2 Day FM Australia Pty. Ltd. v. Commissioner of Stamp Duties (N.S.W.)

Judges:
Sully J

Court:
Supreme Court of New South Wales

Judgment date: Judgment handed down 28 August 1989.

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Sully J.

1. Introduction

1.1 By summons dated 14 October 1988, 2 Day FM Australia Pty. Limited (the plaintiff) brings before the Court by way of a case stated pursuant to sec. 124(5) of the Stamp Duties Act, 1920 (N.S.W.) (the Act), a challenge to the correctness of an assessment of stamp duty made and issued on 1 October 1987 by the Commissioner of Stamp Duties (N.S.W.) (the defendant).

1.2 The assessment in question was made by the defendant in relation to a certain instrument which is dated 16 February 1987 and which describes itself as a ``Business Sale Agreement'' (the agreement). I shall consider, presently, the true nature and certain of the particular provisions of the agreement.

1.3 The assessment so made by the defendant assessed the agreement to duty in the sum of $3,558,276.50. The plaintiff, having received that assessment, objected to it in the manner provided by sec. 124(1)(a) of the Act. The grounds relied upon in support of the objection were expressed as follows:

``(i) The Agreement did not relate to property.

(ii) Alternatively, if the Agreement related to property, which is not admitted, it did not relate to property in New South Wales.''

1.4 The defendant, having considered the objection, disallowed it. The defendant stated in writing, as he is required in such a case to do by the provisions of sec. 124(4) of the Act, reasons for his disallowance of the objection. The reasons as so given were in these terms:

``... I have concluded that my assessment... should stand on the basis that the broadcasting licence sold in the Agreement is property located within New South Wales.''

1.5 Thereupon, the plaintiff called upon the defendant to state the case which has now been presented to this Court for determination. The practical effect of the contending views is that the agreement is liable to duty in the sum of either $3,558,276.50 or $197,886.50.

2. The agreement

2.1 The agreement, as already noted, is dated 16 February 1987 and is described on its face as a ``Business Sale Agreement''.

2.2 The vendor, so described under the agreement, is 2 Day FM Australia Pty. Limited, and the purchaser, so described, is Fulston Pty. Limited.

2.3 The agreement contained prefatory recitals, of which those at present relevant are in the following terms:

``A. The Vendor carries on the business in New South Wales of the operation of commercial radio broadcasting station trading as `2 Day FM' (the `Business').

B. The Vendor has agreed to sell to the Purchaser and the Purchaser has agreed to purchase from the Vendor the goodwill and the assets of the Business more particularly described in this Agreement for the price and upon the terms and conditions expressed in this Agreement.''

2.4 Clause 1 of the agreement, so far as is here particularly relevant, provides:

``1. SALE OF GOODWILL AND ASSETS

Subject to the terms and conditions of this Agreement the Vendor as beneficial owner agrees to sell to the Purchaser and the Purchaser agrees to purchase from the Vendor free from any mortgage lien charge or other encumbrance of any nature with effect from the close of business on the date defined in Clause 5.1 as the Effective Date the following items (the `Assets'):...

(b) The licence issued under the Broadcasting and Television Act 1942 (Cth)

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as amended from time to time (the `Act') for the commercial broadcasting station to be known by the call sign `2 Day' (the `Licence');...''

2.5 Clause 2 of the agreement fixes a purchase price in the order of $65 million and apportions that price to the assets agreed to be sold in such a way as apportions in respect of the licence a sum which cannot be determined precisely upon the available evidence, but which is plainly an enormous sum of money, amounting in all probability to tens of millions of dollars.

2.6 Clause 4 of the agreement provides for payment by the purchaser of a deposit of $6,500,000. The deposit is to be credited against the purchase price, or is to be refunded if ``... this Agreement is terminated in accordance with Clause 12.3...''.

2.7 Clause 5 makes elaborate provision for final completion of the sale and purchase. The following parts of cl. 5 are to be noted:

``5.1 The Effective Date shall be the day which is five (5) Sydney business days after the Australian Broadcasting Tribunal shall have made and formally notified to the Purchaser a determination consenting to the transfer of the Licence to the Purchaser, or such other date as the parties may agree in writing.

