Collector of Imposts (Victoria) v Cuming Campbell Investments Pty Ltd

63 CLR 619

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(Judgment by: Latham CJ)

Between: Collector of Imposts (Victoria)
And: Cuming Campbell Investments Pty Ltd

Court:

Judges:
Latham CJStarke J
Dixon J
Evatt J
McTiernan J

Subject References:
TAXATION AND REVENUE
STAMP DUTY
Instrument of transfer of real property
No adequate consideration

Legislative References:
Stamps Act 1928 (Vic) No 3775 - Third Schedule, Headings VI and IX

Hearing date: 29-31 May 1940
Judgment date: 19 August 1940

Sydney (heard in Melbourne)

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Judgment by:
Latham CJ

The question which arises upon this appeal from the Supreme Court of Victoria is whether a transfer of certain lands by the executors of the late Edward Campbell to the respondent company expressed to be in consideration of the sum of PD50,000 is dutiable under the Victorian Stamps Act 1928 as a conveyance or transfer on sale of real property under div. VI. (A) of the Third Schedule to the Act or as a deed of gift under div. IX. (1) of that schedule. Upon a case stated by the Collector of Imposts it washeld by Gavan Duffy J. that the instrument was dutiable as a transfer and not as a deed of gift.

The late Edward Campbell on 17th September 1931 made an agreement with the respondent company, which was a proprietary company entirely under his own control, whereby he agreed to sell and the company agreed to purchase certain land and other property. In a schedule the sale price of the land was stated at PD50,000 and of the other property at PD30,000. On the same day he executed three deeds in which he declared in favour of his three sons trusts of sums of PD10 paid to the trustees and of other property which he might thereafter vest in the trustees. On the same day 80,000 shares in the company were allotted to Edward Campbell. On the same day also the trustees of each of the three several deeds agreed to purchase from Edward Campbell 25,000 shares in the company at a price of 5s. a share.

It is not disputed that the value of the shares was more than 5s. a share. Edward Campbell died on 7th December 1931. The main asset in his estate was a debt of 5s. a share shown as owing to him on the 75,000 shares in the company sold to the trustees. On 28th July 1937 the surviving executors and trustees of Edward Campbell executed an instrument of transfer to the company of all the land specified in the schedule to the agreement of 17th September 1931. It is stated as a fact in the case that the true value of the land on 17th September 1931 was PD89,515: See Cuming Campbell Investments Pty Ltd v Collector of Imposts. ^[F1] It is also stated as a fact that the true value of the land at the date of the transfer was PD101,718. The question which arises is whether the instrument of transfer is chargeable with duty under the Stamps Act 1928, and, if so, with what amount of duty. It was held by the Supreme Court that the instrument was chargeable as a transfer upon the amount of PD50,000, the consideration stated therein, and not as a deed of gift. The Collector of Imposts appeals to this court from that decision.

The Stamps Act 1928, s. 17, imposes duties upon the instruments specified in the schedule. Section 78 and following sections relate to the duties chargeable upon deeds of settlement and deeds of gift under div. IX. of the Third Schedule. That division, so far as itis relevant, is in the following terms:"Settlement or Gift, Deed of-(1) Any instrument other than a will or codicil whether voluntary or upon any good or valuable consideration other than a bona-fide adequate pecuniary consideration whereby any property is settled or agreed to be settled in any manner whatsoever, or is given or agreed to be given in any manner whatsoever, such instrument not being made before and in consideration of marriage. Where the value of the property does not exceed PD1,000-10s. per cent" etc

Under Act No. 4430 (which is applicable to the transfer in question) the rates of duty chargeable begin at one per cent, rising to five per cent where the value of the property exceeds PD100,000. The duties imposed upon conveyances and transfers under div. VI. are ten shillings for each PD50 of the amount or value of the consideration for the sale. Thus the duties imposed upon deeds of gift (where the value of the property exceeds PD1,000) are much heavier than those imposed upon transfers.

The courts have not succeeded in finding any satisfactory meaning for the provisions of div. IX., which have often been described as confused and almost unintelligible. The sections of the Act (e.g., s. 78) and the heading of the division refer to deeds of settlement and deeds of gift, but it has been decided that the subsequent words in the first sub-clause of the division produce the result that documents which are not deeds are nevertheless subject to duty under the division: See Howard-Smith v Comptroller of Stamps. ^[F2] This decision is in accordance with long-established practice.

