EIE OCEAN BV v COMMR OF STAMP DUTIES (QLD)

Judges: Macrossan CJ
Pincus JA

Williams J

Court:
Queensland Court of Appeal

Judgment date: Judgment given on 17 December 1996

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Williams J

In his reasons for judgment Pincus JA has set out the circumstances in which this Case Stated pursuant to s. 24 of the Stamp Act 1894-1990 has come before the court. Except where it is necessary in order to make my reasoning clear I will not refer to those matters.

Pincus JA has commented on the unsuitability of the Case Stated procedure to resolve disputes of the kind raised here. What he has said merely adds to the weight of judicial criticism of that procedure in recent years. In days when the only question was as to the duty payable on the face of a particular document there was probably no inadequacy with the Case Stated procedure; the document itself was before the court and generally no other information was required. But given the complexity of modern stamp duty legislation, particularly when transactions rather than documents are being assessed to duty, it is no longer appropriate to ask the court to determine an appeal against an assessment of duty in this way.

It has now been recognised that findings of fact made by the Commissioner preliminary to the making of an assessment may be reviewed pursuant to the provisions of the Judicial Review Act 1991, but that does not produce a satisfactory result in all instances (
Commissioner of Stamp Duties (Qld) v Westpac Banking Corporation (1994) 1 Qd R. 99 ).

The fact that the legislature has not responded to judicial criticisms of the procedure is not without significance. Clearly the legislation provides for an appeal against an assessment; the Act does not provide that the assessment of the Commissioner is conclusive so that it cannot be challenged in the court. The taxpayer is given a right of appeal by s. 24, and that section expressly requires the court to assess the duty with which the document or transaction is chargeable. Particularly where the court concludes that there is some error in the assessment made by the Commissioner, the court must, albeit impliedly, have the power to do all that is necessary in order for it to assess the duty chargeable. This is a matter to which I will return later.

The relevant Share Sale Agreement dated 24 September 1988 was lodged for assessment of duty, and the assessment of the Commissioner on 18 December 1990 in the sum of $127,552.20 was paid by EIE Ocean BV (``EIEO'') and that assessment is not contested in these proceedings. When that Agreement was lodged the solicitors acting for the taxpayer delivered to the Commissioner a letter dated 24 October 1988 in which the view was expressed that once relevant land valuations were finalised Riana Investments Pty Limited (``Riana'') would not be a landholder for purposes of s. 56FL(2) of the Stamp Act; but to protect the taxpayer's position, if the valuations should establish the contrary, a Form Z under the Stamp Act was lodged noting that the land component was ``subject to valuation''.

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So far as the Case Stated contains matters of fact it can be said that subsequently the Commissioner pursuant to s. 22A(2) of the Stamp Act altered that Form Z by inserting $294,651,864 as the value of land to which Riana was entitled. Thereafter the Commissioner issued a Default Assessment dated 30 May 1991 under s. 22A(2) of the Stamp Act showing $11,046,671 as the duty payable. It is that default assessment which is challenged on this appeal.

Before discussing the merits of the appeal it is desirable to refer in some little detail to certain provisions of the Stamp Act as at the material time. Section 22 is the basic provision providing for assessment of duty by the Commissioner. Where an instrument comes into his possession he may require such evidence as he considers necessary to show to his satisfaction whether all facts and circumstances affecting the liability of the instrument to duty are fully and truly set out therein. Subsection (2) is then in these terms:

``(a) Where the Commissioner is of the opinion that an instrument -

• (i) is not chargeable with any duty, it is to be stamped with a particular stamp denoting that it is not chargeable with duty;
• (ii) is chargeable with duty, the Commissioner is to assess the duty with which, in the Commissioner's opinion, it is chargeable.''

Then the Commissioner is empowered by s. 22A to make default assessments of duty; for present purposes subsections I and 2 are relevant and provide as follows:

``(1) Where a person fails to deliver or lodge, as and when the person is required to do so by or under this Act, the statement, return or other document on which duty is chargeable under this Act, the Commissioner may assess the duty which in his opinion ought to be charged on the statement, return or other document that has not been delivered to or lodged with him, as if it had been delivered to or lodged with him.

