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Cite as: [1877] ScotLR 14_389, [1877] SLR 14_389

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SCOTTISH_SLR_Court_of_Session

Page: 389↓

Court of Session Inner House Second Division.

[Court of Exchequer.

Saturday, February 24.

14 SLR 389

Commissioners of Inland Revenue

v.

Belch.

Subject_1Stamp
Subject_2Contract of Ground-Annual
Subject_3Discharge of a Security
Subject_4Reconveyance — Statute 33 and 34 Vict. c. 97.
Facts:

Where certain subjects were disponed by contract of ground-annual, with power to the purchaser at any term after the expiry of 20 years to redeem the ground-annual on 6 months' notice at 22 1 2 years' purchase— held that the stamp-duty exigible upon the instrument granted under that power to the purchaser
Page: 390↓
by the seller was the ad valorem duty payable on it as a discharge of a security, and not as a reconveyance of release “upon a sale” under the Act 33 and 34 Vict. cap. 97.

Headnote:

By contract of ground-annual, dated 17th April 1856, between Duncan Cameron and John Belch, it was provided “that the said John Belch and his foresaids shall at any term of Martinmas or Whitsunday occurring after said term of Whitsunday 1876, but not sooner, be entitled to redeem from the said first party or his foresaids the said ground-annual, or any of the allocated portion thereof (provided the subjects burdened with the remainder shall be of the full yearly rent to the extent aforesaid), upon giving six months' previous notice in writing, and making payment of twenty-two years and six months' purchase of the said ground-annual, or of the part thereof to be so redeemed; and on payment being made of such redemption money in the terms foresaid, and all arrears, the said Duncan Cameron binds himself and his foresaids to grant and deliver, at the expense of the party redeeming, all discharges or deeds necessary for disburdening the foresaid lands, or the portion thereof liable for said ground-annual, or the allocated portion thereof; all which additional provisions and declarations before written shall also be inserted in the instrument of sasine to follow hereon, and shall be validly referred to in all the subsequent transmissions and investitures of the said several lands and others hereby disponed, or any part thereof, until redemption of the ground-annual, otherwise the same shall be void and null.”

The ground-annual payable under this contract was £480, and the contract was stamped with the duty of £30, being the ad valorem duty on the ground-annual.

In 1876 Mr Belch redeemed the ground-annual by payment of £10,800 in terms of the contract, and the trustees of Duncan Cameron (then deceased) granted a discharge dated 5th October 1876 to Mr Belch, which formed the subject of this appeal.

The following was an abstract of the discharge:—It narrated that John Belch, in terms of the contract of ground-annual between Duncan Cameron and John Belch therein mentioned, had right to redeem on the terms after mentioned from the said trustees a ground-annual of £480 sterling, upliftable furth of subjects in Main Street, Anderston, Glasgow; therefore, and in consideration of the sum of £10,800 paid by the said John Belch, the said trustees discharged the said ground-annual upliftable furth of the foresaid subjects, in terms of contract of ground-annual between Duncan Cameron and John Belch. Further, the trustees redeemed and disburdened of said ground-annual, &c., All and Whole the subjects therein described; statement of titles by which said trustees acquired their right to said ground-annual; clause of warrandice from fact and deed; consent to registration for preservation; testing clause.

The deed was stamped with a duty of £2, 14s., being the ad valorem duty payable on the discharge of a security, but the Commissioners of Inland Revenue charged upon it the additional duty of £51, 6s. to make up the duty to £54, being the ad valorem conveyance on sale duty in respect of the sum of £10,800.

Mr Belch maintained that the instrument was only liable to the duty of £2, 14s., being the duty under the head of mortgage, bond, debenture, &c., in schedule to the Act 33 and 34 Vict. c. 97, chargeable in respect of—“(4) Reconveyance, release, discharge, surrender, resurrender, warrant to vacate, or renunciation of any such security as aforesaid, or of the benefit thereof, or of the money thereby secured, for every £100, and also for any fractional part of £100 of the total amount or value of the money at any time secured, 6d.” Or otherwise, that the said instrument was only liable to a duty of 10s., either under the head of “release” in the said schedule, “in any other case than upon a sale, or by way of security;” or under the head of “deed of any kind whatsoever, not described in the schedule.”

