Peter Bone Ltd v Commissioners of Inland Revenue
| Jurisdiction | England & Wales |
| Judgment Date | 27 July 1995 |
| Date | 27 July 1995 |
| Court | Chancery Division |
Chancery Division.
Sir John Vinelott.
Philip Baker (instructed by Pictons, Bedford) for the taxpayer.
Michael Furness (instructed by the Solicitor of Inland Revenue) for the Crown.
The following cases were referred to in the judgment:
Chesterfield Brewery Co v IR Commrs ELR[1899] 2 QB 7
Cory (William) & Son Ltd v IR Commrs ELR[1965] AC 1088
Ingram v IR Commrs TAX[1985] BTC 8088
IR Commrs v G Angus & Co ELR(1889) 23 QBD 5
Prenn v Simmonds WLR[1971] 1 WLR 1381
West London Syndicate v IR Commrs ELR[1898] 2 QB 507
Stamp duty - Ad valorem stamp duty on conveyance on sale - Agreement for sale of land to company - Equitable interest held by nominees for company - Conveyance on sale to third party - Whether liability to duty on deed of agreement - Stamp Act 1891 section 54 section 59 subsec-or-para (1)Stamp Act 1891, ss. 54, 59(1).
This was an appeal by the taxpayer by way of case stated by the Revenue under Stamp Act 1891 section 13s. 13 of the Stamp Act 1891 against a determination to ad valorem stamp duty on a deed which embodied an agreement for the sale of an equitable interest in land.
By a deed of agreement dated 30 November 1989 ("the deed") Mr Bone and Mr Abrahams ("the vendors") agreed to sell the farming business carried on by the Peter Bone Partnership to Peter Bone Ltd ("the company"), which had been incorporated for the purpose, as a going concern. Mr Bone and Mr Abrahams were directors of the company.
The partners were Mr Bone and the Bone trustees (Mr Bone and Mr Abrahams) in their capacity as trustees of a settlement made by Mr Bone. Mr Bone and the Bone trustees also owned the freehold of the farm and all the assets comprised in the partnership business.
By the deed, the partnership business, the land and other assets of the partnership were sold to the company. The purchase price was a sum equal to the aggregate of the value of the land and other assets to be satisfied by the issue of shares in the company. The vendors were constituted nominees of the company and were obliged to "execute such assignments, transfers or conveyances of the property to such person or persons as the purchaser may require". "Completion" was expressed in the deed to mean the close of business on 30 November 1989, that is, the day when the deed was executed.
On 19 January 1990 the company contracted to sell part of the land to a third party. A conveyance to the third party purchaser was executed on 16 February 1990 and stamp duty was paid.
The company contended that the deed was an agreement for the sale of the legal estate in freehold land, specifically excluded from liability under Stamp Act 1891 section 59 subsec-or-para (1)s. 59(1) of the 1891 Act. The deed, however was not a "conveyance on sale" within the meaning of Stamp Act 1891 section 54s. 54. Accordingly the deed was not chargeable with ad valorem duty under either provision.
The Revenue contended primarily that the deed was chargeable with duty calculated by reference to the consideration for all the assets subject to the deed within Stamp Act 1891 section 59 subsec-or-para (1)s. 59(1) of the 1891 Act, or alternatively as a "conveyance on sale" of an equitable interest in the land within the meaning ofStamp Act 1891 section 54s. 54.
Held, dismissing the company's appeal:
1. Stamp duty was payable on an agreement without the execution of a conveyance under Stamp Act 1891 section 59s. 59 only where the agreement was not capable of specific performance and might include land where the agreement was "for the sale of an equitable estate or interest in any property whatsoever". The vendors, being nominees of the company, did not have the right to require the purchaser to accept a conveyance in specific performance of the agreement. They did not remain constructive trustees of an uncompleted contract which was capable of being specifically enforced but were obliged under the deed to convey the property to a third party as required by the purchaser.