5.2 The Vendor and the Purchaser undertake to use their best endeavours to procure that the determination referred to in Clause 5.1 is made as soon as possible after the date of this Agreement.''

2.8 Succeeding clauses of the agreement make elaborate provisions for the adjustment on completion of, or for the taking over on completion of responsibility for, debts, contracts, employees, leases and the like.

2.9 Clause 12 is entitled ``Conditions Precedent''. The course of argument in the present proceedings makes it desirable to reproduce the terms of this clause. They are as follows:

``12.1 Completion of the Agreement shall be conditional upon:

• (a) the renewal of the Licence, whether for a term of three years or less, by the Australian Broadcasting Tribunal with conditions attaching thereto (other than conditions as to term) not substantially different from the conditions attaching to comparable radio station licences; and
• (b) the granting by the Australian Broadcasting Tribunal of its consent to the transfer of the Licence to the Purchaser.

12.2 The parties undertake that they will use their best endeavours to seek to obtain the renewal of the Licence and the consent to assignment of the Licence referred to in Clause 12.1.12.3. If the completion conditions have not been fulfilled or waived within six (6) calendar months of the date of this Agreement then either party shall, but only after discussion with the other party as to extension of the time for completion, be entitled to give written notice to the other of the non-fulfilment thereof and on the giving of such notice this Agreement will automatically terminate and all rights and obligations of the parties under this Agreement shall cease and determine and neither party shall have any obligation of claim against the other hereunto except under Section 12.2 hereof.''

2.10 The remaining clauses deal with a large number of ancillary matters of which the only two at present material are the matter of stamp duty as to which it is provided:

``18.2 The Purchaser will bear all stamp duty and registration fees payable or assessed in relation to this Agreement and any documents including without limitation the transfer of the Licence, the Property Leases or the Lease Agreement.;''

and as to assignment, as to which it is provided as follows:

``The Purchaser may not assign any benefit or other right under this Agreement except with, and in strict accordance with any conditions of, the prior written consent of the Vendor PROVIDED THAT the Vendor shall consent to an assignment to a related corporation (as defined in the Companies (New South Wales) Code) of Broadcast Investments Pty. Limited so long as Broadcast Investments Pty. Limited shall guarantee to the Vendor the obligations of the assignee.''

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3. The commercial broadcasting licence

3.1 The licence issued, relevantly for present purposes, on 21 December 1983, and was expressed as continuing thereafter for a period to expire on 31 December 1986. The other relevant features of the licence are sufficiently summarised in para. 3 and 4 of the case stated, and I need not set them out here in detail.

3.2 It will be observed that, as at 16 February 1987, the date of execution of the agreement, the licence period had expired. The licence was, nevertheless, continued in force pursuant to sec. 87(3) of the Broadcasting and Television Act 1942 (Cth) (the Broadcasting Act), pending the outcome of an inquiry then current in the Australian Broadcasting Tribunal into the renewal of the licence. Apparently such a renewal was granted by the Tribunal, and a licence accordingly issued on 14 April 1987 to the vendor under the agreement.

3.3 That licence was transferred to Fulston Pty. Limited on 20 May 1987, with the approval, signified on 2 May 1987, of the Tribunal.

3.4 On 31 July 1987 the Tribunal approved the change by Fulston Pty. Limited of its name to the name of the present plaintiff.

4. The relevant commercial radio licensing legislation

4.1 The relevant legislation is the Broadcasting Act to which reference is made in 3.2 above.

4.2 So far as concerns the licensing of commercial radio stations, the following features of the legislative scheme have particular present relevance:

• 4.2.1 It is an offence to operate such a radio station without a licence granted pursuant to the Broadcasting Act: see sec. 6A.
• 4.2.2 The grant of such a licence, and the general policing of such licences when granted, is entrusted to the Australian Broadcasting Tribunal which is established by Pt II of the Broadcasting Act. It is a specific function of the Tribunal ``to authorize transactions in relation to licences under section 89A''; see sec. 16(1)(b).
• 4.2.3 Part IIIB of the Broadcasting Act establishes a comprehensive scheme of licensing. The provision of Pt IIIB which has particular present relevance is sec. 89A. The basic premiss of that section is contained in its subsec. (1) which provides, relevantly, as follows:

• ``... a licensee may, with the consent in writing of the Tribunal, but without that consent shall not, transfer the licence or admit another person to participate in any of the benefits of the licence or to exercise any of the powers or authorities granted by the licence.''

