CAMPBELLS HARDWARE & TIMBER PTY LTD v COMMR OF STAMP DUTIES (QLD)

Judges:
Byrne J

Court:
Supreme Court of Queensland

Judgment date: Judgment given on 22 April 1996

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Byrne J

By this application for a statutory order of review, the applicant challenges an amended assessment of stamp duty and the respondent's rejection of the objection to that assessment. The original assessment was made in respect of a Form S(a) lodged in August 1993. After the assessment was paid, the respondent amended the Form S(a) and reassessed the duty at an additional $765,557.54. An objection to the amended assessment has been disallowed.

The contest arises out of the acquisition of retail hardware shop businesses formerly conducted by subsidiaries of James McEwan Limited (Receiver and Manager appointed). By a ``Sale of Business Agreement'' dated 21 September 1992, the applicant purchased the goodwill of the businesses, specified plant and equipment, and other assets associated with the businesses. The Form S(a) disclosed the value of the assets acquired at $4,091,839. Of this, $2,700,000 was attributed to freehold properties, $1,300,000 to plant and chattels, and the balance to sundry debtors. The form provided space to insert the value of the stock in trade acquired. Here ``Nil'' was typed in. The amendment of this entry accounts for the reassessment. The respondent changed it to $20,471,207.

The application raises three issues, whether (i) the amendment of the Form S(a) accords with the effect of the contracts for the acquisition of the businesses and their assets; in other words, whether the trading stock was ``agreed to be acquired from the owner'' of the businesses within the meaning of s. 54A of the Stamp Act 1894 (``the Act''); (ii) section 81 of the Act sustains the amended assessment; and (iii) ss. 22A(2) and 80(2) authorise the reassessment of the amended Form S(a).

Basis of Liability to Duty

Section 54A(2) of the Act requires a person who acquires, or agrees to acquire, a business in Queensland to deliver to the respondent ``a statement... in the prescribed form... showing the prescribed information''. By s. 54A(5), that statement is ``charged with duty... as if it were a conveyance or transfer of the property to which the statement relates...''. The prescribed form is the Form S(a).^[1] It is presently immaterial whether s. 4 or else s. 14A of the Stamp Duties Regulations 1926 prescribes the Form S(a) for these transactions: with State Bank of New South Wales Ltd v. Commr of Stamp Duties (Qld) 93 ATC 5005 , 5010; [1994] 2 Qd R 661 , 668 , cf. Carnation Australia Pty Ltd v. Commr of Stamp Duties (Qld) 93 ATC 4486 , 4496; [1994] 2 Qd R 366 , 380 . Nor does it matter here that para. 2 of the Form S(a) uses slightly different words from those in the section. Echoing words in s. 54A(1), para. 2 of the declaration at the beginning of that form states that the:

``attached statement sets out full details of all assets... appertaining to, or in any manner connected with the business which were acquired or agreed to be acquired from the owner whether the same were included in the transaction whereby the business was acquired or agreed to be acquired or were the subject of a separate transaction.''

Accordingly, the chattels to be valued and included in the Form S(a) as stock in trade were those appertaining to the businesses which were ``acquired or agreed to be acquired'' from the owners of those businesses. In this context,

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``acquire'' and its derivatives import to ``get as one's own''.^[2] cf. Allina Pty Ltd v. FC of T 91 ATC 4195 , 4200; (1991) 28 FCR 203 , 209 and State Bank of New South Wales Ltd at ATC 5013; Qd R 671, citing the Oxford English Dictionary 2nd ed (1989) and the Macquarie Dictionary 2nd ed (1987). See also Black's Law Dictionary 6th ed (1990) p. 24; Helvering v. San Joaquin Fruit & Investment Co 297 US 496 , 499 (1936) . Merely to take possession of goods is not to ``acquire'' them as that word is used in s. 54A. The evident intent of s. 54A is to exact duty in respect of arrangements which, so far as trading stock is concerned, partake of the nature of a ``transfer of the property'', as sub-s. (5) expresses it.

