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High Court of Ireland Decisions |
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You are here: BAILII >> Databases >> High Court of Ireland Decisions >> Revenue Commissioners -v- Glenkerrin Homes Ltd [2007] IEHC 182 (22 May 2007) URL: http://www.bailii.org/ie/cases/IEHC/2007/H182.html Cite as: [2010] 1 IR 1, [2007] IEHC 182 |
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Judgment Title: Revenue Commissioners -v- Glenkerrin Homes Ltd Composition of Court: Laffoy J. Judgment by: Laffoy J. Status of Judgment: Approved |
Neutral Citation Number: [2007] IEHC 182 THE HIGH COURT REVENUE 2006 No. 868 R. BETWEEN/ THE REVENUE COMMISSIONERS APPELLANTS AND GLENKERRIN HOMES LIMITED RESPONDENT Judgment of Miss Justice Laffoy delivered on 22nd May, 2007.Factual background The factual background to this case stated commences with a contract for sale by tender dated 28th April, 2004 (the Contract), whereby the respondent agreed to purchase from the Eastern Regional Health Authority (ERHA) certain lands, being part of the lands and premises situate at St. Loman’s Hospital, Palmerstown, Dublin 20 and being part of the lands registered on Folio 6232 of the Register of Freeholders, County Dublin, at a price of €31,600,000. The deposit payable under the Contract was equivalent to 10% of the purchase price, which amounted to €3,160,000. It was payable in two tranches: €500,000 with the tender; and the balance within five working days of notice of acceptance of the tender. The closing date provided for in the Contract was seven days after the issue of certain consents or approvals of statutory bodies related to ERHA or 23rd June, 2004, whichever should be the later. Completion took place on 24th June, 2004, but it did not take place in the normal way, as was envisaged by the Contract, by payment of the entire purchase money, including release of the deposit, in exchange for an executed transfer, and delivery of possession, of the lands. Instead, ERHA facilitated a completion whereby, instead of being paid the balance of the purchase money on completion, ERHA was given two documents: (a) An undertaking dated 24th June, 2004 (the Undertaking) on the letter heading of the respondent and signed by Rory Grehan as director of the respondent, which was in the following terms:
Appeal to Appeal Commissioner The respondent appealed to John O’Callaghan, Appeal Commissioner (the Commissioner) against that assessment. The issue which arose on the appeal turned on the proper construction of s. 40(2) of the Stamp Duties Consolidation Act, 1999 (the Act of 1999), which provides as follows:
The Commissioner identified the question which arose before him as being whether the chargeable consideration was limited to €3,160,000 on the following basis:- (a) that the security given for the sum of €28,440,000 constituted a “non-marketable security” for the purposes of s. 40(2) of the Act of 1999; and (b) that no amount was due on security on the day of the date of the Transfer within the meaning of s. 40(2) of the Act of 1999. The Commissioner gave his decision on 25th April, 2005 and the transcript of his ex tempore decision is set out in the case stated. The Commissioner recorded his determination in the case stated as follows:
The issue on the case stated The appellants having expressed dissatisfaction with the Commissioner’s determination, they sought a case stated pursuant to s. 941 of the Taxes Consolidation Act, 1997, as applied by s. 21(2) of the Act of 1999. The Commissioner stated the following question for the opinion of this Court:
The approach to be adopted to the construction of s. 40(2) The approach to be adopted by a court in construing any taxation measure is well settled and there was no real divergence between the parties on that point. Counsel for the respondent submitted that, insofar as the terms of s. 40(2) are in any way ambiguous in imposing a charge, the respondent is entitled to the benefit of the doubt, on the basis that there is a long line of authority for that proposition, commencing with Gurr v. Scudds (1855) 11 Exch. 190. While the factual backdrop against which that case was decided over a century and a half ago is somewhat remote from the factual backdrop to this case stated (the issue there being the admissibility of an unstamped document under which Mr. Gurr agreed to take “all the mannure at four pence each horse, a week, for 45 horses by the year” from Mr. Scudds and, in particular, whether it was exempt from stamp duty as a “contract for the sale of goods”), the principle stated by Pollock C.B. in the passage in his judgment relied on by counsel for the respondent is still apposite. Pollock C.B. stated (at p. 192):
Authorities on meaning of “due” As will be clear from what I will say later, in my view, the ordinary and natural meaning of the word “due” in the context in which it is used in s. 40(2) is clear, so that recourse to authorities is not really necessary. Nonetheless, I propose considering the authorities relied on by counsel for the appellants in some depth. The earliest was the decision of the Court of Appeal in Chancery in Ex parte Kemp [1874] L.R. 9 Ch. App. 383. There the court was concerned with the construction of s. 15(5) of the Bankruptcy Act, 1869 which enumerated among descriptions of property divisible among the creditors of a bankrupt:
When it came to construing the word “due” in s. 15(5), it seems to me that Mellish L.J. took what today would be called a purposive approach. Lest in outlining this aspect of the judgment the impression is given that the appellants relied on it, they did not; they relied only on the second sentence in the passage quoted above. In any event Mellish L.J. recorded that he was construing a recent amendment to bankruptcy law and the general thrust of the modifications effected, noting, however, that the legislature had thought it right not to alter the law which made an assignment of book debts by a trader void against his trustee if notice of the assignment had not been given to the debtors prior to an act of bankruptcy being committed. He continued:
The most recent was a decision of the Supreme Court of New South Wales, acting as the Court of Appeal in the exercise of federal jurisdiction, in Deputy Commissioner of Taxation (NSW) v. Peacock (1980) 32 A.L.R. 280. The issue in that case was the validity of two notices served on a bank in which the taxpayer had interest-bearing deposits. The notices were served under s. 218(1) of the Income Tax Assessment Act, 1936, which provided:
The court held that the words “due by the taxpayer” in s. 218(1)(i) referred to a liability which has arisen, whether the money be payable presently or at a future date. Counsel for the appellants referred the court to a passage in the judgment of Mahoney J.A. in which there was reference to the earlier Australian case, Mack v. Commissioners of Stamp Duties (1920) 18 C.L.R. 373, a decision of the High Court of Australia on an appeal from the Supreme Court of New South Wales, in which Isaacs J. stated as follows (at p. 382):
Mahoney J.A. then went on to consider the purpose of s. 218. Indeed, as counsel for the respondent submitted, in his judgment, Hutley J.A. also adopted a purposive approach. Counsel for the appellants did not, however, rely on those aspects of the judgments. Finally, counsel on each side contended that the decision of the Irish King’s Bench Division in Irish Land Commission v. Massereene [1904] 2 I.R. 502 supported his assertion as to the meaning of “due” in s. 40(2). The issue in that case was whether s. 90 of the Irish Land Act, 1903 entitled the defendant to variation in respect of the gale of rent due under a perpetuity grant of 1872, which fell due on 1st November, 1903. The passage from the judgment of Gibson J. referred to by both sides is to be found at p. 513 and is in the following terms:
Whether Gibson J. and Mellish L.J. were ad idem on the common meaning of the word “due” is not of significance for present purposes. What is significant, in my view, is that what is to be learned from the passage of the judgment of Gibson J. is that the word “due” may have different meanings in different contexts. That is also the lesson which is to be learned from the judgment of Mellish L.J., in which he illustrates the point by reference to various sections of the statute in issue there in which the word had different meanings. Similarly, it is the lesson which is to be learned from the decision in the Peacock case, where the word was found to have different meanings in two juxtaposed, although independent, elements of the statutory provision in issue. In short, for present purposes, the authorities tell us no more than that it is necessary to construe the word “due” by reference to its context. Construction of s. 40(2) Neither party invited the court to look beyond s. 40(2) in construing that provision. Accordingly, I do not propose to do so save to note that the broader context of the issue which arises here is that under the stamp duty code it is the instrument (in this case the instrument which gave effect to the transaction between EHRA and the respondent), not the transaction itself, which is chargeable with stamp duty and it is chargeable as a conveyance on sale. The narrow context is how the amount of the charge is to be quantified when all or part of the consideration for the conveyance on sale is not money. Sub-section (1) of s. 40 governs the position where all or part of the consideration consists of any stock or marketable security. Sub-section (2) of s. 40 governs the amount of the charge where, as it is accepted is the case here, all or part of the consideration is a non-marketable security. The net question here is what is the proper construction of the phrase “the amount due on the day of the date of the conveyance for principal and interest on that security”. The seeming tautologous phrase “the day of the date of the conveyance”, the meaning of which was questioned by the Commissioner, was not in issue in this Court. It was accepted that under s. 40(2) the date of the conveyance was the material date. In this case that was 24th June, 2004, which is the date which appears on the Transfer. Both parties agreed that the word “due” must be construed in the context of s. 40(2) as a whole and not in isolation. Where s. 40(2) applies, the charge to stamp duty is quantified by reference to the “amount due … for principal and interest” on the security which has been substituted for money on the material date. In essence, the respondent’s case is that the ordinary and natural meaning of the words “amount due” in this context is the amount payable on the material date. The appellants, on the other hand, contend that the words “amount due” extend to all sums for which there is legal liability to make payment, whether the time for payment has actually arisen or not. In my view, the respondent has not illustrated by reference to the context that one must give the word “due” the restricted meaning it has ascribed to