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HAWLEY PARTNERS PTY LTD v COMMR OF STAMP DUTIES (QLD)

Judges:
Macrossan CJ
MacPherson JA
Byrne J

Court:
Queensland Court of Appeal

Judgment date: Judgment delivered 20 August 1996

Macrossan CJ and McPherson JA

This is an appeal by Hawley Partners Pty. Ltd. by way of case stated under s. 24 of the Stamp Act 1894 against an assessment by the Commissioner of Stamp Duties of stamp duty on a deed of compromise and sale dated 17 October 1990. The questions for the decision of the Court are set out in sub-paras. (a) to (g) of para. 22 of the stated case. Of those seven questions, the parties have agreed on the answers to (a) to (d), leaving only the last three questions, which include the matter of costs, to be determined by the Court. Of these, question 22(e) asks whether the original assessment to duty, as amended on 3 August 1993 to $73,230, is in accordance with the Act; and, if not, then by question 22 (f) whether any and what other amount of duty is chargeable on the deed and an instrument of redemption which followed it on 26 October 1990.

A number of individuals and companies were parties to the deed, which disposed of three different forms of property. They were shares, units in a unit trust, and an interest in a partnership. It is only with the units that this appeal is concerned. By cl. 1.3 of the deed the unit vendor, which was Harward Nominees Pty. Ltd. as trustee for the Keith Harward Family Trust, agreed to sell, and the unit purchasers, which were three companies named in schedule 5 as trustees for specified family trusts, agreed to buy 25 (``the subject units'') out of 100 issued units in the unit trust. By cl. 1.4, the consideration for that purchase or purchases was set out in schedule 12, which provided for payment, in the case of each purchaser of a parcel of 8 units (together with one other unit to make the number up to 25), of a small deposit paid or payable on or before execution of the deed. The balance of those prices, which together totalled $690,000, was to be paid in each instance on the date of settlement, which was to be 26 October 1990. Clause 3.1 of the deed also incorporated certain special conditions contained in schedule 17, of which paras. 1 and 3 are as follows:

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``1. Each of the parties hereto acknowledges and agrees that this Deed is being entered into pursuant to an Agreement made between the parties on March 28 1990, and that notwithstanding the date of this Deed or the Date of Settlement the effective date of transfer for the purposes of the Income Tax Assessment Act and for all other purposes whatsoever shall be the 31st day of January 1990.

3. Notwithstanding that this Deed is expressed as an agreement for the sale and purchase of the Subject Units, if at any time prior to the Date of Settlement, the Trustee determines to redeem the Subject Units, then the provisions of this Deed relating to consideration, payment of the deposit and payment of the balance of the consideration shall apply mutatis mutandis to such redemption.''

The trustee was Hawley Partners Pty. Ltd., which is the taxpayer and the appellant in these proceedings. By an instrument dated 26 October 1990 entitled Redemption of Units, the appellant as trustee addressed to the unit vendor Harward Nominees Pty. Ltd. an offer to redeem the subject units, of which it was the registered holder, for a price of $690,000 ``with the effective date of redemption being 31 January 1990''. Also on 26 October 1990, the offer was duly accepted by Harward Nominees Pty. Ltd.

According to para. 9(b) of the stated case, the Commissioner in making his assessment relied on ss. 4 and 56B(4) of the Act, and para. 4(b) of the heading ``Conveyance or Transfer'' in schedule 1 to the Act. Section 4(1) charges stamp duties on the several instruments specified in that schedule. Paragraph 4(a) in the schedule imposes duty on a conveyance or transfer of any property, to be calculated at a specified rate ``on the amount or value of the consideration''. According to s. 56B(4):

``(4) Subject to subsection (5), an instrument transferring a unit or effecting or evidencing a disposition in relation to a unit shall be chargeable with duty as if it were a conveyance free of encumbrances of an undivided share, equivalent to the proportion of the total issued units under the unit trust scheme represented by the unit, in the property held by the unit trustee as trustee without regard to the debts or liabilities of the unit trust scheme.''

The expression ``unit'' is defined in s. 56B(1) to mean any right or interest of a beneficiary under a ``unit trust scheme'', which in turn is defined in s. 56B(l) in such a way as to make those definitions applicable to the subject units in the present case.