(2) Where the Commissioner is not satisfied with a statement, return or other document delivered to or lodged with him and on which duty is chargeable under this Act, he may -

• (a) alter the statement, return or other document so that, in his opinion, it satisfies the requirement of this Act; and
• (b) assess the duty which in his opinion is chargeable under this Act on the statement, return or other document (altered by him pursuant to paragraph (a)) with which he was not satisfied.''

I also refer to, without quoting, s. 23 which empowers the Commissioner to require information necessary for the purpose of determining the amount of stamp duty payable pursuant to the Act. Finally reference need be made to s. 56FC which, so far as is relevant, provides:

``(1) The commissioner may -

• (a) require a person who is required to lodge a statement under section 56FH, 56FI or 56FJ to furnish the commissioner with a further statement in a form approved by the commissioner concerning the full unencumbered value of any land, or such evidence of that value as the commissioner considers appropriate; and
• (b) assess duty having regard to the evidence of value referred to in paragraph (a).

...

(3) Where the commissioner is not satisfied with evidence of value furnished under subsection (1)... the commissioner may -

• (a) cause a valuation of the property to be made by some person appointed by the commissioner; or
• (b) accept a valuation of the property tendered by or on behalf of any party;

and for the purpose of assessing duty payable or determining any liability to prepare a statement under this part, the commissioner may have regard to that valuation.''

What the Case Stated asserts is that the Commissioner acted under s. 22A. On 30 May 1991 he had ``formed the opinion that the full unencumbered value of the land as at 24 September 1988 was $294,651,864'' (paragraph 7 of the Case) and altered the schedule to Form Z by inserting that figure in the relevant schedule. On that basis the default assessment

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ATC 4030

was issued. It is now necessary to look at the Case Stated in order to see what were the facts on which the Commissioner acted in arriving at that opinion. The Case Stated does not make it clear that the Commissioner required the taxpayer to furnish a valuation pursuant to s. 56FC(1), but in fact in November 1988 the taxpayer furnished a valuation report by Jones Lang Wootton. It is clear that between then and May 1991 the taxpayer furnished the Commissioner with other information relevant to the assessment of duty. During that period the Commissioner in March 1990 advised the taxpayer ``of his view that goodwill generated from the development, promotion and marketing of the Sanctuary Cove Resort attached to the Resort could not be separated from the land upon which the business of the Resort had been carried on.'' (Case para 17) That contention was the subject of further material lodged on the taxpayer's behalf with the Commissioner.

That brings one to paragraphs 26, 27 and 28 of the Case which are of critical importance: -

``26. The Commissioner did not accept the contentions made in those submissions of EIEO, its solicitors and agents, in respect of the sum of $79,280,000 and concerning the asset matters, and instructed Messrs Ernst and Young, by letter dated 20 May 1991, to undertake an expert review of the issues which the submissions raised.

27. After further consideration of the issues and after discussions with Ernst and Young of the conclusions which were later contained in their written report of 5 July 1991... the Commissioner issued to EIEO the Notice of Default Assessment dated 30 May 1991... on or about 27 June 1991 under s. 22A of the Stamp Act.

28. In determining that the full unencumbered value of the land was $294,651,864 and in determining the assessment of duty chargeable on the Form Z, the Commissioner was satisfied that he should not reduce the full unencumbered value of the land for assessment purposes by a further amount of $79,280,000 as contended for by EIEO because...''

The Case Stated does not say so, but it would appear that the Commissioner purported to act under s. 56FC(3) in seeking advice from Ernst and Young. The instructions contained in the letter of 20 May 1991 are not included in the annexures to the Case Stated, but the report of Ernst and Young of 5 July 1991 commences by saying: ``We refer to your letter of 20 May 1991 and our subsequent discussions with Mr Graham Tregenza. You have requested Ernst and Young undertake a review of the issues associated with the value attributed to the management rights, intellectual property and goodwill of the Sanctuary Cove Resort in a report by Price Waterhouse dated 7 January 1991.''

