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In re Estate Management Services Ltd [2011] FJHC 318; HBE3.2005 (2 June 2011)

IN THE HIGH COURT OF FIJI AT SUVA
COMPANIES PROCEEDINGS

CASE NUMBER: HBE 3 of 2005

IN THE MATTER OF Estate Management Services Limited

AND

IN THE MATTER of the Companies Act, Cap, 27.

Appearances: Mr. S. Valenitabua for the Applicant, Darrell Eugene Lee.
Ms. K. Vuibau for the Respondent, Commissioner of Stamp Duties

Date/Place of Judgment: Thursday, 2nd June, 2011 at Suva.
Judgment of: The Hon. Justice Anjala Wati.

JUDGMENT

STAMP DUTY –application to court for determination of whether any duty is payable on an instrument of transfer which was legally going to vest the property in the name of the applicant – held that the provisions of the Stamp Duties Act must be complied with before court is asked to intervene and also held that the instrument is liable for stamp duty as it is not exempted from payment by virtue of any statutory exemption-application dismissed.
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Legislation

Stamp Duties Act, Cap. 205.

Case Background

1. This matter is brought by an applicant Darrell Eugene Lee against the Commissioner of Stamp Duties but the latter was not made a party to the proceedings. I had ordered service of the application on the Commissioner of Stamp duties and pursuant to that order and the compliance, Ms Vuibau appeared to protect the interest of the Commissioner of Stamp Duties.
   
2. The application seeks to dispense with the payment of the stamp duties ad valorem but for the duty to be paid as per the terms of settlement that was entered between the parties dated the 31st day of March, 2006.
   

The Grounds in Support

3. The application is supported by an affidavit which states that the winding up matter was settled between the parties to the winding up action number 3 of 2005 upon the parties entering into a terms of settlement dated the 31st day of March, 2006. On the 3rd day of April, the court had ordered that the matter be settled as per the said terms of settlement. Pursuant to the terms of settlement, the transfers of the properties were being lodged. The Acting Commissioner of Stamp Duties has advised the applicant that an order be obtained that no ad valorem stamp duty is payable on the transfers of properties in question.
   

Grounds in Opposition

4. The Acting Commissioner of Stamp Duties filed an affidavit in response which stated that the court ordered settlement does not indicate that the stamp duty is not to be paid. The terms of settlement also does not exempt payment of the stamp duties. The application for exemption does not meet the requirements stipulated under the Stamp Duties Act and so the request for exemption was turned down by the Commissioner.
   

Applicant's Submissions

5. Mr. Valenitabua appearing for the creditor submitted that this application was brought under section 45 (1) of the Stamp Duties Act, Cap. 205. The Commissioner of Stamp Duties had never made an assessment of the duties payable so this is not an application where the applicant is dissatisfied with the assessment of the stamp duties. This is a case where the Commissioner upon presentation of the instrument failed to state whether the instrument is liable for stamp duties. The Commissioner had doubts whether the instrument was liable to be paid the stamp duty and so the application was made by the applicant to the court for clarification. It was further submitted that the winding up matter was settled under an agreement and the agreement does not discuss the issue of payment of stamp duties. The Commissioner has failed to act as required by the statute in stating whether the instrument is liable to duties and now it is for the court to decide the issue as there is no power given to the court to compel the Commissioner of Stamp Duties to comply with the Stamp Duties Act. It was also submitted that the Stamp Duties Act does not state anywhere that the applicant's instrument is liable for duty. This instrument is not a transfer on sale and neither is this property transferred in satisfaction of a debt so the instrument should be exempted from duty.
   

The Respondent's Submissions

6. Ms Vuibau submitted that the applicant has not submitted the instrument for the Commissioner to exercise its powers under s. 43 to state whether and what duty is payable. There was an oral discussion when the applicant orally asked whether ad valorem duty is payable and the Commissioner answered that in the affirmative. The instrument of the applicant is not liable for exemption as it does fall under general and conditional exemption and thus the duty is therefore payable.
   

The Law and the Determination

7. I will first of all have to look to the terms of settlement to see whether any reference in respect of Stamp Duties is made.
   
8. Clause 3 (d) of the terms of settlement states that any duty to be paid upon transfer of the Lots to the applicant Darrell Eugene Lee shall be paid by the applicant Darrell Eugene Lee. The terms of settlement cannot and does discuss the aspect of liability and quantum of assessment of the duty. It is a matter for the statute and not for the parties to contract out of the statutory obligation.
   
9. The applicant states that the Commissioner of Stamp Duties is in doubt as to whether duty is payable on the instrument presented to the Commissioner.
   
10. The respondent states that the instrument was not presented for the Commissioner to exercise its powers; however, there was an oral discussion between the solicitors and the Commissioner whereby the application for exemption was refused.
    