The applicant contends that the stock remained the vendors' property, being held by it as a bailee for sale on consignment as agent for the vendors. According to the respondent, however, the applicant agreed to ``acquire'' the stock, which was destined for retail sale on the applicant's own account. The question is whether, according to the true legal character of the arrangements, the applicant agreed to get the stock as its own. To arrive at the answer, in this case it is necessary to ``look at what the contract really was, and not at what the parties said it was''.^[3] The Kronprinzessin Cecilie (1917) 33 TLR 292 , 293 ; cf McEntire v. Crossley Brothers Limited [1895] AC 457 , 462-463, 468 ; Michelin Tyre Company Limited v. Macfarlane (Glasgow) Limited [1917] 2 SLT 205 , 213, 215 ; Pongakawa Sawmill Ltd v. New Zealand Forest Products Ltd [1992] 3 NZLR 304 , 309 . As to substance predominating over form in revenue cases, see Australian National Airlines Commission v. Commr of Stamp Duties (Qld) 87 ATC 4218 , 4222; [1989] 1 Qd R 246 , 250 ; cf. Firestone Tire and Rubber Co Ltd v. Commission of Income Tax [1942] SCR 476 , 482 .

Substance of the Contracts

Clause 7 of the Sale of Business Agreement provides that the trading stock of the businesses was to ``remain the property of'' the vendors ``and is not included in the Assets acquired... under this Agreement'', which is plainly opposed to the notion that the applicant agreed to acquire it. But matters do not rest there.

The day that Agreement was signed, the parties to it entered into an ``Agency Agreement'' dealing with the stock. This contract begins by reciting that each vendor owns ``trading stock which it wishes to dispose of as part of its business'', and that the applicant has agreed ``to act as agent of each vendor'' to effect its disposal. By cl. 2, the applicant is ``irrevocably'' appointed such an ``agent''. That clause also establishes an interdependence with the Sale of Business Agreement: the Agency Agreement ``shall terminate'' if the other contract ``be terminated''. The important cl. 3 then provides:

• ``(a) The Stock Agent acknowledges that, from the Completion date, it shall hold the Trading Stock as bailee for the Vendors on a consignment basis.
• (b) Until delivery to a purchaser, the Stock Agent will store the Trading Stock at its risk and will keep it adequately insured against all usual risks and (subject to clauses 7 and 9) shall account to the Vendors for any proceeds of that insurance as soon as practicable after they become available, as if such proceeds constituted the proceeds of disposal of that Trading Stock.
• (c) Subject to the obligations of the Stock Agent to account to each Vendor as set forth in this Agreement, the Stock Agent shall have the same powers to deal with the Trading Stock for the benefit of the Vendors as it has in respect of its own stock, including the power to sell any part of the Trading Stock to one or more of its Related Bodies Corporate.
• (d) The Stock Agent's powers also include the power to sell any part of the Trading Stock to itself (and on its own account), should the Stock Agent so wish.''

The Agency Agreement stipulates a mechanism for calculating the cost the applicant was to incur in exchange for the rights accorded to it under the Agreement. By cl. 4, ``subject to cl. 28.1(d)'', the applicant ``warrants'' that the vendors will receive from disposal of their stock ``the aggregate amount required to be advanced... under cl. 8''. Clause 8 required the applicant, on completion, to pay - ``make an advance'' is the phrase used - $17,500,000 as the estimated value of the stock on the completion date. The ultimate expense the applicant was to bear for the rights acquired in respect of the stock might have been more or less than that substantial ``advance''.

Clause 8.2 called for a stocktake to value the stock according to a methodology described in the contract. The stocktake might have triggered an adjustment to the price. Broadly, the scheme was this: if the value of the stock exceeded $17,500,000, the applicant had to pay the difference ``by way of a further advance''; and if the value proved to be less than $17,500,000, the ``deficit'' was to be repaid. Consistently with this, by cl. 10 the applicant was entitled to receive for itself, not for the vendors,^[4] cf. Puma Australia Pty Ltd v. Sportsman's Australia Limited (No 2) [1994] 2 Qd R 159 . the proceeds of disposal of the stock; and by cl. 7, the applicant bore the deficiency if it received less from selling the stock than the ``advances'' payable to the vendors.

