[2008] TASSC 39

Taxes and Duties - Stamp duties - What transactions or instruments are liable - Miscellaneous instruments and transactions - Tasmania - Deed of nomination - Covenant by grantee to exercise option to purchase real estate and nominate appellant as co-purchaser - Whether a transfer of dutiable property.

Duties Act 2001 (Tas), ss6(1)(a), 9(1)(k).

Coles Myer Limited v Commissioner of State Revenue [1998] 4 VR 728, referred to.

Judgment Number: [2008] TASSC 39

CALBOURNE NOMINEES PTY LTD v COMMISSIONER OF STATE REVENUE

1 This is an appeal pursuant to the Taxation Administration Act 1997, s89(1)(a), against a determination by the respondent ("the Commissioner"). It concerns a deed of nomination dated 29 June 2005. The Commissioner determined that the transaction effected by the deed was dutiable. The appellant contends that it was not.

2 The execution of the deed of nomination was the last in a series of transactions which can be summarised as follows:

•

By a call option deed dated 29 May 2001, Tower Australia Limited ("Tower") agreed to sell a property at 99 Bathurst Street, Hobart to Hurstbat Pty Limited ("Hurstbat"), upon the due exercise by Hurstbat of a call option granted by that deed. The option was granted to "Hurstbat or its nominee". It may be exercised during the period from 31 May 2010 to 31 August 2010.

•

By a second call option deed, also dated 29 May 2001, Tower agreed to sell a property at 79 - 85 Melville Street Hobart to Villemel Pty Limited ("Villemel") upon the due exercise by Villemel of a call option granted by that deed. The option was granted to "Villemel or its nominee". It may be exercised during the period from 28 February 2013 to 31 May 2013.

•

In each of the call option deeds, the parties stated in cl 3.6 thereof that they agreed that the call option was an irrevocable offer.

•

The deed of nomination dated 29 June 2005 was made between the appellant, Hurstbat, Villemel and other parties, not including Tower. The appellant thereby covenanted to pay certain monies in consideration of (1) a covenant by Hurstbat to exercise its right to call for the Bathurst Street property, and to nominate the appellant as a purchaser of that property as a tenant in common in equal shares with it; and (2) a covenant by Villemel to exercise its right to call for the Melville Street property, and to nominate the appellant as a purchaser of that property as a tenant in common in equal shares with it.

3 The Duties Act 2001, s6, includes the following:

(2) Such a transfer, transaction or vesting is a dutiable transaction for the purposes of this Act.

...

(3) In this Chapter -

'transfer' includes an assignment and an exchange."

4 The interpretation section of that Act, s3, contains the following:

"'dutiable property' has the meaning given by section 9".

1">5 There is a list of different types of dutiable property in s9(1). The relevant parts of that subsection read as follows:

"(1) Dutiable property is any of the following:

(l) an interest in any dutiable property referred to in the preceding paragraphs of this section, except to the extent that -

(i) it arises as a consequence of the ownership of a unit in a unit trust scheme and is not a land use entitlement; or

(ii) it is, or is attributable to, an option over dutiable property.

6 As a result of the execution of the deed of nomination, the appellant acquired contractual rights to compel each of Hurstbat and Villemel to exercise the call options in respect of the Bathurst Street and Melville Street properties, and to compel each of those companies to nominate itself and the appellant as the purchasers, as tenants in common in equal shares. The appellant contends that the rights that it has acquired in relation to the two options were not acquired by way of a "transfer" within the meaning of s6(1)(a). Counsel for the appellant submitted that this was the position because the effect of the deed of nomination was merely to create new contractual rights in the appellant, rather than to cause any sort of property to pass from Hurstbat or Villemel to the appellant.