11. What is the statutory requirement? I shall turn to the Stamp Duties Act, Cap. 205 for an answer. S. 43 and s. 45 are very relevant. They read as follows:-
    

"43. Where an instrument is brought to the head office for assessment the Commissioner shall state whether it is liable to duty and if he is of the opinion that-

(a) It is not so liable, he shall impress thereon the Commissioner's seal and the particular stamp denoting that it is not so liable; or

(b) It is liable to duty or fine, he shall assess the duty or fine with which it is in his opinion chargeable and, on payment of the amount so assessed, shall stamp the instrument with the Commissioner's seal and a particular stamp denoting the amount of duty or fine so paid."

"45(1) If the Commissioner is in any doubt as to whether an instrument is liable to duty or as to the amount of duty or fine with which it is chargeable or if the person presenting the instrument is dissatisfied with the assessment of the Commissioner thereon, the matter upon payment of the duty so assessed shall be summarily referred to the High Court and its decision thereon shall be final, and the High Court may, for that purpose, require the Commissioner to state and sign a case setting forthwith the question upon which his opinion was required and the assessment made by him.

(2) The Commissioner shall thereupon state and sign a case accordingly and deliver the same to the appellant by whom it is required and on the application such case may be set down for hearing in the High Court.

(3) Upon the hearing of such case (due notice of what is to be given to the Commissioner), the Court shall determine the question submitted and, if the instrument in question is in the opinion of the Court Chargeable with any duty, shall state the duty with which it is chargeable".

12. Under s. 43 of the Act, for the Commissioner to determine whether an instrument is liable for payment of stamp duty, the instrument itself must be presented to the Commissioner.
    
13. If the instrument is not so presented and only an oral discussion has taken place, the Commissioner will then not have the benefit of the full material before it to make a decision as to whether or not the instrument is liable for duty. The instrument itself will determine the issue and the question of assessment.
    
14. The applicant states that the Commissioner has refused the application for the instrument to be exempted from the duty and so the Commissioner is in doubt as to whether duty is payable. If the Commissioner orally had the benefit of all the documents to determine that ad valorem duty cannot be exempted then there is no question of doubt. The Commissioner may have had doubts on the question itself because properly the procedure of handing the instrument over for determination was not followed.
    
15. This is not an application by the Commissioner on his doubt as to whether and what duty is payable. It is also not a question of the applicant being dissatisfied with the assessment as there has not been any assessment. If there was an assessment then the proper procedure under s. 45 would have been to first pay the duty as assessed then the matter to be brought to court. The court would then have had the benefit of the Commissioner's opinion and the assessment and the objections raised thereto for the court to make a proper determination on liability and quantum.
    
16. The applicant has acted in haste. If it thinks that the instrument is liable for exemption then an application for exemption of stamp duties should be made when the instrument is presented to the Commissioner. The application would indicate the grounds on which an exemption is made. The relevant provisions of the statute or the circumstances should be brought to the Commissioner's attention for the application to be considered. No such application has been made and it is premature for the court to intervene at this stage of the transaction to make a determination.
    
17. I do not agree with the applicant that the Commissioner has failed to act in accordance with the Act. In fact there is failure by the applicant to act according to the Act for a proper resolution to be reached and before a court can intervene. Without the proper procedures being followed, the court's jurisdiction has been invoked and this I regard as procedurally flawed.
    
18. Be that as it may, section 3(1) of the Stamp Duties Act states that "subject to the exemptions and provisions as to conditional exemptions contained in the Schedule, there shall be raised, levied, collected and paid onto Her Majesty for the public uses of Fiji upon and in respect of the several instruments specified in Column of Part I of the Schedule headed "Nature of Instrument" the several duties specified in the column of that Part of the Schedule headed "Amount of Duty" ".
    
19. Every instrument is liable to be paid stamp duty unless it is specifically exempted under any Act. I do not find any grounds and statutory provisions to state that this is a case for exemption.
    
20. The instrument that the applicant proposes to tender to the Commissioner will legally transfer and vest the property in the applicant and thus it is liable for duty under s. 71 of the Stamp Duties Act, Cap. 205.
    
21. The applicant has to now follow the proper procedure of forwarding the instrument to the Commissioner who shall indicate whether the duty is payable and what the assessment of the Commissioner is. Any application for exemption should be formally made to the Commissioner with all relevant facts and documentations included in the application, for example, the terms of settlement.
    

Costs

22. This is a matter where no costs were paid in form of disbursements by the respondent. Further, an in-house solicitor had represented the respondent and not much time and costs had been involved in arguing the matter. However affidavits and submissions were filed and the resources of the state were utilized and so it is fair that a nominal cost be awarded in favour of the state.
    

Final Orders

23. The application for exemption of payment of ad valorem duty is refused.
    
24. The applicant to follow the procedures outlined in the Stamp Duties Act being s. 43 and/or s. 45 before any further application is brought to the court.
    
25. There shall be costs in favour of the respondent in the sum of $350.00 to be paid by the applicant.
    
26. Orders Accordingly.
    

Anjala Wati
Judge
02.06.2011

To:

1. Mr. S. Valenitabua for the plaintiff;
   
2. Ms. K. Vuibau for the defendant; and
   
3. File: HBE 3 of 2005.