As I have said, cl. 28.1(d) qualified the applicant's promise that the vendors would receive ``the aggregate amount required to be advanced'' under cl. 8. The qualification concerns a contingency identified in cl. 8.7 of the Sale of Business Agreement. As that contract discloses, some of the businesses were conducted from leased premises. Clause 8.7

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addressed the possibility that the applicant might not secure a lessor's consent to an assignment of the lease. It envisaged that, where such a consent had not been obtained or other arrangements had not been negotiated with the lessor by a nominated date, the particular ``site lease'' became excluded from the sale. In that event, the related business was not to be acquired and trading stock at those premises was likely to be affected.

Under cl. 28 of the Agency Agreement, if a site became such an ``excluded site'', as it was called, a stocktake was to take place to ascertain the value of the stock of that business at the ``exclusion date'' in accordance with the same methodology used to establish any balance ``advance'' to be paid by the applicant. The Agency Agreement also catered for the contingency that a site became excluded in another way. The ``stock agency'' created by cl. 2 terminated from the ``exclusion date'' to the extent that the ``agency'' related to stock at the excluded site. The applicant was required to re-deliver the excluded stock, whereupon it became entitled to a ``refund'' representing the value of the excluded stock. Accordingly, subject to the cl. 28.1 contingency, at completion the applicant was to take possession of the stock appertaining to the businesses and, in exchange for those goods and the rights acquired in them, became obliged to pay their value established in accordance with the agreed methodology.

In this case, the intention of the parties is to be gathered from their contracts. Not surprisingly, the applicant attaches significance to the terminology. Clause 7 of the Sale of Business Agreement is explicit: the stock remains the property of the vendors. And the Agency Agreement abounds with words indicative of agency for sale rather than an acquisition by the applicant of the goods. In particular, cll. 2 and 3 are replete with language familiar in the law of principal and agent. The applicant, appointed as ``stock agent'', expressly acknowledges that its possession of the stock after completion is ``as bailee... on a consignment basis''.^[5] ``consignment basis'' may be neutral: Universal Guarantee Pty Ltd v. Metters Limited [1966] WAR 74 , 79 ; Teneha Oil Co v. Blount 368 SW 2d 655 , 657 (Tex CA, 1963) ; Michelin Tyre at 212. Pending delivery to a ``purchaser'', the applicant must insure the stock, and the applicant must ``account to'' the vendors for the proceeds of that insurance. Powers to ``deal with'' the stock are described as being ``for the benefit of the Vendors''. Other ideas and expressions are reminiscent of agency. Clause 6 envisages that the applicant will be remunerated ``for its services'' by ``commission'' ``equal to the amount by which the net proceeds of disposal'' of the stock exceeds the ``Warranted Amount''. By cl. 12, the applicant was to give regular written reports. And, pursuant to cl. 15, the vendors and the Receiver could inspect business records. Moreover, cl. 3(c) confers on the applicant an option to purchase, which cannot be reconciled with an agreement to buy the stock.

Yet with varying significance, some features of the Agreement point to sale, rather than agency, as the essence of the relationship. That the risk of accidental loss is borne by the applicant is one.^[6] Knoblauch v. McInnes [1935] St R Qd 28 . This factor is not as significant as once it was in indicating whether property in goods has passed: cf K. Sutton, Sales and Consumer Law , 4th ed (1995) p. 416, where it is pointed out that common retention of title clauses invariably state that the risk passes to the buyer. Clause 3(b), it may be noted, does not entitle the vendor to the proceeds of an insurance policy. On accidental destruction, the applicant is so entitled because it has the right to the proceeds of disposal of all the stock: see cl. 10. Another is that inevitably the applicant would sell to a multitude of purchasers in its own name and in circumstances where a purchaser would not be aware that the goods were other than the applicant's property.^[7] Restatement of the Law 2nd on Agency (1958) §14J at 74. Clause 14.2, incidentally, contains a promise by the vendors to assign to the applicant, or else hold on trust for it, the benefit of any manufacturers warranties. It is not easy to see the point of this obligation if the Agency Agreement was intended to bring the vendors into contractual relations with the customers of the stores. That the applicant must pay for the rights acquired in relation to the stock at fixed times and irrespective of the extent of any retail sales is another, albeit slight, indication that the applicant may have got the stock as its own.^[8] Gannow Engineering Co Ltd v. Richardson [1930] NZLR 361 , 369 ; Firestone Tire at 487; Towle & Company v. White (1873) 21 WR 465 , 466 ; Williston on Sales 4th ed (1973) §2-1. And although an agent can be remunerated by the surplus beyond a price received for the principal,^[9] Re Stephanian's Persian Carpets Limited (1980) 34 CBR 35 , 39 ; Buckland v. Clarke [1956] SR (NSW) 185 , 187 ; Ex parte Bright . In Re Smith (1879) 10 Ch D 566 ; Bowstead on Agency 15th ed (1985) p. 21. still it is ``evidence towards a sale that the recipient is entitled to sell at whatever price he thinks fit, accounting to the supplier for only a pre-determined sum''.<sup>[10]</sup> Benjamin's Sale of Goods 4th ed (1992) para. 1-049; cf Chickering v. Bastress 22 NE 542 , 543 (Ill, 1889) ; Paul Martin Co Inc v. Sumpter 64 A 2d 425 , 426-427 (CA DC, 1949) . Other things indicate more distinctly that the applicant contracted to get the stock for its own purposes, free of any residual right or interest in the goods in the vendors, and so agreed to ``acquire'' it.

