COMMISSIONER OF STATE REVENUE (WA) v PINESALES PTY LTD

Members: Steytler P
Wheeler JA

EM Heenan AJA

Tribunal:
Supreme Court of Western Australia, Court of Appeal

MEDIA NEUTRAL CITATION: [2007] WASCA 142

Decision date: 6 July 2007

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EM Heenan AJA

3. This appeal concerns the circumstances in which a taxpayer is entitled to a reduction and repayment of stamp duty paid on an instrument

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ATC 4696

in respect of a matter included in the instrument which is not carried into effect, pursuant to s 20 of the Stamp Act 1921 (WA). It raises questions of general importance because of the dispute which has arisen between the parties over what is the " matter " which was included in this dutiable instrument - a contract for the sale and purchase of a proposed strata title unit, which therefore attracted ad valorem stamp duty as a conveyance pursuant to s 16 and s 63 and Item 4(1)(e) of the Second Schedule to the Stamp Act . A related, and subsidiary, question of importance is whether or not the respondent received " a benefit in respect of the matter " . A taxpayer " receives a benefit in respect of a matter included in an instrument if, as a result of the matter not being carried into effect, an amount of money, or a right, property or service, is received … by the taxpayer " : Stamp Act , s 20(4). If such a benefit had been received by the respondent, no entitlement to a reduction and repayment of the duty would arise. Consequently, the appeal touches upon fundamental concepts in the legislation relating to the imposition of stamp duty; namely, those of " an instrument " ; " a matter included in the instrument " ; " a matter [ being ] carried into effect " ; and, whether or not the taxpayer has received or will receive " a benefit in respect of the matter " .

4. These questions arise in a setting where the respondent, Pinesales Pty Ltd ( " Pinesales " ), agreed in writing with a vendor by contract dated 10 December 2003 to purchase a strata title unit (apartment 301) in a project to be constructed by the vendor known as " Allegro " , the Peninsular, Burswood. The consideration under this contract was $ 525,000 and, consequently, stamp duty on the document was correctly assessed at $ 25,980 and was paid by the respondent. The contract of sale and purchase was subject to a series of conditions, including condition 13 of the Joint Form of General Conditions for the Sale of Land 2002 Revision ( " General Conditions " ). Clause 13.1 made the contract conditional on an application for the subdivision of the lot from the original land being lodged with the Planning Commission within three months after the contract date and other, related, conditions. If not satisfied within the time specified, cl 13.7 would result in the termination of the contract. In this case it was an acknowledged fact that the vendor had not complied with condition 13 of the General Conditions.

5. There is some uncertainty over whether or not this non-compliance, itself, resulted in the termination of the contract or whether the contract was terminated by a second contract made between the same parties on 10 August 2004 which replaced it, and pursuant to which the respondent and the vendor, respectively, agreed to purchase and to sell the same unit for the same price and on the same terms and conditions, except as to the times for construction, completion and final payment. However, both parties are agreed that the position which should be accepted is that found to be the case by the State Administrative Tribunal ( " SAT " ). That is, that by entering into the second contract of 10 August 2004 the parties terminated the earlier contract and that it was that second contract, as a stand-alone agreement, which constituted and contained the terms of the mutual obligations of the parties for the construction, sale and purchase of apartment 301 in the project.

6. There is no appeal or cross-appeal from that finding and, accordingly, the proper course is for this Court to proceed on the basis that the first contract was entirely terminated and replaced by the second. Further, counsel for the appellant expressly disclaimed any suggestion that the second contract might be regarded as a variation, but otherwise an affirmation, of the first.

7. The second contract for the sale and purchase of the strata title unit is also a dutiable instrument assessable for stamp duty as a conveyance. However, between the date of the first contract, 10 December 2003, and the date of the second, 10 August 2004, Parliament amended, and reduced, the rates of duty applicable to such conveyances. Consequently, the stamp duty payable on the second contract at the applicable ad valorem rate is less than the duty payable on the first. The position of the respondent is that it accepts its liability to pay stamp duty on the second contract assessed at the rates applicable in August 2004, but has claimed a reduction and a repayment of the whole of the duty assessed on the first contract pursuant to s 20 of the Stamp Act , on the grounds that the matter included in that

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ATC 4697

instrument has not been and will not be carried into effect.

8. Consequently, the respondent sought the repayment of the whole of the stamp duty assessed and paid on the agreement for sale of 10 December 2003 and submitted the second agreement for sale of 10 August 2004 for assessment of duty. However, the appellant refused to reduce the first assessment, stating, among other reasons, that because the respondent was to sign a new contract for the sale of the same unit which it had previously contracted to purchase, the matter of the original contract is clearly being " carried into effect " . The appellant assessed the agreement for sale of 10 August 2004 at nominal duty of $ 20, presumably on the basis that it was ancillary to the first agreement. The appellant then wrote again to the solicitors for the respondent on 3 February 2005 confirming the decision to decline to reduce or repay duty assessed on the first contract of sale stating that:

" It is considered that:

• • the original contract did not automatically terminate upon the failure of the vendor to apply for subdivisional approval within the three month period required by clause 13.2 of the Joint Form of General Conditions;
• • the subsequent instrument executed by the purchaser(s) affirms the terms of the original contract and is to be assessed to nominal duty only; and
• • the requirements for a reduction of duty under section 20 of the Stamp Act 1921 are not satisfied in the present case as the matter included in the instrument, being the conveyance of the apartment, will be carried into effect. "

The respondent then formally objected to the assessment under s 34 of the Taxation Administration Act 2003 (WA). The appellant considered the objection and disallowed it on 11 July 2005. By a letter of that date the appellant stated his reasons, as follows:

" The Commissioner remains of the view that the Original Contracts did not automatically terminate upon the failure of the vendor to apply for subdivisional approval within the three month period as required by clause 13.2 of the 2002 General Conditions. The non-fulfilment of a condition such as clause 13.2 renders the contract voidable rather than void. It is the Commissioner ' s view that a court would in applying the general rules of construction in determining whether there has been a termination of the contract tend against construing the condition in a way that resulted in the automatic termination of the Original Contracts.

