Hartley Poynton Ltd. v. Chong Yee Yap

Members:
White Ma

Tribunal:
Supreme Court of Western Australia

Decision date: Judgment handed down 20 November 1989.

---

Master White

The plaintiff is a stockbroker and investment adviser. During the period 23 September 1985 to 16 March 1988 the defendant was a client of the plaintiff. There was an oral agreement between the parties whereby the plaintiff agreed, from time to time and in consideration of a fee, to buy and sell shares on behalf of the defendant and pursuant to his instructions.

It is common cause that, pursuant to that agreement, the plaintiff operated an account in the name of the defendant, to which account the plaintiff, from time to time, debited the purchase price of shares bought for the defendant, brokerage charges, the amount of any sums remitted to the defendant by the plaintiff from time to time and the relevant stamp duty pursuant to the Stamp Act 1921 (W.A.) (``the Act''). The plaintiff, from time to time, credited to the account the amount of the proceeds of the sale of shares on behalf of the defendant and also any amounts paid by the defendant to the plaintiff pursuant to the agreement.

The plaintiff claims that, as at 16 March 1988, when all proper credits and debits had been brought to account, there was a balance due by the defendant to the plaintiff of $14,816.95. Although this has been denied by the defendant in his pleadings, that denial, as will be seen, is based upon a contention of law and there is no significant dispute between the parties as to the facts.

The defendant, in his amended defence and counter-claim, made a number of allegations of fraudulent conduct against the plaintiff but these allegations were wholly withdrawn by him at the hearing before me and it was obvious that these allegations had been made without any factual foundation whatever. In his counter-claim, the defendant claimed to be entitled to be repaid by way of damages the total amount which he had paid to the plaintiff from time to time, amounting to $1,137,287.33. He claimed a further sum of damages of $138,221.80 in respect of the purchase and sale of certain shares [sic] in Sarich Technology Trust. There was a claim for an account in respect of the transactions between the parties and an account was included in the papers before me. The defendant claimed also to be entitled to be paid the gross proceeds of the sale of all shares sold for his account by the plaintiff, amounting to $510,161.81, on the grounds that that sum was money had and received by the plaintiff, as agent, to the use of the defendant, as principal.

The plaintiff applied for summary judgment on its claim and the defendant applied for summary judgment on the counter-claim. Both applications were heard together. During the hearing, the defendant abandoned the counter-claims but stated that he persisted with his defence against the plaintiff's claim upon a single issue of law, namely as to whether, by virtue of the provisions of sec. 27(1) of the Act, the plaintiff could prove its case by admissible evidence.

In view of the express concessions or withdrawals made by the defendant, his application for summary judgment falls away and will be dismissed with costs.

It is necessary now to consider the single issue of law upon the basis of which the defendant says that the plaintiff's claim must fail.

---

ATC 5312

Section 27(1) of the Act is in the following terms:

``27(1) Except as otherwise provided by this Act no instrument chargeable with duty and executed in Western Australia, or relating, wheresoever executed, to any property situate or to any matter or thing done or to be done in Western Australia, shall, except in criminal proceedings, be pleaded or given in evidence or admitted to be good, useful, or available in law or equity, unless it is duly stamped in accordance with the law in force at the time when it was first executed.''

Other relevant provisions of the Act are:

``112B(1) This Part and the duty payable as calculated on the return referred to in section 112C, in accordance with subitem 4(4) of the Second Schedule, apply to the sale and purchase of a marketable security...

...

112C(1) Subject to subsection (5), a broker shall forthwith on a sale or purchase of a marketable security or right in respect of shares being made by him, or being deemed to have been so made, whether in or outside the State -

• (a) pursuant to an order lodged with him in the State; or
• (b) on his own account or behalf,

being a sale or purchase to which this Part applies, enter such details of the sale or purchase in a record to be kept by him in such form as is prescribed.

112C(2) A broker shall, from the details entered in the record referred to in subsection (1), make a return in such form as the Commissioner requires in writing and lodge or cause to be lodged that return with the Commissioner within a period of 15 days after the end of the month to which that return relates, together with a remittance for the amount of the duty payable on the sales and purchases to which that return relates in accordance with this Act.

...

112E(1) A broker shall forthwith after entering the prescribed details of a sale or purchase of a marketable security or right in respect of shares in a record required to be kept under section 112C, or on the making of a sale or purchase of a marketable security or right in respect of shares to which subsection (1) of that section applies by virtue of subsection (6) of that section endorse the transfer of that security or that right with a statement that the duty has been or will be paid by him or that no duty is payable, as the case may be, and affix his stamp and the date he so endorsed the transfer.

112E(1a) A broker who contravenes or fails to comply with any of the provisions of subsection (1) commits an offence against this Act.

...

112E(3) An instrument of transfer in respect of a sale or purchase that is endorsed in accordance with the provisions of subsection (1) or with a corresponding law shall be deemed to be duly stamped under this Act.

...

112H(1) A transfer of a marketable security or a right in respect of shares shall not be registered, recorded or entered in the books of the corporation to whose security or right the transfer relates -

• (a) in the case of a transfer to give effect to a sale and purchase or other disposition of that security or that right otherwise than through the agency of a broker unless -
  • (i) a proper instrument of transfer has been delivered to that corporation and wherein, in the case of a transfer by way of sale, the consideration therefor is expressed in terms of money and the actual date of the sale and the date of the execution by the transferor or the transferor and transferee where both are required to execute the instrument, are set out therein; and
  • (ii) the instrument is duly stamped
  • ...''

