WM Cory & Son Ltd v Commissioners of Inland Revenue
| Jurisdiction | England & Wales |
| Judge | The Master Of The Rolls,LORD JUSTICE DANCKWERTS,LORD JUSTICE DIPLOCK,THE MASTER OF THE ROLLS |
| Judgment Date | 25 June 1964 |
| Judgment citation (vLex) | [1964] EWCA Civ J0625-2 |
| Date | 25 June 1964 |
| Court | Court of Appeal |
(Appeal of the Respondents)
[1964] EWCA Civ J0625-2
The Master of the Rolls
(Lord Denning)
Lord Justice Danckwerts
Lord Justice Diplock
In The Supreme Court of Judicature
Court of Appeal
(Revenue Paper)
Mr. J. A. Brightman, Q. C. and Mr. S. W. Templeman (instructed by Messrs. Ingledew, Brown, Bennison & Garrett, 51, Minories, London, E. C.3.) appeared as Counsel on behalf of the Appellants.
Mr. J. F. Donaldson, Q. C. and Mr. E. Blanshard Stamp (instructed by The Solicitor of Inland Revenue, Somerset House, Strand, W. C.2.) appeared as Counsel on behalf of the Respondents.
The facts in this case are fully set out in the Case Stated, and I need only summarise them sufficiently to show the point. In August, 1957, Cory's entered into negotiations with the Palmer shareholders with the object of buying the whole of the issued shares in the Palmer companies. The price was agreed at £450,000, and the matter was referred by the parties to their solicitors to draw up the contract and carry through the sale. The solicitors prepared a draft contract by which Cory's were to purchase the shares from the Palmers for £450,000. It provided that completion was to be on 1st November, 1957. There was some difficulty about the title deeds of the Palmer companies as they had been lost or destroyed during "the war. The draft contract contained provisions enabling Cory's to rescind if they were not satisfied about the titles; and in other events also.
By 24th October, 1957, the draft contract had passed to and fro between the solicitors several times, each making amendments, but it appeared that nearly everything was agreed ready for a straightforward contract for sale. On 25th October, 1957, Cory's solicitor told the Palmers' solicitor that Cory's were "not prepared to do more than have an option and that, if the vendors could not give it to them, the deal was off." Early in November, 1957, the matter was put through in the following stages:- First, the grant of an option. Under a written agreement dated let November, 1957, the Palmers (in consideration of £100) granted Cory's an option to purchase the shares for £420,856 3s.6d., such option being exercisable within 30 days. It was expressly provided that the option could be exercised orally or in writing. (The sum was put at £420,856 3s.6d. instead of £450,000 because a small parcel of the shares was dealt with separately. It makes no difference).
(2) The transfer of the shares. On the same day, 1st November, 1957, the Palmers executed 89 transfers of the shares to Cory's. They were signed, sealed and delivered by both parties and delivered to Cory's solicitors. The consideration for each transfer was stated to be ten shillings, and in the transfers it was said that the transaction was "made for the protection of option lights in the shares transferred." (3) No beneficial interest was then transferred. The option agreement provided that the transfers were not to operate to pass any beneficial interest in the shares, and that Cory's were to hold the shares in trust for the Palmers. (4) Provision for re-transfer of the shares. The option agreement provided that, if the option was not exercised, the shares were to be re - transferred to Palmers. (On 2nd November, 1957, the option agreement, and also the transfers, were presented to the Commissioners of Stamps with a view to stamping. The Commissioners required the transfers to be stamped with the ad valorem duty on £420,856 3s.6d. That came to £8,418. Cory's paid this sum and now seek to recover it back on the ground that the documents were not liable to that duty). (5) The exercise of the option. On 8th November, 1957, Cory's orally exercised the option. They paid £420,856 3s.6d. The transfers then were registered in the books of the Palmer companies.
There is no doubt that if the sale had gone through in the way originally contemplated – a contract for sale and purchase of the shares, followed by transfer – the stamp duty would be £8,418. But Cory's claim that, because it was put through in the way that it Ms, by an option agreement and transfer followed by the exercise of the option, the only stamp duty payable is £46 10s. Od., made up of £2 on the option agreement and 10s. on each of the 89 transfers. The Commissioners held that the full stamp duty of £8,418 was payable on the transfers. Mr. Justice Pennycuiok reversed that decision mid held that only £46.l0s. Od. was payable. The Crown appeal to this Court.
