CONTRACT ENTERED INTO BY AGENT

The exemption from double stamp duty applied where an agent for family companies entered into a contract for the sale of land, the Victorian Supreme Court has held.  

Commissioner of State Revenue (Vic) v Viewbank Properties Pty Ltd & Ors (Court ref: [2004] VSC 127 (Nettle J), 7 April 2004)
 

FACTS

In October 1999, three individuals executed a document authorising a Mr. Hargrave ("H") to enter a contract of sale to purchase a property in his name but subject to the right to nominate substitute purchasers. Shortly after, H executed a contract of sale to purchase the property for $2.3m with the purchaser as H and/or his nominee(s).

In December 1999, the three individuals nominated their family companies ("Prilo", "AJF Investments" and "Viewbank") as purchasers of the property, Viewbank incorporated some months after the date of the contract. Subsequently, the family companies executed a transfer of land as transferees as to one half share, and one-quarter share and a one-quarter share, respectively, as tenants in common.

An agent of the Commissioner stamped the transfer with duty of $9,460. Later, however, the Commissioner issued an assessment for $171,987, constituted by two lots of duty plus penalties and interest. The taxpayers appealed on the basis that the exemption in section 67A (3) (a) (i)  Stamps Act 1958  (Vic) applied as H had entered into the contract of sale as an agent. However, the Commissioner argued that the requirement in section 67A (3) (a) (i)  Stamps Act 1958  (Vic), that the authority by the transferee be in writing, was not satisfied.

The Victorian Civil and Administrative Appeals Tribunal considered that section 67A (3) (a) (i)  Stamps Act 1958  (Vic) should not be interpreted literally so that it only applies if the authority is in writing from the transferees directly. Rather, its interpretation should be more liberal, so that it applies if the authority is in writing from either the transferee or an authorised agent of the transferee (whether or not the transferee had by then been formally created). Accordingly, the exemption was satisfied.
 

COURT DECISION

On the Commissioner's application for leave to appeal, the Court rejected the Tribunal's "purposive approach" to interpreting section 67A (3) (a) (i)  Stamps Act 1958  (Vic), considering that the section should be construed according to the plain, ordinary and natural meaning of its terms. That means that it will not apply unless the purchaser enters into a contract as the agent of another person and with the authority in writing of the transferee.

Despite that, however, the Court considered the Tribunal did not err in finding that section 67A (3) (a) (i)  Stamps Act 1958  (Vic) applied to Prilo and AJF Investments. In each case, individuals on behalf of interests associated with his family signed the authority, and each had the power to sign the authority on behalf of his family company.

In relation to Viewbank, the Court considered that section 67A (3) (a) (i)  Stamps Act 1958  (Vic) did not apply because it had not come into existence at the time of the contract for sale. However, the Court then went on to find that section 67A (3) (a) (ii)  Stamps Act 1958  (Vic) applied because H had entered into the contract for sale in anticipation of the incorporation of Viewbank. In the Court's opinion that finding was open to the Tribunal and it was probable that it would have done so had it been necessary to decide the question.

Accordingly, the application for leave to appeal should be refused.

STAMP DUTY ON TRANSFER UNDER A NOVATED CONTRACT

The transfer of land pursuant to novation by the making of a new contract in substitution for the original contract was caught by section 31  Duties Act 2000  (Vic).
 

Commissioner of State Revenue (Vic) v Politis & Anor (Court ref: [2004] VSC 126 (Nettle J), 20 April 2004)
 

FACTS

On 29 June 2002, the first taxpayer entered into a contract for the sale of certain land to herself or her nominee for $251,000. The contract provided for the payment of a deposit of $21,500 on the signing of the contract, and for the payment of the balance thirty days from the date of the contract (29 July 2002) or earlier by agreement.

However, on 24 July 2002, the parties cancelled the original contract and on the same day, the vendor entered into a new contract with the second taxpayer at the same price of $251,000. The second taxpayer was the trustee of the first taxpayer's family trust. Although the second contract was left undated, the parties appear to have intended that the day of the sale be treated as 29 June 2002, as it had been under the first contract). The second contract had the vendor's original statement attached to it. The Commissioner issued an assessment to the taxpayers under section 31 (equivalent to section 67A  Stamps Act 1958  (Vic)).

On appeal, the Victorian Civil and Administrative Appeals Tribunal held that the rights acquired by the second taxpayer under the second contract were not acquired directly or indirectly under the first contract, and reduced the amount of duty assessed.  

COURT DECISION

The Victorian Supreme Court, on the Commissioner's application for leave to appeal, held that there would be an acquisition of rights of the purchaser within the meaning of the section where a purchaser agrees to the substitution of its rights or interest under the contract of equivalent rights or interest in favour of the transferee. These would include a nomination clause in the original contract, an express agreement to amend the original contract, an amendment constituted of conduct, as by a direction to the vendor to transfer to the second purchaser in lieu of the first and compliance by the vendor with the direction, and a novation.

In the present case, the Court found that the deed of cancellation provided for the cancellation of the original contract of sale and for the deposit paid under that contract is held on trust until a new contract was executed with the transferee. It was executed simultaneously with the new contract of sale and a copy of the new contract of sale was attached to it, as was the original vendor's statement. In effect, therefore, the deed achieved the substitution for the first taxpayer of the second taxpayer, and the creation in its favour of an interest in the land equivalent to that which the first taxpayer would have held if the original contract of sale had been completed.

It followed that the deed of cancellation effected the acquisition directly or indirectly by the second taxpayer of the rights or interest of the first taxpayer under the original contract within the meaning of section 31. The transfer executed by the vendor in favour of the second taxpayer therefore attracted the operation of section 31. It followed that leave to appeal should be granted and the appeal allowed.

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