Crowther v. Commissioner of Stamp Duties (N.S.W.).
Judges:Sheppard J
Court:
Supreme Court of New South Wales
Sheppard J.: The stated case in this matter concerns the liability to duty of a declaration of trust bearing date 10th May, 1971, but executed by the plaintiff on 27th September, 1971. The document the plaintiff signed acknowledged and declared that he held certain land being a grazing property known as ``Warley'' upon trust for a family company, Warley Pty. Limited. The property was acquired by the plaintiff on 10th May, 1971, when a contract of sale, in which he was the purchaser and one O'Leary was the vendor, was completed. The contract was dated 26th March, 1971. It provided for a purchase price of $105,000 payable by way of a deposit of $10,500 to the vendor's agent as stakeholder. A further sum of $29,500 was to be paid in cash on completion. The balance of $65,000 was to be secured by a mortgage from the plaintiff to O'Leary.
Correspondence between the vendor's solicitors and the purchaser's solicitors, which is annexed to the stated case, shows that it was originally intended by the plaintiff that title to the land would be taken in the name of Warley Pty. Limited. At the time of the correspondence the company had not been formed. On 8th February, 1971, the plaintiff's solicitors wrote to the vendor's solicitors saying, amongst other things, that in their view a great deal of difficulty might be avoided if the contract were prepared in the name of the plaintiff. The letter continued.
``We take it that your client would consent to the execution by Mr. Crowther of a declaration of trust pursuant to which he will declare that he is holding the property in trust for the company, Warley Pty. Limited.''
The vendor's solicitors replied by saying that their client was prepared to deal with the plaintiff on the basis of a straight out sale to him and would not be concerned with any dealings the plaintiff might have with Warley Pty. Limited. They further said that the vendor would not be a party to any declaration of trust which the plaintiff might make concerning the property. The matter proceeded upon that basis. At the date of the contract the company was still not in existence. It was incorporated on 1st April, 1971.
The company purported to hold a meeting of shareholders on 8th April, 1971. The two shareholders were the plaintiff and his wife who, according to the minutes of the company, were present by proxy. The only person in attendance was a Mr. Lackey who was said to be the chairman of the meeting and who is apparently the company's accountant. At the meeting he was appointed the secretary of the company. The meeting is unimportant in relation to the present problem except in so far as the company purported to appoint the plaintiff and his wife directors. A meeting of directors was purported to be held on the date the contract was completed, 10th May, 1971. I am prepared to assume that this meeting was held prior to completion of the contract. But the only person present was Mr. Lackey as secretary of the company, although the minute notes that the plaintiff and his wife were present ``by proxy''.
Amongst the matters recorded in the minutes is the following:
``The Chairman tabled a Declaration of Trust between Graham William Crowther and the Company being in respect of lands
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held by him as the registered proprietor in trust for and on behalf of the Company, such property being as follows: -''
There then followed a list of the certificates of title for the land comprising ``Warley''. The minute continued:
``The Chairman also tabled for sighting at the meeting a copy of the sale agreement for the above property and the terms and conditions contained therein were noted.
IT WAS RESOLVED that in accordance with the conditions required under the Declaration of Trust the Company agree to indemnify the Trustee at all times from expenses and outgoings in respect of the said lands and to repay on demand the loan of $40,000 made by Graham William Crowther to the Company to enable it to effect settlement.
The Secretary advised that a copy of the Declaration of Trust and the sale agreement had been placed in the records of the Company.''
No declaration of trust was executed on 10th May, 1971, but the reference to a declaration of trust in the minute is no doubt a reference to the instrument in question here, it bearing the date 10th May, 1971.
Each of the minutes to which I have referred was signed at a later point of time by the plaintiff purporting to act as chairman, presumably, of later meetings. The date when the two sets of minutes were signed is not shown.
I should say that because the Commissioner, for reasons which I shall refer to in a moment, would not accept the minutes as minutes of any meetings of the shareholders or directors of the company, the plaintiff made an affidavit dealing with the two meetings and the circumstances under which they were held. He was pressed in cross-examination on the question of whether or not it was his signature at the end of each of the minutes in question. I am satisfied, notwithstanding differences which there are in the way that he writes his name from time to time, that he did sign the two minutes.
