Lion Nathan Brewing Investments Pty Limited v Commissioner of ACT Revenue [1996] ACTSC 72 (12 July 1996)

SUPREME COURT OF THE ACT

LION NATHAN BREWING INVESTMENTS PTY LIMITED v. COMMISSIONER FOR ACT REVENUE
No. SCA 74 of 1995
Number of pages - 9
Administrative Law

COURT

IN THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
HIGGINS J

CATCHWORDS

Administrative Law - appeal from ACT Administrative Appeals Tribunal - error of law - assessment of stamp duty - interpretation of Stamp Duties (Marketable Securities) Determination 1990 (No. 67 of 1990) - meaning of "value" for purpose of assessment - ultra vires - power of Minister to make determinations - differential rates of duty - differentiating criteria not unreasonable - interpretation affected by status of Determinations as disallowable instruments - meaning of "consideration" - what is consideration for transfer of shares.

Administrative Appeals Tribunal Act 1989 (ACT), s46

Administrative Appeals Tribunal Act (Cth)
Taxation (Administration) Act 1987 (ACT), ss22, 99
Stamp Duties (Marketable Securities) Determination 1990 (No. 67 of 1990)
Subordinate Laws Act 1989 (ACT), s10
Stamp Duties and Taxes Act 1987 (ACT), s45

Agfa-Gevaert Ltd v Collector of Customs and Kodak [1994] FCA 1336; (1941) 124 ALR 645
Maples v The Commissioners of Inland Revenue (1914) 3KB 303
Bastow v Collector of Imposts (1917) VLR 81
Duckett v Collector of Imposts (1927) VLR 457
Roberts v The Collector of Imposts (1919) VLR 638
War Service Homes Commissioner v Collector of Imposts (Vic) [1920] HCA 10; (1920) 27 CLR

334

HEARING

CANBERRA, 1 April 1996
12:7:1996

Counsel for the Appellant : Mr A Robertson, SC

Instructing solicitors : Mallesons Stephen Jaques

Counsel for the Respondent: Mr I V Gzell, QC with
Dr H Sorensen

Instructing solicitors : ACT Government Solicitor

ORDER

THE COURT ORDERS THAT:

The appeal be dismissed.

DECISION

HIGGINS J This is an appeal from a decision of the Australian Capital Territory Administrative Appeals Tribunal (ACT AAT) constituted by the President, Professor L J Curtis.

2. That decision, delivered on 17 August 1995, partially upheld an appeal to the ACT AAT against the dismissal by the Commissioner of ACT Revenue, the respondent, (the Commissioner) of the appellant's objection to an assessment issued by the Commissioner claiming duty from the appellant in respect of certain share transfers.

3. The appellant succeeded in having the assessment of interest on allegedly unpaid duty remitted but failed to have the assessment of duty reduced or set aside.

4. It is from that latter decision the appellant appeals to this Court. Jurisdiction to hear and determine such an appeal is conferred by s46 of the Administrative Appeals Tribunal Act 1989 (ACT) (AAT Act). The relevant provisions are,

(1) A party to a proceeding before the Tribunal may appeal to
the Supreme Court on a question of law from any decision of the
Tribunal in the proceeding.

(5) The Supreme Court shall hear and determine the appeal and
may make on the appeal -

(a) an order affirming or setting aside the decision of the
Tribunal;
(b) an order remitting the case to be heard and decided again,
either with or without the hearing of further evidence, by
the Tribunal in accordance with the directions of the Court;
or
(c) such other order as the Court, in its discretion, thinks
appropriate having regard to its decision.

5. It may be noted that the appellant does not have an unlimited right of appeal. An appeal lies only for error of law.

6. In Agfa-Gevaert Ltd v Collector of Customs and Kodak [1994] FCA 1336; (1941) 124 ALR 645, Gummow J, applying the equivalent provision of the AAT Act (Cth), set out a series of propositions, at 648-9, which are of considerable value in determining whether an appeal truly concerns error of law. His Honour said,

(i) The meaning of a legal term of art is a question of law, but,
otherwise, to determine the ordinary meaning of a word, which
may be a scientific term or a word used by those with but a
basic vocabulary, is to determine a question of fact. If it is
contended that there is a commercial or other special meaning of
a word, this is to be proved by evidence, as a fact.

(ii) If a commercial or other specialised meaning of a particular
item is established by evidence, it is then necessary to
determine whether the legislation has used the term in its
ordinary specification or in the special sense.

