Ash Street Properties Pty. Ltd. & Ors v. Pollnow & Ors.

Judges: Samuels JA

Mahoney JA
Priestley JA

Court:
Supreme Court of New South Wales (Court of Appeal)

Judgment date: Judgment handed down 12 June 1987.

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Mahoney J.A.

I have had the advantage of reading the judgment of Priestley J.A. His Honour has detailed the facts and I shall not repeat them.

I agree with his Honour's judgment in relation to the Bay Road Apartments Pty. Limited transaction and the orders he proposes in relation to it.

I agree generally with his Honour's judgment in relation to the other transactions and I agree with the orders which he proposes in relation to them. In my opinion, the claim put forward by Mr Pollnow fails, in this proceeding, because

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ATC 4623

of the provisions of the Stamp Duties Act to which Priestley J.A. has referred. As the questions arising in relation to these transactions are of public importance, I shall add some observations of my own in relation to them.

The question which arises is the effect of the Stamp Duties Act 1920, as it was at the relevant time. In argument, reference was made in particular to sec. 29. Mr Pollnow's case was that the management partner companies hold the land in question on trust, as to part, for the investors and, as to part, for him or his company. His case was put on two alternative bases: that the trust was constituted by a deed; and (if the deed was not proved or valid) that trusts to the same effect arose from the circumstances of the case.

As to the first basis of Mr Pollnow's claim:

McLelland J. and Priestley J.A. have concluded that, in so far as it was claimed that the trusts were created by the relevant deeds, they were not proved. I am of the same view. But it is relevant that the basis of this part of Mr Pollnow's claim and of the rejection of it be referred to.

The rejection of this part of Mr Pollnow's claim rests on two propositions: (i) that the trust was created in terms by certain deeds; and (ii) that those deeds were deprived of effect and were, in the relevant sense, rendered void by the operation of the Stamp Duties Act 1920 and in particular by sec. 29.

• (i) The appeal proceeded on the basis that it was the purpose of the parties that the trusts in favour of the Pollnow interests be created expressly by the deeds to which Priestley J.A. has referred; that such deeds were executed; that they were in existence outside New South Wales; and that they were not tendered in evidence in the proceeding. This was the claim made on Mr Pollnow's behalf. He tendered copies of the deeds to prove their existence, upon the basis that the deeds had been executed. Whether what was done constituted, as against Mr Pollnow as a party to the present proceeding, an admission of the existence and execution of the deeds need not, I think, be formally determined because the existence and execution of the deeds was, in relation to this part of the proceeding, not in contest.
• (ii) Section 29(1) of the Stamp Duties Act provided that, except in criminal proceedings, the deeds should not be "admitted to be good, useful or available in law or equity for any purpose whatsoever". The effect of such a provision is that an unstamped document subject to its operation is deprived of effect unless and until the duty be paid: see
  Dent v. Moore (1919) 26 C.L.R. 316 ;
  Shepherd v. Felt and Textiles of Australia Ltd. (1931) 45 C.L.R. 359 . No distinction is, in my opinion, to be drawn between sec. 29(1) and the provision in question in Dent v. Moore; no distinction was drawn by Dixon J. (with whose judgment Starke J. and McTiernan J. agreed) in the Shepherd case.

The effect of the statute was stated in the unanimous decision of the Court in Dent v. Moore at p. 324; in the following terms:

"The meaning of the second branch of the enactment, unless controlled by authority, is not open to reasonable doubt. The Legislature by way of securing the payment of the impost for public purposes, which is placed on the instrument, provides in effect that the sanction of law shall be withheld from the acts of the parties until the revenue law is obeyed. It lies at the root of all contractual obligation that the mere convention of the parties creates no binding tie between them. It is the law operating on their compact - either the common law or some Statute - which creates the obligatory relation that one can enforce against the other. But here, acting impersonally on the bargain finally embodied in an `instrument', and therefore contained nowhere else, it strikes that instrument with sterility (to borrow an expression from another branch of the law) unless and until the public requirement of taxation has been complied with. Until that has happened, the instrument (except in criminal proceedings) is not `available' and not `effectual' - that is, it has no effect - for any purpose whatsoever at law or in equity: in other words, it cannot be considered as an instrument giving title, or as one which could be made the means of compelling anyone to give title. It is in the eye of the law a nullity, except for criminal proceedings and, of course, for the purpose of being stamped."