• The Tribunal, in considering an application for its consent to a transfer, cannot refuse the application without first holding an inquiry into the application: see subsec. (1B); and cannot in any event refuse the application save upon any of a very limited number of specific grounds: see subsec. (1C). Those grounds put simply are related to the essential fitness and capacity of the proposed transferee, and to the perceived need to avoid a concentration, inimical to the public interest, of the ownership of radio stations.
• 4.2.4 Section 129 of the Broadcasting Act is in the following terms:

• ``(i) Every licence granted or deemed to have been granted under this Act shall be subject to the provisions of this Act and the regulations so far as they are applicable to the licence, and those provisions shall be deemed to be incorporated in the licence as terms and conditions of the licence.
• (ii) In this section, `licence' has the same meaning as in Part IIIB.''

5. The dutiability of the agreement

5.1 The dutiability of the agreement depends, fundamentally, upon the liability created by sec. 41(1) of the Act. It is there provided as follows:

``(1) Every agreement for the sale or conveyance of any property in New South Wales shall be charged with the same ad valorem duty to be paid by the purchaser or person to whom the property is agreed to be conveyed as if it were a conveyance of the property agreed to be sold or conveyed and shall be stamped accordingly.''

5.2 The word ``sale'' appearing in sec. 41(1) is not separately defined; but the words

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``conveyance'' and ``property'' as therein appearing are so separately defined.

5.3 ``Conveyance'' is defined in sec. 65 of the Act. It is not necessary to set out that provision here.

5.4 ``Property'' is defined in sec. 3 of the Act as including ``real and personal property and any estate or interest in any property real or personal, and any debt, and any thing in action, and any other right or interest''.

5.5 Whatever else can be said about the agreement, it is, I consider, plainly an ``agreement for the sale'' of, inter alia and relevantly for present purposes, the broadcasting licence which is described in cl. 1(b) of the agreement.

5.6 If, therefore, the broadcasting licence is properly characterised as having been, as at 16 January 1987, ``property in New South Wales'' in the sense contemplated by sec. 41(1) of the Act, then, the agreement is, plainly, dutiable as the defendant contends.

5.7 Is such a broadcasting licence, then, ``property'' at all? Certainly, the statutory definition as cited above is, on its face, very wide. It was formally submitted by the defendant that the concluding words ``any other right or interest'' can properly be given an interpretation which is not limited to proprietorial rights or interests. That submission, as put to me, was made, however, in order to protect the defendant's position to pursue that argument, if appropriate, on appeal. So far as I am concerned, both plaintiff and defendant argued upon the basis that there is authority binding on me which would require those words to be read down at least to the extent of reading them as referring only to proprietary rights and interests:
McCaughey v. Commr of Stamp Duties (1945) 46 S.R. (N.S.W.) 192; and
Commr of Stamp Duties (N.S.W.) v. J.V. (Crows Nest) Pty. Ltd. 86 ATC 4740 per McHugh J.A. at p. 4744.

5.8 Does, then, the grant of a licence under Pt IIIB of the Broadcasting Act confer upon the grantee some such proprietary right or interest?

Some guidance on the question can be gleaned from the decision of the High Court in
Commercial Radio Coffs Harbour v. Fuller (1986) 60 A.L.J.R. 542.

In that case, Gibbs C.J. and Brennan J. say in their joint judgment:

``Part IIIB of the Act provides for exemptions from the general prohibition on operation of transmitters for broadcasting and television enacted by Pt IA. The purpose of Pt IIIB is simply to provide the machinery for the granting of licences and to prescribe what the holders of licences must do to comply with the licensing regime. Part IIIB does not purport to confer powers or authorities on the holders of licences. If a duty imposed on the holder of a licence cannot be performed without contravening another law, Pt IIIB gives no authority to contravene the other law.''