The subsequent instrument executed by each Objector affirms the terms of the Original Contracts and is properly assessed to nominal duty only.

The requirements of section 20 of the Stamp Act are not satisfied in the present case as the reference to ' a matter included in the instrument ' in section 20 refers to a conveyance of property (the apartment) and this matter will be carried into effect as indicated by the vendor and objector entering into the subsequent instrument or, alternatively, the affirmation of the Original Contracts (which remains on foot) by the objector. "

This letter reveals that the respondent ' s contention was only one of a number of objections made to similar decisions in respect of comparable contracts for the sale and purchase of other apartments in the proposed building. The present case, therefore, may be viewed as a test case of the various objections made in respect of those similar transactions.

9. Pursuant to s 40 and s 42 of the Taxation Administration Act , the respondent then applied to the SAT for a review of the appellant ' s decision. The review was heard and determined by the President of the SAT, Barker J, on 12 July 2006. His Honour found in favour of the respondent. The orders made by the SAT are:

• " 1. The Tribunal declares that -
  • (a) no ' matter ' , within the meaning of s 20 of the Stamp Act 1921 (WA) in the original contract between Pinesales Pty Ltd and BL Developments Pty Ltd has been, or will be, carried into effect;
  • (b) Pinesales Pty Ltd has not received and will not receive any benefit in respect of the matter included in the original contract;
  • (c) the reason that the matter included in the original contract has not been, and will not be, carried into effect is not merely to enable a replacement transaction to be entered into.

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    ATC 4698

• 2. The Tribunal sets aside the decision the subject of review between the Commissioner of State Revenue and Pinesales Pty Ltd and, pursuant to the State Administrative Tribunal Act 2004 s 29(3)(c)(ii), sends the matter back to the Commissioner for reconsideration so that the amount of duty payable on the original contract is reduced under the requirements of s 20 of the Stamp Act 1921 (WA) and in accordance with the declaration made by the Tribunal in par 1 of this Order. "

10. The original position of the Commissioner, as evident from the reasons given for disallowing the objection, and maintained before the SAT, was that the first contract was not terminated by the second but, rather, affirmed with some variations as to the dates of performance. That issue was decided against the appellant by his Honour and, as already mentioned, that finding is not challenged by the appellant. The specific finding made by his Honour, at [ 66 ] and [ 69 ] , in this respect is:

" In my view, there is no doubt that the deed constitutes by itself a stand-alone agreement between the vendor and the applicant to purchase the apartment. The terms and conditions of the deed are, by reference to the original contract, the same terms and conditions as were set out in the original contract, although with some obvious changes.

…

In these circumstances, the Tribunal finds that the deed executed on 10 August 2004 constitutes a stand-alone contract for the sale and purchase of proposed strata lot apartment 301 Allegro, and that by that agreement the parties intended to terminate the original contract between them. "

11. In reaching that conclusion his Honour followed, and applied, the decisions in
Dan v Barclays Australia Ltd (1983) 46 ALR 437 at 448;
Commissioner of Taxation of the Commonwealth of Australia v Sara Lee Household and Body Care (Australia) Pty Ltd 2000 ATC 4378 ; [ 2000 ] HCA 35 ; (2000) 201 CLR 520 ; and
Concut Pty Ltd v Worrell [ 2000 ] HCA 64 ; 176 ALR 693 ; to the effect that, where parties to an existing contract enter into a second contract relating to the same subject matter as the first, the question of whether the second terminates the first depends on the intention of the parties. His Honour also noted that whether or not the parties intended termination or not could sometimes be inferred from the degree to which their contract had been modified:
Tallerman & Co Pty Ltd v Nathan ' s Merchandise (Vic) Pty Ltd (1957) 98 CLR 93 ; and that occasionally courts have been disinclined to make a finding of termination because of the fact that parties to a commercial arrangement often modify their contractual regime as, for example, in
Berry v Wong [ 2000 ] NSWSC 1002 ;
Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 11,110 ; and
Vroon BV v Foster ' s Brewing Group Ltd [ 1994 ] 2 VR 32 . Consequently, the position is that there is a finding, now accepted by the parties, that this second contract did in fact terminate and entirely replace the first.

12. With respect to the appellant ' s contention that the " matter " , the subject of the first contract, will be carried into effect by reason of the vendor and the respondent entering into the second contract, his Honour, at [ 80 ] , rejected the submissions of the appellant and found:

" In my view, the ' matter included in the instrument ' is the sale and purchase of apartment 301 on the terms and conditions set out in the original contract. That matter has not been, and will not be, carried into effect. That is, because the original contract has been terminated by the deed of 10 August 2004. The sale and purchase of apartment 301 will now be carried into effect by the new contract evidenced by the deed. "

This then led to his Honour ' s conclusion that the matter included in the second contract was a different matter from the matter included in the original contract.

