Revenue Commissioners v GLENKERRIN HOMES Ltd

• Jurisdiction: Ireland
• Judge: Miss Justice Laffoy
• Judgment Date: 22 May 2007
• Neutral Citation: [2007] IEHC 182
• Date: 22 May 2007
• Docket Number: [2006 No. 868 R]
• Court: High Court

[2007] IEHC 182

THE HIGH COURT

No. 868 R./2006

Revenue Commissioners v Glenkerrin Homes Ltd

REVENUE

BETWEEN/

THE REVENUE COMMISSIONERS

APPELLANTS

AND

GLENKERRIN HOMES LIMITED

RESPONDENT

STAMP DUTIES CONSOLIDATION ACT 1999 S 40(2)

STAMP ACT 1891 S55(2) (UK)

TAXES CONSOLIDATION ACT 1997 S941

STAMP DUTIES CONSOLIDATION ACT 1999 S 21(2)

GURR v SCUDDS 1855 I EXCH 190

CAPE BRANDY SYNDICATE v INLAND REVENUE CMRS 1921 1 KB 64

REVENUE CMRS v DOORLEY 1933 IR 750

MCGRATH v MCDERMOTT 1988 IR 258

TEXACO IRELAND LTD v MURPHY 1989 IR 496

KEMP, EX PARTE 1874 LR 9 CH APP 383

BANKRUPTCY ACT 1869 S15(5) (UK)

BANKRUPTCY ACT 1869 S6(6) (UK)

BANKRUPTCY ACT 1869 S25(6) (UK)

BANKRUPTCY ACT 1869 S19 (UK)

BANKRUPTCY ACT 1869 S49 (UK)

DEPUTY CMSR OF TAXATION (NSW) v PEACOCK 1980 32 ALR 280

INCOME TAX ASSESSMENT ACT 1936 S218(1) (AUSTRALIA)

INCOME TAX ASSESSMENT ACT 1936 S218(1)(i) (AUSTRALIA)

MACK v CMSR OF STAMP DUTIES (NSW) 1920 28 CLR 373

INCOME TAX ASSESSMENT ACT 1936 S218(1)(a) (AUSTRALIA)

IRISH LAND CMSN v MASSEREENE 1904 2 IR 502

IRISH LAND ACT 1903 S90 (UK)

STAMP DUTIES CONSOLIDATION ACT 1999 S 40(1)

FINANCE ACT 2005 S116(1)

CRONIN v CORK & COUNTY PROPERTY CO LTD 1986 IR 559

REVENUE

Stamp duty

Conveyance on sale - Consideration for conveyance on sale - Security - Non-marketable security - Imposition of charge for stamp duty on non-marketable security - Quantification of charge - Amount due on security at date of transfer - Deputy Commissioner of Taxation v Peacock (1980) 2 NSWLR 130, Irish Land Commission v Massereene [1904] 2 IR 502 and Ex parte Kemp (1874) LR 9 Ch App 383 considered - Stamp Duties Consolidation Act 1999 (No. 31), s. 40(2) - Interpretation of tax statute - Strict construction - Imposition of charge - Whether charge imposed by clear and express terms - Purposive approach - Contextual approach - Subsequent amendment to section of statute - Whether subsequent amendment effects construction of original section of statute - Cronin (Inspector of Taxes) v Cork and County Property Co Ltd [1986] IR 559 followed - Appeal allowed (2006/868R - Laffoy J - 22/5/2007) [2007] IEHC 182

Revenue Commissioners v Glenkerrin Homes Ltd

WORDS AND PHRASES

Amount due" - Amount due on material date - Whether meaning includes debts receivable in future - Whether meaning includes debts for which legal liability exists on material date - Ordinary and natural meaning of words - Stamp Duties Consolidation Act 1999 (No 31), s 40(2) - (2006/868R - Laffoy J - 22/5/2007) [2007] IEHC 182

Revenue Commissioners v Glenkerrin Homes Ltd

The respondent appealed to the Appeal Commissioner against an assessment. The issue which arose on the appeal turned on the proper construction of s. 40(2) of the Stamp Duties Consolidation Act 1999. The Revenue Commissioners were dissatisfied with the Commissioner's determination and sought a case stated pursuant to s. 941 of the Taxes Consolidation Act 1997 as to whether the Commissioner's interpretation was correct.

Held Laffoy J. that the Commissioner was not correct in his interpretation of s. 40(2).

Reporter: R.W.

1 Judgment of Miss Justice Laffoy delivered on 22nd May, 2007 .

Factual background

2 The factual background to this case stated commences with a contract for sale by tender dated 28th April, 2004 (the Contract), whereby the respondent agreed to purchase from the Eastern Regional Health Authority (ERHA) certain lands, being part of the lands and premises situate at St. Loman's Hospital, Palmerstown, Dublin 20 and being part of the lands registered on Folio 6232 of the Register of Freeholders, County Dublin, at a price of €31,600,000. The deposit payable under the Contract was equivalent to 10% of the purchase price, which amounted to €3,160,000. It was payable in two tranches: €500,000 with the tender; and the balance within five working days of notice of acceptance of the tender. The closing date provided for in the Contract was seven days after the issue of certain consents or approvals of statutory bodies related to ERHA or 23rd June, 2004, whichever should be the later.