Wilson, Deane and Dawson JJ., in their joint judgment, say:

``The Act prohibits broadcasting without a licence. The prohibition is removed upon the grant of a licence, subject to certain conditions. Failure to comply with the conditions may result in a revocation or suspension of the licence thereby reinstating the prohibition. The licence confers on the grantee a permission to broadcast. There is nothing in the Act which suggests that it confers an absolute right or positive authority to broadcast so that the grantee, because he has a licence, is immune or exempt from compliance with State laws.''

Does this mean that the licence gives the licensee nothing more than a bare personal privilege?

I do not think so.

It seems to me that the better view is that a licence granted under Pt IIIB of the Broadcasting Act confers upon the grantee a transferable personal right to use for the transmission of commercial radio broadcasts and to the exclusion of all other would-be users, the airwaves in the appointed area. Such a right is to be seen, I think, as having a real and an extremely valuable commercial existence. That the right is transferable only with the consent of a public authority does not seem to me to make the right commercially any the less real or any the less valuable; and more certainly not when the public authority in question has a distinctly limited right to refuse an application for a transfer.

5.9 Clause 21 of the agreement implicitly recognises, and I think correctly so, that the agreement conferred upon the purchaser, as

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between the purchaser and the vendor, rights capable, in the absence of particular provision to the contrary, of being assigned by the purchaser.

That consideration tends, in my opinion, to strengthen the view that the rights conferred upon the grantee of a Pt IIIB licence are, in the sense now material, rights of property.

It seems to me that the position vis-a-vis each other of the vendor and the purchaser under the agreement is, at least broadly, analogous to the position vis-a-vis each other of the creditor and debtor to whom Jordan C.J. refers in the example which he gives in the
Estate of McClure (1947) 48 S.R. (N.S.W.) 93 at p. 96.

5.10 I am confirmed further in my view by the reasoning of Pollock C.B. in
Potter & Ors v. Commrs of Inland Revenue (1854) 156 E.R. 392.

I have regard in particular to his Lordship's definition of property as ``... that which belonged to a person exclusive of others, and which could be the subject of bargain and sale to another''; and, also to what he said in the passage commencing on the last line on p. 396 and continuing to the end of the judgment on p. 397.

5.11 For the plaintiff, great reliance has been placed on the decision of the High Court in Commr of Stamp Duties (N.S.W.) v. Yeend (1929) 43 C.L.R. 235. It seems to me, however, that when one reads, in the joint judgment of Knox C.J., Gavan Duffy, Rich and Dixon JJ., the passage at pp. 242-243 which deals with sec. 41(1) of the Act, one encounters reasoning which, in my view, does not support the arguments which the plaintiff sought to rest upon the decision. I do not think that it can be said, in the context of the present case, that the words ``every agreement for the sale... of any property in New South Wales'' are at all ``inappropriate to describe the contract'' between the purchaser and the vendor under the agreement. The agreement here in question is, in terms, an agreement for the sale of the licence as a distinct asset of the vendor to a party described in terms, and appropriately so, as a purchaser.

5.12 I have come, therefore, to the conclusion that the licence here in question was, as at 16 February 1987, ``property'' in the sense contemplated by sec. 41(1) of the Act.

5.13 Was the licence, being such ``property'', also ``in New South Wales''?

It was submitted by the plaintiff that it was not. It was argued, put simply, that the source of any ``rights'' arising under a broadcasting licence is Commonwealth legislation which apportions a Commonwealth-wide resource, and that those considerations indicate that a commercial broadcasting licence, if it is ``property'' at all for the purposes of sec. 41(1) of the Act, is ``property'' situated in the Commonwealth rather than New South Wales.

Authority apart, I would not accept such a submission: first, because the plain fact of the matter is that the licence confers an exclusive right to operate the particular licensed service in a specifically designated area of New South Wales; and secondly, because it seems to me that such a submission flies in the face of, at least, recital A in the agreement.

5.14 I have considered whether I am constrained by any binding authority to hold otherwise.

In McCaughey v. Commr of Stamp Duties (supra), Jordan C.J., delivering the judgment of the Court, speaks of the problem of the location of ``... proprietary rights... (which)... are not associated with a tangible object, for example, debts, patent rights, or copyright''. His Honour states the principle, and supports it with a variety of particular illustrations, that: ``For this class of property, conventional rules have been adopted by which it is regarded as situated in the place with which it is most definitely associated'': see p. 201.