13. The appellant also contended that, even if the matter included in the dutiable instrument had not been, and would not be, carried into effect, the respondent was still not entitled to a reduction and repayment of duty because the

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ATC 4699

taxpayer had received a benefit in respect of that matter by proceeding to enter into the second contract for the purchase of the unit to be constructed. His Honour also rejected that submission, and its derivative submission that the entry into the second contract resulted in the taxpayer receiving a benefit because " an amount of money, or a right, property or service " had been received by the taxpayer: Stamp Act , s 20(4). In this respect, his Honour, at [ 89 ] , concluded:

" In my view, that is not the correct and preferable interpretation or application of the s 20(4) provision. It is necessary to look at the original contract and ask the question whether if, as a result of a matter included in the original contract not being carried into effect, a right is received by the taxpayer. All the evidence shows is that the instrument that was the original contract was terminated. A fresh contract was entered into, as evidenced by the deed. As a result of the matter the subject of the original contract not being carried into effect, no right arose at all. That contract simply came to an end. What happened was that a fresh contract was negotiated by the parties to the original contract. It was not inevitable that a fresh contract would be entered into or would come into existence. The parties further negotiated and agreed to that outcome. The applicant was not obliged to accept the offer of the vendor to enter into the fresh contract. "

At [ 92 ] and [ 93 ] , his Honour then added:

" The Tribunal does not accept that the fact that the parties to the later deed might not have entered into further negotiations and fresh contract had they not been parties to the original contract which each accepted was at an end, means that the taxpayer received a benefit in the form of a right to acquire the proposed strata lot ' as a result of the matter [ of the original contract ] not being carried into effect ' .

The correct and preferable decision is that the applicant did not receive any relevant benefit as a result of the matter not being carried into effect. "

14. From the decision of the SAT the Commissioner now appeals to this Court pursuant to s 105(3)(a) of the State Administrative Tribunal Act 2004 (WA), as of right. Leave to appeal is not necessary, because of s 43A of the Taxation Administration Act . Under that section an appeal from a decision of the SAT can be brought on " a question of law, of fact, or mixed law and fact " . In this particular case, the only questions arising on the appeal are questions of law.

15. As the appeal raises the proper interpretation of the provisions of s 20 of the Stamp Act , it is desirable to set out the section in full:

• " 20. Reduction of duty if matter not carried into effect
  • (1) The amount of duty payable on an instrument is reduced by the amount of the full duty payable in respect of a matter included in the instrument if the Commissioner is satisfied that -
    • (a) the matter has not been, and will not be, carried into effect;
    • (b) the taxpayer has not received, and will not receive, a benefit in respect of the matter; and
    • (c) the reason the matter was not, and will not be, carried into effect is not merely to enable a replacement transaction to be entered into.
  • (2) The amount of duty payable on an instrument is reduced in accordance with subsection (3) if the Commissioner is satisfied that -
    • (a) a matter included in an instrument has not been, and will not be, carried into effect;
    • (b) the taxpayer has received, or will receive, a benefit in respect of the matter;
    • (c) the value of the benefit is less than the full duty payable in respect of the matter; and
    • (d) the reason the matter was not, and will not be, carried into effect is not merely to enable a replacement transaction to be entered into.
  • (3) The amount of duty payable on the instrument is reduced by the amount of the difference between the value of the benefit referred to in subsection (2)(b) and the amount of the full duty payable in respect of the matter.

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    ATC 4700

    (4) A taxpayer receives a benefit in respect of a matter included in an instrument if, as a result of the matter not being carried into effect, an amount of money, or a right, property or service, is received -
    • (a) by the taxpayer; or
    • (b) with the consent, or at the direction of, the taxpayer, by an independent person.
  • (5) A taxpayer receives a benefit in respect of a matter contained in an instrument chargeable as a conveyance or transfer of property if -
    • (a) the instrument provides for or contemplates the conveyance or transfer of the property to an independent person;
    • (b) under an agreement, arrangement or understanding between the taxpayer and another party, the property has been or is to be conveyed or transferred to that other party or to another person; or
    • (c) the taxpayer obtains exclusive use or control of the property under a term contract (however described), whether or not the contract is for any reason not fully carried into effect.
  • (6) Where a taxpayer receives a benefit of the kind described in subsection (5) the value of the benefit is the amount of the full duty payable in respect of the matter.
  • (7) For the purpose of calculating the value of a benefit received by a taxpayer in respect of a matter (other than a benefit of the kind described in subsection (5)), an amount equal to the amount (if any) required to restore the taxpayer to the position the taxpayer would have been in if the matter had not been included in the instrument, is not to be taken into account.
  • (8) Subject to section 17 of the Taxation Administration Act 2003, the Commissioner must make any reassessment necessary to give effect to this section.
  • (9) In this section -
    •   ' full duty ' , in relation to a matter, means the amount of duty that would, but for this section, be payable in respect of the matter;
    •   ' independent person ' , in relation to a matter, means a person who is not a party to the instrument that includes the matter;
    •   ' party ' , in relation to a matter, means a person who is a party to the instrument that includes the matter.
    •   ' replacement transaction ' , in relation to a matter, means a transaction between the taxpayer and an independent person that is substantially similar in effect to the transaction that was to have been effected by the instrument that includes the matter. "

16. The two grounds of appeal relied upon by the Commissioner are:

• " 1. The Tribunal erred in law in determining that no ' matter ' , within the meaning of s 20(1)(a) of the Stamp Act 1921 (WA) ( ' Stamp Act ' ), in the instrument has been, or will be, carried into effect.
• 2. Further or in the alternative, the Tribunal erred in law by determining that the respondent has not received and will not receive any benefit, within the meaning in s 20(1)(b) [ of the ] Stamp Act in respect of a matter included in the instrument. "

