CHAN KOON PING LAWRENCE AND ANOTHER v. COLLECTOR OF STAMP REVENUE

Headnote

1.          Stamp Duty payers have no right to apportion the total consideration for a flat and a car-park in order to pay less stamp duty for the car-park under Head 1(1)(a) and (e) of the 3rd Schedule to the Stamp Duty Ordinance.

2.          It is the instrument with which the court was concerned not the transaction behind it.

3.          In the circumstances, stamp duty on the car-park is chargeable under (e) and not (a) as a matter distinct from the flat notwithstanding the flat and the car-park formed one single transaction only.

IN THE DISTRICT COURT OF HONG KONG

HOLDEN AT VICTORIA

CRIMINAL JURISDICTION

STAMP APPEAL NO. 2 OF 1984

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EX TEMPORE JUDGMENT

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1. This is an Appeal from the Assessment of Stamp Duty on a car park which was sold together with the premises namely Flat D, 2nd Floor of No.72, McDonald Road. The Appeal is by both Appellants as join owners of the properties and of course, the Assessment was made by the Collector of Stamp Duty.

2. By an Agreement dated 16th June 1983 the Appellants agreed with the vendor to purchase the flat for HK$720,000 (Clause 2) and the car park for $5000 (2A). Under Clause 19A thereof the deal concerning both properties was stipulated in effect to be a package deal, the two going together. By Clause 7, the Appellants were given the option to have either a single assignment or seperate assignment to be executed. On 12th August 1983 an assignement covering both the flat and the car park was executed thereby completing the Agreement for sale by the payment of $720,000 for the flat and $5000 for the car park.

3. The main question submitted for my opinion and determination is whether the Appellents have the right to apportion the total consideration of HK$725,000 between the two properties in a manner they deem appropriate (that is, so that only $20 would be payable as Stamp Duty for the car park under HEAD, 1(1)(a) of the 3rd Schedule to the Stamp Duty Ordinance and not $1925 under (e) thereof.

4. It was made abundantly clear to me in Court this morning that all three parties are of one mind that the true valuation of the car park at the material time should be $70,000 as assessed by the Collector and not $5000 and that what I am asked to rule on is purely a question of Law on whether the Appellants were entitled to such apportionment, there being no question of valuation or disputes of facts touching on valuation at all.

5. It is also common ground that for the purpose of this appeal that the purchases of both the flat and the car park really constituted one transaction, not two.

6. If I understand them correctly as they are both laymen, albeit putting up forcible argument in clear terms, the 1st Appellant, Mr. Chan contended that looking at the transaction as a package deal, whatever inadequancy in the monetary consideration for the car park was adequately made up by and included in the larger consideration in the main property the flat.

7. The 2nd Appellant argued that the Appellants had the right to divide up the purchase monies in accordance with the Agreement for sale for the flat and the garage in the way as they did for it is not up to the Collector to say what was adequate or inadequate for which. Adequate consideration as a whole for the package due suffices.

8. As correctly pointed out to me by Mr. Wingfield, the question is really one of Law being interpretation of the Stamp Duty Ordinance for the Court. I shall deal with his submission as I go along in my judgment.

9. What he replied in a nutshell was really that Section 27(4) applies to the instant situation rendering that part of the conveyance relating to the car park a voluntary disposition inter vivos liable to the Stamp Duty as finally assessed by the Collector. Section 27 (4) was vertually adopted verbatim from Section 74(5) of the FINANCE (1909-10) ACT 1910 of the United Kingdom. That means those case law decided in England on that subsection have either the highest persuasive value or the effect of binding authority. In laymen language, what was submitted to the Collector for $20 under (a) would not represent the true value of the car park a mischief which the subsection aimed to put right.

10. It is of significance to refresh myself, as I have been asked to, that the law on the subject is a matter of positivi juris, a notion on strict interpretation rather than involvement of principle or reason (See Sergeant And Sims on Stamp Duties, 8th Edition, Page 9 Para. (c). Hardship or anomalies are really lrrevalent.

