Clifford Development Pte Ltd v Commissioner of Stamp Duties

• Jurisdiction: Singapore
• Judge: Chan Sek Keong CJ
• Judgment Date: 24 April 2009
• Neutral Citation: [2009] SGCA 17
• Docket Number: Civil Appeal No 133 of 2008
• Date: 24 April 2009
• Published date: 29 April 2009
• Year: 2009
• Plaintiff Counsel: Leung Yew Kwong and Tan Shao Tong (WongPartnership LLP)
• Citation: [2009] SGCA 17
• Defendant Counsel: Liu Hern Kuan and Quek Hui Ling (Inland Revenue Authority of Singapore)
• Court: Court of Appeal (Singapore)
• Subject Matter: Stamp duties,Words and Phrases,Section 15(1)(a) Stamp Duties Act (Cap 312, 2006 Rev Ed),"Scheme for the Reconstruction",Instruments liable to ad valorem stamp duty,Whether "reconstruction agreement" exempt from stamp duty,Exemptions,Revenue Law

24 April 2009

Chan Sek Keong CJ (delivering the grounds of decision of the court):

Introduction

1 This is an appeal from the decision of the High Court which held that a transfer of two immovable properties (“the subject properties”) to Clifford Development Pte Ltd (“Clifford”) pursuant to an agreement dated 11 May 2006 (“the Reconstruction Agreement”) between Clifford and Overseas Union Enterprises Ltd (“OUE”) was not entitled to stamp duty relief under s 15(1)(a) of the Stamp Duties Act (Cap 312, 2006 Rev Ed) (“the Act”): see Clifford Development Pte Ltd v Commissioner of Stamp Duties [2009] 1 SLR 607 (“the GD”).

2 The facts leading up to the present appeal are not disputed and are as follows. Clifford was incorporated in 1990 as a wholly-owned subsidiary of OUE. It was a dormant company until it entered into the Reconstruction Agreement. By way of a letter dated 4 January 2006, PricewaterhouseCoopers Services Pte Ltd (“PwC”) wrote to the Commissioner of Stamp Duties (“the Commissioner”) on behalf of OUE stating, inter alia, that the OUE group of companies would be entering into a scheme for the reconstruction of its business operations. As part of this scheme, OUE would transfer its undertaking of operating and leasing the subject properties to Clifford. The letter requested that relief from ad valorem stamp duty be granted on the instruments executed in furtherance of the transfer of “this undertaking”. The letter also stated that Clifford would:

… continue the review of redeveloping the [subject properties] to renew and enhance the properties as well as to maximize the rental and leasing potential and the overall investment values. Should the redevelopment option materialize, Clifford may invite a joint venture partner to participate through a fresh share issue and an injection of funds …

3 The Commissioner replied on 26 January 2006 and requested for further information. Meanwhile, on 11 March 2006, OUE and Clifford entered into a joint-venture agreement (“the JVA”) with United Overseas Land Limited (“UOL”). Clause (B) of the recitals to the JVA read as follows:

OUE and UOL have agreed to co-invest in [Clifford] to undertake the business of, amongst other things, redeveloping the [subject properties] ...

The other material terms of the JVA were as follows:

2. OBJECTIVES OF THE PARTIES

2.1 OUE will transfer the entire undertaking of operating and leasing the [subject properties] and the ownership of the [subject properties] to the Company [ie, Clifford] for a consideration of [$73,000,000], which is based on the average of the valuations (on an “as-is” basis) of the [subject properties] as at 31 December 2005 conducted by HVS International and as at 28 February 2006 conducted by Jones Lang LaSalle in accordance with Clause 3.1. In the event that an exemption pursuant to Section 15 of the Stamp Duties Act (Chapter 312 of Singapore) is not obtained, the stamp duty for the transfer of the [subject properties] to the Company shall be borne by the Company.

2.2 When the New Site [ie, the site located adjacent to the subject properties] is released for tender by the Urban Redevelopment Authority, the Shareholders shall bid (the “Bid”) for the purchase of the New Site through the Company and the Company shall submit a tender of the New Site to the Urban Redevelopment Authority for the acquisition by the Company of the New Site.

2.3 The business of the Company shall unless and until the Shareholders agree be confined to the following:

(a) the acquisition of the New Site and the [subject properties];

(b) the redevelopment of the [subject properties] (together with the New Site, if the Bid is successful) (the “Project”). For the avoidance of doubt, the Company shall proceed with the redevelopment of the [subject properties] even if the Bid is unsuccessful;

(c) the letting of units in the Project; and

(d) generally, to perform all acts, matters and things as may be consistent with, necessary for and incidental to the attainment of any and all of the foregoing objects,

and any other business as the Shareholders may unanimously agree.