17. Plainly, the concept of " a matter included in the instrument " is fundamental to the determination of this appeal. Counsel for the appellant has pointed out that the concept of " a matter contained in an instrument " was first introduced into this legislation by s 3 of the Stamp Amendment Act 1990 (WA), which inserted s 15A into the Stamp Act . This section was later repealed and replaced by the present s 20 of the Stamp Act by s 7 and s 12 of the Stamp Amendment Act 2003 (WA). Despite this relatively late introduction of the concept of " a matter included in the instrument " into the text of the legislation itself, the concept of " matter " in connection with legislation relating to the imposition and liability for stamp duty has a much older, and therefore well-established, meaning and an earlier statutory pedigree. To

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ascertain this it is, to some extent, necessary to look to the history of this form of taxation.

18. In Hill D G, " Duties Legislation " Lawbook Co, 2001 at [ 1.0020 ] , the late Hill J explained that " [ s ] tamp duties were first legislated for in England in 1694 (5 Wm & M c21) as a temporary measure for four years to assist in financing the then war against France " . Traditionally, and even until comparatively recent times, it was a principle of stamp duty law that stamp duty was a tax on instruments and not transactions.

Consequently, much ingenuity was devoted to attempts to carry out a transaction without an instrument on the basis that, if this were possible, no duty would be attracted. Gradually, however, there were encroachments on this principle by legislation which amended the Stamp Act to impose duty specifically on transactions which caused or resulted in a change in the beneficial ownership of an estate or interest in certain property. As a result certain transactions may now be dutiable regardless of whether or not they are effected by an instrument - see, for example, s 31B and s 31C of the Stamp Act . Consequently, the practical effect of the distinction between a dutiable instrument and a property transaction, which, regardless of the existence of an instrument, gives rise to a liability for stamp duty under modern legislative regimes, has diminished. This marks a significant alteration in the fundamental principles of liability for stamp duty. Nevertheless, there can be no doubt that a dutiable instrument and a property transaction each retains its separate and different meaning, notwithstanding that, because of the modern legislation, each may give rise to a liability for stamp duty.

19. At [ 3.2820 ] of his work ( supra ), Hill J also explained that because stamp duty was intrinsically a duty on instruments and not transactions, liability on an instrument would arise when the instrument came into existence (see s 17A of the Stamp Act ) and, in the absence of any specific legislative provision, would continue notwithstanding that the underlying transaction may have been brought to an end:
Casella v Commissioner of State Taxation (WA) 96 ATC 4,145 at 4,150;
Spring Grove Pty Ltd v Commissioner of State Taxation (WA) [ 2000 ] WASCA 138 at [ 8 ] ; 2000 ATC 4,347 at 4,349 ; and
Commissioner of State Taxation (WA) v Extos Pty Ltd [ 2000 ] WASCA 293 ; 2000 ATC 4,748 . For this reason, if a dutiable contract is rescinded or annulled, but the circumstances of that rescission or annulment fall outside the scope of s 20 of the Stamp Act , which is the only basis for a reduction or repayment of duty if the matter is not carried into effect, then the duty will continue to be payable and, if previously paid, will not be refunded. It follows from this that eligibility for and the criteria governing entitlements to a reduction in or repayment of duty on an instrument where the matter included in the instrument has not and will not be carried into effect, depend entirely upon compliance with the conditions prescribed by s 20 of the Stamp Act , and that these do not always necessarily coincide with the existence or continuation of those circumstances which created the liability for stamp duty in the first instance.

20. An early Australian example of legislation strictly controlling the circumstances in which duty on an instrument might have been reduced or repaid, in circumstances where it was alleged that the dutiable transaction which it records had been rescinded or annulled, but where the entitlement to a reduction or repayment of duty was qualified by a provision which excluded application where the purchaser or any person claiming under him had entered into possession of or had attorned tenant of the property, was provided by the originally enacted s 41(7) of the Stamp Duties Act 1920 - 1949 (NSW). This was examined in
Vickery v Woods (1952) 85 CLR 336 , where the claimed entitlement to a reduction and repayment of stamp duty failed because the court was satisfied that the first contract of sale had not been rescinded or annulled.

21. Several of the early cases, discussed in
Vickery v Woods ( supra ), dealing with claims for a refund of duty on the basis that an earlier contract had been rescinded, related to pre-incorporation contracts made by a party on behalf of a company then to be incorporated, followed by a post-incorporation contract with the new company itself to perform the obligations assumed under the first engagement. Another such example is
Australian Airlines Ltd v Commissioner of Stamp Duties (Qld) (1988) 79 ALR 425 . However, those cases

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largely depended on whether or not the claimant for the refund of duty was able to prove that the first contract had indeed been rescinded and annulled, either independently or by the second contract. They often failed because the eventual transaction was found to have been performed, or to be performed, in accordance with the terms of the first obligation, and nothing had been done to release or discharge the parties to the first contract from the obligations which they had mutually accepted. This is only one small step short of the evolved notion that the purchaser under the second contract took the benefit of the first contract and it is, no doubt, the germ from which the concept of receiving a " benefit in respect of a matter included in an instrument " which was not carried into effect has since sprung.