He therefore appealed, and the question stated by the Commissioners for the opinion of the Court was—“Whether the said instrument is liable to be assessed and charged with the said ad valorem conveyance oh sale stamp-duty, in terms of the Act 33 and 34 Vict. cap. 97, or, if not, what other stamp-duty it is liable to be assessed and charged with?”

The Act 17 and 18 Vict. c. 83, schedule “Conveyance,” and the second paragraph of sec. 11 of the Act 16 and 17 Vict. c. 59, were set forth in the case. Subsections 2 and 4 of the 72d section of the Act 33 and 34 Vict. cap. 97, and the schedule, title “Conveyance” of the Act 13 and 14 Vict. cap, 97, were also quoted.

Argued for Belch—An original stamp of £30 has been already paid, the ground-annual being valued when constituted. The Inland Revenue asks for a second duty, as on sale, in respect of the discharge of the ground-annual. There is a personal obligation to pay ground-annual, and the real right is merely in security. The case is the same as if part of the price had been left on the subject and then discharged. A new stamp might have been exigible on an assignation of the ground-annual; but here under the contract there was a power to redeem, and there is no new transaction— Miller v. Small and Royal Bank v. Gardyne, 1 Macq. 345, 358; Williams on Law of Real Property, p. 178.

Argued for Inland Revenue—This is clearly not the discharge of a security. The substance of the deed must be looked to— Christie v. Commissioners, L.R., 2 Ex. 50; Leinmer Asphalte Company, L.R., 7 Ex. 214. Under the Stamp Acts property is anything capable of assignment except moveables. This is a release or renunciation on sale. The ground-annual is amarketable subject, of fluctuating value, different from bond and disposition in security or bond of annual-rent. The option reserved to redeem is now exercised for the purchaser's interest, and does not affect the nature of the transaction.

At advising—

Judgment:

Lord Justice-Clerk—[ After stating the facts, and the clauses of the Stamp Acts referred to]—The question raised here depends on whether, first, the transaction represented by the instrument proposed to be stamped is a conveyance on a sale of property, or, second, whether it is a discharge of a security by way of mortgage, or, third, whether it belongs to a class not specially enumerated.

I am of opinion that this instrument does not represent a conveyance on a sale of property. If, indeed, the granter had possessed a perpetual

Page: 391↓

and unconditional right of ground-annual, which he was entitled to retain or not as he pleased, a new bargain with the purchaser to redeem the burden would be in substance a conveyance on a sale, and the sum stated as the consideration would represent the price paid. But such is not the position or nature of the transaction represented by this instrument. The seller never had an unconditional right of ground-annual. He had only a right to his annual payment secured by infeftment as long as the purchaser elected to retain the stipulated price, being twenty-two years' purchase of the annual sum. But when the purchaser used his option and paid the price, the sum paid was the consideration for the original conveyance, and the payment of it and the discharge granted in respect of it were no new transaction, but only the completion of the original contract of sale. The discharge only becomes necessary, not for the purpose of conveying any substantial interest, but solely to clear the record.

But, in the second place, I am of opinion that this infeftment on the ground-annual right was simply security for the interest on the contract price, being £480 on a principal sum of £10,800, or something short of £5 per cent. That was its real nature, and it only subsisted at the option of the purchaser until the price was paid. I am therefore of opinion that the stamp first proposed by the second party is the correct one.

Lord Obmidale—The instrument or deed in question may in one sense be said to be a receipt or discharge for £10,800, the sum on payment of which Mr Belch was entitled to redeem the ground-annual; but the deed or instrument does more than merely acknowledge the receipt of that payment. It also declares Mr Belch's property to be redeemed and disburdened of the ground-annual and of the contract by which it was constituted. It also contains a clause of warrandice and the other clauses usual in a release or renunciation of such an heritable right. The stamp applicable to a mere receipt or discharge for money received is therefore not that with which the deed or instrument in question is chargeable, and this was not maintained.