From what has been recounted above, it is clear that the subject units were not conveyed or transferred to the unit purchasers pursuant to the deed dated 17 October 1990, but were instead redeemed on 26 October 1990 before the contemplated sale was completed. However, s. 54(1) of the Act provides that any contract or agreement for sale, or any contract or agreement by which a person becomes entitled or may (if the terms and condition are met) become entitled, to a conveyance or transfer of any property is to be charged as if it were an instrument of conveyance of property. The deed dated 17 October 1990 appears to satisfy that description because, at that date and thereafter, it was one by which the unit vendors ``may'' have become entitled to the subject units which were to be sold. More specifically, in relation to an instrument evidencing a ``disposition'' of a unit under s. 56B(4), that term is defined in s. 56B(1) to include ``a transfer or other disposition (including... [an] agreement to dispose) of the unit''. In fact, in reliance on s. 53(7) of the Act, the course adopted by the Commissioner was to treat the deed dated 17 October 1990 and the instrument of redemption dated 26 October 1990 as instruments which together gave effect to the same conveyance. Having done so, the Commissioner then acted under s. 53(7) to set off the duty chargeable on one instrument against the duty charged on the other. As the property in each instance was the same, the result was said to be that the appellant paid or became liable for only one amount of duty on the whole ``disposition'' or transaction involved.

Much of this is relevant, if at all, only incidentally now that the parties to this appeal have reached agreement about how the first four questions in para. 22 of the stated case are to be answered. What remains to be decided is the proper date at which the value of the subject units ought to have been determined for the purpose of assessing duty. In the amended assessment made by the Commissioner, the date adopted was 31 January 1990. It was, in terms of para. 1 of schedule 17 to the deed, described by the parties to the deed, as ``the effective date

ATC 4850

of transfer'' for the purposes of the Income Tax Assessment Act ``and for all purposes whatsoever''. Accountants acting for the parties, or one or more of them, made a valuation dated 28 March 1990 of the property that was the subject of the unit trust. March 28, 1990, was, according to para. 1 of schedule 17 to the deed, also the date of an agreement ``pursuant'' to which the parties entered into the deed; but the property included a variety of different items, such as a business, farms and real estate, which had to be separately valued, and the accountants' valuation is stated to be their opinion of the value of a unit ``at 31 January 1992''. It was that value or valuation that was adopted by the Commissioner, with some departures which are not material here, for the purpose of the assessment.

The appellant challenges this approach, and submits that the Commissioner was bound as a matter of law to adopt the date of the deed (17 October 1990) as the date for valuing the property the subject of the ``disposition'' assessable to duty. That, it was submitted, was the only relevant date, for the reason that stamp duty is a tax on instruments, and it was the deed dated 17 October 1990 which, under s. 56B(4), constituted the relevant instrument that transferred the subject units. In valuing the property comprised in the subject units, the Commissioner was therefore not entitled to adopt ``the effective date'' of 31 January 1990 selected by the parties; and, having done so, the assessment was liable to be set aside. The result would be to require a further assessment based on a valuation at 17 October 1990.

Neither the provisions of the legislation nor judicial decisions given under it provide an unequivocal answer to the question raised by the appellant. Stamp duty, it may be accepted, remains at least primarily a tax on instruments. But the amount of tax or duty exigible depends on the character of the disposition effected by the instrument assessed at the rate specified by the Act. In this case, the character and rate are determined by the provision in s. 56B(4) that the instrument is dutiable as if it were a conveyance of an undivided share in the trust property. It is therefore not possible to approach the deed as if its date in isolation from its operation were the dominant consideration. It is only because it is an instrument effecting a disposition of property that it attracts duty as a conveyance or transfer and does so at the rate specified in schedule 1 of the Act.

In the ordinary way questions about the date at which property the subject of a disposition is to be valued do not very often arise. That is because para 4(a) of schedule 1 to the Act provides that duty is to be calculated on the ``amount or value of the consideration'', and the amount of the consideration stated by the parties can in many, if not most, instances be relied on as genuine. In the present case, the amount of the consideration as stated in the deed was $690,000 representing the total of the balances payable in terms of cl. 1.4 and schedule 12, taken with the deposits mentioned in that schedule. The Commissioner was, however, not satisfied with the amount so stated and instead adopted, although with some departures, the values used or arrived at by the accountants in their valuation ``at 31 January 1990'', which, in para. 1 of the schedule 17 to the deed, had been accepted by the parties as the effective date of transfer for all purposes.

