CAMPBELLS HARDWARE & TIMBER PTY LTD v COMMR OF STAMP DUTIES (QLD)Judges:
Supreme Court of Queensland
By this application for a statutory order of review, the applicant challenges an amended assessment of stamp duty and the respondent's rejection of the objection to that assessment. The original assessment was made in respect of a Form S(a) lodged in August 1993. After the assessment was paid, the respondent amended the Form S(a) and reassessed the duty at an additional $765,557.54. An objection to the amended assessment has been disallowed.
The contest arises out of the acquisition of retail hardware shop businesses formerly conducted by subsidiaries of James McEwan Limited (Receiver and Manager appointed). By a ``Sale of Business Agreement'' dated 21 September 1992, the applicant purchased the goodwill of the businesses, specified plant and equipment, and other assets associated with the businesses. The Form S(a) disclosed the value of the assets acquired at $4,091,839. Of this, $2,700,000 was attributed to freehold properties, $1,300,000 to plant and chattels, and the balance to sundry debtors. The form provided space to insert the value of the stock in trade acquired. Here ``Nil'' was typed in. The amendment of this entry accounts for the reassessment. The respondent changed it to $20,471,207.
The application raises three issues, whether (i) the amendment of the Form S(a) accords with the effect of the contracts for the acquisition of the businesses and their assets; in other words, whether the trading stock was ``agreed to be acquired from the owner'' of the businesses within the meaning of s. 54A of the Stamp Act 1894 (``the Act''); (ii) section 81 of the Act sustains the amended assessment; and (iii) ss. 22A(2) and 80(2) authorise the reassessment of the amended Form S(a).
Basis of Liability to Duty
Section 54A(2) of the Act requires a person who acquires, or agrees to acquire, a business in Queensland to deliver to the respondent ``a statement... in the prescribed form... showing the prescribed information''. By s. 54A(5), that statement is ``charged with duty... as if it were a conveyance or transfer of the property to which the statement relates...''. The prescribed form is the Form S(a).
``attached statement sets out full details of all assets... appertaining to, or in any manner connected with the business which were acquired or agreed to be acquired from the owner whether the same were included in the transaction whereby the business was acquired or agreed to be acquired or were the subject of a separate transaction.''
Accordingly, the chattels to be valued and included in the Form S(a) as stock in trade were those appertaining to the businesses which were ``acquired or agreed to be acquired'' from the owners of those businesses. In this context,
ATC 4350``acquire'' and its derivatives import to ``get as one's own''.
The applicant contends that the stock remained the vendors' property, being held by it as a bailee for sale on consignment as agent for the vendors. According to the respondent, however, the applicant agreed to ``acquire'' the stock, which was destined for retail sale on the applicant's own account. The question is whether, according to the true legal character of the arrangements, the applicant agreed to get the stock as its own. To arrive at the answer, in this case it is necessary to ``look at what the contract really was, and not at what the parties said it was''.
Substance of the Contracts
Clause 7 of the Sale of Business Agreement provides that the trading stock of the businesses was to ``remain the property of'' the vendors ``and is not included in the Assets acquired... under this Agreement'', which is plainly opposed to the notion that the applicant agreed to acquire it. But matters do not rest there.
The day that Agreement was signed, the parties to it entered into an ``Agency Agreement'' dealing with the stock. This contract begins by reciting that each vendor owns ``trading stock which it wishes to dispose of as part of its business'', and that the applicant has agreed ``to act as agent of each vendor'' to effect its disposal. By cl. 2, the applicant is ``irrevocably'' appointed such an ``agent''. That clause also establishes an interdependence with the Sale of Business Agreement: the Agency Agreement ``shall terminate'' if the other contract ``be terminated''. The important cl. 3 then provides:
- ``(a) The Stock Agent acknowledges that, from the Completion date, it shall hold the Trading Stock as bailee for the Vendors on a consignment basis.