In Castlemaine Brewery Co Ltd v Collector of Imposts ^[F3] it was held by a'Beckett J. and by the Full Court of Victoria that the words of the heading, "Settlement or Gift, Deed of", constituted a "governing description" and that no instrument was dutiable thereunder unless it could "by reasonable intendment be brought within the definition of `Settlement or Gift, Deed of.'" It was said that sub-clause 1 did not "create new subjects of taxation which cannot, by any reasonable intendment, come under the description of `deeds of settlement or gift'": See the report, ^[F4] per a'Beckett J.; at pp. 12, 13, in the judgments of the Full Court. This decisionwas approved in the case of Collector of Imposts (Vict.) v Peers, ^[F5] but it was there interpreted as deciding not that the heading controlled the first sub-clause, but, on the contrary, that the sub-clause extended and enlarged the meaning of the words in the heading so as to make those words cover documents which they would not ordinarily include. ^[F6] This must be so in some sense, because div. IX. under the heading of "Deeds of Gift" does include instruments which are given upon valuable consideration if that consideration is not bona fide, adequate, and pecuniary. It is plain that such transactions cannot be described in any ordinary sense as gifts, although the legislature says that in some manner or in some degree instruments giving effect to them are to be taxed as if they were gifts.

Sub-clause 1 of div. IX. excludes wills and codicils and instruments made before and in consideration of marriage. The sub-clause includes cases where valuable consideration is given for a transfer of property (real or personal) made by an instrument unless the consideration is bona fide, adequate, and pecuniary. It is difficult to reconcile some of the decisions with the words of the sub-clause. For example, in Atkinson v Collector of Imposts ^[F7] the consideration for a transfer of land was the compromise of a contested will case, including the withdrawal of a caveat. Such a consideration was plainly not pecuniary, but nevertheless it was held that the instrument was not a deed of gift within the meaning of div. IX. If that division applies to transfers of property upon any consideration which is not pecuniary, the decision was plainly wrong. In fact, the decision went upon the ground that there was no benevolence in the transaction-a ground which it is now impossible to maintain after the decision in Collector of Imposts v Peers. ^[F8]

But the acceptance of the proposition that a transfer for consideration is a gift is only one of the difficulties presented by sub-clause 1. The words of the sub-clause further require (wherever there is a pecuniary consideration) a decision as to whether the consideration is bona fide. Even if a consideration is adequate and pecuniary, so that full value is given for the property transferred, but in somesense the transaction is not bona fide, then the transfer may possibly be dutiable as a deed of gift. It is difficult to conceive a transaction consisting in a transfer of property for adequate pecuniary consideration which can be described as not bona fide in any sense relevant to a revenue Act. It may, however, possibly be the case that the legislature intends to penalize, by a specially high rate of duty, transactions which have associated with them some kind of fraudulent intent, even although full pecuniary consideration should be given for any property transferred.

The presence of some, or even of some substantial, pecuniary consideration plainly does not relieve an instrument transferring property from dutiability under div. IX. Even if there is a pecuniary consideration, but it is not adequate, the instrument may be charged under sub-clause 1. In Kelly v Collector of Imposts, ^[F9] a father transferred to his son a piece of land the admitted value of which was PD9,000. The consideration for the transfer was the payment of about PD5,500 to the father and a verbal promise to pay PD400 to a brother of the transferee and to maintain an aged father for his life. The transaction was held to be bona fide; there was a pecuniary consideration, but the pecuniary consideration was not adequate. It was, on this ground, held by the Full Court of Victoria that the instrument of transfer was dutiable under sub-clause 1 of div. IX. In In re Officer's Transfer ^[F10] the Full Court of Victoria dealt with a case where land of the value of PD15,284 was transferred in consideration of PD14,000 and of natural love and affection. On the admitted facts the pecuniary consideration was not adequate, and it was held upon this ground that the instrument of transfer was dutiable under div. IX. and not under div. VI. In each case duty was charged upon the full value of the property transferred.

It has been said, on the authority of Davidson v Chirnside, ^[F11] that the question whether an instrument is dutiable under div. IX. must be determined by an examination of the instrument itself and not upon extrinsic evidence. This rule was enunciated in the case cited in relation to the question whether the provisions of an instrument were such as to bring it within the word "settlement" in theschedule. It is obvious that, in order to determine whether a consideration is bona fide or adequate, it is necessary to go beyond the terms of the instrument, and that, for this purpose, extrinsic evidence must be admitted.