It was contended, however, on the part of the Crown, that it was of the nature of a reconveyance, release, or renunciation of a right of property, or right or interest in property “upon a sale,” and the question really comes to be, is it so or not?

If the ground-annual had not in its constitution contained, as it does, an express stipulation or provision to the effect that it was redeemable on payment of a principal sum calculated at 22 1 2 years' purchase, or, in other words, a payment of £10,800 by Mr Belch, a great deal might have been said in support of the Crown's contention, for on that assumption Cameron's trustees could, if they pleased, have refused to consent to any redemption, and, at anyrate, they would have had it in their power to negotiate for payment of a larger sum as the consideration or price, so to speak, of their agreeing to the redemption and consequent release or renunciation of the ground-annual. But, as the matter stands, no such negotiation was necessary or indeed admissible. All Mr Belch had to do was to tender payment of the stipulated redemption money, and thereupon to insist for the necessary dis-charge, or, to use the words of the Act, release or renunciation. But such a transaction cannot well be said to be of the nature of a sale, which necessarily implies a seller on the one hand and a purchaser on the other, each being entitled to make the best bargain he could for himself. No room, however, for any such bargaining was left relative to the redemption of the ground-annual in question, for the consideration in respect of which its redemption could be enforced, and every other characteristic of a sale, were entirely excluded, all that having been previously arranged and fixed in 1856 by the contract of ground-annual itself, on which an ad valorem stamp was then paid.

I must own, therefore, my inability to see how the deed or instrument here in question can be held to be of the nature of a reconveyance, release, or renunciation of property, or of a right or interest on property “upon a sale.” It is at anyrate impossible, I think, to come to any such conclusion without giving a strained and unnatural construction to the language of the statute, contrary to the well-established rule that penal and revenue Acts are to be construed strictly, and not extended to cases to which they do not clearly and unequivocally apply. In accordance with this rule it was, in Phillips v. Morrison, in 1844 (13 L.J., Exch. 212), laid down by the Court of Exchequer in England that—“The party who seeks to bring an instrument within the Stamp Act must show clearly that it falls within it: he must, so to speak, hit the bird in the eye. We,” said the learned Judges, “can make no intendment in favour of the liability.”

For these reasons, I am of opinion, in answer to the question submitted in the case, that the Commissioners have erred, and that the deed or instrument referred to is not liable to be assessed and charged with an ad valorem “conveyance on sale duty” in terms of the Act 33 and 34 Vic. cap. 97, and that the stamp-duty it is chargeable with is that which it was stamped with prior to the opinion of the Commissioners being taken, viz., £2, 14s. duty, being the ad valorem duty payable on the discharge of a security.

Lord Gifford— concurred, observing that in exercising his option to redeem Mr Belch was not buying, he was paying in one of the forms of payment agreed to in the contract of sale.

Counsel for Belch moved, in terms of the Stamp Act (33 and 34 Vict. cap. 97), sec. 19, subsec. 4, for an order for repayment of the excess of duty erroneously paid, and for payment of costs in the appeal.

The Court pronounced the following interlocutor:—

“Find that the instrument referred to in the Case is liable to be assessed and charged with a stamp-duty of £2, 14s., being the amount chargeable in respect of the discharge or renunciation of a security, and therefore order the sum of £51, 6s:, being the excess of duty paid by the appellant, to be repaid to him by the said Commissioners, together with the costs incurred by him in relation to the appeal: Remit to the Auditor to tax the said costs and to report, and decern.”

Page: 392↓

Counsel:

Counsel for Belch— R. V. Campbell. Agents— Maitland & Lyon, W.S.

Counsel for Inland Revenue—Solicitor-General ( Macdonald)— Rutherfurd. Agent—The Solicitor of Inland Revenue.
1877