3 Completion took place on 24th June, 2004, but it did not take place in the normal way, as was envisaged by the Contract, by payment of the entire purchase money, including release of the deposit, in exchange for an executed transfer, and delivery of possession, of the lands. Instead, ERHA facilitated a completion whereby, instead of being paid the balance of the purchase money on completion, ERHA was given two documents:

4 (a) An undertaking dated 24th June, 2004 (the Undertaking) on the letter heading of the respondent and signed by Rory Grehan as director of the respondent, which was in the following terms:

"In return for you delivering the Deed of Transfer to us, Glenkerrin Homes Limited, we hereby promise and undertake with you to pay to you on the 30th June, 2004 the sum of €31,600,000 (thirty-one million, six hundred thousand euro) and the said amount shall not be deemed due or payable prior to the said date. This undertaking to you is supplemented by the attached guarantee which we have procured from Allied Irish Banks Plc. You might please note that our obligations to you on foot of this undertaking are not assignable to any third party."

5 (b) A bank guarantee also dated 24th June, 2004 (the Guarantee) under the common seal of Allied Irish Banks Public Limited Company (the Bank). The Guarantee was issued by the Bank in favour of ERHA. It recited the Contract. It also recited that, without prejudice to the terms of the Contract, the respondent had sought a deferral of the balance of the total consideration of €31,600,000 payable under the terms of the Contract amounting to €28,440,000 until 30th June, 2004, which was referred to as "the Payment Date". It further recited that the respondent had agreed to provide the vendor, ERHA, with a bank guarantee as security for that sum and that the Bank had agreed to provide the guarantee thereafter set out. The terms on which the Bank gave the security, as set out in clause 1 of the operative part, were as follows:

"... in consideration of the premises we Allied Irish Banks Public Limited Company, as primary obligor and not as surety only, hereby unconditionally and irrevocably guarantee the due and punctual payment to [ERHA] of the said sum of €28,440,000 ... to be paid on the Payment Date upon receipt of written request and notice from [ERHA] to pay ... upon the Payment Date and not later than the Payment Date unless otherwise agreed in writing between [ERHA], the [respondent] and the Bank, and in this respect time shall be of the essence."

6 Clause 6 of the Guarantee provided as follows:

"This Guarantee shall terminate and cease to have effect on the payment by the Bank to [ERHA] ... in accordance with the terms and conditions of this Guarantee or on the payment to [ERHA] of the said sum of €28,440,000 being the balance of the consideration due under the Purchase Agreement (whichever shall be the earlier)."

7 On 24th June, 2004, in exchange for receipt of those two documents, ERHA furnished to the respondent a transfer of the lands in sale duly executed by ERHA (the Transfer). The Transfer was expressed to be made in pursuance of the Contract and -

"... in consideration of a security to the effect of €31,600,000 (Thirty One Million Six Hundred Thousand Euros) which will be due and payable by the purchaser to the vendor on 30th June, 2004 ..."

8 The respondent duly presented the Transfer, which bore the date 24th June, 2004, for stamping. On 10th August, 2004 the appellants issued a notice of assessment to stamp duty under which they assessed the stamp duty due on the Transfer in the amount of €2,844,000, that is to say, ad valorem stamp duty at the rate of 9 % on the entire consideration of €31,600,000.

Appeal to Appeal Commissioner

9 The respondent appealed to John O'Callaghan, Appeal Commissioner (the Commissioner) against that assessment. The issue which arose on the appeal turned on the proper construction of s. 40(2) of the Stamp Duties Consolidation Act, 1999 (the Act of 1999), which provides as follows:

"Where the consideration, or any part of the consideration, for a conveyance on sale consists of any security not being a marketable security, the conveyance is to be charged with ad valorem duty in respect of the amount due on the day of the date of the conveyance for principal and interest on that security."

10 Section 40(2) corresponded to s. 55(2) of the Stamp Act, 1891, of which it was a verbatim replication.

11 The Commissioner identified the question which arose before him as being whether the chargeable consideration was limited to €3,160,000 on the following basis:-

12 (a) that the security given for the sum of €28,440,000 constituted a "non-marketable security" for the purposes of s. 40(2) of the Act of 1999; and

13 (b) that no amount was due on security on the day of the date of the Transfer within the meaning of s. 40(2) of the Act of 1999.

14 The Commissioner gave his decision on 25th April, 2005 and the transcript of his ex tempore decision is set out in the case stated. The Commissioner recorded his determination in the case stated as follows:

"I came to the conclusion that the security described above constituted such a non-marketable security for the purposes of section 40(2) ... and ... that there was no amount ' due' on the security on the day of the date of the Deed of Transfer. As a consequence, I came to the conclusion that stamp duty fell to be assessed on the amount of the deposit paid, namely €3,160,000. On that basis, I came to the conclusion that the stamp duty payable on the Deed of Transfer amounted to €284,400."

The issue on the case stated

15 The appellants having expressed dissatisfaction with the...