Papua New Guinea Law Reports - 1991
[1991] PNGLR 60
N968
PAPUA NEW GUINEA
[NATIONAL COURT OF JUSTICE]
WEK
V
COLLECTOR OF STAMP DUTIES
Waigani
Brown J
11 February 1991
STAMP DUTIES - Right to refund - Agreement for sale of land - Agreement giving vendor power to “terminate” - Refund available where “rescinded or annulled” - Right to refund dependent on legal effect of action - Stamp Duties Act (Ch No 117), s 48.
STAMP DUTIES - Collector of Stamp Duties - Rulings of - Of no legal effect.
The Stamp Duties Act (Ch No 117), s 48(1), provides that where an agreement for the sale of land “is rescinded or annulled”, the stamp duty paid thereon shall be refunded.
The Collector of Stamp Duties had issued a Ruling No 4 which stated, inter alia, that in cases where parties mutually decide not to proceed because finance is not available, refunds are not available.
The vendor under an agreement for the sale of land gave notice of “termination” pursuant to a clause of the agreement following failure of the purchaser to obtain finance to complete. The purchaser sought to recover stamp duty paid on the agreement.
Held
(1)      The stamp duty was recoverable:
(a)      the use of the words “is rescinded or annulled” in s 48(1) of the Stamp Duties Act relates to the legal effect of whatever action might have been taken;
(b)      in the circumstances the legal effect of the notice to “terminate” pursuant to the agreement was that of rescission.
Vickery v Woods (1951) 85 CLR 336, considered.
(Obiter), The Ruling No 4 of the Collector of Stamp Duties had no legal force or effect.
Cases Cited
Australian Airlines Commission v Commissioner of Stamp Duties (Qld) (1987) 18 ATR 433.
Vickery v Woods (1951) 85 CLR 336.
Summons
This was an originating summons claiming declarations in respect of entitlement to recovery of stamp duties paid under the Stamp Duties Act (Ch No 117).
Counsel
J Sheppherd, for plaintiff.
J Weigall, for the defendant (Collector of Stamp Duties).
THE APPLICATION
BROWN J: By way of originating summons the plaintiff claimed declarations that he is entitled pursuant to s 48 of the Stamp Duties Act (Ch No 117) to a refund of stamp duty paid on a contract for purchase of land. The plaintiff was the purchaser pursuant to the contract dated 6 July 1989 for the purchase of Allotment 41 Section 65 Mount Hagen from the vendor, one Morea Baru.
The Collector gave notice of his intention to defend. By virtue of the nature of the relief sought argument relating to the grounds of defence to the declarations was solely based on relevant law, the facts were uncontroverted.
THE LEGISLATION
Section 48 of the Stamp Duties Act (Ch No 117) provides:
“(1)    Where an agreement referred to in Section 46 or Section 47 is rescinded or annulled, the ad valorem stamp duty paid on the agreement shall, subject to this section, be refunded by the Minister to the party to the agreement by whom or on whose behalf the duty was paid, or to his executors, administrators or assigns.
...
(5)      This section does not apply where the purchaser or a person claiming under him has entered into possession of, or has attorned tenant of, the property.
(6)      This section does not apply unless the department head is satisfied that the agreement has not been rescinded or annulled only to avoid the stamp duty on a sale or subsale of the property.”
The Collector’s Ruling No 4 dated 14 April 1988 relates to his interpretation for the benefit of his officers but has no force of law. It states —
“In all other cases, such as where parties mutually decide not to proceed because finance has not been available, death or bankruptcy of a party to the transaction, or for any other reason, refunds are not available”.
THE FACTS
By affidavit of John Wek, the plaintiff, sworn the 26 June 1990, the history of the conveyancing transaction was given.
On 6 July 1989, the plaintiff entered into the contract to purchase the property for the sum of K56,000. On 5 September 1989, stamp duty in the sum of K2,254 was paid. On 13 September, the ANZ Bank notified the plaintiff purchaser it could not at that time commit funding as required to complete the purchase. Various correspondence was then entered into with the bank to facilitate funding and at the same time completion of the purchase was delayed by mutual consent to allow the purchaser time to obtain finance. In the absence of finance and with the passage of time, the vendor determined to terminate the contract as provided for and, on 17 January 1990, a notice of termination of contract for sale was served on the lawyers for the purchaser.
Such notice of termination initially recited cl 11 of the contract. Clause 11 provides that the vendor shall be entitled to terminate the agreement and thereafter either to sue the purchaser for breach of contract or to resell the property as owner and recover the deficiency (if any) arising on such resale and expenses from the purchaser as liquidated damages. As well, the deposit is forfeited to the vendor.