Neither the court nor the taxpayer are aware of the substance of discussions between the Commissioner and Ernst and Young referred to in paragraph 27 of the Case Stated; it was after those discussions that the default assessment was issued. What is known, because it is annexed to the Case Stated, is that when Ernst and Young provided their report of 5 July 1991 the following critical conclusions were expressed:

``... we are unable to state that $79.28 million is properly attributable to intangible assets due to the existence of two different real estate valuations for Sanctuary Cove at acquisition date. However, we consider that any amount paid in excess of the fair value of net assets acquired (including identifiable intangible assets) is attributable to unidentifiable intangible assets or (residual goodwill). We consider that the value of intangible assets such as the CDTT is already included in the real estate valuations of Sanctuary Cove.

There may be a value attributable to the CDTT in relation to future economic benefits from licensing arrangements but there is no financial information available in this regard nor any indication that such additional revenue sources are not already included in JLW's valuation. We note that there may be a value of between $Nil and $13.944 million included in the above amount attributable to accumulated tax losses but there is insufficient information available to form a precise view as to value.''

(CDTT is a reference to Concept, Design, Tradename and Trademark)

A major concern is whether or not the Commissioner has complied with s. 56FC(3)(a) of the Act. It seems tolerably clear that Ernst and Young did not make a valuation of the property in question; it cannot be said that the

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ATC 4031

Commissioner caused or required them to make such a valuation. Rather they have given their views on certain issues raised in the material furnished on behalf of the taxpayer. They concluded that certain deductions were not justified and apparently the Commissioner accepted their reasoning. But finding that certain deductions should not be made does not support a valuation of $294,651,864 for the land in question. Ernst and Young do not in the report find the land to be so valued.

It cannot be said in my view that in forming the opinion that the full unencumbered value of the relevant land as at 24 September 1988 was $294,651,864 the Commissioner acted under s. 56FC(3). Whilst that provision says that he ``may have regard to that valuation'' it would appear that Ernst and Young did not provide a ``valuation''. Whilst it is easy to say that a valuation in circumstances such as this can be broken up into compartments and a valuation could be limited to a specific component thereof, it is nevertheless of critical importance that the taxpayer knows the precise basis on which the Commissioner is acting so that steps can be taken to challenge findings made or opinions expressed by him if necessary.

One agreed fact is that the total consideration for the Share Sale Agreement was $341 million. The Commissioner has worked back from that in the sense that he has asked himself the question what amounts can be deducted as being the values of other property the subject of the transaction. He has not directly addressed the question what is the value of the relevant land component. Clearly, at least in theory, the Commissioner's approach could result in a value being attributed to the land which was totally insupportable if the value thereof was assessed according to one of the more traditional methods. More importantly he has not, as noted, complied with s. 56FC(3) of the Act.

That would be a sufficient basis, in my view, for this court concluding that the Commissioner's opinion and assessment based thereon cannot be accepted. That conclusion can clearly be reached if one excludes from the 700 odd pages of what is said to constitute the Case Stated the evidentiary and argumentative material and limits consideration to ``ultimate fact'': Commissioner of Stamp Duties (Qld) v Westpac Banking Corporation 93 ATC 4335 at 4338; (1994) 1 Qd. R. 99 at 103.

If one adopts a strict approach to what constitutes the Case Stated and decides the matter thereon, it may not in my respectful view be possible to analyse some of the factual matters in depth as Pincus JA has done. Certainly I agree with his Honour's reasoning that the Commissioner has demonstrably, if one has regard to all the material annexed to the Case Stated, erred in concluding that all goodwill must attach to the land. Given the fact that the Commissioner has included all of that material in the Case Stated it is certainly not unfair to have recourse to it in order to confirm the conclusion that his assessment cannot be upheld. In the circumstances it is not necessary to say more on that.