11. Lay persons as they are, the highest argument that I can put up for them, if I may, is that it is a well settledrule of law that an instrument must be stamped for its leading and principle object, and the stamp covers everything accessory to that object. See Limmer (1872) LR 7 Exch. 211 at 217. At Page 214 of that judgment Martin, B. observed: -

"In order to determine whether any, and if any, what stamp duty is chargeable upon an instrument, the legal rule is that the real and true meaning of the instrument is to be ascertained; that the description of it given in the instrument itself by the parties is immaterial, even although they may have believed that its effect and operation was to create a security mentioned in the Stamp Act, and they so declare. For instance, if a writing were headed by a recital that the parties had agreed to execute the promissory note thereinafter written, yet if, in truth, the contract set forth was not a promissory note, but an agreement of another character, the stamp duty would be not that of a promissory note, but of the agreement. The question, therefore, stamp or no stamp, and if a stamp to what amount, is to be determined upon the real and true character and meaning of the writing. It is sufficient to refer to the case of R.v. Ridgwell Inhabitants(r) to establish this proposition ..."(r-(1827)6 B&C 665.

12. If the purchase of the car park were no more than an accessory or corollary to that of the flat, the Appellant would make out the case. An example of this accessory or corrollary principle is given at Page 16 of Sergeant that the ad valoremduty chargeable on a lease would normally cover a provision therein containing a guarantee of the rent. Another example of an exemption from duty covering an accessory provision would be an assent of property under seal in which case the exemption of assent would cover any acknowledgment for production or safe custody of title deeds. In other words, if I come to the view that not only was the sale of the car park part of the same transaction but also that it was an accessory or corollary of the flat, my ruling is likely to go in favour of the Appellants.

13. On reading of all the relevant clauses in both its agreement for sale and the conveyance as a whole and repeatedly reminding myself that the two were of one single transaction, I have no hesitation in this case to hold that the car park and the flat were two separate and distinct matters albeit all in one transaction. It follows that the separate and distinct matter rule has the command of application. The underlying principle where there are alternative ways of carrying out the same transaction is that Stamp Duty is chargeable according to the type of instrument chosen to carry out the operation. For example, if a person intends to transfer a mortgage by way of gift it is open to him to give a sum of cash to the donee which can be used by the donee to acquire the mortage by way of purchase, but because instruments transferring mortgages are no longer liable to stamp duty, the instrument, notwithstanding the preceding transfer of the amount in cash by way of gift, will not be chargeable to duty. On the other hand a straight transfer of the mortgage by way of gift will mean that the instrument will be treated as a voluntary disposition and so be chargeable to stamp duty ad valorem accordingly. (See Pages 19 - 20 of Sergeant.) In this case for purposes best known to the Appellants themselves which purposes are irrevelent for my consideration and which purposes I must not enquire about for the purpose of this appeal, the Appellants had chosen the manner of assignment as they did, and in law they must bear the legal consequences for so doing.

14. The picture of this appeal will not be complete without a reference to Section 25(1) of the Stamp Duty Ordinance : -

"25.(1) Where immovable property contracted to be sold for one consideration for the whole is conveyed to the purchaser in separate parts or parcels by differtnt instruments, the consideration shall be apportioned in such manner as the parties think fit, so that a distinct consideration for each separate part or parcel is set forth in the convey ance relating thereto, and such conveyance shall be chargeable with stamp duty by reference to such distinct consideration."

15. Look at it from the angle of a distinct purchase, the car park was grossly under value for the purpose of stamp duty as rightly conceded. Another possible argument in favour of the Appellant is that had they chosen to purchase both for $725,000 as a whole without specifying how much for each, the Collector would not have been able to make the assessment as he did. The simple answer to that is that the Appellant had chosen not to and I think I had already dealt with that aspect earlier on. As to distinct matters of the same transaction, they are liable to stamp duties separately under (e). It is the instrument namely the Purchase Agreement For Sale read in conjunction the conveyance, the assignment that is in question and must be looked at not the transaction or transactions behind them.

16. In the result, I answer the first question submitted under Para. 11 of the case stated in the negative and the third question in the positive with no necessity to deal with the balance of the questions. The appeal is dismissed.

17. There will be costs to the Respondent on the upper scale to be taxed, Counsel's certificate is given to Mr. Wingfield.

18. Leave is also given for the Appellants or either Appellant to appeal to the Court Of Appeal against my judgment today as the matter would appear to be of some general interest. Last but not the least, I am indebted to Mr. Wingfield for his useful and valuable assistance which have made it possible for me to deliver this judgment promptly.