In dealing with matters of valuation the statutory provisions do not throw much light on the appropriate date at which value is to be determined. Under s. 51C(l) the Commissioner may, if of opinion that the consideration for the property transferred does not represent the full unencumbered value of that property, either: (a) cause a valuation of the property to be made, or (b) accept a valuation tendered by a party; and, in either event, may assess the duty payable ``on the footing of such valuation''. Perhaps because it was not ``tendered'' but obtained from the appellant after requests or requisitions by the Commissioner, the accountants' valuation dated 28 March 1990 appears not to have been regarded as answering the description in s. 51C(1)(b). Whether or not that view of it is correct, a valuation obtained in either of the ways contemplated by s. 51C(1) is plainly not legally binding on the Commissioner. See
Healthcorp Ltd. v. Commissioner of Stamp Duties [1992] 1 Qd.R. 610 , at 624-625 . In making an assessment of the duty payable, it would be open to the Commissioner to act ``on the footing'' of a valuation by proceeding to adopt it subject to adjustments arrived by a legitimate process of allowance or extrapolation that were appropriate in the circumstances.

The only other provision to which we were referred in the present case as having any direct

ATC 4851

relevance to the matter of value or its date was s. 56B(10), which is as follows:

``(10) Where in respect of a disposition in relation to a unit, a transfer or an instrument effecting or evidencing a disposition is not executed and a unit trustee or manager fails to comply with subsection (2), the trust deed in respect of the unit trust scheme is chargeable with the amount of duty with which the instrument transferring a unit or effecting or evidencing a disposition of a unit would have been charged under subsections (4) to (4AF) had subsection (2) been complied with and the unit trustee or manager and each of the holders of a unit as at the date of the disposition and thereafter under a unit trust scheme is liable for such duty on the trust deed.''

Subsection (2) of s. 56B, to which reference is made in s. 56B(10), is a provision which prevents a unit trustee or manager from giving effect to a disposition in relation to a unit trust unless a duly stamped instrument is delivered to him. By an amendment which inserted subs. (2A), the disponer and disponee of units are also required to execute an instrument effecting or evidencing the disposition.

Section 56B(10) is evidently designed to ensure that, even where the foregoing provisions are not complied with, the unit trustee or manager and the holders of units are each to incur a statutory liability for the amount of duty payable. It is true that, in so providing, subs. (10) speaks of ``the date of the disposition''; but it does so in the course of identifying the persons on whom that liability is imposed. In doing so, it may be thought to lend some support to an argument that it is the date of the disposition that is relevant rather than the date of the instrument; but the two dates are ordinarily the same, and it is doubtful whether, in resolving the question before the Court, decisive significance can be allowed to s. 56B(10), or to the reference in it to the date of the disposition.

In the course of their submissions the parties to the appeal were content to assume that it was legitimate for the contracting parties to provide that their contractual relations should have retrospective effect to a date before the date on which their contract was executed or even concluded. Authority sufficiently bearing out this assumption may be found in
Trollope & Colls Ltd. v. Atomic Power Constructions Ltd. [1963] 1 W.L.R. 333 , at 339 ; and
City of Box Hill v. E.W. Tanschke Pty. Ltd. [1974] V.R. 39 . In
Newlands v. Argyll Insurance Co. Ltd. [1959] S.R. (N.S.W.) 130 , there was a division of opinion among the members of the Full Court; but all of their Honours in that case appear to have accepted that it was possible for parties, by an appropriate provision in their contract, to stipulate that it should regulate their mutual relations retrospectively.

