Kuok (Singapore) Ltd v Commissioner of Stamp Duties

• Jurisdiction: Singapore
• Judge: Woo Bih Li J
• Judgment Date: 09 April 2003
• Neutral Citation: [2003] SGHC 81
• Date: 09 April 2003
• Subject Matter: Instruments liable to ad valorem duty,Transfer of shares from company to sole creditor and shareholder,Revenue Law,Stamp duties,Company in liquidation
• Docket Number: Originating Motion No 18 of 2002
• Published date: 01 October 2003
• Defendant Counsel: Liu Hern Kuan (Inland Revenue Authority of Singapore)
• Court: High Court (Singapore)
• Plaintiff Counsel: Nand Singh Gandhi (Nand Singh Gandhi & Co)

1 The appellant Kuok (Singapore) Limited (“KSL”) set up Hovert Investments Pte Ltd (“Hovert”) as a wholly owned subsidiary to acquire all the shares in Pacific Carriers Limited (“Pacific Carriers”) which was a de-listed company in order to delist Pacific Carriers. After Pacific Carriers was de-listed, Hovert was placed into members’ voluntary liquidation and Wong Kian Kok, Kon Yin Tong and Helen Hee Boe Hian were appointed its liquidators. This was on 20 September 2001.

2 Hovert had assets of $2 cash and 305,626,000 shares in Pacific Carriers worth $409,538,840. However Hovert had a liability to KSL for a sum equal to the value of its shares in Pacific Carriers.

3 By a letter dated 27 November 2001, one of the liquidators Wong Kian Kok wrote to KSL stating:

We are agreeable to distribute the 305,626,000 ordinary shares of $0.50 each in Pacific Carriers Pte Ltd to the holding company, Kuok (Singapore) Ltd, in full and final settlement of the loan owing to the holding company for the amount of $409,538,840.

Please let us have a letter of agreement from Kuok (Singapore) Ltd pertaining to the above arrangement and proceed to prepare the necessary transfer documents, which we will execute accordingly.

4 By a letter dated 29 November 2001, KSL replied stating:

We refer to your letter dated 27 November 2001 and confirm our agreement to your distribution of 305,626,000 ordinary shares of $0.50 each belonging to our wholly-owned subsidiary, Hovert Investments Pte Ltd in Pacific Carriers Limited to us, in full and final settlement of the loan of $409,538,840 owing by Hovert to us.

We enclose a share transfer form in respect of the abovementioned transfer of shares, duly executed by us, for your execution and return to us, together with certified true copies of the Forms 52 and 71 filed with the Registry of Companies, for our onward transmission to the Stamp Office.

5 The instrument of transfer stated that the transfer was:

“by way of distribution in specie of the shares mentioned below to our sole shareholder Kuok (Singapore) Limited of No. 1 Kim Seng Promenade #07-01 Great World City Singapore 237994”

6 KSL then submitted the instrument of transfer to the respondent, the Commissioner of Stamp Duties, together with a cheque for $10 on the basis that the duty payable was $10 pursuant to Article 3(h) of the First Schedule to the Stamp Duties Act (Cap 312) (“the Act”).

7 The Commissioner was of the view that the instrument of transfer should be stamped with ad valorem duty under Article 3(c) of the First Schedule to the Act based on a consideration of $409,538,840. The rate under Article 3(c) was 0.2%. This would have attracted stamp duty of over $800,000. However, with a 30% rebate as an off-budget measure, the duty was reduced to $573,354.45.

8 KSL disagreed that Article 3(c) should apply and submitted the matter for adjudication and assessment. The Commissioner assessed the duty to be $573,354.45.

9 By a letter dated 14 August 2002, KSL objected to this assessment and applied for a review of the assessment. By a letter dated 31 August 2002, the Commissioner maintained his assessment.

10 KSL then paid the duty, as assessed, as it was obliged to do under the Act, but remained dissatisfied with the assessment. It then appealed to the High Court by way of the present Originating Motion, requiring the Commissioner to state and sign a case which was then done.

11 The principal question for determination is whether the instrument of transfer is chargeable with ad valorem stamp duty as a conveyance, assignment or transfer on sale of shares under Article 3(c) of the First Schedule of the Act or as a conveyance assignment or transfer of any property or any interest thereof not otherwise specifically charged with duty under Article 3(h) of the said First Schedule. I have already stated that the rate of stamp duty under Article 3(c) is 0.2%. With the 30% rebate mentioned above, the stamp duty is $573,354.45, if Article 3(c) applies. Under Article 3(h), the stamp duty is $10. With the same 30% rebate, it would be $7.

12 Although the instrument of transfer states that the transfer is by way of distribution in specie, it was not disputed that the Commissioner and the court could have regard to the exchange of correspondence constituting the agreement which led to the execution of the instrument of transfer. It was also not disputed that in the exchange of correspondence between Mr Wong and KSL, which I have set out above, the shares were to be transferred to KSL in full and final settlement of KSL’s loan to Hovert.