The amplitude of the applicant's dominion after completion is not left to inference. By cl. 3, the applicant has the same power ``to deal with'' the trading stock as in relation to its other stock, which must comprehend a right to sell in its own name. True it is that the power is expressed to be ``for the benefit of the vendors''; but these words serve no function because the vendors' entitlements are not affected by any dealing in the stock by the applicant. The vendors get a sum of money unrelated to the destiny of the goods. More importantly, at completion the applicant took possession with the right^[11] As against the vendors. The possession might have been interrupted by secured creditors. to it indefinitely, entirely free of the vendors' control. The vendors retained neither a dispositive right in respect of the stock nor any power to direct dealings by the applicant in the goods.

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Although the applicant could have insisted on returning stock on the occurrence of an event contemplated by cl. 8.7 of the Sale of Business Agreement, on no contingency could a vendor have demanded the goods back or controlled their fate.^[12] The absence of any right in the goods after completion contrasts with retention of title clauses often found in contracts for the sale of goods. Commonly they not only assert retention of title pending payment of the price but also reserve rights to repossess or to dispose of the goods in the meantime: cf. Clough Mill Ltd v. Martin [1985] 1 WLR 111 , 114-115 ; Hendy Lennox (Industrial Engines) Ltd v. Grahame Puttick Ltd [1984] 1 WLR 485 , 492 ; NE Palmer, Bailment , 2nd ed (1991) pp. 132-133, 177-178. See also Professor D. Everett's interesting article, ``Romalpa Clauses: The Fundamental Flaw'', (1994) 68 Australian Law Journal 404.

It is ``characteristic of ownership that an owner has a residuary right in the thing owned''.<sup>[13]</sup> A.M. Honoré, ``Ownership'', in A.G. Guest (ed), Oxford Essays in Jurisprudence , (1961) p. 127; see too G.W. Paton, A Text-Book of Jurisprudence , 3rd ed (1964) p. 469; R.M.W. Dias, Jurisprudence , 5th ed (1985) pp. 297-299; A.P. Bell, Modern Law of Personal Property in England and Ireland , (1989) pp. 67, 74; Restatement of the Law of Property (1936) §10 c, p. 25. Here, however, the applicant was entitled to exclusive possession of the stock permanently, and in circumstances where the vendors were ``contractually disabled... from enforcing any right of property against the person receiving delivery''.<sup>[14]</sup> Per Dixon J in Chapman Bros v. Verco Bros & Co Ltd (1933) 49 CLR 306 , 318 ; cf. Farnsworth v. FC of T (1949) 9 ATD 33 , 40; (1949) 78 CLR 504 , 518 ; The South Australian Insurance Co v. Randell (1869) 3 LR PC 101 , 109 ; S. Gageler, ``Retention of Title Clauses'', (1989) 2 Journal of Contract Law 34, 36-38. The vendors agreed to give possession of the goods and to the extinguishment of all their rights in them. In other words, in substance though not in terms, it was agreed that the applicant should become the new owner.

