Option to purchase land granted for £15,000–Held subject to ad valorem stamp duty as a conveyance or transfer on sale–Transaction correctly described as a ‘sale’ in the context of the Stamp Act 1891 though rights sold created de novo by the instrument concerned
This was an
appeal by George Wimpey & Co Ltd from a decision of Brightman J in the
Chancery Division on April 5 1974 holding that an instrument granting, in
consideration of payment of the sum of £15,000, an option to purchase certain
land in Glamorgan was subject to ad valorem stamp duty as a conveyance or
transfer on sale. The respondents were the Commissioners of Inland Revenue.
Mr P W Rees QC
and Mr A L Potez (instructed by P J Ward) appeared for the appellants, and Mr C
Slade QC and Mr P Gibson (instructed by the Solicitor of Inland Revenue)
represented the respondents.
Giving
judgment, RUSSELL LJ said that on June 12 1972 a Mr Jeffrey Morgan, the owner
of some 30 acres of building land in Glamorgan, entered into a written
agreement with the appellant company (‘Wimpey’) whereby Wimpey was to have the
option of purchasing the fee simple in the land, on terms set out, in
consideration of a payment of £15,000. The option was exercisable for five
years, and the terms specified that the £15,000 paid for the option was to form
part of the purchase price for the property, which was also fixed. The sole
question now was whether ad valorem stamp duty on the agreement as a
‘conveyance on sale’ had been correctly levied. Section 54 of the Stamp Act
1891 defined that expression to include every instrument whereby ‘any property,
or any estate or interest in any property, upon the sale thereof is transferred
to or vested in a purchaser.’ He (his
Lordship) thought that the option here fell within the scope of the word
‘property’ in that definition, a word which had more than once been described
in the context of the Stamp Act as having wide import. The consideration paid
was £15,000, and he (Russell LJ) thought it correct to say that the option was
sold for that sum. Accordingly, the instrument of June 12 1972 was one by which
property on the sale thereof was vested in the purchaser of that property; it
was consequently within the expression ‘conveyance on sale’ and fell to be
stamped as such.
Counsel for
Wimpey had proposed that it was impossible to describe the transaction effected
as a ‘sale,’ and had cited Re VGM Holdings Ltd [1942] Ch 235; IRC
v G Angus & Co (1889) 23 QBD 579; Muller & Co’s Margarine Ltd
v IRC [1900] 1 QB 310, and W Cory & Son v IRC [1965]
AC 1088. He (his Lordship) thought the dicta in all these authorities
supportable in context, but could not accept the argument that they governed
the decision in the appeal before the court. He would add only one further
point. It had been suggested that if stamp duty were exigible on the agreement
made in 1972, it might be exigible in respect of the £15,000 paid for the grant
of the option twice over when that sum became part of the purchase price for
the land. Mr Slade had denied that the Inland Revenue would seek to do that,
and he (Russell LJ) did not consider it would be possible to do so anyway,
since, although the wording of the agreement was unfortunate, it was clear that
the £15,000 would not itself be part of the consideration for the land, having
been paid already as consideration for the option. The agreement was a
conveyance or transfer of property on sale, stamp duty had therefore been
correctly levied, and the appeal must be dismissed.
Agreeing,
STAMP LJ said that in his opinion the passage in Brightman J’s judgment to the
effect that section 54 applied as much to an instrument creating property de
novo as to one transferring property previously created was well founded.
Also agreeing,
SIR JOHN PENNYCUICK said that he would make it clear that in the case of a
right created de novo the transaction must possess the other attributes of a
sale; in particular, there must be a price in money or money’s worth. Most
executory commercial transactions created new rights without, however,
amounting to a sale of such rights.
The appeal
was dismissed, leave to appeal to the House of Lords being granted.
