Allgas Energy Limited v. Commissioner of Stamp Duties (Qld.).

Judges: Lucas SPJ

Kelly J
Sheahan J

Court:
Supreme Court of Queensland

Judgment date: Judgment handed down 19 December 1979.

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Kelly J. (Lucas S.P.J. and Sheahan J. concurring): This is an appeal by way of case stated by the Commissioner of Stamp Duties pursuant to sec. 24 of the Stamp Act 1894-1976 (``the Act''). It concerns the assessment to duty of an agreement in writing dated 28 February 1978 (``the Agreement'') between Jimbilly Pty. Ltd. (``Jimbilly'') and the appellant Allgas Energy Ltd. (``Allgas'').

An Agreement in writing dated 13 January 1978 (``the Principal Deed'') had been entered into between AAR Limited (``AAR''), IOL Petroleum Limited (``IOL''), Mines Administration Pty. Limited (``Minad'') and Jimbilly whereby it was agreed under certain terms and conditions that Jimbilly may earn a 50 per cent working interest in parts of an Authority to Prospect and certain Leases held by AAR and IOL and granted under the Petroleum Act 1923-1976 and that with the consent of AAR and IOL Jimbilly may make assignments not exceeding in total nine-tenths of the 50 per cent working interest it may earn or has earned pursuant to the Principal Deed. Jimbilly's working interest in any particular area was to be earned on the completion of a petroleum exploration well in that area. However, although in accordance with the terms of the Principal Deed Jimbilly might complete a particular well either in conjunction with AAR and IOL

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or, in certain circumstances, alone, it was not obliged to complete any well and it could terminate the Deed at any time by giving fourteen days notice in writing to all other parties.

The Agreement recited, inter alia, that Jimbilly wished to assign to Allgas (in the Agreement referred to as ``the Purchaser'') a working interest of 47½% per cent out of the 50 per cent working interest which it may earn in certain specified blocks. Clause 3(1) provided as follows: -

``Subject to Jimbilly earning a FIFTY PERCENT (50%) working interest in each of the Mascotte No. 1 Farmin Block and the Dundonnell No. 1 Farmin Block in accordance with Clause 9(1) of the Principal Deed, Jimbilly hereby assigns to the purchaser a FORTY SEVEN AND ONE HALF PERCENT (47½%) Working interest in the Mascotte No. 1 Farmin Block and a FORTY SEVEN AND ONE HALF PERCENT (47½%) Working interest in the Dundonnell No. 1 Farmin Block on the terms and conditions contained in this Deed. The Purchaser acknowledges that such assignments are made subject to the terms and provisions of the Principal Deed and subject to Clauses 3(2) and 7 hereof agrees to assume and perform all of the obligations under the Principal Deed with respect to the Working Interests assigned and upon such assignment being effected Jimbilly shall be relieved of all obligations thereafter accruing but not theretofore accrued under the Principal Deed with respect to the Working Interests so assigned.''

Clause 3(2) does not require consideration for the present purpose.

Clause 7 provided as follows: -

``7. TRANSFER OF WORKING INTERESTS

Upon a FIFTY PERCENT (50%) Working Interest in the Mascotte No. 1 Farmin Block and the Dundonnell No. 1 Farmin Block being transferred to Jimbilly in accordance with Clause 9 of the Principal Deed then Jimbilly and the Purchaser shall execute such further documents as may be necessary to transfer a FORTY SEVEN AND ONE HALF PERCENT (47½%) Working Interest in the said Farmin Blocks to the Purchaser.''

Clause 4 made provision for the making of certain payments by Allgas and for the application of the amounts so paid. Within seven days of the Agreement receiving the approval of the Minister for Mines and Energy, which was required by cl. 2, Jimbilly and Minad (which was not a party to the Agreement but which agreed to be bound by the provisions of cl. 4) were required to establish two interest bearing deposits, referred to as the Mascotte Account and the Dundonnell Account respectively, with a trading bank. Subclauses (4) to (8) of cl. 4 then provided: -

``(4) Upon the opening of the Dundonnell Account and the Mascotte Account the Purchaser shall deposit the amount of ONE HUNDRED AND SEVENTY TWO THOUSAND SEVEN HUNDRED AND TEN DOLLARS ($172,710) in the Mascotte Account and ONE HUNDRED AND NINETY THOUSAND EIGHT HUNDRED AND NINETY DOLLARS ($190,890) in the Dundonnell Account.

