Cargills (Ceylon) Ltd. v. Commissioner of Stamps
1954Present: Gratiaen J. and Fernando A.J.CARGILLS (CEYLON) LTD.,-Appellant, and COMMISSIONEROP STAMPS, RespondentS. C. 250—A])peal under Section 31 of the Stamps Ordinance
Stamps Ordinance-Business—Agreement to sell it—Movable assets—Liability toduty—Meaning' of “ business ”—Section 26a—Schedule, Heins 4 (c) and2l< (2a) (vii)…
An agreement for the sale of a business is chargeable to duty as such underItem 23 (2'j) (vii) of the Schedule to the Stamps Ordinance notwithstandingt hat the various assets of the business are separately specified in the agreement.
Where such an agreement includes a provision for the sale of the goods,wares and merchandise belonging to the business the exemption in Item 4 (c)is not applicable.
FERNANDO A.J.—Cargills (Ceylon) Lid. t>. Commissioner oj Stamps
.A.PPEAL under section 31 of the Stamps Ordinance against- adetermination by the Commissioner of Stamps.
N. E. Weerasooria, Q.C. with H. W. Tambiah and S. Shnrvananda,for the appellant.
T. S. Fernando, Q.C., Solicitor-General, with M. Tiruchelvam, CrownCounsol, for the respondent.
Cur. adv. mil.
July 8, 1954. Fernando A.J.—
At the conclusion of the argument in this case, we made order dismissingthe appeal with costs, and indicated that reasons would be given later.
This was an appeal under S. 31 of the Stamps Ordinance against adetermination by the Commissioner of Stamps. The instrument inquestion is an agreement No. 3819 of 19th February, 1946, entered intobetween the attorney of Cargills Ltd. (a Company incorporated inScotland) (“ the vendor ”) and Mr. Abraham Gardiner (“ the purchaser ”)which first recited the receipt by the vendor of an earlier written offerby the purchaser and the agreement by the Board of Directors of CargillsLtd., which was communicated by cablegram, to accept the said offer.By the agreement the vendor bound himself to sell and the purchaser tobuy with effect from 1st April, 1946 “ the movable and immovable assetsof Cargills Ltd. hereinafter specified at a price hereinafter mentioned ”,the price being “ the aggregate sum of Its. 11,500,000 for all the assetsconcerned ”. Tho specified assets were :—1. Immovable propertybriefly described in the Schedule, and the goodwill of the business of thevendor, 2. Furniture, fittings and plant equipment, 3. Customers out-standings due to the vendor on March 31st, 1946, 4. All the stocks, waresand merchandise remaining undisposed of in Ceylon belonging to thovendor on 31st March, 1946. The agreement stated that in arriving attho aggregate sum, the sum payable for the assets fourthly mentionedhad been tentatively fixed at Rs. 3,300,000 and provided for adjustment-by reference to the actual position on 31st March, 1946. (At a later stageit was accordingly agreed between the parties that the sum payable inrespect of the fourth asset should be adjusted to Rs. 4,374,768.) Thepayment by the purchaser of a deposit of 10% of the aggregate sum wasacknowledged and the balance of the aggregate was declared to bepayable on or before August 1946. The vendor agreed to execute thenecessary conveyances relating to the transfer of the assets to thepurchaser.
The agreement was ultimately carried into execution and the necessaryformal instruments of conveyance were executed by the vendor, transfer-ring to the nominee of the purchaser, Cargills Ceylon Ltd., the assets
FKRNANDO A.J.—Cargills (Ceylon) Ltd. v. Commissioner of Stamps
included in the categories 1 and 3. Stamp duty having been paid onthese conveyances, the Commissioner in making his determination ofthe duty payable on the agreement No. 3819 deducted the amount ofthe duty so paid, and we are therefore concerned in this case only withthe amount of duty, if any, payable on the remaining assets namely :—
the furniture, fittings plant and equipment belonging to the vendor,
the stocks wares and merchandise belonging to the vendor on 31stMarch, 1946. The Commissioner has determined that both categoriesof assets are chargeable with duty under S. 23 (2) of the Schedule to theStamps Ordinance.
The principal question for determination is whether the documentNo. 3819 constituted an agreement for the sale of the business of CargillsLtd. and therefore chargeable under Item 23 (2a) (vii) of the Scheduleto the Ordinance.