2. However, strictly, the deed, expressly completed on the same day as it was executed, operated as the transfer of an equitable estate in the property chargeable with duty under the Stamp Act 1891 section 54Stamp Act 1891, s. 54 rather than as as an agreement for the sale of an equitable estate within Stamp Act 1891 section 59 subsec-or-para (1)s. 59(1).
1. By a deed of agreement dated 30 November 1989 ("the deed"), a copy of the vendors' counterpart, Peter Lawrence Bone and Sidney Anthony George Abrahams ("the vendors") agreed to sell the business carried on under the name of the Peter Bone Partnership as a going concern as at completion to Peter Bone Ltd ("the company"). The assets of the business included the land described in schedule 1 to the deed ("the land").
2. The following facts and circumstances relate to the deed:
(2) The vendors were and are currently directors of the company.
(3) By letter dated 25 September 1991, Messrs Pictons, solicitors for the company, stated that:
It is not intended that a transfer should be entered into. The legal estate will remain vested in the current beneficial owners [sic] as nominees for the company.
(4) By letter dated 10 January 1992, Messrs Pictons stated that:
In due course the land will be sold either as a whole or in parcels and the stamp duty will be incurred by the sub-purchasers.
(5) By letter dated 25 August 1992, Messrs Pictons stated that:
We cannot confirm that there will not be a conveyance or transfer document in implementation of the agreement for sale. On the contrary, it is presently envisaged that there will be conveyance or transfer document if and when called for in accordance with the terms of the agreement. At that time, under the stamp duty legislation as it currently stands, duty will be payable. For the present, however, the parties are content to rely on their rights under the agreement for sale.
(6) On 19 January 1990, the company contracted to sell part of the land (together with certain other land not subject to the deed) to a third-party purchaser. A conveyance was executed on 16 February 1990 conveying that part of the land from the vendors to the third-party purchaser. This conveyance was stamped with ad valorem stamp duty with respect to the consideration for that part without an assessment underStamp Act 1891 section 12s. 12 of the Stamp Act 1891 ("the Act").
3. The company contends that the deed is not chargeable with duty for the following reasons:
(2) With respect to the land, the deed is an agreement for the sale of the legal estate in freehold land and is therefore not withinStamp Act 1891 section 59 subsec-or-para (1)s. 59(1)of the Act.
(3) Accordingly, Stamp Act 1891 section 59 subsec-or-para (1)s. 59(1) does not apply to the deed, so far as that deed relates to the land.
(4) With respect to the assets to which the deed relates other than the land, the value of those assets which are subject to duty does not exceed £30,000. The rate of duty with respect to those assets is therefore nil.
(5) The deed is not a conveyance on sale.
(6) Accordingly, the deed is not chargeable with ad valorem duty.
4. The commissioners are of the opinion that the deed is properly chargeable with ad valorem duty calculated by reference to the consideration specified in the deed in respect of the land, fixtures, goodwill, book debts and other property (£4,817,085.44) on the following grounds:
(2) On completion, the company obtained an absolute equitable interest in the land and the vendors held the land as the nominees of the company pursuant to cl. 4.4 of the deed.
(3) An agreement to sell a legal estate in land must contain co-relative obligations - on the one hand to convey, and on the other to take a conveyance of, such an estate.
(4) In this case, the company did not agree to take a conveyance of the legal estate in the land and was not obliged to do so.
(5) The agreement between the parties was that the vendors were to give and the company was to take an equitable interest in the land upon completion. Thereafter, the company was entitled to require the vendors to hold the legal estate on trust for the company pursuant to clause 4.4 of the deed and to deal with it according to its...
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...1 AC 553, PC (Yew Bon Tew)* Armstrong & Holmes Ltd v Holmes [1994] 1 All ER 826, HC (Armstrong & Holmes) Peter Bone Ltd v IR Commrs [1995] BTC 8050 (Peter Bone v IR Commrs) Kleinwort Benson Ltd v Lincoln City Council [1999] 2 AC 349 (Kleinwort Besnon)* IR Commrs v Scottish Provident Institu......
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