Commissioner of ACT Revenue v Renato Antonio Cervo Sca [1992] ACTSC 1 (24 January 1992)

SUPREME COURT OF THE ACT

COMMISSIONER FOR ACT REVENUE v. RENATO ANTONIO CERVO
S.C.A. No. 100 of 1991
Administrative Law

COURT

IN THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Higgins J.(1)

CATCHWORDS

Administrative Law - Appeal from ACT Administrative Appeals Tribunal - Assessment of stamp duty - Construction of statutory determination - Crown lease - Determined amount - Whether value of interest acquired or consideration relevant - Meaning of value of interest acquired.

Taxation (Administration) Act 1987 (ACT), s.99(1)

Stamp Duties (Conveyances) Determination (No. 3) 1987

Stamp Duties and Taxes Act 1987 (ACT), s.17(b)

Australian Capital Territory Stamp Duty Act 1969 (Cth)

HEARING

CANBERRA
24:1:1992

Counsel for the Applicant: Mr P. Walker

Instructing solicitors: ACT Government Solicitor

Counsel for the Respondent: Mr T. Johnstone

Instructing solicitors: Messrs Gillespie-Jones and Co

ORDER

The appeal be dismissed.

The applicant pay the respondent's costs.

DECISION

This is an appeal from a decision of the ACT Administrative Appeals Tribunal, constituted by the President, Mr R.K. Todd, given on 28 June 1991.

2. There is no factual dispute. The question for decision before the learned President was whether stamp duty had been correctly assessed by the Applicant on a Crown Lease granted to the Respondent pursuant to the latter's successful bid at an auction on 18 April 1990.

3. As a result of his successful bid of $750,000.00, the Respondent became entitled to elect either:-
(a) to take a Crown Lease in respect of Block 15 Section 21 Division

of Belconnen with no provision for land rent other than a
nominal 5 cents per annum if and when demanded in consideration of
the payment of the sum of $750,000.00 as bid; or
(b) to take a Crown Lease over the said land
subject to payment of land rent at the rate of $75,000.00 per
annum for the first six years and thereafter on the basis of an
assessed rental value (not being less than $75,000.00 per annum).

The Respondent chose to take the second option.

4. On 20 August 1990 the lease document was lodged with the ACT Revenue Office. The Respondent submitted to the Applicant that the value of the Crown Lease for duty purposes was $1,000.00 and the duty should be assessed accordingly at $12.50. A valuation report was enclosed.

5. The Applicant did not agree. On 21 August 1990 an assessment issued valuing the Crown Lease at $750,000.00 and fixing duty at $29,265.00. The Respondent objected and that objection was upheld by the ACT Administrative Appeals Tribunal (AAT). The Applicant now seeks to reverse the AAT's decision.

6. The issue before the AAT and on this appeal is whether the Determination made under the Taxation (Administration) Act 1987 (ACT) (s.99(1)) pursuant to which duty was assessable favours the Applicant's contention or that of the Respondent.

7. I set out the text of the relevant part of the Determination (Stamp Duties (Conveyances) Determination (No.3) 1987):-

"6. The determined amount of stamp duty for the purposes of
section 17(b) of the Ordinance (a reference to the Stamp Duties
and Taxes Act 1987 (ACT) as it is now cited) for a Crown lease ...
is the amount set out in Schedule 1."

8. Section 17(b) imposes stamp duty in the following terms:-

"17. The determined amount of stamp duty is payable on: ...
(b) a Crown lease..."

The "determined amount" is that fixed from time to time by the Minister by a "Determination".

9. The learned President ruled, and I see no rational alternative to the proposition, that the terms of the relevant Determination apply the terms of Schedule 1 thereof to the calculation of the relevant duty.

10. Clause 4 of the relevant Determination is as follows:-

"4. A reference in this determination to an amount set out in a
Schedule means an amount calculated by applying the formula
appearing in column 2 of the relevant Schedule, opposite and in
relation to the appropriate range of value or consideration
specified in Column 1 of that Schedule, to the value of the interest
transferred or agreed to be transferred or to the consideration
given or agreed to be given, as the case may be, in respect of: ...
(b) a Crown lease..."

11. This is an interpretation clause. Clause 6 expressly applies Schedule 1. It follows that the formula in Column 2 thereof is applied to calculate the duty payable. It depends on that formula as to whether "value" or "consideration" is relevant. The difficulty is, of course, that the grant of a Crown lease creates an interest so that the words following "to the value of the interest" may well not embrace the terms of clause 6. However, I think the intent of clause 4 is clear even if its drafting is not. It merely refers to the applicability of the express terms of the clause imposing duty and gives guidance as to where the applicable formula is to be found. It may be read in the same sense as if the word "transferred" included "granted". It is obvious that it was not intended to displace the clear words of clause 6 and Schedule 1.

12. The real issue, therefore, is as to the meaning of those words.

13. Schedule 1 provides a formula for calculating duty in the following terms.

"Schedule 1
Column 1 Column 2
Value of interest in land Amount
Up to and including $1.25 per $100.00
$14,000 or part of $100.00 of
the value of the interest
(The remaining items use a similar formula. I set out only that
which the appellant contends to be applicable.)
exceeding $300,000.00 $9,015.00 plus $4.50
but not exceeding per $100.00 or part
$1,000,000.00 $100.00 by which the value
of the interest exceeds

$300,000.00"

14. It follows, therefore, that duty is imposed on the "value of the interest". In context, that can only mean the value of the interest acquired by the Respondent. "Value" in that context must mean market value.

15. The valuation evidence was that the market value of the land was $750,000.00. That was not surprising. The Respondent had bid $750,000.00 to acquire the lease. However, in the light of the option adopted by the Respondent, the valuation evidence suggested that, as at the time the lease on those terms was granted, that lease was worth only a nominal sum to a prospective purchaser from the Respondent. Hence the value of the interest granted to the Respondent was only nominal (say $1,000.00). The lessor's interest, however, was valued by the rent reserved. That rent was capable of a lump sum valuation. It was assessed by the valuer at a value of between $624,000.00 and $750,000.00.

16. It may be noted that under the Australian Capital Territory Stamp Duty Act 1969 (Cth) duty was imposed on the "value of the interest in the land granted". The First Determination under the Taxation (Administration) Ordinance 1987, of 29 July 1987, imposed duty by reference to "the consideration payable for the lease". The Second Determination imposed duty by reference to "the consideration". It was dated 9 September 1987. The Third Determination, current at the date of the grant of the Crown lease in this case, was dated 21 September 1987. The first two Determinations would have imposed duty on a value of not less than $624,000.00. The 1969 Act, by contrast, would have used the same test as the Third Determination. It is also interesting to note that on 1 October 1991, a new Determination was gazetted which imposes duty on the capital value of the lease as if the rent was nominal. It adopts neither the value of the consideration nor the value of the interest acquired by the lessee.

17. If, as seems to me to be the case, it is the value of the interest acquired by the lessee that is to be valued, it is impossible to do so without a consideration of the burdens imposed by the lease. Of course, a burden not running with a transfer of the lease could be ignored. However, the rental covenant would most certainly run with a transfer of the lease. The value of the lease had it contained a covenant for nominal rental only is purely hypothetical.

18. It follows that I am in agreement with the learned President that the Respondent's valuer adopted the correct approach to the valuation of the lease. His expert opinion, if that was so, was not challenged. The valuation evidence tendered by the Applicant did not address the correct issue, correct though it may be on that incorrect assumption.

19. Accordingly, I dismiss the appeal with costs.