the licences on its own behalf or on behalf of the owners. In this respect, Metro acted as the owners' agents in relation to licensing only. When viewed with the rest of the transaction,

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this was clearly an arrangement of commercial convenience.

I have reached the conclusion that the agreement between the appellant and the owners was one for hire only and is exempt from duty under Item 7(1)(a) of the Third Schedule to the Stamp Act.

The answers to the questions posed in the Commissioner's statement are as follows:

(a) Yes

(b) Yes - the instruments are exempt under Item 7(1)(a) of the Third Schedule to the Act.

(c) The respondent to pay the appellant's costs of the appeal to be taxed.

The appeal will therefore be allowed and I will hear counsel as to any appropriate further orders under s 33(4) of the Stamp Act.