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The effect of such a construction of the statute was illustrated by the facts in Dent v. Moore. The plaintiff there claimed commission alleged to be due on the sale of the defendant's property to a company called Mutual Investments Ltd. To be entitled to commission, the plaintiff had to prove the sale which took place. In the course of proving the sale, the plaintiff tendered three documents. The first was an indenture of surrender of the land by direction of Mutual Investments Ltd. to the Crown, that indenture reciting, inter alia, that by a memorandum of agreement between the defendant and the company it had been agreed that the defendant should sell and the company should sell and the company should purchase the land at the price specified. The second document was a memorandum of transfer by the defendant, at the direction of the company, to the Crown. And the third was an agreement between the company and the Crown for the sale of the land to the Crown. The actual written contract was not stamped and was not tendered.

As the Court held, it was necessary for the plaintiff to prove both the existence of the sale and the terms of it, for the price was relevant to the commission. The argument was whether the documents tendered and admitted were rightly admitted to prove those two facts.

The defendant had, in the documents and in his conversation proved in evidence, admitted the existence of the sale and the relevant terms of it. But the Court held that the effect of the statute was that, unless and until stamp duty was paid, there had been in law no such transaction. On that basis the plaintiff's claim for commission failed.

The Court does not appear to have dealt, at least in detail, with the transactions or documents whereby the defendant transferred the land to the Crown at the direction of the company, thus effectively or purportedly transferring the title to the property. It appears to have been accepted that it was the agreement for sale rather than the passing of the property upon sale which was relevant for the purposes of the plaintiff's claim.

As to the second basis of Mr Pollnow's claim:

McLelland J. concluded that, if the deeds be put aside, it would be inequitable for there to be no trust of the land in favour of the Pollnow interests. If the effect of the Stamp Duties Act be put aside, I would agree with his Honour's conclusion. The contemplation of the parties was that the Pollnow and the Butler interests were to have the relevant equitable interests in the land because of what they had done or were to do in organising the relevant arrangements. It is to be assumed for this purpose that they did what it was contemplated they should do. If, for example, they had done what they were to do, the lands had become vested in the managing partner companies, but there had been no execution of the deeds, the denial by them that they held the land, as to part, for the Pollnow interests might constitute equitable fraud: see
Rochefoucauld v. Bousted (1897) 1 Ch. 196 at pp. 205-207 . The question to be determined is how this is affected by sec. 29.

The question can be approached in two ways: by a conceptual analysis of the operation of sec. 29; and by reference to the purpose of the section.

The way in which sec. 29 operates is set forth in the passage in the judgment of Dent v. Moore to which I have referred: at p. 324. The legal effects which otherwise would result from the transaction embodied in the unstamped instrument do not result from it: the section says that they shall not. As Priestley J.A. has indicated, the deeds here in question were not restricted to the creation of a trust in favour of the Pollnow interests; they extended to include substantial aspects of the necessary to consider whether, if the investment transaction, as far as it was embodied in the deeds, is deemed to have no effect in law, what was done by the parties should be seen to create equities or whether there would be equitable fraud if there were no intervention to set up rights equivalent to those which it was the purpose of sec. 29 to destroy.

In some cases where the ordinary effect of a transaction has been affected by statute, equity will intervene in such a way. Thus, where legislation on the Statute of Frauds model operates to prevent the proof of, though not to destroy, rights created by the transaction into which the parties have entered, equity may hold equivalent equitable rights to exist. The better view, I think, is that in such a case equity operates, not by way of restraining reliance on the statute and so enforcing the transaction itself, but by creating equities independent of the transaction: see
Regent v. Millett (1976) 133 C.L.R. 679 at p. 682 ;
Maddison v. Alderson

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(1883) 8 App. Cas. 467 at pp. 475, 478 and 479 ;
Rawlinson v. Ames (1925) 1 Ch. 96 at p. 111 et seq . See generally Meagher Gummow & Lehane, Equitable Doctrines and Remedies, 2nd ed., para. 1218 et seq.