7 He relied on a passage in the judgment of Smithers J in Acorn Computers Limited v MCS Microcomputer Systems Pty Ltd [1984] FCA 339; (1984) 57 ALR 389 at 393, where his Honour said the following:

"It is normally the consequence of such a transaction that, value having been given, an equitable interest in the subject thereof arises in the party giving it: see Central Trust and Safe Deposit Co v Snider [1916] 1 AC 266 at 272; Fairweather v Fairweather [1944] HCA 11; (1944) 69 CLR 121 at 154. In such a case the equitable interest arises not by way of transfer but by activation in Equity of the conscience of the receiver of the valuable consideration. A trust is created; there is not a transfer or assignment; there is no transmission of an equitable interest. The estate arising from a declaration of trust is appropriately spoken of as the estate created thereby; thus per Gibbs CJ in DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties (NSW) [1982] HCA 14; (1982) 40 ALR 1; 149 CLR 431. It is appropriate also to speak of the fiction that by a declaration of trust the declarant 'imparts' to the beneficiary an equitable estate or interest upon which the Stamp Duties Act 1920 (NSW) operates; per Mason J in the last-mentioned case (ALR) at 21; (CLR) act 457. Where there is no transmission s 196(3) of the Act is not involved. Similarly where there is an enforceable contract to transfer property the equitable interest arising in the proposed transferee is not the product of a transfer but an exercise in creation."

8 That case concerned an action for the infringement of copyright in certain works. The respondent had applied to strike out parts of the statement of claim that were based on allegations that the applicants were the equitable owners of certain copyrights by virtue of equitable assignments. The respondent relied on the Copyright Act 1968 (Cth), s196(3), which required assignments of copyright to be in writing signed by or on behalf of the assignor. The applicants had pleaded a transaction for value under which it was agreed that the interest of the owner or part owner of the copyright was to pass to them. The comment quoted was concerned with the basis upon which a court exercising equitable jurisdiction will grant specific performance after part performance, despite non-compliance with a statutory requirement as to writing. That case was not concerned with the characterisation of a transaction or instrument for the purposes of a fiscal statute.

9 Counsel for each party relied on the decision of the Victorian Court of Appeal in Coles Myer Limited v Commissioner of State Revenue [1998] 4 VR 728. That case concerned a transaction whereby a public company entered into a "buy-back" of a parcel of its own shares pursuant to the provisions of the Corporations Law, Pt2.4, Div4B. By majority, it was held that the transaction did not constitute a "transfer of any marketable security" for the purposes of the Stamps Act 1958 (Vic). Counsel for the appellant made a submission to the effect that that case supports the proposition that a transfer does not occur unless property is disposed of by the transferor and the same property is acquired by the transferee. Counsel for the Commissioner submitted that that case supports the proposition that, when determining whether a transfer has taken place, it is necessary to look at the substance or the real nature of the transaction, as distinct from the form of the transaction.

10 The leading judgment in that case was delivered by Ormiston JA, with whom Winneke P agreed. At 740 - 741, he observed that the transaction had constituents of a true transfer, including a transfer form, a transferor, a transferee, and a registration of the share transactions in the company's register. However he went on to consider the nature and effect of the transaction, observing at 741 that "a company cannot be a shareholder in, or member of, itself." He reached the following conclusion at 742 - 743:

"... I would conclude that it was not intended by the legislature when passing this Division of the [Corporations] Law that the purchasing company, under this or any other buy-back scheme, was intended to take as transferee or as purchaser or otherwise any of the rights which went to make up the shares the subject of a buy-back. Immediate temporary suspension, followed by unqualified extinguishment, of all rights can but demonstrate that no shares, nor any rights in them, vested in the company sufficient to satisfy the proper description of a transfer for the purposes of the Stamps Act."

"A transfer involves two parties; here the second party, the transferee, undoubtedly received certain benefits, but they were not the benefits, not the rights or interests which the transferor formerly had."

11 There is a long line of stamp duty cases in which it has been held that questions of liability to duty should be determined by reference to the "real nature" or "substance" of a transaction, rather than the purported description of a document or the form that the transaction takes: Wale v Inland Revenue Commissioners (1879) 4 Ex D 270; Great Western Railway Company v Commissioner of Inland Revenue [1894] 1 QB 507; Commissioner of Stamp Duties (Qld) v Hopkins [1945] HCA 14; (1945) 71 CLR 351 at 378; Comptroller of Stamps v Buckland [1959] VicRp 72; [1959] VR 517 at 520 - 521; Renwall Fabrics Limited v Commissioner of Stamp Duties [1983] 1 Qd R 423 at 434 - 435.