Securities subsisting when the contracts were made are said for the applicant to be inconsistent with its having agreed to ``acquire'' the stock. These fixed charges affected the entire trading stock and were a source of the receiver's power to sell. The applicant, it is said, could only give title to a third party as agent for the receiver. And so, as best I grasped the argument, it is contended that the securities show that the Agency Agreement did not promise the property in the stock to the applicant.

By cl. 17 of the Agency Agreement, the vendors warrant the existence of a power to sell ``subject, at the date of this agreement, to the Securities''. Clause 30.1 contains an undertaking that the charges over the stock will not be released or varied while the agency continues or ``Advances'' remain outstanding. Clause 30.2 deals with the prospect that the securities might be enforced during the period mentioned in cl. 30.1. In that event, the proceeds were to be applied in favour of the vendors towards the ``Warranted Amount'' in partial satisfaction of ``the Advances'' and then, ``by way of commission'', to the applicant. The securities involved, I suppose, a potential to affect the volume of stock available to the applicant and therefore the aggregate price payable. But neither the existence nor the prospect of enforcement of the securities matters to the conclusion that the applicant agreed to get the stock as its own.

The alteration the respondent made to the Form S(a) accurately stated the effect of the contracts in relation to the trading stock appertaining to the businesses. This conclusion makes it unnecessary to consider whether the anti-avoidance provision, s. 81, applies and leaves for decision the question whether the respondent was entitled to reassess the amended Form S(a) to duty.

Reassessment

Section 22A(2) of the Act relevantly provides:

``Where the Commissioner is not satisfied with a statement... on which duty is chargeable under this Act, the commissioner may-

• (a) alter the statement... so that, in the commissioner's opinion, it satisfies the requirements of this Act; and
• (b) assess the duty which in the commissioner's opinion is chargeable under this Act on the statement... (altered by the commissioner...)...''

By s. 80(2):

``... where it is ascertained... that the amount of duty payable on any... statement has been assessed at an insufficient amount, the Commissioner may-

• (a) reassess that duty...; and
• (b) demand and recover an amount equal to the difference between the duty assessed at an insufficient amount and the amount of duty correctly assessed.''

The applicant contends that s. 22A(2) does not permit alteration of a Form S(a) once assessed to duty. This proposition receives support from the structure of s. 22A(2) and the content of s. 80(2). The former speaks of an assessment after alteration, and does not mention reassessment. The latter does not allow reassessment of a Form S(a) which, on the facts stated in it, has been assessed to the right amount of duty. However, nothing in the text of the Act in terms stipulates that an alteration may only be made before assessment. Nor, in my opinion, is the ``and'' between paragraphs (a) and (b) of sub-s. (2) only consistent with a legislative intention that the respondent may not alter a Form S(a) except for an initial assessment.

Inconvenient consequences could attend the interpretation suggested for the applicant. Take Forms S(a). A person liable to duty on the acquisition of a Queensland business must

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provide the prescribed information. The facts stated might be inaccurate or incomplete. Despite the respondent's s. 23 powers to obtain information, the real position might not be established until after assessment. Yet a Form S(a) assessed to the duty appropriate to the facts it states cannot be reassessed under s. 80(2) unless it is altered. So to accept the interpretation suggested for the applicant is to anribute to the Parliament an intention not to allow a reassessment where a wrong Form S(a) is lodged and the error is not discovered until after assessment. This seems unlikely, even if^[15] Which seems doubtful, notwithstanding remarks of Pincus JA in Carnation Australia at ATC 4496-4497; Qd R 380-381. ss. 54A(4) and (4AA)^[16] Section 54A(4) provides that a person who fails to deliver ``a statement ... in compliance with the requirements of subsection (2) ... shall be guilty of a continuing offence''. By sub-s. (4AA), a person convicted is to be ordered to pay the duty payable in respect of the statement. apply where an inaccurate, as distinct from no, Form S(a) is lodged. In my opinion, the view that s. 22A(2)(a) permits alteration of a Form S(a) both before and after assessment better accords with contemporary approaches to statutory interpretation.^[17] See Cooper Brookes (Wollongong) Pty Ltd v. FC of T 81 ATC 4292 ; (1981) 147 CLR 297 ; s. 14A(1) Acts Interpretation Act 1954 and example.

The application is dismissed.