The defendant's submissions included the following:

``1. On the day of purchase of shares plaintiffs are required by sec. 112C and

---

ATC 5313

112E(1) and (1a) of the Stamp Act 1921 (W.A.) to record the purchase and to stamp on the transfer with their broker's stamp and declaration whether stamp duty `is paid', `to be paid' or `not required to be paid'. Failure by the plaintiffs to observe the said provision would constitute an offence committed under the Stamp Act. Plaintiffs cannot produce evidence of the transfers of the shares, therefore, the above requirement cannot be, and was not, complied with. Hence the offences have been committed.

Time is not a relevant consideration and compliance with the above provision of the Stamp Act is compulsory on pain of sanction.

Once more quoting Mr Forbes at p. 2 of his affidavit, sworn on 28 July 1989, where he states:

• `I deny defendant's allegation that the plaintiff company has not paid to the Commissioner of State Taxation the stamp duty payable on the transactions entered into by the defendant. The plaintiff company pays all stamp duty collected by it from clients to the Commissioner once a month.'

In the first place, my submission on this issue is that the plaintiffs have failed to comply with the requirements of the Stamp Act in the steps to be complied with before an instrument can be taken to be `duly stamped'. Non-compliance with the steps or procedure constitute offences under the Stamp Act and various Acts of Parliament. Above everything, the instrument was not stamped. This is the fatal flaw - under sec. 27(1) of the Stamp Act 1921 (W.A.)...

2. Stamp duty is levied on an instrument, not on a transaction or on a person (citing `Revenue Law - Principles and Practice' 6th ed., C. Whitehorn and E. Stuart-Buttle, London, Butterworths 1988, p. 580).

3. As the plaintiffs do not have any of the transfer forms relating to shares purchased by them on behalf of the defendant, they cannot claim to have paid stamp duty on such transfer forms. Reference was made to
Louis v. Grigg (1913) 14 S.R. (N.S.W.) 78.

4. IT LOGICALLY FOLLOWS THAT NO INSTRUMENT OF TRANSFER exists to complete my purchase of the shares from the original vendor-transferor. The alleged transfer in blank passed on to subsequent purchaser-transferee from me ceases to exist for me at that point in time; it was completed for a transfer from original vendor-transferor to `A TRANSFEREE'. Therefore, so far as my original purchase is concerned, there was no STAMPING of `an instrument' of transfer. The plaintiffs had not `duly stamped' the instrument of transfer because none existed. I submit on the authority of Louis v. Grigg, that even if plaintiffs offer to pay fines and stamping charges, they will not be allowed to do so because no instrument of transfer existed to stamp on.

5. In the final analysis, the issue is whether an instrument of transfer in respect of a sale or purchase is `deemed to be duly stamped' under the Stamp Act. The fact of any payment in respect of stamp duty goes only half-way towards compliance under the Stamp Act, the other half-way is made up of due compliance with the steps to be carried out so that the whole process of stamping is `DEEMED TO BE DULY' complied with.

6. Further lengthy submissions were directed to the alleged breaches of sec. 72(1) of the Securities Industries Code and of sec. 198(1) of the Companies (Western Australia) Code. Reference was also made to sec. 112H of the Stamp Act.''

It seems to me that the defendant's case is really founded upon a confusion between a contract and a subsequent conveyance pursuant to a contract.

The provisions of Pt IV A of the Stamp Act are perhaps somewhat unusual in an Act concerned, in general, with the stamping of instruments. None the less, I think it is plain from the provisions of sec. 112C of the Stamp Act that the duty therein referred to is payable (as is expressly stated in sec. 112C(2)) ``on the sales and purchases'' to which the return that a broker is required to make to the Commissioner each month relates. Section 112C(1) makes it plain that the stamp duty is to be calculated ``forthwith on a sale or purchase of a marketable security...'', without regard to the existence at that point of time of any such transfer such as is mentioned in sec. 112E(1) of that Act.

---

ATC 5314

The scheme of Pt IV A of the Stamp Act is that stamp duty is to be calculated by the broker upon a sale or purchase taking place. The duty is to be paid within 15 days after the end of the month in which a record of the transaction is made. This obligation is not dependent upon the existence of any instrument of transfer.

The provisions of sec. 112E, requiring a broker to endorse the transfer of a security, seems directed to the requirements of sec. 112H which section is concerned with the registration of transfer.

It is fundamental to the defendant's case that the plaintiff must, to prove its case, rely upon the transfers and, absent due compliance with the law relating to transfer, that the plaintiff is not permitted to do so.

It is, however, common cause on the pleadings that the plaintiff agreed to act as the defendant's agent for the purpose of buying and selling shares. It is not established that there was any obligation to register the transfer of shares to the defendant or to anyone else. The plaintiff does not rely upon the transfers for any of the relief claimed by it. There is no evidence one way or the other as to whether or not the transfers were duly endorsed pursuant to sec. 112E and no issue as to this arises on the pleadings. The evidence satisfies me, and it is not challenged, that the plaintiff has complied with its obligations under sec. 112C to pay the relevant stamp duty in respect of each of the purchases and sales reflected in the account operated in the defendant's name.

The plaintiff's case is based upon the contracts for the purchase of shares on behalf of the defendant effected orally on the floor of the stock exchange (whether in Perth or elsewhere in Australia). The transfers are not relevant to the plaintiff's claim.

I accepted the argument of learned senior counsel for the plaintiff that, in any event, sec. 27(1) does not apply to the transfers because the transfers are not instruments chargeable with duty. It is the sale or purchase of a marketable security which is chargeable with duty, as appears from sec. 112C(2) of the Stamp Act.

In the result, as the only remaining defence put forward by the defendant fails, I shall uphold the plaintiff's application and grant summary judgment in its favour accordingly.