In the present case it is stated as a fact in the case that the value of the land transferred was, at the date of the agreement to transfer, PD89,515, and at the date of transfer, PD101,718. The consideration for the transfer was a pecuniary consideration, namely, PD50,000. According to the decisions in Kelly's Case ^[F12] and Officer's Case, ^[F13] and according to the plain meaning of the words of the sub-clause, the pecuniary consideration was not in this case an adequate consideration. It has nevertheless been held in the Supreme Court that the transfer is not dutiable as a deed of gift under div. IX. If div. IX., however, applies to all transfers of property if they are made for a pecuniary consideration which is not adequate, then I am unable to concur in the view that the decision of the Supreme Court is correct.

There is really no meaning in describing as a gift the transfer of property for consideration unless the consideration is merely illusory. Accordingly, the words of div. IX., as they have hitherto been construed, contain an inherent contradiction in terms. The question arises whether it is not possible to adopt an interpretation of the words which does not involve self-contradiction and which will produce a result which is more reasonable than that brought about in, for example, Officer's Case. ^[F14] In that case a deficiency in price as compared with value (and not a very great deficiency) exposed the parties to a bona-fide transfer of property to duty upon the full value of the property at a much higher rate than would have been applicable if the transaction had been treated either as a transfer, or partly as a transfer and partly as a gift. In my opinion it is possible to interpret the words in such a manner as to avoid these results in the case of deeds of gift.

But the collector contends that the instrument of transfer is nevertheless dutiable as a gift (which carries a higher duty) because of the explicit provision of the schedule already mentioned. According to this contention, any instrument (with certain exceptions which are inapplicable to the present case) upon good and valuable consideration other than a bona-fide adequate pecuniary consideration whereby property is given or agreed to be given in any manner whatsoever falls within the description "Gift, Deed of" in the Third Schedule, item IX. The case states that the true value of the properties transferred was on the date of the agreement of sale PD89,515 and on the date of the instrument of transfer PD101,718.

It is not easy to suggest any limitation upon the words of the schedule. But limitation it must have, otherwise the disposition of property in the ordinary course of business, other than for an adequate pecuniary consideration, would fall within the terms of the schedule. Parties who genuinely negotiated the sale of property would fall within the description if it appeared that the consideration was not a pecuniary one or was not in fact adequate. That view is opposed, I think, to the opinion given by this court in Collector of Imposts (Vict.) v Peers, ^[F23] and clearly to the decision of Hood J. in Atkinson v Collector of Imposts, ^[F24] which was approved in Peers' Case. ^[F25] It was decided in Atkinson's Case ^[F26] that the transfer there in question was not an instrument of gift, though the consideration was not a pecuniary one. It bore no resemblance, said Hood J., to what is ordinarily known as a deed of gift.

However, the words of the Act are controlling and if explicit they must prevail. The schedule to the Act, though, is not very explicit. It uses the words "gift" and "given" or "agreed to be given," which point to a transference of property from one person to another voluntarily and without any valuable consideration. But thewords in the schedule widen the legal conception of a gift to the transference of property for a consideration that is not bona fide, adequate and pecuniary. Still, the dominant words of the schedule suggest an instrument whereby some benefaction is intended and conferred. "The real meaning of the schedule is," as Hood J. said in Atkinson's Case, ^[F27] "that a deed of gift shall not escape taxation merely because there is some good or valuable consideration therefor." "In some cases the absence of a good bona-fide adequate pecuniary consideration may be evidence that the transaction is in reality a gift." It cannot be pretended that this conclusion is satisfactory, for it affords no clear rule and requires the consideration of the facts of each particular case. Thus the third step taken by Campbell in the present case, the handing over of 75,000 shares to the trustees under the deeds already mentioned for a nominal sum of five shillings per share, may perhaps constitute a gift for the purposes of the schedule and be dutiable. But that is a matter for further consideration if it ever arises.

In my opinion, for reasons already appearing, no gift or benefaction was intended or conferred by the instrument of transfer from Campbell to the company: it completed a genuine sale of real property and was in fact and in law a transfer on sale and is so dutiable.

The decision of Gavan Duffy J. in the Supreme Court was right and should be affirmed.