Having found that the assessment of the Commissioner cannot stand this court must determine the duty with which the transaction is chargeable. It is necessary now to return to the court's powers when dealing with a Case Stated pursuant to s. 24 of the Act. When a matter comes before the court strictly on a Case Stated procedure the court is limited to the facts as stated therein. It may well be (see, for example, the discussion of the issue in O'Sullivan & Ors v Commissioner of Stamp Duties (Qld) 83 ATC 4684; (1984) 1 Qd. R. 212 and Commissioner of Stamp Duties (Qld) v Westpac Banking Corporation 93 ATC 4335; (1994) 1 Qd. R. 99) that in determining whether the assessment of the Commissioner is correct the court should only have regard to ultimate facts as in the Case Stated. But once the position is reached where the court says that the Commissioner's assessment cannot stand, different considerations must apply. The court is obliged by the statute to assess the correct amount of duty. Once that stage is reached the statute obliges the court to determine what is the correct amount of duty, and that must, at least impliedly, mean that the court must investigate the transaction, make findings of fact, and assess duty.

The legislation gives a right of appeal to the taxpayer and entitles the taxpayer to have the court assess the duty if the Commissioner's assessment is found to be wrong in law. As the legislature has not seen fit to respond to the court's criticisms of the suitability of doing that given the procedure provided for by s. 24, the court must of itself determine what is the most appropriate procedure to adopt in order to give effect to the taxpayer's rights. If the court was

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merely to hold that it did not have the necessary machinery to make such an assessment that would be depriving the taxpayer of the statutory right to have the court determine the proper amount of duty payable where the Commissioner's assessment was shown to be erroneous.

The legislation under consideration by the High Court in Commissioner of Stamps (SA) v Telegraph Investment Co Pty Ltd & Anor 96 ATC 4075; (1995) 184 CLR 453 was materially different from the Queensland legislation, but the philosophy underlying the reasoning is relevant for present purposes. The position in that case was different because the legislation gave a right of appeal which was instituted by filing a notice of appeal with the court. Thereafter the Commissioner was required to state and sign a case for the purpose of the appeal (at ATC 4077-4078; CLR 458-459). The ratio of the case was clearly that the provisions relating to the Case Stated could not detract from the basic right of appeal to the court. Here there is no separate right of appeal as such, there is only an appeal by way of Case Stated: the proceedings in this court are initiated by the Case Stated.

But, adapting the reasoning of the High Court, clear and unambiguous words would be required if the taxpayer was to be denied the right, conferred by s. 24, to have the court determine the proper amount of duty payable. In my view there is nothing in the statute which clearly prevents the court from doing all that is necessary to arrive at the proper assessment of duty. This court can therefore have recourse to its general and inherent powers in determining how disputed issues relevant to the proper assessment of duty should be resolved.

Clearly it is entirely inappropriate to have three judges sit on a hearing to determine facts, some of which would clearly be disputed, necessary to be made in order to determine the value of the subject land for purposes of assessing duty. In those circumstances s. 68(3) of the Supreme Court of Queensland Act 1991 affords a reasonable solution. This court may of its own motion order that the relevant questions be remitted to the Trial Division for determination.

Before concluding I should refer to one minor matter on which, with respect, I have come to a conclusion contrary to that reached by Pincus JA. The 1988 amendment to the Stamp Act deleted s. 22(1) as it stood prior to that time. It had provided that the Commissioner might be required by any person to express his opinion with reference to any executed instrument, whether it was charged with duty, and if so, with what amount of duty. On the deletion of that provision there was no longer any such requirement on the Commissioner. But s. 24 was not relevantly amended when that provision was deleted. Subsection (1B) requires the ``Commissioner to state and sign a case setting out the questions upon which the Commissioner's opinion was required''. It was argued for the Commissioner that since 1988 that must mean ``was required by the Act''. I agree with that interpretation. Whenever the Commissioner makes an assessment it must be said he was ``required'' to do so for purposes of s. 24(1B). A somewhat similar situation was considered by the High Court in the Telegraph Investment case. The court there recognised that ``the effect of the amending Act may be to alter the meaning which remaining provisions of the amended Act bore before the amendment'' (96 ATC at 4080; 184 CLR at 463). In other words the previous construction of a section does not survive an amendment if, reading the amended statute as a whole, the provision should be given another construction. That is the position here in my view.

I agree with the orders proposed by Pincus JA.