3. CAPITAL STRUCTURE OF THE COMPANY

3.1 On or before 15 April 2006 or such other period as the Shareholders may mutually agree:

(a) OUE shall effect a transfer of the [subject properties] to the Company for a consideration of [$73,000,000] which shall be satisfied by the allotment and issue to OUE of [65,699,998] Shares and the sum of [$7,300,000] shall remain outstanding as a Shareholders’ Loan by OUE; and

(b) contemporaneously with the transfer of the [subject properties] referred to in Clause 3.1(a), UOL shall (1) make an unconditional application in writing to the Company for the allotment to UOL of [32,850,000] Shares for cash at the subscription price of [$1.00] per Share and pay the sum of [$32,850,000] to the Company, and (2) grant the Company a Shareholders’ Loan of [$3,650,000], such payment to be by way of a cashier’s order or banker’s draft drawn on a bank licensed in Singapore and made out in favour of the Company or as it may direct.

…

18. PUT AND CALL OPTION

18.1 In consideration of the sum of [$1.00] paid by UOL to the Company (the receipt, sufficiency and adequacy of which the Company hereby acknowledges), the Company hereby irrevocably grants to UOL, an option (the “Call Option”) at any time during the Option Period to require the Company to allot and issue to UOL, free from all Encumbrances and with all rights attached thereto, as at the date of the Option Completion, the Option Shares [ie, 32,850,000 shares or such number of new shares which shall result in UOL holding 50% of the enlarged issued share capital of Clifford] at the Aggregate Subscription Price [ie, $32,850,000] and on the terms and subject to the conditions of this Clause 18.

…

18.3 In consideration of the sum of [$1.00] paid by the Company to UOL (the receipt, sufficiency and adequacy of which UOL hereby acknowledges), UOL hereby irrevocably grants to the Company, an option (the “Put Option”) at any time during the Put Option Period to require UOL to subscribe from the Company, free from all Encumbrances and with all rights attached thereto, as at the date of the Option Completion, the Option Shares at the Aggregate Subscription Price and on the terms and subject to the conditions of this Clause 18.

…

18.7 Against payment of the Aggregate Subscription Price by UOL, (a) the Company shall allot and issue the number of Option Shares specified in the Call Option Notice or (as the case may be) the Put Option Notice and deliver the share certificate(s) for the Option Shares to UOL, and (b) UOL shall grant the Company a Shareholders’ Loan of [$3,650,000]. …

4 On 23 March 2006, PwC replied to the Commissioner and provided the requested information. The reply also informed the Commissioner that:

[Clifford] has recently invited a joint venture partner to participate in the redevelopment of the [subject properties]. The joint venture partner will only invest or inject the funds [into] [Clifford] after the completion of the transfer of the business undertaking and [the subject properties] from OUE to [Clifford].

5 On 4 May 2006, the Commissioner replied to PwC informing the latter that the application for stamp duty relief under s 15(1)(a) of the Act for the proposed reconstruction exercise was not approved and that ad valorem stamp duty had to be paid on the transfer of the subject properties. A week later, on 11 May 2006, OUE and Clifford entered into the Reconstruction Agreement whereby OUE transferred the subject properties to Clifford. The consideration of $73m, being the value of the subject properties, was satisfied by an issuance of shares by Clifford to OUE and the entry in Clifford’s books of a shareholder’s loan of $7.3m.

6 On 22 May 2006, pursuant to the JVA, Clifford allotted to UOL new shares which amounted to 33.33% of its enlarged share capital. Slightly more than a week later, on 30 May 2006, UOL exercised its call option under the JVA and raised its stake in Clifford to 50%. Sometime in October 2006, as a result of a deadlock between OUE and UOL, the deadlock mechanism provided for in the JVA was triggered and OUE purchased UOL’s entire 50% shareholding in Clifford for a consideration of $212m.

7 Throughout the period of May 2006 to February 2007, Clifford, through either PwC or its solicitors, continued to make representations to and/or correspond with the Commissioner. However, the latter maintained his stance throughout, ie, that the Reconstruction Agreement did not come within the ambit of a “scheme for the reconstruction of any company” under s 15(1)(a) of the Act. Finally, on 10 March 2008, the Commissioner issued a formal notification pursuant to s 39A(5) of the Act and informed Clifford of the reasons for his decision. Clifford then appealed to the High Court. The High Court judge (“the Judge”) held that the Reconstruction Agreement did not qualify for stamp duty relief. Dissatisfied, Clifford appealed to this court. After hearing counsel for Clifford and for the Commissioner, we dismissed the appeal. We now give our reasons for dismissing the appeal.

Relief from stamp duty under section 15(1)(a): Scheme for reconstruction

8 Section 15(1) of the Act provides relief from ad valorem stamp duty in respect of instruments giving effect to two types of transactions, as follows:

Relief from ad valorem stamp duty

15.—(1) If it is shown to the satisfaction of the Commissioner that the prescribed conditions have been fulfilled, ad valorem stamp duty under Articles 3 (a) and (c) and 9 (c) in the First Schedule shall not be chargeable on any instrument made on or after 1st July 2000 for the purposes of or in connection with —

(a) the transfer of the undertaking [or part of an undertaking, when read together with the Stamp Duties (Relief from Stamp Duty upon Reconstruction or Amalgamation of Companies) Rules (see [19] below)] or shares in respect of a scheme for the...