The notice of termination proceeds in the following manner (omitting formal parts):
“Now therefore you are hereby given notice that you forfeited to the vendor the said deposit and all other monies paid by you and that the said contract is entirely at an end so far as it relates to sale and purchase of the land and further that the vendor will in pursuance of the herein before recited condition of sale, proceed to re-sell the said land and will hold you responsible and liable as well for any deficiency in price as for all costs, charges and expenses occasioned by such re-sale dated the 16th day of January 1990
Young & Williams
Lawyers for the Vendor.”
The efficacy of the notice is not in issue and it appears to have been accepted by the plaintiff in relation to his dealing with the vendor who is not a party to these proceedings. There has been no possession of, nor has the purchaser, attorned tenant of the property.
The notice touched on incidents which are common to rescission. A penalty in the defaulting party being merely one.
THE CASE FOR THE COLLECTOR
The Collector says that the terms “rescinded” and “annulled” have a precise legal meaning. They refer to situations in which there is some vitiating factor present at the time of formation of the contract which either renders the contract void or entitles the innocent party to avoid the contract. In either case the effect is that the contract is void ab initio.
Counsel for the Collector states that the Papua New Guinea section corresponds to the New South Wales section and refers the Court to the cases of Vickery v Woods (1951) 85 CLR 336 and Australian Airlines Commission v Commissioner of Stamp Duties (Qld) (1987) 18 ATR 433 in support. He further says a strict interpretation of the Stamp Duties Act is consistent with the general approach to statutory interpretation by this Supreme Court. With the latter proposition, I agree.
But so far as the plaintiff’s circumstances are concerned, the unavailability of finance gave rise, after the date of contract, to a right in the vendor to “terminate” pursuant to cl 11 of the contract. The Collector says that his Ruling No 4 is on point and thus there is no right to a refund.
THE PLAINTIFF’S CASE
Counsel for the plaintiff uses the New South Wales Stamp Duties Act 1920 and its associated case law to support his submissions since he says there are no relevant cases on this point in the Papua New Guinea Law Reports.
Section 48 is similar to the New South Wales s 41(7)(a) which also says that where an agreement is afterwards rescinded or annulled the ad valorem duty paid shall be refunded.
Counsel canvassed the meaning of “rescinded” and “annulled” at some length. He equated “to terminate” referred to in cl 11 of the contract with the right to rescind and argues cogently why this is so. Clause 15 of the contract uses “rescind” but that relates to a rescission ab initio and different results flow to those rights touched on in cl 11. Counsel goes on to explain the distinction he makes between “rescinded” and “annulled” as distinguishing the use of cl 11 in the plaintiff’s circumstances as an illustration of “rescission”.
The apparent imprecision which arises because the stamp duties legislation uses on the one hand “rescinded” or “annulled” and the contract uses a right to “terminate” is only an imprecision in terminology. The statute is related to the legal effect of action, the contract provides for such action. The question really is whether the action of the vendor by exercising his rights under cl 11 of his contract in terms of his notice of termination can be legally categorised as a “rescission”. There can be no doubt on the facts deposed in the plaintiff’s affidavit that both the vendor and purchaser are at arms length. There is no suggestion that the agreement has been rescinded or annulled only to avoid stamp duty on a sale or sub-sale of the property.
CASE LAW
Vickery v Woods is authority for the submission that the plaintiff must establish the fact of a rescission before a purchaser, for instance, is entitled to recover the amount claimed under s 48 of the Stamp Duties Act. In that case the plaintiff purported to act for a company which had not then been incorporated. After the formation of the company, the instruments of transfer to effect the conveyance to the company were duly executed and the balance of purchase moneys were paid by the company. The agent sought to recover stamp duty paid in respect of the original contract. The Commissioner refused on the basis that there had been no rescission. The facts may be clearly distinguished from the proceedings before this Court since there is an uncontroverted notice of termination which in the circumstances of this case amounts to a rescission.
The next case is Australian Airlines Commission v Commissioner of Stamp Duties (Qld). In this case there were two contracts with different purchasers for the sale of property. The first contract gave the initial purchaser the right to have a second contract entered into with rescission of the first contract. The Supreme Court of Queensland found that the Act of purported rescission under the first contract was performance of the first contract and not an act of rescission. The duty payable to the Commissioner on the first contract was not refundable. Again those facts can be distinguished from this present case.
CONCLUSION
In the circumstances, I conclude that the purchaser is entitled to his declaration for I find there has been on the facts a valid act of rescission by virtue of the notice of termination. The section clearly describes in those circumstances the entitlement to a refund of duty.
The contract has not been discharged by novation.
The plaintiff shall accordingly have his declaration and costs.
Judgment for the plaintiff in the sum of K2241 plus interest at 8 per cent from the 10 July 1990, until this date pursuant to O 12, r 6 of the National Court Rules.
I further order a stay of execution for a period of 28 days.
Judgment for plaintiff
Lawyer for the plaintiff: K Y Kara.
Lawyer for the defendant: Ms Weigall.