The totality of the material annexed to the stated case, and the statements made therein, satisfy me that it was at all material times the intention of the plaintiff and of his wife that the land purchased should be held beneficially by the company.
Originally it was intended, as I have said, that the title would be taken in the name of the company. To this end a declaration for the purposes of obtaining the consent to the transaction of the Minister of Lands pursuant to the Crown Lands Consolidation Act, 1913, was signed by the plaintiff on 28th January, 1971. In that declaration he said that the application for consent was being made, ``for and on behalf of a company to be formed to be called `Warley Pty. Limited'.'' The correspondence between the solicitors prior to contracts being exchanged shows that it was the intention that the land, if not taken in the name of the company, should be held by the plaintiff as trustee for it; and the entirety of the conduct of the plaintiff after contracts were exchanged shows that this remained his intention.
It would seem to me, notwithstanding the fact that the declaration of trust referred to in the minute of 10th May, 1971, was not then executed and notwithstanding submissions by the Commissioner that there was no valid meeting of directors on that day, that that minute evidences the fact that the plaintiff was the trustee of the lands for the company.
In the stated case it is said that the plaintiff contended that the declaration of trust of 27th September, 1971, fell within the provisions of para. 1 of the second sch. to the Stamp Duties Act, 1920, as amended, where that schedule deals with declarations of trust. During the argument the plaintiff, without objection from the Commissioner, also contended that the declaration of trust fell within para. 3(b) of the schedule. In either event the duty payable, if the plaintiff be right, is three dollars.
On the other hand, the Commissioner contended that the declaration of trust fell within para. 2 of the schedule with the result that ad valorem duty was payable upon it at the rates provided for in the second schedule. For reasons which need not be gone into, the Commissioner did not seek to charge duty upon it in accordance with the rates provided for in the sixth sch. to the Act.
The relevant descriptions of declarations of trust in the first column of the second sch. are as follows:
``DECLARATION OF TRUST -
(1) Any instrument declaring that a person in whom property is vested as the apparent purchaser thereof holds the same in trust
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for the person or persons who have actually paid the purchase-money therefor.(2) Any instrument declaring that any property vested or to be vested in the person executing the same is or shall be held in trust for the person or persons or purpose or purposes mentioned therein notwithstanding that the beneficial owner or person entitled to appoint such property may not have joined therein or assented thereto.
(3) Any such instrument as aforesaid by which...
- (b) the trusts declared are the same trusts as those upon or subject to which the same property was conveyed to the person declaring the trust by an instrument duly stamped with ad valorem duty under this Act.''
If the declaration of trust in question falls within the description referred to in para. (1) or (3)(b), the duty payable is three dollars; if it falls within the description referred to in para. (2) duty at ad valorem rates is payable.
I propose to deal with the arguments of the plaintiff based upon para. (3)(b) first of all. In my opinion, the plaintiff cannot rely upon this provision because no trusts are declared in the contract of sale nor in the transfer giving effect to it. I think para. (3)(b) is limited to cases where there has been a conveyance of property to a person in trust for another or other persons with the result that the trust is declared in the contract or conveyance. I think that this situation arises because of the use of the words ``upon or subject to which the same property was conveyed to the person declaring the trust''; cf.
King v. Denison 1 V. & B. 260 at pp. 272-273 (35 E.R. 101 at pp. 106-107).
My conclusion in this regard makes it unnecessary for me to deal with a further argument of the Commissioner, namely, that the case was not within para. (3)(b) of the schedule because the conveyance (memorandum of transfer) was not stamped with ad valorem duty; rather the contract was so stamped. In the submission of the Commissioner the contract was not within the meaning of the Act a conveyance; cf. sec. 41(1) and 65.
I turn to consider the argument based upon para. (1) of the schedule. The Commissioner contended that the declaration of trust in this case was not within that paragraph because: -
- (a) the plaintiff was not the apparent purchaser of the land; he was the real purchaser thereof, and
- (b) the company did not actually pay the purchase money for the land.