(iii) The choice between ordinary meaning and commercial or trade
meanings may not be mutually exclusive; the legislation may
disclose some artificial extension or limitation of either or
both meanings.

(iv) The question whether or not a word or phrase in legislation
is to be given its ordinary meaning or some special meaning or an
extension or limitation thereof is a question of law.

(v) The effect or construction of a term once its meaning or
interpretation is established is a matter of law.

(vi) So also is the question of whether the facts as found fall
within the terms of the law as properly construed; to this
there is the qualification that, where the statute uses words
according to their ordinary meaning and it is reasonably open to
hold that the facts as found fall within those words, the
decision as to whether they do so fall generally is a matter of
fact.

(vii) The qualification "generally" is used in (vi), because the
law may use a word in an ordinary sense, but there may be a number
of ordinary senses and it then is necessary to select that which
is appropriate, and because whilst the word may have but one
ordinary meaning that is imprecise, the word will take its
colour from the context and that will require construction of
the law, a lawyer's task. the result in such cases will be more
than the matching of a set of facts with plain words.

(viii) With respect to revenue laws directed to commerce, the
courts are more ready to conclude that items have been described
according to common commercial or trade usage rather than in
their natural ordinary sense.

(ix) However, the expression must be uniformly understood in the
specialised sense in the relevant trade and have been so
understood when the law in question was enacted.

7. The factual situation set out by Prof Curtis was complex. However, the issue raised is less so. I will refer to the parties involved in a shortened fashion, without reference to their correct corporate names. As Prof Curtis found, as part of the sale of Bond Brewing to Bell Resources, certain shares in Bond Brewing were transferred to Manchar, a subsidiary of Bell Resources. There was, in turn, an agreement between Bell Resources and Lion Nathan to conduct the Bond Brewing business as a joint venture. Manchar agreed to procure a transfer to a Lion Nathan subsidiary, of half the shares Bond Brewing had agreed to transfer to it. It directed Bond Brewing to transfer the shares accordingly. The consideration paid to Bond Brewing for the transfer of shares was $697m, but the market value of the shares, as the Tribunal found, was no more than $90.2m.

8. The Commissioner, on 26 November 1990, issued two notices of assessment of duty on this transaction, which had been completed on 2 October 1990. It is not disputed that the Commissioner was given all relevant facts and documents upon which to base his assessments.

9. The first, to the appellant, assessed duty on 50% of the market value of the shares, that is, $45.1m.

10. The second, to Manchar, assessed stamp duty on the basis of the total consideration paid by Manchar for the shares, that is, on $691.082m.

11. The appellant was not a party to the agreement for the transfer of shares to Manchar or its nominee.

12. Subsequently, on 10 September 1993, the Commissioner, pursuant to s22 of the Taxation (Administration) Act 1987 (ACT), issued, or purported to issue, an amended assessment to the appellant. In this amended assessment, the Commissioner determined that duty should be assessed as if the shares transferred to the appellant were valued at 50% of the price Manchar had agreed to pay for them, that is, on $345.541m rather than at 50% of market value of the parcel of shares as had been the original basis for assessment.

13. On 26 October 1993, the Commissioner gave his reasons for so amending the assessment.

14. Not surprisingly, the appellant filed a Notice of Objection.

15. However, on 24 November 1993 a second Amended Assessment issued. It corrected certain errors in the first Amended Assessment but maintained the same substantive demand.

16. A fresh Notice of Objection was filed restating the previous grounds for objection. On 27 June 1994, the Commissioner advised that he had rejected the objection. Why it took him so long to reject the objection is unclear, but little turns on that.

17. At the heart of the dispute is the status and interpretation of the Stamp Duties (Marketable Securities) Determination 1990 (No. 67 of 1990). That Determination was made on 28 September 1990. It replaced and revoked a prior Determination made on 26 September 1989.

18. The 1989 Determination had purported to levy duty on the unencumbered "market value" of any security transferred.

19. The 1990 Determination purported to define the term "value" but left the previous provision otherwise unaltered.

20. "Value" was defined as,

the consideration paid or payable for the marketable
security; or
the unencumbered value of the marketable security;

whichever is the greater.

21. Clearly, if the 1989 Determination had applied to the transfer, the basis for the amended assessment would be incorrect. It would have been based upon an error of law.

22. The issue raised by the appellant was whether, if the 1990 Determination was applicable, the term "consideration" should be taken to refer to the price paid by the transferee or more broadly, to the price paid to the transferor for the transfer whether or not that price was paid by the transferee or another person.

