People's Investment Company Pty Ltd v Commissioner\_of State Revenue [2004] VCAT 2424

People's Investment Company Pty Ltd v Commissioner\_of State Revenue [2004] VCAT 2424 - VCAT 2004 case summary — Zoe

[30]

23

The Politis decision was that section 31 of the Act applies where, a vendor having agreed to transfer land to a purchaser, that agreement is cancelled in consideration of another person agreeing to purchase the land from the vendor. But the ratio decidendi of the decision is broader than this.

24

The contract in the Politis case was expressed to be between the vendor and Angela Politis or her nominee. Subsequently this contract was cancelled; and a new contract, at the same price, was entered into between the vendor and Politis Investments Pty Ltd. This company had been incorporated before the initial contract was made.

25

The matter first came before this tribunal, which decided that section 31 of the Act did not apply to the Politis situation as the second purchaser had not acquired the rights of the first purchaser, even though it had acquired rights of exactly the same description and value. Nettle J agreed that, as a matter of general law, the rights acquired by the second purchaser under the second agreement could not have been the rights of the first purchaser under the first agreement. But he concluded that section 31 should be construed as embracing an acquisition by a second purchaser of, not only rights of a first purchaser, but also rights that were equivalent in character to those held by a first purchaser. His Honour reasoned that the drafter of the legislation must have supposed that "the whole or any parts of the rights and interest" included equivalent rights and interest.

26

Nettle J observed that under a typical nomination clause the nominee would not acquire any rights as against the vendor, let alone the rights of the purchaser. By reference to the Minister's second reading speech, he then observed that that the apparent basis for section 31 was to prevent the use of nominee clauses as a device to avoid stamp duty, whilst protecting the genuine use of a nominee clause. Confronted with this divergence between the Minister's intent and the application of the principles of the general law, Nettle J posed the following question and provided the following answer:

[39]

32

Having regard to the principle that an intention to impose a tax or duty must be shown by clear and unambiguous language, there is obviously considerable force in these arguments. But I think I should leave it to the Court of Appeal, if called upon, to decide whether the applicant's arguments are to be preferred to the approach adopted by Nettle J.

33

Normally when a parliament passes a taxing law which operates by reference to a rule of the common law, the taxing law should be understood to have been intended to apply in circumstances determined by reference to the common law.[7] If section 31(1)(b) of the Act is interpreted literally the provision would not have a broad application, having regard to the common law explained by Nettle J, although it could still apply in some circumstances. No doubt it could be argued that the Parliament should be presumed to know the law; with the consequence that section 31(1)(b) of the Act should be given its literal, and limited, meaning. The argument to the contrary relies upon the intention of the provision, including by reference to the Minister's second reading speech. Some may find the terms of second reading speech to be so general that it provides no assistance. But the purpose of the provision could still be inferred from the words used in section 31.

34

If the matter does go further, the Court of Appeal may have regard to the policy underlying section 31 of the Act. The section is clearly directed at the practice of avoiding duty by engaging in sub sales rather than new sales. But, on the basis of the Politis decision, the section operates to embrace many practices other than sub sales. It might be wondered what policy basis exists for charging double duty when the "first purchaser"[8] receives no consideration, directly or indirectly, for the transferee receiving equivalent rights to the first purchaser. If section 31(1)(b) includes "equivalent rights", it may be that the words "acquire", "acquires" and "acquired", where used in section 31, were intended to mean obtain as a consequence of some consideration passing, directly or indirectly, to or for the benefit of or at the direction of "the first purchaser".

35

I was informed by the parties that the Commissioner does not have any general discretion to allow the objection simply because it would be just to do so. Further, I was informed by the parties that the tribunal did not have any such general discretion. If this is right, it provides a further reason to be cautious before giving section 31 an extended meaning. On the basis of the Politis decision, section 31 has the potential to operate in a capricious manner, unlikely to have been contemplated by the Parliament. This is so as real estate contracts are typically completed without legal advice, let alone the expert legal advice of a lawyer skilled in the intricacies of duties law.

[50]

The contract itself was expressed as an acknowledgement of a sale to the appellant as agent for the Gunbar Pastoral Co Pty Ltd, and his signature as purchaser is qualified by the words "For Gunbar Pastoral Co Pty Ltd". As that company had not yet been registered and so did not then exist, he must be considered as contracting so as to incur the liability of a principal; otherwise the contract would be inoperative. To avoid personal liability as a consequence, a clear expression of an intention not to be bound personally is necessary; the expressions used in this contract are not sufficient for that purpose. But, while the result is to make the appellant the person liable as the contracting party, it does not follow that the references to the Gunbar Pastoral Co Pty Ltd are to be rejected from consideration for every purpose as if they were not present in the contract. They serve to indicate that the company is the intended transferee of the land and I am disposed to think that as a consequence the expression "purchaser", in the provision relating to the vendors' obligation to procure registrable transfers, should be interpreted as covering the company, on its coming into existence. "A vendor's obligation is to execute a conveyance of the land sold to the purchaser or as he shall direct" (Williams, Vendor and Purchaser, 3rd ed (1922-1927), p.579), and doubtless the appellant could, therefore, in any case, have required the vendors to execute transfers in favour of the company. But for the purposes of s. 41(4)(a) of the Stamp Duties Act 1920-1949 (NSW) there may be a difference between such a transfer and a transfer to a person named in the contract as the intended transferee, even when that person is a company yet to be incorporated. In Lake Victoria Ltd v Commissioner of Stamp Duties [1949] NSWStRp 14; (1949) 49 SR(NSW) 262, at 265 Jordan CJ distinguishes, for the purpose of the application of s.41(4)(a), the case where the conveyance to a third party is made at the purchaser's direction from the case of a contract which provides for a conveyance to the purchaser or, not to the purchaser, but to some other person. In the latter case I understand his Honour regarded the conveyance as made in conformity with the contract, within the meaning of s.41(4)(a), and therefore as not chargeable with ad valorem duty. "A conveyance is not made in conformity with the agreement, unless it is made to the purchaser, or if the agreement provides that it is to be made not to the purchaser but to some other person, to that other person". Clearly enough Jordan CJ was here speaking of a person identified in the contract as opposed to any nominee, but I am not inclined to think that it makes any difference if the identifiable person is a contemplated company yet to be clothed with legal personality. As at present advised therefore I do not see why the transfer to the company should be regarded as otherwise than in conformity with the contract. The Commissioner of Stamp Duties, however, thought otherwise and determined that the transfers to the company were liable to ad valorem duty under s.42(5), that is, as conveyances by direction of the purchaser to someone else.[11]

At a glance

Court

Decision date

Before

Source

Judgment (64 paragraphs)

People's Investment Company Pty Ltd v Commissioner_of State Revenue [2004] VCAT 2424 (14 December 2004)

Parties

Cases Cited (5)