The reason why the Commissioner submits that the plaintiff was the real purchaser of the land is that at the time that the contract was exchanged the company was not in existence. The plaintiff, by his counsel, relied upon the following statement in Gower's Modern Company Law, 3rd ed., at pp. 273-274:
``It is often stated that the duty of a promoter may be even heavier than that of making full disclosure of any profit made. The suggestion is that if he acquires any property after the commencement of the promotion he is presumed to do so as a trustee of the company so that he must hand it over to the company at the price he gave for it, unless he discloses not merely the profit which he proposes to make but also informs the company of its right to call for the property at its cost price. In theory this is undoubtedly sound. If the promoter broke his duty by attempting to acquire the property beneficially when he should have acquired it for the unborn company, then his breach of duty was not merely failure to disclose his profit but was his attempted expropriation of the company's property.''
There is a note to the text relating to the words ``acquired it for the unborn company'' which says:
``There seems to be no objection in principle to the establishment of a trust in favour of an unformed company - for there can certainly be a trust in favour of an unborn person - but the decisions display a reluctance to invoke this principle.''
Reference is made to
Natal Land Company v. Pauline Syndicate (1904) A.C. 120 where it was said by the Privy Council at p. 126 that a company cannot by adoption or ratification obtain the benefit of a contract purporting to have been made on its behalf before the company came into existence. Their Lordships said that it was unnecessary to cite all the cases in which this had been decided since
Kelner v. Baxter L.R. 2 C.P. 174.
In
Lake Victoria Limited v. Commissioner of Stamp Duties, 49 S.R. 262 Jordan C.J. said at p. 265.
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``The present is not a case of an agent contracting to buy on behalf of an undisclosed principal who wishes to conceal the fact that he is in the market lest it should lead to a demand for an exorbitant price. It is unnecessary, therefore, to consider what the position would be if in such a case, the Commissioner sought to obtain ad valorem duty not only on the contract with the agent, but also on the conveyance to his principal. In the present case, it is clear that Smith did not by the agreement of 4th March, 1947, contract either as agent or as trustee for the companies which he intended to incorporate, for they then had no existence. In law, the effect of the agreement was that Smith became the equitable owner of the lands and other property, the subject of the agreement, and liable to pay to the vendor the price of £86,000 therefor.''
The emphasis is mine.
In
Summergreene v. Parker (1950) 80 C.L.R. 304, Williams J. said at p. 318:
``An agent cannot contract on behalf of a principal who is not in existence and ascertainable at the date of the contract, and the contract, if contract there be, must be a contract between the agent as principal and the other party, and therefore a contract on which the agent is personally liable. In Kelner v. Baxter it was held that such an agent is personally liable unless it clearly appears from the terms and the conditions of the alleged contract that it was not intended that the agent should be so liable.''
That statement has to be read in the light of what was decided by the High Court in the more recent case of
Black v. Smallwood (1966) 117 C.L.R. 52. I refer also to
Miller Associates (Australia) Pty. Limited v. Bennington Pty. Limited, (1975) 2 N.S.W.L.R. 506 at pp. 513-519. I also refer to
Vickery v. Woods (1952) 85 C.L.R. 336 at p. 349 where reference is made by Williams J. to the Pauline Colliery case referred to in Gower.
Counsel for the plaintiff sought to distinguish these cases from the present on the basis that here I am concerned with the relationship of trustee and beneficiary and not that of principal and agent. I agree that the relationship of trustee and beneficiary is the one here in question and that the cases to which I have referred, including the Pauline case, are agency cases. I do not, however, feel persuaded, notwithstanding the reference which was made in argument to some American authorities, that I, as a judge of first instance, ought to depart from the approach adopted in the cases to which I have referred. Professor Gower himself referred to the Pauline case in the context of the relationship of trustee and beneficiary and it, in turn, referred to Kelner v. Baxter and other cases (not by name) presumably involving a relationship of principal and agent after that case was decided.
In those circumstances it seems to me to be correct to say that the plaintiff was the real and not the apparent purchaser of the land with the result that the declaration of trust is outside para. (1) of the schedule.
The Commissioner submitted that the purchase money was not actually paid by the company because, first of all, the deposit was paid, as the plaintiff acknowledged in his evidence, by the plaintiff himself. It was said by counsel for the plaintiff that that was not a relevant consideration because the deposit was paid to a stakeholder who accounted for it to the vendor after completion of the transaction, that is after the minute of 10th May, 1971. I do not myself understand what difference that makes. The deposit was paid to the stakeholder to be applied by him in accordance with the provisions of the contract If it were completed, he was bound to account for it to the vendor. So far as the plaintiff was concerned, it was paid when the contracts were exchanged, that is before the company was incorporated. It was he who paid the deposit. Thus, the deposit could not have been ``actually paid'' by the company because at the time it was paid the company was not in existence.