(5) If the said amounts of ONE HUNDRED AND SEVENTY TWO THOUSAND SEVEN HUNDRED AND TEN DOLLARS ($172,710) and ONE HUNDRED AND NINETY THOUSAND EIGHT HUNDRED AND NINETY DOLLARS ($190,890) respectively are not deposited to the Mascotte Account and the Dundonnell Account respectively within the SEVEN (7) day period referred to in cl. 4(2) hereof this Deed shall be at an end and the Purchaser shall be deemed to have forfeited in favour of Jimbilly all its right title and interest (including Working Interest) in the Mascotte No. 1 Farmin Block and the Dundonnell No. 1 Farmin Block.

(6) No later than SEVEN (7) days after the Mascotte No. 1 Farmin Well reaches its programmed depth, at the request of Jimbilly the Purchaser shall join with Jimbilly and Minad in closing or terminating the Mascotte Account and paying out of the said sum of ONE HUNDRED AND SEVENTY TWO

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THOUSAND SEVEN HUNDRED AND TEN DOLLARS ($172,710) an amount of ONE HUNDRED AND SIXTY SIX THOUSAND SIX HUNDRED AND FIFTY DOLLARS ($166,650) to Minad in part satisfaction of the `turn key price' due to Minad under the Deed referred to in cl. 4(1) hereof in respect of the Mascotte No. 1 Farmin Well. If the Mascotte No. 1 Farmin Well shall not reach its programmed depth within THREE (3) months after the commencement of drilling then Jimbilly and Minad shall join with the Purchaser in closing the Mascotte Account and paying the said sum of ONE HUNDRED AND SEVENTY TWO THOUSAND SEVEN HUNDRED AND TEN DOLLARS ($172,710) and interest to the Purchaser.

(7) No later than SEVEN (7) days after the Dundonnell No. 1 Farmin Well reaches its programmed depth, at the request of Jimbilly the Purchaser shall join with Jimbilly and Minad in closing or terminating the Dundonnell Account and paying out of the said sum of ONE HUNDRED AND NINETY THOUSAND EIGHT HUNDRED AND NINETY DOLLARS ($190,890) an amount of ONE HUNDRED AND EIGHTY ONE THOUSAND EIGHT HUNDRED DOLLARS ($181,800) to Minad in part satisfaction of the `turn key price' due to Minad under the Deed referred to in cl. 4(1) hereof in respect of the Dundonnell No. 1 Farmin Well. If the Dundonnell No. 1 Farmin Well shall not reach its programmed depth within THREE (3) months after the commencement of drilling then Jimbilly and Minad shall join with the Purchaser in closing the Dundonnell Account and paying the said sum of ONE HUNDRED AND NINETY THOUSAND EIGHT HUNDRED AND NINETY DOLLARS ($190,890) and interest to the Purchaser.

(8) Any interest earned in respect of the Mascotte Account or the Dundonnell Account when paid by the Bank concerned shall be the property of the Purchaser and the balances remaining of the Mascotte Account and the Dundonnell Account remaining after the payments referred to in cl. 4(6) and 4(7) hereof have been made to Minad, shall be the property of Jimbilly.''

The assignment of a 47½ per cent interest exceeded that permitted by cl. 24(1) of the Principal Deed under which the limit was nine-tenths of a 50 per cent interest, but the other parties to that deed consented to it. The Commissioner of Stamp Duties assessed the Agreement to duty in the amount of $10,066 relying upon the head of charge ``Conveyance or Transfer'' in the First Schedule to the Act.

The questions for determination by the Court are: -

• (a) Is the Agreement an instrument assessable with duty and, if so, what duty?
• (b) How should the costs of and incidental to the case be borne and paid?

Section 49 of the Act provides, inter alia, that for the purpose of the Act the expression ``Conveyance or Transfer'' includes every instrument whereby any property or any estate or interest in any property is transferred to or vested in any person. The relevant paragraph of the head of charge ``Conveyance or Transfer'' in the First Schedule to the Act on which it is necessary for the Commissioner to rely to support the assessment made is para. (2) which relates to a Conveyance or Transfer ``on the sale of any property (except stock or marketable security)''. ``Property'' is not defined in the Act but it is a word of wide import (
Danubian Sugar Factories v. I.R. Commrs. (1901) 1 Q.B. 245 per Stirling L.J. at p. 257). In that case the benefit of a contract was held to be property within the meaning of sec. 59 of the Stamp Act 1891, which corresponds with sec. 54 of the Queensland Act. See also
Western Abyssinian Mining Syndicate Ltd. v. I.R. Commrs. (1935) 46 T.C. 407. In my opinion the interest which is the subject of cl. 3(1) of the Agreement is ``property'' for the purpose of the provisions of the Act to which I have referred.

