Escoigne Properties Ltd v Commissioners of Inland Revenue
| Jurisdiction | UK Non-devolved |
| Judgment Date | 23 January 1958 |
| Court | House of Lords |
| Date | 23 January 1958 |
Revenue - Stamp duty - Conveyance or transfer on sale - Company having contracted for purchase of property agrees to re-sell to second company - Conveyance to second company by executors of original vendor when first company benefiial owner of not less than 90 per cent. of other company's share capital - Whether “the effect” of conveyance to transfer a beneficial interest from one company to another - Whether conveyance executed in pursuance or in connexion with arrangement whereunder beneficial interest had been previously conveyed or transferred -
By section 58 (4) of the Stamp Act, 1891:
“Where a person having contracted for the purchase of any property, but not having obtained a conveyance thereof, contracts to sell the same to any other person, and the property is in consequence conveyed immediately to the sub-purchaser, the conveyance is to be charged with ad valorem duty in respect of the consideration moving from the sub-purchaser ….”
By section 42 of the Finance Act, 1930:
“(1) Stamp duty under the heading ‘Conveyance or Transfer on Sale’ in the First Schedule to the Stamp Act, 1891, shall not be chargeable on an instrument to which this section applies: … (2) This section applies to any instrument as respects which it is shown … — (a) that the effect thereof is to convey or transfer a beneficial interest in property from one company with limited liability to another such company; and (b) that … one of the companies is beneficial owner of not less than 90 per cent. of the issued share capital of the other company.”
By section 50 (1) of the Finance Act, 1938:
“Section 42 of the Finance Act, 1930, … shall not apply … unless it is shown to the satisfaction of the Commissioners of Inland Revenue that the instrument was not executed in pursuance of or in connection with an arrangement whereunder — (a) the consideration for the transfer or conveyance was to be provided directly or indirectly by a person other than a company which at the time of the execution of the instrument was associated with either the transferor or the transferee; or (b) the beneficial interest in the property was previously conveyed or transferred directly or indirectly by such a person as aforesaid.”
In 1950 C entered into an agreement to sell certain properties to company No. 1 in consideration of an allotment of shares in that company. The agreement was duly stamped and the shares allotted to C, but no conveyance or transfer of the properties to company No. 1 was executed either by C or, after C's death in 1951, by his executors. In 1954 company No. 1 orally agreed to sell the properties to the appellants, company No. 2, in consideration of an allotment of shares in the appellant company. In November, 1954, at a time when company No. 1 was the beneficial owner of not less than 90 per cent. of company No. 2's issued share capital, C's executors at the direction of company No. 1 executed five instruments conveying or transferring the properties to company No. 2, which duly allotted the agreed number of shares to company No. 1. The instruments were presented to the Inland Revenue Commissioners for adjudication under section 12 of the Stamp Act, 1891. The commissioners were of the opinion that the instruments were within the definition of “conveyance on sale” in section 54 of the Act and were liable to stamp duty under the heading “Conveyance or Transfer on sale” in the first Schedule to that Act assessed ad valorem, by virtue of section 58 (4) of the Act, upon the value of the shares allotted by the appellant company to company No. 1. They assessed stamp duty accordingly:—
Held, that whatever was the effect of section 42 of the Act of 1930 on the instruments in question, they were excluded from relief by the provisions of section 50 of the Act of 1938. The commissioners were well justified in not being satisfied that the instruments in question were not executed in pursuance of or in connexion with an arrangement having the result described in section 50 (1) (a); it would be unreasonable to regard the final transaction as unconnected with the earlier transactions.
Per Lord Keith, Lord Somervell and Lord Denning. The instruments in question were not exempted by section 42 of the Act of 1930.
Per Lord Somervell. The instruments were stampable in respect of the transfer of the equitable interest as passing from the original vendor to the sub-purchaser.
Per Lord Denning. Each conveyance was by a seller who had contracted to sell it for value to one of the associated companies. On consideration of the intention of Parliament there was no reason why any of the instruments should be exempted from duty because the conveyance was not to the purchasing company but to its associated company at its direction.