22. It is necessary to approach this appeal on the footing that the second contract of 10 August 2004 is, indeed, a contract separate from the first. It is a contract which stands alone, and which terminated, rather than varied or affirmed, the first. Hence the emphasis by the appellant on the contention that the second contract was essentially in respect of the same matter as the first or, alternatively, resulted in a benefit received by the respondent as a result of that matter not being carried into effect.

23. The concept of " matter " has a well-developed and recognised place in the evolution of the law relating to liability for stamp duty. It is, of course, possible for one instrument to record several distinct matters or transactions, each of which may attract stamp duty leading to a liability for the cumulative duty payable in respect of the distinct transactions or matters. For example, an instrument may document a contract for the sale of property by instalments, for example, a farm, giving rise to a liability for conveyance duty on the consideration payable for the purchase. In addition, the same instrument may provide for the purchaser to mortgage the property purchased to the vendor for a period to secure payment of the balance of the purchase price, giving rise to a liability for stamp duty at mortgage rates for the amount so secured. Further, the same instrument may also contain a provision for the lease of part of the property purchased to third parties to the instrument for a fixed term at an ascertainable rental, and recording the consent of the vendor/mortgagee to the lease which, in former times or in other places where there was stamp duty payable in respect of ordinary leases, would give rise to an additional liability for stamp duty on the agreement for lease.

24. In the days when gift duty existed it was not uncommon to find that in instruments such as deeds of partnership, or deeds of dissolution of partnership, or in deeds of family arrangement, part of the transactions recorded included a gift from one partner, or member of a family, to another. One such example might have been the extinguishment or release of a debt, which, if recorded in that way, would have given rise to liability for stamp duty at the higher gift duty rates.

25. Hence, it became significant to determine what " matters " were dealt with by the single instrument because there might, or might not be, a cumulative liability for stamp duty in respect of the separate matters recorded by the one instrument. The need to identify the matter or matters to which the instrument related became even more important in the light of the rule that if an instrument dealt with several matters, it was assessable to stamp duty only in respect of its principal object or matter and that this liability covered every other matter which was accessory to, or incidental to, its main object or matter. The extent to which an instrument was assessable to duty only in respect of its principal matter was examined in
Commissioner of Stamp Duties (NSW) v Pendal Nominees Pty Ltd 89 ATC 4207 ; (1989) 167 CLR 1 . This principle of charging instruments separately with duty in respect to two or more distinct matters recorded by the instrument is also to be found in s 19 of the Stamp Act . The Act also requires all facts and circumstances affecting the liability of the instrument to duty, or the amount of the duty with which it may be chargeable, to be fully and truly set out in the instrument: Stamp Act , s 26(1).

26. The instrument under consideration in
Commissioner of Stamp Duties (NSW) v Pendal Nominees Pty Ltd ( supra ) was a deed for the sale and purchase of certain shares, which also called for the shares to be transferred to the purchaser upon completion, and for the purchaser to hold the shares once purchased as a nominee for the trustee of a unit trust. The

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ATC 4703

deed was charged with ad valorem duty as an agreement for the sale of shares, and the share transfer was stamped with nominal duty. In addition, the Commissioner assessed the deed to further ad valorem duty as a declaration of trust. The appeal concerned whether or not the deed was properly assessed to the additional ad valorem duty as a declaration of trust. The decision of the High Court, allowing the Commissioner ' s appeal from the Court of Appeal of New South Wales, held that it was. Addressing s 17(1) of the Stamp Duties Act 1920 (NSW), which for present purposes is indistinguishable from s 19(a) of the present Western Australian Act, Mason CJ said, at 10 - 11:

" The statutory concept of ' distinct matters ' has traditionally been associated with the rule enunciated by Martin B in
Limmer Asphalte Paving Co v Commissioner of Inland Revenue [ (1872) LR 7 Ex 211 at 217 ] in these terms:

' There is no better established rule as regards stamp duty than that all that is required is, that the instrument should be stamped for its leading and principal object, and that this stamp covers everything accessory to this object ' .

This rule has been described as a common law rule. It may be traced back as far as
Pratt v Thomas [ (1831) 4 C & P 554 ; 172 ER 822 ] .
Price v Thomas [ (1831) 2 B & Ad 218 ; 109 ER 1125 ] which was decided long before a provision in the form of s 17(1) first found its way into the United Kingdom Stamp Act of 1870 (33 & 34 Vict, c 97): see s 8 of that Act. But it should be noted that the Act of 1815 (55 Geo III c 184) contained a similar provision under the heading ' Conveyance ' . It is likely that the common law rule was fashioned with this provision in mind. Be this as it may, the statutory provision seems to have been regarded as being consistent with the common law rule, no doubt on the footing that, in general, a provision that is merely accessory or merely ancillary to the principal transaction or obligation embodied in an instrument is not a ' distinct ' matter which attracts additional duty [ citations omitted ] . However, what must be recognised is that s 17(1) now provides the governing rule. The old common law rule, being entirely subservient to the statutory provision, cannot generate a life of its own. The utility of the old rule is limited; it conveys the idea, which conforms to the statutory concept of distinctness, that a provision which is merely accessory or merely ancillary to a particular transaction or obligation embodied in an instrument is not a matter ' distinct ' from that transaction or obligation. But, in judging what is merely accessory or merely ancillary, the court must always have regard to the statutory concept itself. "

The learned Chief Justice then proceeded to explain how it would be impermissible to characterise an instrument by reference to a single broad purpose or object so that all obligations created by the instrument might be treated as subsidiary or accessory to that subject or purpose. His Honour specifically approved of the passage in the judgment of Sugerman J in
Bambro (No 2) Pty Ltd v Commissioner of Stamp Duties [ 1963 ] SR (NSW) 52 at 527, which was cited in this appeal both by counsel for the appellant and the respondent, where Sugerman J said:

" I see no reason for concluding that ' matters ' may not be ' distinct ' in the sense now under consideration even though in a contractual sense, and in the terms of the instrument which embodies them, they are integrated and interlocked as parts of a single larger transaction or bargain or agreement. Matters contained in the same instrument are distinct for the purposes of s 17(1) where it is necessary to regard them separately in order to assess the same amount of duty as would have been assessable if each had been expressed in a separate instrument, more particularly when each falls within a different classification created by the Act for the purpose of specifying the nature (fixed or ad valorem) and amount or rate of the duty payable. "

In
Commissioner for Stamp Duties (NSW) v Pendal Nominees Pty Ltd ( supra ) at 12, Mason CJ referred to subsequent authority which approved and applied this statement of Sugerman J in
Bambro (No 2) Pty Ltd v Commissioner of Stamp Duties ( supra ) and then said:

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ATC 4704

" The point, as Adam J noted in
Comptroller of Stamps v Martin [ [ 1967 ] VR 369 at 375 ] , is that to be ' distinct ' the matters ' must be different from the point of view of the Stamp Act and taxation ' and be, if they had been the subject of a separate instrument, separately and distinctly dutiable. "

Mason CJ, and Brennan and Toohey JJ, who comprised the majority (Deane and Dawson JJ dissenting), held that the provision in the deed providing for the shares which had been purchased to be held by the purchaser as the nominee for the trustee of a unit trust did constitute a separate and distinct declaration of trust and was, accordingly, separately and additionally liable to stamp duty.

27. Consequently, it is clear that the reference to a matter or matters included in a dutiable instrument refers to those features or characteristics of the transaction which render it susceptible to stamp duty. Where the instrument deals with more than one matter, there will be a question whether or not the additional matter or matters are distinct, so giving rise to an additional, cumulative, liability to duty in respect of each distinct matter, or whether they are merely accessory or incidental to the principal matter in which case no additional duty shall be chargeable.

28. This interpretation, in my view, conforms to the authorities which have interpreted similar legislative provisions elsewhere. Perhaps, it is even better demonstrated by considering the situation which will arise when there is an instrument including several distinct matters, one or some of which is or are not carried into effect. Returning to the example of the instrument recording an agreement to sell a farm on terms, with an agreement to mortgage the property back to the vendor, and an agreement to lease to third parties; there are, as earlier explained, three distinct dutiable matters. However, if the transaction were to proceed without the mortgage back, and/or without the lease, one or both of those distinct matters would not be carried into effect and a partial reduction and refund of duty on the instrument would be due.

29. In my view, the concept of " matter " in s 20 of the Stamp Act bears the same meaning and should be regarded as that particular feature or characteristic of the transaction recorded by the instrument which renders it liable to duty - in this case, that feature being that it is an agreement for the sale and purchase of real property so characterising it as a conveyance and, accordingly, subject to duty of the nature and in the amount calculated in accordance with item 4(1) of the Second Schedule to the Stamp Act .

30. On this basis the conclusion is clear that the " matter " included in the instrument of 10 November 2003 was the agreement to construct, sell and purchase apartment 301 - a transaction which amounted to a conveyance within the meaning of the Act, on the terms and conditions recorded by that instrument. There was no other distinct matter contained or included in the instrument and it was this, and only this, matter which gave rise to the liability for the duty which was assessed and paid. On the basis of the finding that this first agreement for the construction, sale and purchase of apartment 301 was entirely terminated and replaced by the second agreement of 10 August 2004 as a separate stand-alone agreement, it follows that the termination of the agreement also terminated the matter, namely, that " conveyance " to sell and purchase that property on the terms specified in that instrument. That particular matter, namely the mutual obligation giving rise to the liability for stamp duty as a conveyance, which that instrument recorded, has not been, and will not be, carried into effect.

31. The Commissioner accepted, both before the SAT and in this Court, that the second agreement on 10 August 2004 for the sale and purchase of unit 301 by the respondent was not " a replacement transaction " within the meaning of s 20(1)(c) of the Stamp Act because a " replacement transaction " is defined by s 20(9) as meaning a transaction between the taxpayer, in this case the respondent, and an independent person that is " substantially similar in effect to the transaction that was to have been effected by the instrument that includes the matter " . This second contract of sale is not with any independent third person but is simply a second contract between the same original parties.

32. In contrast, the appellant ' s submission was that the " matter " in the original contract is the property, apartment 301, which was to be

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ATC 4705

sold, and that because it is the same property which was being sold under the second contract, the " matter " was carried into effect. With respect, this wrongly identifies the item of property which is the subject of the dutiable instrument with the matter which renders the instrument dutiable. As already explained, the " matter " , in this case, is the conveyance; namely, the legally enforceable agreement for the sale of real property on fixed and defined terms, recorded by an instrument, which gives rise to the liability for stamp duty. It is this combination of legally enforceable obligations, on defined terms, and in respect of real property, recorded by an instrument and therefore assessable to duty, which constitutes the " matter " . It is that composite set of circumstances giving rise to the obligation to pay duty which constitutes the " matter " , and not the topic or " subject matter " of the transaction. The contrast between the two approaches appears from taking the example of a series of instruments recording the sale of the same property, " Blackacre " , such that the property is sold to a purchaser, that first purchaser then sells to a second, the second seller to a third, and so on. The same " subject matter " , namely, " Blackacre " , is being sold under each contract of sale. However, each contract of sale is in respect of a different " matter " because each constitutes a separate and different conveyance recorded by an instrument and each is dutiable.