Section 17 of the Act

13 As there was also a dispute on the effect of s 17 of the Act, I will deal with s 17 first. Section 17 states:

17.(1) When any property is conveyed to any person in consideration, wholly or in part, of any debt due to him or subject either certainly or contingently to the payment or transfer of any money or stock or other property whether being or constituting a charge or incumbrance upon the property or not, such debt, money, stock or other property shall be deemed to be the whole or part, as the case may be, of the consideration in respect of which the conveyance is chargeable with ad valorem duty.

[The explanation below s 17 is not relevant for present purposes.]

14 Mr Liu Hern Kuan, Counsel for the Commissioner, submitted that where a situation comes within s 17, it is implicit that ad valorem duty is payable. He relied on Ex parte Miller and Gray [1892] 18 VLR 31. In that case, Hood J gave his view on s 97 of the Stamps Act, which is in pari materia with our s 17. Mr Liu cited part of Hood J’s judgment at p 33:

… It pre-supposes a document liable to duty, and then directs how that duty is to be ascertained, viz., by including the amount of the past debt in the consideration upon which the ad valorem duty is assessed.

15 In my view, Mr Liu had cited the above passage out of context. I refer to Hood J’s judgment from p 32 to p 33 where he said:

By the Stamps Act an ad valorem duty is chargeable on a “conveyance or transfer on sale of any real property,” and by sec. 93 this expression is defined as including every instrument whereby any property, upon the sale thereof, is legally or equitably transferred to, or vested in, the purchaser. By sec. 97 it is enacted that when any property is conveyed to any person in consideration, wholly or in part, of any debt due to him, such debt is to be deemed the whole or part (as the case may be) of the consideration in respect whereof the conveyance is chargeable with ad valorem duty. For the collector’s view, it was first argued that sec. 97 covers this case, and itself imposes a duty on this transfer. With this contention I do not agree. Sec. 97, in my opinion, is merely in aid of the general power of taxation, by affording a mode of estimating the duty in cases of executed considerations. It does not of itself create any obligation to pay duty. It pre-supposes a document liable to duty, and then directs how that duty is to be ascertained, viz., by including the amount of the past debt in the consideration upon which the ad valorem duty is assessed. [Emphasis added]

16 Quite clearly Hood J’s judgment militates, rather than supports, Mr Liu’s contention. This part of Hood J’s judgment was adopted by Fullager J in Comptroller of Stamps (Vic) v Rylaw Pty. Ltd 81 ATC 4,411 when Fullager was considering s 68(1) of the Stamps Act 1958 (Vic) which is in pari materia with our s 17.

17 Furthermore, in Finance Corporation of Australia Ltd v Commissioner of Stamp Duties (Qld) 81 ATC 4,396, the Supreme Court of Queensland reached a similar conclusion on s 52 of the Stamps Act 1894-1976 which is also in pari materia with our s 17.

18 So, at p 4,400, Campbell J said:

In Brewer v. Commr. of Stamps (1903) Q.S.R. 143, Griffith C.J., in delivering the judgment of the Court, said that sec. 52 simply laid down a general rule for computing ad valorem duty in certain cases, that under the Schedule duty is only payable in a case of conveyance on sale and the rule of computation in sec. 52 had no application until the occasion for applying it is established. I consider that the decision in Brewer’s case is an answer to Mr. McPherson’s submission that sec. 52 makes the instrument dutiable because there is simply a conveyance for which the consideration is the discharge of an indebtedness.

19 At p 4,408, Macrossan J said:

I do not accept one argument in the simple form in which it was put on behalf of the respondent Commissioner, that for a transaction merely to fall within the literal words of sec. 52 ensures that ad valorem conveyance duty becomes payable. Reference has still to be made to an appropriate Schedule heading to quantify the rate and further words found in the Schedule heading have to be given their due weight. To hold otherwise would be to act contrary to the statements of principle made in Brewer and Anor v. Commr. of Stamps (1903) Q.S.R. 143. …

It was held that if any duty was to be payable it was still necessary for the transaction to match a relevant heading in the Schedule which apparently at that time did not contain the heading “Conveyance or Transfer … by way of gift of any property”. It was held that the transaction could not be matched with the heading “conveyance on the Sale of any Property”. Brewer’s case also stated that sec. 52 operated as a computing section, although of course it did that only when it was otherwise applicable.

20 As Mr Nand Singh Gandhi, Counsel for KSL, observed, our s 17 does not even state the rate of duty payable.

21 In my view, an instrument does not attract ad valorem stamp duty merely because it comes within s 17. Furthermore, s 17 does not give rise to a prima facie presumption that ad valorem stamp duty is payable. It is for the Commissioner to first establish that the instrument attracts ad valorem stamp duty under some other provision of the Act before s 17 may apply. Accordingly, for the case before me,...