Per Lord Keith. The facts are not apt to fit the effect of the instruments but only an effect of them.
Per Viscount Simonds and Lord Reid. The instruments in question fell within the exemption in section 42 of the Act of 1930. They had the effect of conveying or transferring the beneficial interest in the several properties from the old company to the appellant company. In determining whether an instrument has the prescribed effect, it need not be asked whether it was the main or real or substantial effect or whether it had any other effect.
APPEAL from the Court of Appeal (Lord Evershed M.R., Birkett and Romer L.JJ.).
This was an appeal from an order dated December 17, 1956, of the Court of Appeal allowing an appeal by the respondents, the Commissioners of Inland Revenue, from an order dated June 28, 1956, of the Chancery Division (Vaisey J.) in favour of the appellant company, Escoigne Properties Ltd., on a case stated by the respondents under section 13 of the Stamp Act, 1891, for the opinion of the court as to the stamp duty chargeable on five instruments presented to them by the appellant company for adjudication under section 12 of that Act. The question of substance for determination on this appeal was whether those five instruments were exempt from ad valorem stamp duty.
The facts are fully set out in the opinion of Viscount Simonds.
John Pennycuick Q.C. and John Warner for the appellant company.
A. G. N. Cross Q.C. and E. B. Stamp for the respondents.
The following cases were referred to in argument: Inland Revenue Commissioners v. G. Angus & Co.F1; In re HarveyF2; Potts' Executors v. Inland Revenue Commissioners.F3
Their Lordships took time for consideration.
January 23, 1958. VISCOUNT SIMONDS. My Lords, in my opinion this appeal should be dismissed. The appellant company claim that five instruments, to which I shall refer in greater detail, are not subject to the stamp duty payable on conveyances or transfers on sale. They can only succeed if they establish, first, that the instruments fall within section 42 of the Finance Act, 1930, and, secondly, that they are not excluded from relief by the provisions of section 50 of the Finance Act, 1938. In my opinion, whatever conclusion may be reached on the first point they must fail on the second.
In the year 1950 the late Samuel Cohen was the owner of a number of freehold and leasehold properties in the counties of London and Middlesex. On June 30 of that year he entered into an agreement with Samuel Cohen (Properties) Ltd., which I will call “the old company,” for the sale to them of such properties subject to the incumbrances then affecting them. The agreement was stamped with a ten shilling stamp and was adjudged duly stamped. The consideration, apart from the liabilities assumed by the old company, was £9,998 to be satisfied by the allotment to Cohen or his nominees of 9,998 fully paid shares of £1 each of the old company. These shares were duly allotted on or about June 30, 1950, but no conveyance or assignment of any of the properties was executed by Cohen. He died on June 21, 1951, and his will was duly proved on February 29, 1952.
On August 26, 1954, the appellant company, Escoigne Properties Ltd., was incorporated with a capital of £10,000 divided into 10,000 shares of £1 each, and shortly thereafter entered into separate bargains with the old company for the purchase of the said properties or some of them for shares of the appellant company. The value of these shares far exceeded their nominal value and were issued at a premium of £10 per share. Five separate instruments were accordingly executed to give effect to these bargains, the executors of Cohen joining in them by the direction of the old company as beneficial owners in order to convey or transfer the still outstanding legal estate or interest to the appellant company. These instruments were then presented for adjudication, the appellant company claiming that they were not liable to any stamp duty under the heading “conveyance or transfer on sale” in Schedule I to the Stamp Act, 1891. Immediately before the execution of these instruments the old company owned not less than 90 per cent. of the issued share capital of the appellant company.
This claim was rejected by the respondents, the Commissioners of Inland Revenue. On a case stated for the opinion of the court their determination was reversed by Vaisey J., but his decision was in turn reversed by the Court of Appeal. The determination therefore stands unless this appeal succeeds.
I must now look at the relevant sections and, first, at section 58 (4) of the Stamp Act,...
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