33. Furthermore, liability to stamp duty, and the extent of the liability to duty, has long been recognised as being governed by the terms of the law in force, and the circumstances existing at the time when the instrument becomes dutiable; that is, at the moment it is executed:
William Cory & Son Ltd v Inland Revenue Commissioners [ 1965 ] AC 1088 per Lord Reid at 1105; per Lord Donovan at 1109. That was a case concerning an option to purchase shares which, later, were transferred to the party holding the benefit of the option. It was held, unanimously by the House of Lords, that the option to purchase was not a " conveyance on sale " , because at the point when it was executed there was no sale and the fact that there was a hope or expectation or a strong probability of a sale later arising served merely to emphasise that there had been no sale at the crucial date of execution of the option agreement. Examples abound of cases which emphasise that the liability to duty of an instrument depends upon its substance or actual effect, rather than its form or any label ascribed to it by the parties:
Great Western Railway Co v Commissioners of Inland Revenue [ 1894 ] 1 QB 507 per Lopes LJ at 513. However, it is equally clear that the proper characterisation of a transaction recorded by an instrument is to be ascertained by identifying the legal effect of the instrument itself. Accordingly, the " matter " , if any, contained in the instrument, and the nature and extent of the liability of the instrument to duty, is to be found from a proper characterisation of the instrument at the point at which it first becomes liable to duty. This is an entirely orthodox principle, but it is also a powerful indication that the identification of " matter " must be found within the terms of the instrument, containing, as it must, all facts affecting the liability to duty. This feature is not diminished by the fact that extrinsic evidence may be admissible to cast light on the terms used by the instrument or even the true consideration or value of the subject matter.

34. This concept of a " matter " being the transaction recorded by the instrument on particular terms and conditions, which reveal the instrument to bear stamp duty of a particular nature, is also confirmed by the historical examples of cases arising under similar legislation in other jurisdictions. For example, in Halsbury ' s Laws of England 4th ed reissue, Butterworths, London, 1995, vol 44(1) at [ 1015 ] , there is the following passage:

" [ A ] n instrument containing or relating to several distinct matters is to be separately charged, as if it were a separate instrument, with stamp duty in respect of each of the matters, and an instrument made for any consideration in respect of which it is chargeable with ad valorem duty, and also for any further or other valuable consideration or considerations, is separately chargeable, as if it were a separate instrument, in respect of each of the considerations.

It seems that ' distinct matters ' means for this purpose matters which either fall under separate heads of charge or are separate transactions. Thus a statutory declaration, sworn as to one part by one person and as to

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ATC 4706

another part by another, attracted only one stamp as one declaration prior to the abolition of duty under this head. On the other hand, a single conveyance of separate items of property, of which some attract conveyance duty and some do not, relates to distinct matters. Again, if two persons in fact sell property to each other, a mutual conveyance described as an exchange attracts the same aggregate duty as two separate conveyances on sale. " (citations omitted)

35. In none of these examples or commentaries can any support be found for the contention that a " matter " is distinct and separate from, or has a life or significance which endures beyond, the terms of the dutiable instrument which contain it. If that instrument, or the transaction which it records, is completely terminated, rescinded or annulled, as it was found by the SAT to be the case with this first contract of sale, there is simply no matter which endures or which, independently, remains dutiable.

36. This construction also appears to me to be consistent with the earlier decisions of this Court in
Commissioner of State Taxation (WA) v Kitchener Mining NL 94 ATC 4,987 and
Prime Holdings Pty Ltd v Kanemaru (1992) 7 WAR 308 . Both those cases involved consideration of s 15A of the Stamp Act , which, as observed above, has since been repealed and replaced by the present s 20 in different terms.

37. In
Commissioner of State Taxation (WA) v Kitchener Mining NL ( supra ) at 4,998, Murray J addresses the provisions of the former s 15A(1)(b) of the Stamp Act , which, relevantly, provided:

" 15A(1) Subject to this section, the Commissioner shall refund all of the ad valorem duty paid on an instrument when the Commissioner is satisfied that -

• (a) the instrument is rescinded, annulled, discharged or cancelled or that each matter contained in the instrument to which the instrument relates and in respect of which ad valorem duty has been paid has not been, and will not be, carried into effect; and
• (b) no amount of money, right, property or service in respect of the instrument or in consequence of the rescission, annulment, discharge or cancellation or from the matter or matters not being carried into effect has been or will be paid or obtained by -
  • (i) a person to pay ad valorem duty on the instrument; or
  • (ii) any other person (being a person who was not a party to the instrument and the date of its execution) with the consent, or at the direction, of a person liable to pay ad valorem duty on the instrument. "

At 4,999, his Honour observed:

" In my opinion it [ s 15A(1) ] is concerned to produce a refund for a taxpayer who is liable to pay duty upon an instrument which does not go the full distance to the final completion of the transaction to which it relates. The section recognises, however, that its performance may have been stopped at a point where prior to that some money, right, property or service may have passed under or by virtue of the instrument. The sub-section rather clumsily speaks of that in terms of money, right, property or service being paid or obtained ' in respect of the instrument ' . In my opinion, in the context of the section and its evident policy, money, a right, property or a service in respect of the instrument will be paid or obtained where that occurs as a result of or in consequence of the creation of the instrument which led originally to the liability for stamp duty to be paid. "

The present form of s 20 of the Stamp Act , therefore, appears to be in part the response of Parliament to the concerns voiced by his Honour about the clumsy nature of the language employed in the former s 15A(1). It asserts more clearly that a full reduction or refund of the duty paid on an instrument in respect of a matter which is not carried into effect, will not occur if, as a result of the instrument, an amount of money, a right, property or a service is received - to paraphrase both the language of the present s 20(4) and s 20(5) and the language employed by Murray J in those reasons.