It may be argued that equity should operate in such a way where the transaction is not merely rendered inoperative but actually avoided. Section 29 does not require the assumption that the relevant facts do not exist: it operates merely to withhold the legal consequences of them. It may, consequently, be argued that equity should give effect to that which flows from those facts and what was done in reliance on them.

There are limits to the extent to which conclusions can be drawn from conceptual analyses of this kind. Section 29 is directed to the relevant transaction, i.e., to the facts which constitute it and to the effects which those facts would have in law, both at law and in equity. And there would, I think, be incongruity in holding it to be inequitable or fraudulent that that result should obtain which it was the purpose of the section to produce. I do not think that, in the face of the section, equities of this kind should be seen to arise.

But I am conscious that there is in this something of circularity and that what I have said depends on the view to be taken of the purpose of sec. 29. To that I now return.

In considering the operation of sec. 29, it is necessary to look to two things: its purpose, and the method adopted by it to achieve that purpose. In one sense, the purpose of a statute is, of course, to be taken from what it does and in some cases the method adopted by a statute may be less than fully adequate to achieve the purpose which, in the broad sense, it may be seen to have. But, in my opinion, the purpose of sec. 29 is, by the imposition of consequences upon non-payment, to induce the parties to an instrument to have it stamped.

The method adopted to achieve this purpose is to specify the consequences of non-payment. Those consequences are that the unstamped document is not "good, useful or available in law or equity for any purpose whatsoever" and those consequences are to be understood in the sense explained in Dent v. Moore, viz., the transaction is not to have the effects in law or equity which otherwise it would have.

It is possible to give to the section a limited operation. It is possible to separate from the operation of sec. 29 and from the facts which constituted the transaction embodied in the unstamped document, the things which were done for or in consequence of the transaction and to give effect, in law or equity, to those things and what follows from them. If the transaction refers to the doing of acts and the paying of money, it is possible to treat the acts done and the moneys paid as being separate from the transaction to which the operation of the section attaches. For myself, I do not think that that was the meaning which the words used in the section have or were intended to have. At least, if that which constitutes the transaction is to have no effect in law or equity, I do not think that equity should, in the context of the facts of the transaction, base on what was done for or in consequence of them, equities to the effect of those rights which the section has destroyed.

I have detailed what, in my opinion, is the way in which sec. 29 operates, consequent upon the decision of the High Court in Dent v. Moore and the Shepherd case because of the importance which, in practice, sections of this kind may have. I do not mean by what I have said that a revenue statute of this kind is to be given an effect beyond the terms of it in order to achieve even the important purpose of protecting the public revenue. Nor do I think that, because the statute is of such a kind, its effect should be confined. Central to the operation of sec. 29 and the other sections of the Stamp Duties Act are the transactions embodied in the document in question and therefore the nature and extent of the facts the legal operation of which is in question. If, for example, there had been a stamped agreement to convey and an unstamped conveyance, the effect of the statute on the conveyance would not be to avoid the agreement or to preclude the equities which would ordinarily arise from it. Each case, and each instrument, is to be considered by reference to its particular facts. In the present case, I do not think that, because of the operation of the statute, the equities claimed by Mr Pollnow should be held to exist.

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ORDERS

1. Of the seven appeals

• (a) that relating to Bay Road Apartments dismissed.
• (b) all others upheld, judgments below set aside and in their place claims relating to them dismissed.

2. Short minutes to be brought in at 10 a.m. on Thursday 18 June 1987 formally embodying the above orders and providing for an overall order for costs, if that can be agreed between the parties. If the parties are unable to agree on an appropriate order for costs written submissions limited to the disagreement should be lodged with the Associate to Samuels J.A. no later than 4.15 p.m. on Wednesday 17 June 1987.