12 I do not think this is a case that can be decided by applying the Acts Interpretation Act 1931, s8A, which requires an interpretation of a provision of an Act that promotes the purpose or object of that Act to be preferred to an interpretation that does not promote that purpose or object. The relevant purpose or object of the Duties Act is to create liabilities to pay duties in respect of some transactions but not others. There does not appear to be any underlying legislative purpose that can be taken into account in determining whether a particular transaction should be characterised as a transfer of dutiable property or not. That position would have been different if the classes of dutiable transactions had been more widely described. By comparison, for example, the A New Tax System (Goods and Services Tax) Act 1999 (Cth), s9-10(2)(e), defines "supply" to include "a creation, grant, transfer, assignment or surrender of any right". Clearly the Tasmanian Parliament did not choose to define "transfer" as widely as it could have.

13 In the light of the authorities I have referred to, I think that the critical question in this case is whether the real nature of the transaction effected by the deed of nomination was that of a transfer, or, putting it another way, whether that transaction was in substance a transfer. In answering that question, it is relevant that there is a line of authority that a person or transaction is only to be taxed if clearly falling within the words of the section that creates a tax liability: Inland Revenue Commissioners v Duke of Westminster [1937] AC 1 at 24 - 25; Anderson v Commissioner of Taxes (Vic) [1937] HCA 24; (1937) 57 CLR 233 at 239, 243; Hepples v Federal Commissioner of Taxation [1992] HCA 3; (1992) 173 CLR 492 at 510 - 511; Sportsman's Hall Hotel Pty Ltd v Commissioner of Stamp Duties [1990] Tas R 21 at 31.

14 Counsel for the appellant submitted that the contractual rights acquired by the appellant pursuant to the deed of nomination were different from the rights that Hurstbat and Villemel formerly had; and that there was no property that had passed from Hurstbat and Villemel as transferors to the appellant as transferee.

15 Before the execution of the deed of nomination, Hurstbat and Villemel each held a call option. Each had been given the right, exercisable during a period specified in its call option deed, and exercisable in a manner specified in that deed, to require Tower to complete the sale of certain real estate to it. If one of those companies had, for a consideration, assigned its rights in relation to its option to an assignee, that transaction would no doubt have constituted a transfer of dutiable property because of the Duties Act, s9(1)(k). If one of those companies had by some means assigned a one half share in its option to an assignee, so that the assignor and the assignee thereafter held the option as tenants in common in equal shares, it may be that that assignment would also have constituted a transfer of dutiable property.

16 However, the transaction in question was not the same as a simple assignment. As I have said, each of the call options was granted to the grantee "or its nominee". The form of the transaction in question was not such that Hurstbat or Villemel assigned contractual rights to the appellant, or to themselves and the appellant. Instead, the form of the transaction was such that Hurstbat and Villemel each made contractual promises, firstly to exercise each call option, and secondly to exercise the right of nomination conferred by each call option deed in such a way that the appellant would become a co-purchaser as a tenant in common in equal shares with the original grantee.

17 Had there been a simple assignment, the assignee would have had contractual rights directly against Tower. An assignee would have had the right to exercise the option, but the deed of nomination has conferred on the appellant only a right to compel each of the original grantees to exercise their options, and to exercise them in a particular way, nominating it as co-purchaser. The appellant's contractual rights pursuant to the deed of nomination are contractual rights that it may exercise against Hurstbat or Villemel, not Tower. In my view the result, in substance, is that the appellant does not now have half of what Hurstbat and Villemel originally had, before the execution of the deed of nomination. The contractual rights that it received pursuant to the deed of nomination are more remote from Tower than the rights that Hurstbat and Villemel originally had. The transaction effected by that deed does not clearly fall within the words "transfer of dutiable property". I think it must follow that the deed of nomination did not effect a transfer of dutiable property within the meaning of the Duties Act, s6(1)(a).

(1) That the Commissioner's determination made on 19 December 2007 rejecting the appellant's objection made by letter dated 16 July 2007 against the assessment of duty on the deed of nomination dated 29 June 2005, referred to by lodgement number FG-00293-0607 be set aside.

(2) That the said objection be allowed.

(3) That the said assessment of duty be set aside.

(4) That the duty in respect of the transaction effected by the said deed be reassessed at nil.