38. At first instance, Kitchener Mining NL succeeded in its appeal from a decision of the Commissioner rejecting the taxpayer ' s application for a refund of duty, on the grounds that the deed had not been rescinded, or had not, or would not be carried into effect. Master

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ATC 4707

Ng held that the Commissioner had erred in law in finding that the deed had not been rescinded and also concluded that no benefits had flowed to the taxpayer under the rescinded deed:
Kitchener Mining NL v Commissioner for State Taxation (WA) 93 ATC 4,555 . Both those conclusions of Master Ng were upheld by the Full Court in the appeal for reasons set out fully by Nicholson J, with whom Pidgeon and Murray JJ expressly agreed.

39. A special feature of the facts in
Kitchener Mining NL v Commissioner for State Taxation (WA) ( supra ) was that the deed, which had been found to have been rescinded, in fact post-dated an earlier arrangement under which ownership of certain interests, including mining tenements, was to be passed to the taxpayer. The argument for the Commissioner for State Taxation was that, even a subsequent document could operate as a conveyance in respect of a previous transaction and it was this previous transaction from which the taxpayer derived the benefit of acquiring interests in the mining tenements. Commissioner Ng, and Pidgeon, Nicholson and Murray JJ in the Full Court, all rejected that contention on the facts. Their reasons for doing so made it clear that any connection between the instrument which had been rescinded, terminated or which was not to be carried into effect, and the benefit in the property which the taxpayer might receive, had to be more than merely temporal, and that the eventual or earlier obtaining of ownership or possession of that subject property would not of itself suffice unless that possession or ownership was caused by, or derived from, the rescinded agreement, the agreement that was not to be carried into effect, in a causal sense.

40. In my respectful opinion, those analyses correctly emphasised that for a benefit of the kind referred to now in s 20(4) and s 20(5) to be received, the entitlement to the benefit must derive from some right, duty or obligation contained in the instrument in respect of which duty was first assessed, except only in the specific circumstances contemplated by s 20(5)(b) and s 20(5)(c), which had no application in the present case. The unconditional rescission or termination of the agreement of 10 December 2003 by the second agreement of 10 August 2004 in this case demonstrates that no rights or entitlements of any kind to the apartment were obtained or derived under the first agreement, as the SAT correctly held.

41. It follows, that I respectfully consider that the learned President, Barker J, was correct in concluding that there was no matter included in the contract of sale of 10 December 2003 which had been, or would be, carried into effect following the termination of that contract. Further, having regard to the finding which both of the parties to this appeal accept, that the contract of 10 December 2003 was entirely terminated and replaced by a separate stand-alone contract of 10 August 2004, it follows that the learned President was also correct in concluding that the taxpayer had not received and would not receive a benefit in respect of the matter, by reason of the parties voluntarily entering into a separate and distinct contract of sale of 10 August 2004 in respect of apartment 301. These are the two issues upon which the question of the respondent ' s entitlement to a reduction and repayment of the whole of the duty on the first instrument depend in this appeal. It follows that the Commissioner ' s appeal should be dismissed.

42. Counsel for the Commissioner did raise other submissions in support of the appeal to the effect that the interpretation of s 20 of the Stamp Act adopted by the SAT may, in certain circumstances, allow for avoidance of stamp duty by providing an opportunity for a series of voluntary rescissions to defer liability for tax. However, the meaning of " matter " within s 20, and the corresponding meaning of receiving " a benefit in respect of the matter " , are clear and established and any consequence of adopting the established interpretation is not a reason for departing from it. Furthermore, the examples suggested by counsel for the appellant relate to potential liability for penalty tax by a party who fails to lodge an instrument for stamping within time and who later rescinds or terminates the agreement, replacing it by a second or a series of subsequent separate instruments. It is enough to say, with respect to that suggestion, that each such instrument, if dutiable, would become dutiable from the date of execution and that the party liable would be chargeable with the duty, even if the duty paid, or payable, may be reduced and refunded because of subsequent events or instruments. Further, deliberate

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ATC 4708

attempts to evade duty by a series of rescissions of instruments evidencing a conveyance and replacement of them by fresh instruments, may reveal that, in truth, there was no termination or rescission of the earlier agreements but only a series of extensions of them.

43. Nor, despite submissions to the contrary, do I consider that there is any " wait and see " problem, associated with the situation which might arise when, for example, a conditional contract for the sale of land is rescinded or otherwise terminated and the taxpayer applies for a reduction or repayment of the duty pursuant to s 20 of the Stamp Act . There will be no occasion for the Commissioner to " wait and see " whether or not the parties enter into any subsequent transaction. The question for determination will be whether or not the requirements of s 20 have been satisfied and, in particular, in a case such as the present, whether the contract said to have been rescinded or terminated has not been, and will not be, carried into effect, whether the taxpayer has not received, and will not receive, a benefit in respect of the matter, or whether s 20(1)(c) of the Stamp Act applies.

44. In my view, this appeal should be dismissed.