Mr. Weerasooria contends that it is not, but is merely an agreementtq, sell certain specified assets belonging to the vendor, in which case,he argues, duty is not chargeable upon the agreement covering the goods,wares and merchandise. He relied at first on S. 26a of the Ordinancewhich was inserted in the main Stamps Ordinance by the amendingOrdinance of 1941. He urged that the section conferred an exemptionin regard to agreements for the transfer of goods, wares and merchandise,but it became manifest during the course of the argument that the mentionof the item “ goods, wares and merchandise ” in an exception clause iniS. 26a cannot be construed as conferring an exemption hi respect ofprojierty of that class, if in fact a charge oil it is imposed in the Scheduleto the Ordinance.
Mr. Weerasooria relied secondly on Paragraph (c) of Item 4, in theSchedule, which does confer an exemption for agreements relating to thesale of goods, wares and merchandise, but only if such an agreement isnot otherwise charged by the Ordinance. If therefore the agreementin this case is one covered by Item 23 (2a) (vii) of the Schedule a3 amendedin 1941, neither item 4 nor the exemptions to that item would be appli-cable. I would like to refer in passing however to the cases of South v.Finch 1 anti Horsefall v. Hay 2 where a similar exemption in respect ofgoods wares anti merchandise in England was held not to apply to agree-ments for the sale of goods together with other property, and to the testapplied in India “ to see whether the document evidences only a transac-tion of sale or a sale and some other independent transaction ”.(Donough-Indian Stamp Law 9th Ed. p. 581).
Was this then an agreement for the sale of a business 1 In determiningfor the purposes of the Stamp Law whether a document falls within adescription of documents which attract duty, regard must be had to itstrue meaning and intent. As authority for this principle is scarcelynecessary, I am content merely to refer to the case of Chesterfield BreweryCo. v. Commissioner of Inland Revenue 3 which was cited by the learned
1 3 Bing N. C. 506.
* 17 L. J. Exch. 266
(1899) 2. Q. B. 7
190FERNANDO A.J.—Cargills (Ceylon) LtdrV. Commissioner of Stamps
Solicitor General. If therefore a scrutiny of the deed here in questionreveals that what was really agreed upon by the vendor and the purchaserwas that all the assets or substantially all the assets of the business ofCargills Ltd. were to be transferred, then the agreement becomes liableto duty under the relevant item. The transaction covered severalimmovable properties upon which the business of the vendor had beencarried on, the goodwill of the business, customers outstandings, fixturesand the whole of the stocks ; it also covers agencies for imported commodi-ties in so far as the agent was in a position to secure their transfer to thepurchaser ; in fact Mr. Weerasooria was unable to suggest any assetsheld by Cargills Ltd. for the purposes of its business (other than actualcash in hand or money in the Bank) which was not included within thescope of the transaction. In so far as the disputed item of goods, waresand merchandise is concerned, it is important to note that the agreementcovered all goods, wares and merchandise instock on 31st March, 1946,including even goods afloat, and the total value of these assets amountedto nearly Rs. 4£ million. It is clear that but for the transfer of thesestocks the purchaser would not have been able to exercise with any hopeof profit the rights expressly conferred on him by the agreement “ to holdhimself out as carrying on a similar business in Ceylon in successionto Cargills Ltd., and if so desired to carry on Buch business under the nameand style of Cargills (Ceylon) Ltd. ”. This right would have been anempty one, and indeed purchase of the other assets would have been ahazardous venture, if the purchaser had not obtained a binding under-taking from the vendor to hand over all stocks in hand at the time of thetransfer. It is a debatable question whether the purchaser could havoavoided the payment of stamp duty on the value of the stocks by taking iton trust that tho vendor would hand them over on payment togetherwith the other assets, though successful avoidance of the duty by thatmeans would have been perfectly legitimate. But the purchaser actuallychose adifferontcourseandmadethetransfer of the entire stocks an integralpart of the obligations binding upon the vendor by the agreement.
In the ease of In re Rhagg, Fasten v. Boyd 1Simonds J. (as he then was) inconstruing a bequest of “ my business as a solicitor ” said “ The word‘ business ’ in such a context as this bears much the same meaning aswhen it is said that a man has sold his business. It means the urfder-taking or enterprise itself, not the process of carrying it on ”.
I am of opinion that the agreement before us cannot, merely on thoground that the various assets of the vendor were separately specifiedand valued, bo construed as anything other than an agreement for thesale of the undertaking or enterprise theretofore carried on in Ceylon by. the vendor under the name of Cargills Ltd. and that it is therefore charge-able with duty as an agreement for the sale of a business.
Gratiaen J.—I agree.
Appeal ills;:ii.<st i!.
(1938) Ch. D. 828.
CARGILLS (CEYLON) LTD, Appellant , and COMMISSIONER OF STAMPS , Respondent
Cargills (Ceylon) Ltd. v. Commissioner of Stamps