it, whereas the appellants have made a convincing argument that their interpretation is the only interpretation which, as a matter of common sense, accords with the context in which the word is used in s. 40(2). To illustrate the contextual significance, counsel for the appellants took as examples the two most common forms of non-marketable security, mortgages and guarantees. Such securities are invariably taken to secure future payments. A mortgage or a guarantee to secure a payment immediately due makes no sense and putting such a mortgage or guarantee in place as part of the consideration for a conveyance on sale makes no sense. Why would the purchaser not just pay the money to the vendor rather than give the vendor security for money immediately payable, counsel rhetorically asked. It makes no commercial sense to proffer a security on foot of which payment is immediately due in lieu of money consideration, it was submitted. The question for the court in construing s. 40(2) is what meaning did the legislature intend to ascribe to the words it used in providing that stamp duty was to be charged “on the amount due … for principal and interest” on the non-marketable security on the material date. In my view, the type of non-marketable security comprehended by the legislature must have been one which secured future payments of principal and interest because that is the only type of security which, as a matter of both commercial sense and common sense, could have been envisaged as a substitute for money in a sale transaction. The concept of a security for money immediately due could, in my view, without exaggeration, be labelled a legal oxymoron. Therefore, in my view, the legislature must have intended that the “amount due” on such security would include all sums, whether for principal or interest, in respect of which there was a legal liability on the material date even though such sums were payable in the future. The Commissioner, having outlined the authorities which had been cited to him, in his ex tempore decision went on to say:
I certainly think that if somebody said to me what debts are due to you, I would give them a list of various amounts receivable today or receivable in the future. If somebody says to me what debts are due to you today, I would take that as meaning what amounts could I call in today. Any amount which is not receivable a month or three months away would not come within my understanding of the meaning of that phrase. So, that’s my primary conclusion.” The Commissioner recognised that there was a strong argument for the meaning of the word “due” advanced on behalf of the appellants. However, he stated:
Application of s. 40(2) on its true construction to the facts The amount due for principal and interest on the security constituted by the Undertaking and the Guarantee on 24th June, 2004 on the proper construction of s. 40(2), that is to say, that “the amount due” means the amount for which there was liability to EHRA on that day, was €28,440,000. Therefore, the Transfer was chargeable with ad valorem stamp duty which took into account that amount as part of a consideration for the Transfer. There are a number of inconsistencies in the three documents executed on 24th June, 2004. The operative part of the Transfer stated that the consideration for the transfer was “the security to the effect of €31,600,000 which would be due and payable on 30th June, 2004”. We know, however, that 10% of that sum, €3,160,000, was paid by way of deposit and, presumably, was released by ERHA’s solicitor to EHRA on the execution of the Transfer, although it is to be observed that there is no receipt clause for that sum in the Transfer. Moreover, the Undertaking was to pay €31,600,000 on 30th June, 2004 and the Undertaking was to be supplemented by the Guarantee. However, the Guarantee related to €28,440,000 payable on 30th June, 2004, being, as the recital in the Guarantee indicated, the balance of the total consideration in respect of which the respondent had sought a deferral. None of those inconsistencies, in my view, bears on the issue which arises on this case stated. However, I do consider it necessary to comment on the statement in the operative part of the Transfer that the consideration would be “due and payable” by the respondent to EHRA on 30th June, 2004 and the corresponding formula included in the Undertaking that the consideration should “not be deemed due or payable” prior to 30th June, 2004. The Transfer is chargeable to stamp duty by reference to what is provided for in s. 40(2) on the basis of the proper construction of that provision. As a matter of fact and law, on the proper construction of s. 40(2), the amount due on 24th June, 2006 to EHRA on the security constituted by the Undertaking in combination with the Guarantee was €28,440,000. That was the position irrespective of the terminology used in the Transfer and in the Undertaking. EHRA executed the Transfer on that day on the basis that on that day both the respondent and the Bank assumed liability to it for that sum and that was the amount due on that day on the security within the meaning of s. 40(2). Amendment of s. 40(2) The court was apprised that, by virtue of s. 116(1) of the Finance Act, 2005, s. 40(2) was amended in respect of instruments executed on or after 2nd March, 2005. Section 40(2), as amended, now provides:
Answer to the question posed The answer to the question posed in the case stated is that the Commissioner was not correct in his interpretation of s. 40(2). |