23. Before the Tribunal, the 1990 Determination was attacked as invalid on the ground of "bad faith" or "improper purpose". However, whatever might have been the effect of any such "bad faith" had it existed, the Tribunal rejected the proposition on the facts. That finding is not now open to challenge and is not challenged on this appeal.

24. The 1990 Determination is, nevertheless, attacked as ultra vires s99(1) of the Taxation (Administration) Act 1987.

The Validity of the 1990 Determination
25. The Tribunal found no support for the contention that the 1990 Determination was invalid. The appellant's argument is that the Determination is ultra vires because it imposes differential rates of duty on marketable securities depending on whether they are "listed" or "unlisted" or relate to companies holding land in the Australian Capital Territory as opposed to companies which do not.

26. The power of the Minister to make determinations is declared by s99(1)(b) to include,

... the rate or differential rate to which, or the method by
which, an amount of tax, duty, a licence fee or interest,
payable under a relevant tax law, is to be calculated.

27. The term "differential rate" seems to me to permit the Minister to prescribe different rates of duty for different classes of dutiable transactions. To differentiate between listed and unlisted securities does not seem to me to be so irrational or arbitrary as to be an invalid exercise of power. The same comment applies to the discrimination made between shares in companies holding land in the Territory and those which do not.

28. I agree with Prof Curtis' view to the same effect in his Reasons, that is, at p13-14,

49. It seems to me, however, that what paragraph 5 of the 1990
Determination -1- does is provide a method of calculating the duty
payable on a transfer of certain kinds of shares even though it
does involve looking behind the transfer itself and looking into
the substance of the transaction involved. Of more significance
is the argument that section 44 of the Stamp Act, in the form in
which it stood at the relevant date, does not differentiate
between various categories of marketable securities registered in
the Territory. The argument must depend for its basis on the
broad constitutional principle that the Executive Government may
not impose a tax without parliamentary approval. It goes beyond
to saying that a power to impose tax on a class of instruments
does not include a power to impose differential rates of tax on
different sub-classes of that class. One must therefore consider
what was the legislative intent in delegating to the Minister the
power to determine the amount of duty. Section 99 of the TA Act
(Taxation (Administration) Act 1987), however, makes it clear
that the power of determination includes a power to determine
differential rates of duty. That section provides, in my view,
justification for differentiating between listed and unlisted
marketable securities, and between unlisted shares in companies
which hold land in the Territory and companies which do not. The
same determination may provide both a method of calculating duty
and for a rate of differential rates of duty.

-1- Paragraph 5 of the 1990 Determination
For the purpose of section 44 of the Act, the
determined amount of stamp duty payable on a transfer
to which the section applies of an unlisted marketable
security (not being a marketable security consisting
of an unlisted public unit) is the aggregate of -

(a) the amount of stamp duty that would be payable under
section 17 of the Act on a transfer at market value
and by a document to which that section applies of any
land that is to be deemed to have been transferred for
the purposes of this paragraph; and

(b) an amount calculated at the rate of 15 cents for each
$25.00 or part of $25.00 of the amount remaining after
deduction from the unencumbered value of the
marketable security of the market value of any land
that is for the purposes of this paragraph to be
deemed to have been transferred.

29. It may be added that each Determination was a disallowable instrument for the purposes of s10 of the Subordinate Laws Act 1989 (ACT). That consideration supports the view that a broad view is to be taken of the power of the Minister under s99. A judgment concerning the appropriateness or otherwise of the content of a Determination is primarily for the legislature to make rather than the Courts.

30. It was further submitted by the appellant that the definition of "value" was invalidly inserted in the 1990 Determination. With respect, I cannot accept that proposition. Section 99 does not purport to confine the Minister to market value as the only basis upon which rates of duty may be fixed. A rate must be levied by reference to some criterion, whether it be "value" or otherwise, so as to provide a certain basis for assessment of duty. Whether the rate is levied by reference to consideration or market value, it is a basis for assessment which can be applied with certainty to a factual situation capable of rational ascertainment.

31. In any event, there is good reason, it seems to me, why the Minister would determine to levy duty on the greater of market value or the consideration paid for a transfer.

32. Clearly, in making the 1990 Determination, the Minister intended that duty be assessed on the basis of the real value of the transfer to the parties to it. Consideration paid might be nominal. If so, market value would be the appropriate measure of value. Conversely, the consideration paid might reflect a premium value to the transferee of the purchase and so exceed market value generally. If so, it is not unreasonable for duty to be levied on that premium value, even if it exceeds market value assessed generally.