- (b) Until delivery to a purchaser, the Stock Agent will store the Trading Stock at its risk and will keep it adequately insured against all usual risks and (subject to clauses 7 and 9) shall account to the Vendors for any proceeds of that insurance as soon as practicable after they become available, as if such proceeds constituted the proceeds of disposal of that Trading Stock.
- (c) Subject to the obligations of the Stock Agent to account to each Vendor as set forth in this Agreement, the Stock Agent shall have the same powers to deal with the Trading Stock for the benefit of the Vendors as it has in respect of its own stock, including the power to sell any part of the Trading Stock to one or more of its Related Bodies Corporate.
- (d) The Stock Agent's powers also include the power to sell any part of the Trading Stock to itself (and on its own account), should the Stock Agent so wish.''
The Agency Agreement stipulates a mechanism for calculating the cost the applicant was to incur in exchange for the rights accorded to it under the Agreement. By cl. 4, ``subject to cl. 28.1(d)'', the applicant ``warrants'' that the vendors will receive from disposal of their stock ``the aggregate amount required to be advanced... under cl. 8''. Clause 8 required the applicant, on completion, to pay - ``make an advance'' is the phrase used - $17,500,000 as the estimated value of the stock on the completion date. The ultimate expense the applicant was to bear for the rights acquired in respect of the stock might have been more or less than that substantial ``advance''.
Clause 8.2 called for a stocktake to value the stock according to a methodology described in the contract. The stocktake might have triggered an adjustment to the price. Broadly, the scheme was this: if the value of the stock exceeded $17,500,000, the applicant had to pay the difference ``by way of a further advance''; and if the value proved to be less than $17,500,000, the ``deficit'' was to be repaid. Consistently with this, by cl. 10 the applicant was entitled to receive for itself, not for the vendors,
As I have said, cl. 28.1(d) qualified the applicant's promise that the vendors would receive ``the aggregate amount required to be advanced'' under cl. 8. The qualification concerns a contingency identified in cl. 8.7 of the Sale of Business Agreement. As that contract discloses, some of the businesses were conducted from leased premises. Clause 8.7
ATC 4351addressed the possibility that the applicant might not secure a lessor's consent to an assignment of the lease. It envisaged that, where such a consent had not been obtained or other arrangements had not been negotiated with the lessor by a nominated date, the particular ``site lease'' became excluded from the sale. In that event, the related business was not to be acquired and trading stock at those premises was likely to be affected.
Under cl. 28 of the Agency Agreement, if a site became such an ``excluded site'', as it was called, a stocktake was to take place to ascertain the value of the stock of that business at the ``exclusion date'' in accordance with the same methodology used to establish any balance ``advance'' to be paid by the applicant. The Agency Agreement also catered for the contingency that a site became excluded in another way. The ``stock agency'' created by cl. 2 terminated from the ``exclusion date'' to the extent that the ``agency'' related to stock at the excluded site. The applicant was required to re-deliver the excluded stock, whereupon it became entitled to a ``refund'' representing the value of the excluded stock. Accordingly, subject to the cl. 28.1 contingency, at completion the applicant was to take possession of the stock appertaining to the businesses and, in exchange for those goods and the rights acquired in them, became obliged to pay their value established in accordance with the agreed methodology.
In this case, the intention of the parties is to be gathered from their contracts. Not surprisingly, the applicant attaches significance to the terminology. Clause 7 of the Sale of Business Agreement is explicit: the stock remains the property of the vendors. And the Agency Agreement abounds with words indicative of agency for sale rather than an acquisition by the applicant of the goods. In particular, cll. 2 and 3 are replete with language familiar in the law of principal and agent. The applicant, appointed as ``stock agent'', expressly acknowledges that its possession of the stock after completion is ``as bailee... on a consignment basis''.
Yet with varying significance, some features of the Agreement point to sale, rather than agency, as the essence of the relationship. That the risk of accidental loss is borne by the applicant is one.