In principle, therefore, there appears to be no compelling reason why the parties to the deed dated 17 October 1990 should not have chosen to provide, as they did in para. 1 of schedule 17, that January 31, 1990, should be ``the effective date of transfer'' for all the purposes of the disposition contemplated by that deed and of their relationship arising out of it. Of course, it scarcely need be said that, by doing so, they could not affect the rights of others who were not parties to the deed. This may be one reason why traditionally the law has not recognised that ``back-dating'' a lease is effective to give the leasehold interest retrospective effect to a date earlier than the date on which the instrument of lease was executed. See
Queensland Television Ltd. v. Federal Commissioner of Taxation (1969) 119 C.L.R. 167 , at 175 . But, according to the judgment of Megarry V.-C. in
Bradshaw v. Pawley [1980] 1 W.L.R. 10 , even that restriction operates only in limited respects. It applies to the term of the leasehold interest, and not (or not necessarily) to personal rights and obligations which the parties are free to adjust between themselves without affecting the interests of others.

It would follow in the present case that it was permissible for the parties to provide as in effect they did in their deed that the personal rights and obligations under it should be regulated on the footing that the disposition involved in the sale of the subject units was to be regarded as having taken place on 31 January 1990, and not on 17 October 1990, which is the date which the deed itself bears. In any event, it is on one view of the statement in para. 1 of the stated case not beyond doubt that 17 October 1990 was the date on which the deed was in fact executed. Paragraph 1 of the case says that the deed was ``executed by the appellant and dated 17 October 1990'', which is not the same as saying it was executed on that date. The instrument itself bears that date, which is therefore presumptively the date of its

ATC 4852

execution; but evidence has always been admissible to show that the date of execution on an instrument (which in the case of a deed means the date of delivery, and not of its subscription or sealing) was in fact different from the date it bears: see Norton on Deeds (2nd ed.), at 189-191. It follows that, although dated 17 October 1990, the date on the deed in this instance is not to be regarded as conclusive evidence of the date on which the relevant disposition was made or took effect.

In a display of concern for the revenue of a kind not often encountered among taxpayers, the appellant in this case nevertheless submitted that to depart from the date of execution, or at least to permit other taxpayers to do so, would open the door to the perpetration of frauds on the Commissioner. Under the Act, however, the Commissioner of Stamps is well equipped with means of frustrating attempts to evade the duties imposed by the statute. Section 81 enables him or her to treat as void any arrangement having the effect, directly or indirectly, of altering the incidence of stamp duty or of avoiding liability to pay it. See also ss. 16, 22 and 22A of the Act.

To perform the duty of assessing and collecting the duty exigible under the Act, the Commissioner therefore needs no sympathy or help from taxpayers. Quite apart from legislative provisions like s. 80, it seems clear that the Commissioner would not be bound by the provision in para. 1 of schedule 17 to the deed if its effect were to avoid or diminish the duty payable according to the true circumstances. In
Re Hollebone's Agreement [1959] 1 W.L.R. 536 , the parties executed an agreement for the sale of a business, which was made and completed on 14 July 1952, but which provided that the sale was to be treated as having taken effect from 31 March 1952. With reference to that provision, Jenkins L.J. said [1959] 1 W.L.R. 536, at 540:

``The notional back-dating of the sale to March 31, 1952, provided for by the agreement, of course had no foundation in fact, though it was an arrangement which the vendor and company could. as between themselves, readily carry out by appropriate adjustments in their accounts. It was, however, an arrangement which could not affect the position as between the vendor and the Revenue with respect to income tax and surtax. From the point of view of the Revenue the liability of the vendor to income tax on the profits of the business is to be computed in accordance with the actual facts of the case.''

Some authors of texts on stamp duty are perhaps be [ sic ] disposed to regard the decision as laying down a strict rule that stamp duty is always exigible ``by reference to the circumstances at the time of execution'': see Monroe & Nock, The Law of Stamp Duties (6th ed.) § 1-66, n.30, at p. 30; cf also Sergeant & Sims on Stamp Duties (9th ed.), at 146; and Halsbury's Laws of England , vol. 44(1) § 1040, (4th ed. reissue), at pp. 608-609, to all of which we were helpfully referred to by Mr Logan of counsel.