The effect of cl. 3(1) is to assign to Allgas a specified percentage of Jimbilly's working interest in each of the blocks referred to subject to Jimbilly earning the requisite working interest in those blocks. At the date of the execution of the Agreement, Jimbilly's

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working interest had not been earned and it may be that it would never be earned, but under the Principal Deed it had the right to earn that interest, which under the Deed was assignable in part, and so it was possible to assign a percentage of that interest if and when it was earned. That is what cl. 3(1) does. The Agreement effected an assignment of an equitable interest in property, namely, a 47½% per cent working interest in the two blocks when that interest came into existence, with nothing further being required to be done by the parties in order to convey that interest to the assignee and there was consideration for that assignment. The Agreement also had the effect of assigning to Allgas a percentage of Jimbilly's existing rights under the Principal Deed and this likewise is ``property'' for the purpose of the Act. I would not consider that, on the proper reading of cl. 3(1) as a whole, the use of the words ``thereafter'' and ``theretofore'' rather than ``hereafter'' and ``heretofore'' prevents the Agreement from having the effect of an immediate assignment.

It follows that in my opinion the Agreement operated as a ``Conveyance or Transfer'' for the purpose of the Act. The question then is whether it could be said to be on the sale of the property thus transferred and so be liable to the duty assessed by the Commissioner. If it does not come within that description it would not come within any of the specified categories in the head of charge ``Conveyance or Transfer'' in the First Schedule and it would then be dutiable only under para. (7) of that head as an instrument ``not specified in the preceding provisions appearing under this heading, and not of any marketable security'' and in that case the duty assessable would be only $4.00.

In the Agreement Allgas is described as ``the Purchaser'' but the use of such a description does not necessarily mean that the transaction is one of sale and whether or not this is so must be determined by an examination of the transaction effected by the instrument. The character of the instrument must be ascertained by what was its legal effect at the moment it was executed, as the liability to stamp duty arises at that time (
Wm. Cory & Son Ltd. v. I.R. Commrs. (1965) A.C. 1088).

The effect of cl. 4 is that the sums there specified are to be deposited in the respective bank accounts but the amount deposited in respect of each of the wells is repayable in full together with interest if that well does not reach its programmed depth within three months after the commencement of drilling. If the deposits are not made as required by cl. 4 the Agreement is at an end and Allgas shall be deemed to have forfeited in favour of Jimbilly all its right, title and interest in the respective blocks. If the respective wells reach their programmed depth within the specified period the bulk of the sums deposited is to be paid out to Minad, which was to perform the actual drilling, the interest on the deposits then becoming the property of Allgas and the balance of the accounts becoming the property of Jimbilly.

A decision of the Supreme Court of Western Australia,
Amoco Minerals Australia Co. v. C. of T. (W.A.) (1978) 8 A.T.R. 719 was relied upon by both counsel. That case concerned a venture agreement made by Amoco with persons who, as a group, owned certain mining rights and interests and were referred to as the co-venturer. The agreement provided for the payment by Amoco of a certain sum on the signing of the agreement and certain other sums at intervals thereafter and for the incurring by Amoco of certain expenditure, referred to as venture costs. Sixty per cent of the right, title and interest of the co-venturer in and to the properties was to be transferred to Amoco upon its fulfilment of its obligations under the agreement. However, the incurring of venture costs was to be at the election of Amoco and not an obligation imposed on it and it had the right to terminate the agreement at any time and its liability was then only to make payment in such instalments as remained unpaid in respect of any of the specified periods which had expired prior to the giving of the notice of determination. Jones J. held that it could not be said that Amoco by the agreement had agreed to buy anything and that the agreement was not an agreement for sale.

The Agreement here is of an altogether different nature. In the Amoco case (supra) Amoco was under no obligation to incur venture costs and it was required to pay specified sums before any interest was to be

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transferred to it. The Agreement with which the Court is here concerned provides for an immediate assignment and creates an obligation on the part of the assignee to deposit certain sums subject to the forfeiture of its rights under the Agreement if it should fail to do so.

I would consider that the effect of the Agreement is that there is to be the payment of what is in reality a price in money for the interest being assigned (see
Littlewoods Mail Order Stores Ltd. v. I.R. Commrs. (1963) A.C. 135) so that the real nature of the transaction effected by the instrument is one of the sale of the property concerned. This position is not altered by the fact that, if the payments provided for by the instrument are not made, the assignee forfeits its interest or that in certain events the payments made are refundable. That being so the instrument may properly be regarded as a Conveyance or Transfer on the sale of the property with which it deals. There is no dispute that, if the instrument is to be assessed on that basis, the duty is $10,066.

I would therefore answer the questions as follows: -

• (a) the instrument is assessable with duty in the amount of $10,066.
• (b) the costs of the Commissioner of Stamp Duties of and incidental to the case should be taxed and paid by the appellant.