Some attempt was made on behalf of Cory's to explain why they felt it desirable to insist on an option agreement rather than a contract for sale, but it left me quite unconvinced. This was an obvious device to evade stamp duty. The only question is whether it has succeeded. It all depends on whether the transfers come within the words "conveyance or transfer on sale" within the Schedule to the Stamp Act, 1891.
stamp duty is payable on instruments, not on transactions. The liability of an instrument depends on the circumstances which exist at the date when it comes into existence. The Commissioners of Stamps can look back to see what has happened in the past, but are net entitled to look forward to see what may happen in the future. Be said, that, in order "that a conveyance or transfer should be "on sale", there must be a pre-existing contract of sale or a simultaneous contract of sale. Here there was neither. There was only an option to purchase which was not a contract of sale.
I do not accept the proposition that "the liability of an instrument depends on the circumstances which exist at the date when it comes into existence." That proposition started with some observations by Mr. Justice Hawkins in Commissioners of Inland Revenue v. Angus, 1889 and in Carlill v. Carbolic Smoke Ball Company in 1892. That proposition may be generally correct. But it is not universally correct. I say this because it takes no account of conditional instruments of sale. There are many cases where two parties may execute a conveyance or transfer with the intent that it should in due course effect a sale. But they do not intend that it should operate at once. It is dependent on some condition yet to be performed, or some requirement yet to be fulfilled. In such a case, once the condition or requirement is fulfilled, the sale is complete. The conveyance or transfer then passes the title in the property, and it passes it "on sale." To my mind it is clearly then liable to stamp duty ad valorem.
During the argument I put the case of a conveyance which is executed by the vendor but delivered in escrow. There may be no pre-existing contract of sale at all. When an instrument is delivered in escrow, that only means that it is delivered on condition (which may be express or implied by conduct) that it is not to be operative until some condition is performed: see Norton on Deeds, page 18. A good instance is where, on a proposed sale of land, only part of the purchase price has been paid, hut the vendor lets the purchaser into possession and delivers the deed to the purchaser's solicitor, and tells him to hold it until the balance is paid. The deed is clearly delivered on condition that it is not to be operative until the price is paid. Whilst the condition remains unperformed, the sale is not complete and the purchaser does not get the legal title! see Watkins v. Nash in 1875, and Thompson v. McCullouRh in 1947. But as soon as the money is paid, the sale is complete. The instrument there may precede any binding contract. But when the sale is complete it is clearly a "conveyance on sale" and liable to stamp duty.
I can see no difference in principle between that case and this. These transfers were executed and delivered to the purchaser's solicitors on the condition that no beneficial interest in the shares was to pass until the option was exercised. Pending the exercise of the option, the transfers were not registered in the books of the Palmer companies. So the purchaser did not get the legal title. When the option was exercised, the transfers operated to transfer the beneficial interest in the shares. The transfers were then registered. The purchasers got the legal title. The sale was complete. Thus we get the clear pictures when the transfers were executed, they wereintended to effect a sale and were intended to operate on a sale. When the option was exercised, the transfers did in fact effect a gale. They were therefore at that time "transfers on sale" and liable to stamp duty ad valorem. I need not stress the importance of this decision, for, if we were to accede to Mr. Brightman's argument, we should open a hole in the statute through which all the world would soon pass.
I ought to mention a case on which Mr. Brightman much relied, the West London Syndicate v. Commissioners of Inland Revenue in 1898, but that was a decision on the words "contract for the sale of an equitable interest" under Section 59. It was not a decision on the words "conveyance or transfer on sale". I do not regard it as apposite in this case.
I am of opinion, therefore, that the Crown succeed on the main point. But I ought to mention a further argument put forward (though not very strongly) by Mr. Donaldson in case he was wrong on his main point. He submitted that the option agreement should itself be treated as a contract for sale of the shares, or at any rate, of an equitable interest of the Shares. I do not think it was. It was not a contract for sale at all. A contract for sale imports not only an agreement to sell, but also an agreement to buy. That is made clear by Helby v. Matthews in 1895. The observations to the contrary in Felston Tile Co....
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