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SUPREME COURT OF WESTERN AUSTRALIA IN CHAMBERS

AMOCO MINERALS AUSTRALIA CO v COMMISSIONER OF STATE TAXATION (WA)

JONES J

3 July 1978, 7 July 1978 -

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Jones J    In July 1977 (ie before the 1977 amendments of the Stamp Act (WA)) the appellant company entered into a venture agreement with seven individuals who as a group owned certain mining rights and interests in Western Australia. In the written agreement the company was called "Amoco" and the other parties (as a group) "the co-venturer". The agreement contained very many definitions of terms and detailed provisions as to working arrangements and the like, but its main operative provisions and those with which we are concerned in this appeal were those numbered 2.4(a), 2.4(b) and 2.4(c). They were as follows:-

   "2.4(a) Amoco shall procure the rights of Exploration and Development of the Properties and the right to perform and conduct related activities:

   (i) by making the following payments to the co-venturer on or before the dates specified:-

   $7500 on signing of this Agreement. $7500 six months after signing this Agreement. $15,000 one year after signing this Agreement. $30,000 two years after signing this Agreement. $70,000 three years after signing this Agreement. $120,000 four years after signing this Agreement; and

   (ii) by incurring Venture Costs totalling at least $350,000 within five years of the signing of this Agreement of which at least $80,000 shall be incurred within one year of the signing of this Agreement.

   (b) Subject to and in consideration of the terms and conditions of this Agreement, the Co-Venturer will assign, transfer and convey to Amoco, and Amoco will accept said assignment, transfer and conveyance of an undivided 60% of the entire right, title and interest (whether vested upon execution of this Agreement or after acquired) of the Co-Venturer in and to the Properties, effective upon the fulfillment by Amoco of the requirements of cl 2.4(a).

   (c) Incurring Venture Costs shall be at the election of Amoco and not an obligation imposed on Amoco and Amoco shall have the right to terminate this Agreement by notice in writing to the Co-Venturer at any time whereupon Amoco shall be under no liability to the Co-Venturer except in respect of payments pursuant to cl 2.4(a)(i) which remain unpaid in respect of any periods specified therein which have expired prior to the giving of such notice of termination."

   When the document was presented for stamping the respondent ("the Commissioner") classified it as a conveyance on sale under s 74 of the Act and brought it to duty under the head of change in the Second Schedule of the Act "Conveyance or Transfer on sale of property" at the full ad valorem rate, amounting to $3725.00. The solicitors for Amoco objected, they contending that the agreement was not within the provisions of s 74 of the Act; the Commissioner held firm to his opinion (although giving no detailed reasons for it); and the solicitors required him under s 32 of the Act to state a case, which he has done. The questions for the opinion of the court, as set out in the case, are:-

   

"(i) whether the agreement is liable to duty as assessed by the Commissioner;

 

(ii) if not, to what duty (if any) it is liable; and (iii) how are the costs of the proceedings in this case to be borne and paid?"

   The point at issue here, as it seems to me, really is short. The Commissioner contends that since no further document remains to be executed-nothing further remains to be done-in order to enable Amoco to receive the 60% interest in return for its payment of the instalments and expenditure of the venture costs, the agreement is an executed contract of sale and consequently is chargeable with stamp duty accordingly. But this contention, although carefully and skilfully argued by Mr Brown for the Commissioner, appears to me to be a hopeless one. For it forces Mr Brown to say, and he does say, that Amoco is under an absolute obligation to complete the payments envisaged in cl 2.4(a)(i), and that it can never escape that obligation; and that having paid them it will then be entitled to receive, and under an obligation to accept, a transfer of the 60% interest; therefore the document is an agreement for sale, complete, and chargeable with stamp duty accordingly. That contention would (perhaps, not certainly, in my opinion) be valid if cl 2.4 stopped short at the end of (b). But it does not. On the contrary, it proceeds with (c), and that paragraph sets out in words that could hardly be clearer that there is no obligation on Amoco either to complete the instalment payments or to incur the venture costs. It says in terms (the emphasis is mine) that Amoco shall not have any obligation to incur the venture costs, but may do so at its election; and further that Amoco may terminate the agreement at any time simply by giving notice in writing to the co-venturer, and that if it does so it will be under no liability to the co-venturer except to make payment of such instalments as remain unpaid in respect of any of the specified persons which have expired prior to the giving of the notice of termination. Words could hardly be clearer than that, and in the face of those words, as it seems to me, it can never be said that Amoco by this agreement has agreed to buy anything. Rather, Amoco has agreed with the co-venturer, and the co-venturer has agreed with Amoco, that certain steps will be taken which will put Amoco in a position to decide, at its election and according to its judgment as things go along, whether it will complete a contemplated purchase or not. Such an agreement is clearly not an agreement for sale. "Sale is correlative with purchase: there is no contract for sale unless the purchaser agrees to buy whilst the vendor agrees to sell; if the vendor merely agrees to sell and the purchaser does not agree to buy, it is merely an offer and not a contract of sale."-per Channell J in West London Syndicate v IR Comrs [1898] QB 226 at 238. That indeed is an elementary, almost trite, proposition; but it is incontestable, and it is fatal to the Commissioner's argument. What we have here is an offer to sell combined with an option to purchase. Mr Brown frankly admitted that if that were so, his argument must fail. I hold that it is so, and the Commissioner's case fails accordingly.

   I may say in passing that there seems to me to be nothing odd or surprising about such an agreement. In the field of mining exploration and development in general, it is surely prudent and practical for a company such as Amoco to wish to give itself an opportunity to acquire certain interests but to avoid committing itself to do so until it is satisfied by actual experience in the field that the venture is commercially viable.

   There is one further matter to be considered. The one thing that Amoco is absolutely bound and obligated to do by this agreement is to pay to the co-venturer $7500 on the signing of it. It pays that money to "procure the Rights of Exploration and Development of the Properties and the right to perform and conduct related activities": 2.4(a). It can forthwith after that initial payment, if it pleases, terminate the agreement, decline to explore, develop, or perform related activities, and pay no more; but the initial payment has been made in consideration of its acquiring that right. Mr Williams for Amoco in argument expressly declined to concede that such a right is an "interest in any property" within the meaning of s 74(1) of the Act, but he conceded that it might be, and that if it is then the agreement would be dutiable ad valorem on the sum paid for the acquisition of that right. I am prepared to hold that such a right is an "interest in property" within the meaning of the section, and consequently that the sum of $7500 paid on the signing of the agreement is chargeable with ad valorem duty.

   For these reasons I answer the questions asked in the case as follows:-

   (i) No; (ii) $93.75; and (iii) By the respondent.