I read this statement of principle as supporting the view which I have expressed in 5.13 above.

5.15 Apparently to the contrary is a decision of Lusher J.:
J.V. (Crows Nest) Pty. Ltd. v. Commr of Stamp Duties (N.S.W.) 85 ATC 4198.

His Honour was dealing, relevantly, with a so-called franchise agreement which contained a covenant by the franchisor ``... to make available to the franchisee improvements in and developments to any industrial property belonging to the franchisor''.

Of that provision, his Honour said at p. 4204:

``The other point is that industrial property is the subject of Commonwealth legislation

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and by virtue of that is exercisable and maintainable throughout the Commonwealth and is thus not within the instant statutory description `property in New South Wales'. This is to be construed as property solely within New South Wales otherwise the power of the State to levy duty in relation to property which exists throughout the Commonwealth would be raised and no such submission was put forward on this point by the Commissioner.''

The decision of Lusher J. was taken on appeal to the Court of Appeal, but the judgments in the Court of Appeal do not advert to that part of Lusher J.'s judgment which I have quoted.

It is sufficient for present purposes to make the following observations:

• • Lusher J.'s test of ``solely within New South Wales'' is not reconcilable as a concept, in my view, with the principles established by Jordan C.J. in that part of McCaughey's case which I have cited in 5.14 above.
• • In any event, and even assuming that the ``solely within New South Wales'' test is sound in principle, I think that the facts of this case would establish that, in the relevant sense, the property here in question was, at the relevant time, ``solely'' within this State.

5.16 I admitted into evidence over the objection of the defendant para. 11 to 15 inclusive of an affidavit sworn by John Craig Conde on 22 March 1989 and read in support of the plaintiff's case. Having regard to the views to which I have come otherwise, I do not think that the material in those paragraphs advances the plaintiff's case.

5.17 I have come, therefore, to the conclusion that the licence in question, was, as at 16 February 1987, ``property in New South Wales'' in the sense contemplated by sec. 41(1) of the Act.

6. Answers and orders

I set out hereunder the questions put for determination by the stated case together with my answer to each:

• (a) In so far as the agreement was an agreement for the sale of the licence issued under the Broadcasting and Television Act 1942 (Cth) as amended from time to time for the commercial broadcasting station to be known by the call sign ``2 DAY'', was the agreement ``an agreement for the sale or conveyance of any property in New South Wales'' within the meaning of subsec. 41(1) of the Stamp Duties Act 1920?
• Answer: Yes.
• (b) Whether the amount of stamp duty payable in respect of the agreement is:
  • (i) $3,558,276.50
  • (ii) $200,336.50
  • (iii) some other, and if so what, amount?
• Answer: $3,558,276.50.
• (c) If applicable, an order pursuant to subsec. 124(8)(a) of the Stamp Duties Act 1920.
• Answer: Not applicable.
• (d) By whom should the costs of these proceedings be paid?
• Answer: By the plaintiff.

I make the following ancillary orders:

1. Order that the plaintiff have leave to amend the summons and the stated case:

• (a) By inserting in the title of the proceedings the name ``2 Day FM Australia Pty. Limited'' for the name ``Fulston Pty. Limited'';
• (b) By amending para. 3 of the statement of claim by deleting the words: ``... to 2 Day FM Limited and transferred on 1 January 1986 to the plaintiff...'' and by inserting in lieu thereof the following words: ``... originally granted to 2 Day FM Australia Pty. Limited and transferred from that company to Ligdam Pty. Limited which later and prior to 16 February 1987 changed its name to 2 Day FM Australia Pty. Limited, the Vendor in the Agreement'';
• (c) By inserting in the summons and in the stated case, in conformity with Pt V r. 2, the designations ``plaintiff'' and ``defendant'' for, respectively, the designations ``appellant'' and ``respondent''.

2. Order the plaintiff to file in the Court Registry within 14 days hereof a re-engrossed

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form of summons and stated case amended pursuant to O. 1.

3. Order that compliance with the rules, in so far as they would otherwise require service of such amended documents on the defendant, be dispensed with.

4. Order that the exhibit remain with the Court papers for 28 days and thereafter until any appeal proceedings have been concluded.