The decision in Re Hollebone's Agreement is, however, not capable of standing as authority for anything more than that the revenue, or in this case the Commissioner, is not bound by a contractual provision ``back- dating'' the effect of the parties' agreement. It did not decide that the Commissioner is not merely not bound by, but also precluded from taking advantage of, such a provision. On one view of what is said by those textwriters, the decision of Ridley and Darling JJ. in
Measures Brothers Limited v. Commissioners of Inland Revenue (1900) 82 L.T. 689 goes some way to supporting the Commissioner's submission in the present case; but the reasons given there by Ridley J. do not approach the central question in a manner calculated to inspire undue confidence, and the decision itself is not entitled to much if any weight.

None of the other authorities located by counsel on this appeal is decisive of the question now before us. The decision in
Crown v. Bullfinch Proprietary (W.A.) Ltd. (1912) 15 C.L.R. 443 , is authority for no more than that, on a sale of property for a specified amount of money, the consideration for the conveyance is to be taken as the amount so specified for the purpose of assessing duty ``on the consideration for the sale'' in accordance with the schedule to the Act; and that that remained so despite the fact that it was also agreed that an apportioned part of the consideration was to be satisfied by a payment in cash and the balance by transferring shares, which at the time of transfer may have been worth more or less than the value or amount so ascribed to them. The case was, however, not one like that now before us in which the Commissioner elected to adopt the

ATC 4853

value rather than the amount of the consideration as the basis of assessment. Equally, it is not possible to regard
Comptroller of Stamps (Vic.) v. Ashwick (Vic.) No. 4 Pty. Ltd. 87 ATC 5064 ; (1987) 163 C.L.R. 640 as deciding more than was said by the Court at ATC 5072; CLR 654, which was that, in determining the category to which an instrument is to be assigned, its character is to be ascertained by considering its legal effect at the date of its execution. No question of that kind arises in the present appeal. The disposition contemplated under the deed dated 17 October 1990 remained throughout and remains a ``disposition'' within the meaning of s. 56B irrespective of the date on which it took effect. It is not its character but its value that is in issue.

In these circumstances the question for determination falls to be decided as a matter of principle. Consistently with the authorities already referred to, the parties were free by their contracts to adopt a date for regulating their relations that was earlier than the date which the deed itself bears. If their doing so had the consequence that, as between them, the disposition was to be treated as having taken place on 31 January 1990, they at least were bound by their agreement to that effect. The deed was dated 17 October 1990 and, it may be presumed, was executed on that date; but, once executed, it took effect according to its terms:
Bird v. Perpetual Executors & Trustees Association Ltd. (1946) 73 C.L.R. 140 , at 146 . Those terms were, or included, the provision that 31 January 1990 was ``the effective date of transfer'' for all purposes. The Commissioner in assessing the deed for duty purposes was not bound by that provision or that date, and could perhaps have exercised the power conferred by s. 81 of treating it as void, preparatory to adopting some other date which more accurately and genuinely reflected the real intentions of the parties. No doubt there would have had to be some basis on which to act before the Commissioner could properly resort to that course. But in the present case there is nothing at all to show that, in adopting 31 January 1990 as the effective date of transfer, the parties were not acting genuinely, or that they inserted that date as a sham or as a means of disguising their real intention. Possibly it was chosen because it was the date to which, taken as a whole, the true value of the property disposed of by transfer of the subject units most closely corresponded, and for that reason was one that was acceptable to all the parties effected. The deed is, after all, described as a deed of compromise as well as sale, and there is no reason to suppose that the date selected was not an element in the compromise arrived at. In these circumstances, there can also be no reason why the Commissioner should not have followed the example of the parties themselves in adopting the agreed date for the purpose of valuing the property disposed of, and then used it in assessing the duty payable at the specified rate on the value of the consideration for the disposition that was effected by the deed dated 17 October 1990. The Commissioner was not bound to adopt the date chosen by the parties; but neither was there any obligation on him to reject it. It was, after all, the date at which they intended their disposition to have effect.

In view of a further agreement between the parties, it is accepted that the amount of the assessment made by the Commissioner should be reduced by an amount of $1,700. Subject only to that minor difference, the appeal should be dismissed. The questions in para. 22 of the stated case should be answered as follows:

  • (a) Yes.
  • (b) Yes.
  • (c) Yes.
  • (d) No.
  • (e) No.
  • (f) $71,530.
  • (g) The costs of and incidental to the case and the appeal should be borne and paid by the appellant.


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