33. I reject the challenge to the validity of the 1990 Determination.

Does the 1990 Determination support the amended Assessment?
34. The appellant contends that the "consideration paid or payable" refers only to the consideration, if any, paid by the transferee. That was, in the case of the appellant, a nominal or nil dollar sum. Hence, submits the appellant, duty was properly levied, in the first assessment, by reference to the market value of the shares, that is, 50% of $90.2m. The assessment by reference to the consideration paid by Manchar was, therefore, an error of law.

35. The Commissioner, on the other hand, submits that the 1990 Determination refers to the consideration paid for the transfer of the shares to Bond Brewing. That was $691.082m. That payment was that which moved Bond Brewing to effect transfers of shares as directed by Manchar, that is, half to Manchar and half to the appellant.

36. The correctness of that latter submission seems to me to be self-evident.

37. I note that, initially Manchar was assessed for duty on the entire sum paid by it, notwithstanding it was the transferee of only half of the shares. However, the correctness of that assessment, even if it has remained unamended, is not challenged in these proceedings.

38. The transfer of shares from Bond Brewing to the appellant was a transfer by direction of Manchar. Manchar paid Bond Brewing the price for that transfer. Clearly, the price was intended to apply rateably over the entire parcel of shares.

39. In Maples v The Commissioners of Inland Revenue (1914) 3KB 303, the appellant had agreed to purchase a parcel of land. Before conveyance, the appellant agreed to sell portions of the land to various sub-purchasers. The vendor conveyed directly to them the portions so sold. Ad valorem duty was paid on each conveyance. The appellant then took a conveyance of the remainder. He claimed that the conveyance to him should bear ad valorem duty only after the original price was reduced by payments from the sub-purchasers. That would have, at least equalled the original price. Scrutten J held that the conveyance taken by the appellant bore duty rateably to its value as assessed by reference to the original agreement. The true characterisation of the various transactions was, at 309,

... when the purchaser breaks away from the original
consideration, and introduces considerations moving from
sub-purchasers, he is no longer able to say that the total
of all the taxable consideration must not be more than the
original consideration, for he has introduced a person who
is a stranger to the original consideration, and a bargain
which is not the original bargain.

40. This result, of course, works fairly enough where the sub-purchaser pays more than the original purchaser pro rata. If less, or a nominal money amount is paid by the sub-purchaser, a different method of assessment, probably market value, would be more appropriate.

41. A similar analysis was made of similar transactions in Bastow v Collector of Imposts (1917) VLR 81 and Duckett v Collector of Imposts (1927) VLR 457.

42. In Roberts v The Collector of Imposts (1919) VLR 638, Cussen J held that a transfer to a nominee of a purchaser should be treated as if it was a transfer to the purchaser directly.

43. That principle was applied in the case of War Service Homes Commissioner v Collector of Imposts (Vic) [1920] HCA 10; (1920) 27 CLR 334.

44. Those authorities support the pro rata apportionment of the sale price of the shares to the number transferred. They also support the view that, if consideration is the criterion for the imposition of duty, it refers to the consideration received by the transferor to effect the transfer which need not necessarily be the consideration provided by the transferee.

45. Of course, there must be some qualification to the words "the consideration paid or payable" in the definition of value. It relates to the consideration required for the transfer by the transferor. It could not apply to the price paid by the transferor to obtain the shares. That would be absurd. That would be irrelevant save, perhaps, if sufficiently recent to an estimate of market value.

46. It follows that if, as was the case here, A pays B for shares to be transferred to C, that price is, at least, paid on behalf of C and it can truly be said that the consideration for that transfer was that price.

47. A transaction of the kind referred to may, of course, result from a prior agreement between B and C so that B is, to the extent of C's portion, acting as agent for C in procuring the purchase. However, a relationship of agency is not necessary.

48. On their correct construction, the various agreements between the parties resulted in the transfer of shares to the appellant being, simply, a transfer by direction of shares purchased from Bond by Manchar. The consideration for that sale was the price paid for the shares by Manchar. The 1990 Determination then fixed on that consideration as the basis for assessment of duty.

49. That construction of the transaction was also accepted by the Tribunal. Insofar as that involved a finding as to the intention of the parties, it is doubtful that it involves a question of law. That is of no current significance, however, as I would, in any event, support the Tribunal's finding.

50. It follows that the amended assessment is not shown to have been tainted by any error of law.

51. There is no cross-appeal. Nevertheless, I agree with the Tribunal's reasons for disallowing the claim for interest.

52. The appeal is dismissed. I will hear the parties as to costs.