Brion & Anor v. Commissioner of Stamps (S.A.)

Judges:
Duggan J

Court:
Supreme Court of South Australia

Judgment date: Judgment handed down 30 July 1990.

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Duggan J.

Case stated

The Commissioner of Stamps has stated a case to this Court following an appeal against an assessment of stamp duty chargeable on a contract for the sale of a business entered into between the appellants and another party. The contract note was signed on 15 November 1988 and settlement took place on 28 February 1989. The contract was lodged for the opinion of the Commissioner on 13 March 1989.

Section 20 of the Stamp Duties Act, 1923 provides that an instrument executed in South Australia may be stamped without penalty if the stamping takes place within two months after its execution. The Commissioner determined that the contract was lodged outside that time and proceeded on the basis that a penalty was due, but he remitted part of that penalty. However, at the hearing of the case stated Mr Bamford for the appellants contended that the penalty provisions of the Act did not apply. He drew attention to certain special conditions in the contract and argued that a binding contract did not come into existence until those conditions had been fulfilled on 28 February 1989. According to the argument the period of two months provided for in sec. 20 could not commence to run before that date and so no penalty was payable.

It was not in dispute that the duty payable on the contract was the same as if it were an actual conveyance on sale. Section 31(1) of the Act provides as follows:

``Any contract or agreement in writing for the sale of any estate or interest in any property (including goods, wares and merchandise not being goods, wares and merchandise agreed to be sold in the ordinary course of trade by a party whose business is or includes the sale of such goods, wares and merchandise) except -

• (a) property which cannot vest in the purchaser except upon registration of a conveyance;
• (b)...
• (c) stock or marketable securities or shares in the stock, funds or capital of any corporation, company or society,

shall be charged with the same ad valorem duty as if it were an actual conveyance on sale of the estate or interest contracted or agreed to be sold.''

The appellants argued that the contract did not come within the description of ``a contract or agreement in writing'' until special conditions to which I have referred had been fulfilled. The conditions relied upon by Mr Bamford for bringing about this result were two ``subject to finance'' clauses (conditions 1 and

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2), a clause providing that the existing manager of the business would enter into a two-year service agreement with the purchasers and a provision that the contract was to be subject to the successful negotiation of a contract with a third party for the manufacture and distribution of a particular product.

In support of his argument, Mr Bamford relied principally on the case of
Aberfoyle Plantations Ltd. v. Khaw Bian Cheng (1960) A.C. 115. In that case a contract for sale was expressed to be conditional on the vendor obtaining the renewal of certain leases. The joint judgment was delivered by Lord Jenkins who held that a binding contract did not come into existence until the condition was fulfilled. The correctness of this decision has since been doubted
Property & Bloodstock Ltd. v. Emerton (1968) 1 Ch. 94 at p. 116) and in
Perri v. Coolangatta Investments Pty. Ltd. (1982) 149 C.L.R. 537, Gibbs C.J. was of the view that if the decision were correct it could only be because of the particular provisions peculiar to that contract. (See also Mason J. at p. 551 and Wilson J. at p. 557.)

In my view, the decisions of the High Court in Perri v. Coolangatta (supra) and
Meehan v. Jones (1981-1982) 149 C.L.R. 571 are of more assistance in deciding the present case. In the first of these cases a contract for the sale of land was subject to the purchasers' completing the sale of another property. In the view of Gibbs C.J. a binding contract came into existence immediately upon execution. It was at this point that the parties were subject to certain obligations, such as the liability to pay a deposit and the requirement that the purchasers should use their best endeavours to find a buyer for the other property. Mason J. suggested at p. 552 that the conditions should be construed in the following manner:

``Generally speaking the court will tend to favour that construction which leads to the conclusion that a particular stipulation is a condition precedent to performance as against that which leads to the conclusion that the stipulation is a condition precedent to the formation or existence of a contract. In most cases it is artificial to say, in the face of the details settled upon by the parties, that there is no binding contract unless the event in question happens. Instead, it is appropriate in conformity with the mutual intention of the parties to say that there is a binding contract which makes the stipulated event a condition precedent to the duty of one party, or perhaps of both parties, to perform. Furthermore, it gives the courts greater scope in determining and adjusting the rights of the parties. For these reasons the condition will not be construed as a condition precedent to the formation of a contract unless the contract read as a whole plainly compels this conclusion.''

In Meehan v. Jones the Court was required to consider the effect of a ``subject to finance'' clause. Mason J. said at p. 589:

``To say that a `subject to finance' or `subject to finance on satisfactory terms and conditions' clause denotes finance which is satisfactory to the purchaser is not to say that he has an absolute or unfettered right to decide what is satisfactory. To concede such a right would certainly serve the object of the clause in protecting him. But it would do so at the expense of the legitimate expectations of the vendor by enabling the purchaser to escape from the contract on a mere declaration that he could not obtain suitable finance. With some justification the vendor can claim that the agreement made by the parties is not an option but a binding contract which relieves the purchaser from performance only in the event that, acting honestly, or honestly and reasonably, he is unable to obtain suitable finance.''

Each of the special conditions referred to by Mr Bamford was intended for the benefit of the purchaser. It could not have been the intention of the parties that if the purchaser decided not to use his best endeavours to obtain finance, then the contract was void or that the same result would follow if the vendor did not pursue the negotiations with the third party for the contract which was being negotiated. Non-fulfilment of conditions such as these would generally render the contract voidable and not void, but in the present case there was a specific clause to this effect which provided:

``If any of the special conditions above or following shall not be fully satisfied within the time appointed then, unless the purchaser shall have waived such condition or conditions and communicated such waiver in writing to the vendor or to the agent either the vendor or the purchaser may

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at any time thereafter cancel this contract by written notice to the other whereupon the deposit and all other monies paid by the purchaser on account of the purchase shall forthwith be repaid to the purchaser and neither the vendor nor the purchaser shall have any further claim against the other under the contract either at law or in equity.''

In my view, these considerations are fatal to the appellant's argument that no contract came into existence prior to the date upon which the conditions were fulfilled. Furthermore, it is clear that the contract came within the description of the particular type of contract specified in sec. 31 of the Act.

I would answer the case stated as follows:

• The contract marked with the letter ``A'' in the case stated was properly charged with the ad valorem duty provided for in sec. 31 of the Act and the penalty imposed pursuant to sec. 20 of the Act.