The Commissioner further submitted that that portion of the balance of purchase money, $29,500, to be paid on completion was not actually paid by the company because it was paid by the plaintiff although an indebtedness was created upon payment by him pursuant to which the company became obliged to repay the plaintiff what he had expended. I have found these submissions not easy of resolution although I incline to the view that the Commissioner is correct in relation to that concerning the deposit.
It is enough for me to say that it is unnecessary for me to consider the second
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submission made by the Commissioner because of the view which I had formed in relation to the first.Although the declaration of trust is outside the provisions both of para. (1) and (3)(b) of that part of the second schedule dealing with declarations of trust, that does not mean that it necessarily follows that it falls within the provisions of para. (2) thereof. In order for the Commissioner to succeed, it must be established that the instrument does fall within the provisions of that paragraph. For reasons already given, I am satisfied that the land was held upon trust for the company as from 10th May, 1971, that is, some four months or a little more prior to the execution of the declaration of trust. The declaration of trust was therefore no more than declaratory of the position which had previously existed. But the provisions of para. (2) of the relevant part of the schedule apply to catch instruments ``declaring that any property vested... in the person executing the same is... held in trust for the person or persons... mentioned therein...'' In his judgment in
Tooheys Limited v. Commissioner of Stamp Duties, 60 S.R. 539 at p. 545, Walsh J., when giving the judgment of the court, pointed to the fact that declarations of trust referred to in para. (2) of the relevant part of the schedule would in some cases be instruments which did not operate to dispose of any interest in property. In this regard para. (2) of the relevant part of the schedule applied to a wider class of instruments than declarations of trust which were defined to be conveyances in sec. 65 of the Act. In my opinion the words from the paragraph which I have quoted above show that the legislature intended to catch instruments which were no more than declaratory of an existing position.
In the course of argument reference was made to two well known decisions of the High Court,
Davidson v. Chirnside (1908) 7 C.L.R. 324, and
Perpetual Executors & Trustees Association of Australia Limited v. Wright (1917) 23 C.L.R. 185. Those decisions are based upon the then existing Victorian legislation which is different from that under consideration here because it does not purport to apply to instruments which are declaratory only of an existing situation. Relevantly the Victorian provision is:
``Any instrument declaring that the property vested in the person executing the same shall be held in trust...''
(7 C.L.R. at pp. 338-9). The emphasis is mine.
The two authorities are not, therefore, in point and do not affect the conclusion at which I have arrived. I would add, however, that, if they were in point, I would think the better view would be that the declaration of trust here would nevertheless be caught because it should be regarded as the charter of the company's rights - see 7 C.L.R. at pp. 340 and 345.
For the above reasons I am of opinion that the declaration of trust in the present case is within para. (2) of the relevant part of the schedule and liable to ad valorem duty pursuant to the provisions of sec. 66 of the Act accordingly.
I have therefore reached the conclusion that the questions asked in the stated case ought to be answered adversely to the plaintiff. Accordingly the duty upon the declaration of trust should be assessed in the sum of $1,540.
At the conclusion of the argument I raised with counsel the question of costs. The amount involved is comparatively small. On the other hand, there is no other avenue open to a person dissatisfied with the decision of the Commissioner on a question of this kind than to seek a stated case pursuant to the provisions of sec. 124 of the Act.
I have on at least one previous occasion remarked that it is to be regretted that there is not a procedure open to persons dissatisfied with decisions of the Commissioner of Stamp Duties similar to that which is open to taxpayers dissatisfied with the decision of the Commissioner of Taxation. It would seem to me that there is a strong case to be made for the establishment of a tribunal in the nature of a board of review to deal at least with cases involving comparatively small amounts of duty. Perhaps such a tribunal could deal with other State taxation appeals where small sums are involved as well.
After I had made these remarks, counsel for the Commissioner informed me that the Commissioner considered this to be a test case and in those circumstances would not ask for costs if he were successful. I think the Commissioner is to be commended for his attitude, this being a case which, in my view, was arguable and not clear of resolution.
Accordingly, I deal with Question (b) in the stated case by saying that there should be no order as to costs.
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