The amplitude of the applicant's dominion after completion is not left to inference. By cl. 3, the applicant has the same power ``to deal with'' the trading stock as in relation to its other stock, which must comprehend a right to sell in its own name. True it is that the power is expressed to be ``for the benefit of the vendors''; but these words serve no function because the vendors' entitlements are not affected by any dealing in the stock by the applicant. The vendors get a sum of money unrelated to the destiny of the goods. More importantly, at completion the applicant took possession with the right
ATC 4352Although the applicant could have insisted on returning stock on the occurrence of an event contemplated by cl. 8.7 of the Sale of Business Agreement, on no contingency could a vendor have demanded the goods back or controlled their fate.
It is ``characteristic of ownership that an owner has a residuary right in the thing owned''.
Securities subsisting when the contracts were made are said for the applicant to be inconsistent with its having agreed to ``acquire'' the stock. These fixed charges affected the entire trading stock and were a source of the receiver's power to sell. The applicant, it is said, could only give title to a third party as agent for the receiver. And so, as best I grasped the argument, it is contended that the securities show that the Agency Agreement did not promise the property in the stock to the applicant.
By cl. 17 of the Agency Agreement, the vendors warrant the existence of a power to sell ``subject, at the date of this agreement, to the Securities''. Clause 30.1 contains an undertaking that the charges over the stock will not be released or varied while the agency continues or ``Advances'' remain outstanding. Clause 30.2 deals with the prospect that the securities might be enforced during the period mentioned in cl. 30.1. In that event, the proceeds were to be applied in favour of the vendors towards the ``Warranted Amount'' in partial satisfaction of ``the Advances'' and then, ``by way of commission'', to the applicant. The securities involved, I suppose, a potential to affect the volume of stock available to the applicant and therefore the aggregate price payable. But neither the existence nor the prospect of enforcement of the securities matters to the conclusion that the applicant agreed to get the stock as its own.
The alteration the respondent made to the Form S(a) accurately stated the effect of the contracts in relation to the trading stock appertaining to the businesses. This conclusion makes it unnecessary to consider whether the anti-avoidance provision, s. 81, applies and leaves for decision the question whether the respondent was entitled to reassess the amended Form S(a) to duty.
Section 22A(2) of the Act relevantly provides:
``Where the Commissioner is not satisfied with a statement... on which duty is chargeable under this Act, the commissioner may-
- (a) alter the statement... so that, in the commissioner's opinion, it satisfies the requirements of this Act; and
- (b) assess the duty which in the commissioner's opinion is chargeable under this Act on the statement... (altered by the commissioner...)...''
By s. 80(2):
``... where it is ascertained... that the amount of duty payable on any... statement has been assessed at an insufficient amount, the Commissioner may-
- (a) reassess that duty...; and
- (b) demand and recover an amount equal to the difference between the duty assessed at an insufficient amount and the amount of duty correctly assessed.''
The applicant contends that s. 22A(2) does not permit alteration of a Form S(a) once assessed to duty. This proposition receives support from the structure of s. 22A(2) and the content of s. 80(2). The former speaks of an assessment after alteration, and does not mention reassessment. The latter does not allow reassessment of a Form S(a) which, on the facts stated in it, has been assessed to the right amount of duty. However, nothing in the text of the Act in terms stipulates that an alteration may only be made before assessment. Nor, in my opinion, is the ``and'' between paragraphs (a) and (b) of sub-s. (2) only consistent with a legislative intention that the respondent may not alter a Form S(a) except for an initial assessment.
Inconvenient consequences could attend the interpretation suggested for the applicant. Take Forms S(a). A person liable to duty on the acquisition of a Queensland business must
ATC 4353provide the prescribed information. The facts stated might be inaccurate or incomplete. Despite the respondent's s. 23 powers to obtain information, the real position might not be established until after assessment. Yet a Form S(a) assessed to the duty appropriate to the facts it states cannot be reassessed under s. 80(2) unless it is altered. So to accept the interpretation suggested for the applicant is to anribute to the Parliament an intention not to allow a reassessment where a wrong Form S(a) is lodged and the error is not discovered until after assessment. This seems unlikely, even if
The application is dismissed.