Edward Simons and Hill Top Corporation v Accountant General 1997 Civil Jur. No. 270

• Jurisdiction: Bermuda
• Judgment Date: 20 May 1999
• Docket Number: Civil Jurisdiction 1997 No. 270
• Date: 20 May 1999
• Court: Supreme Court (Bermuda)

In the Supreme Court of Bermuda

Meerabux, J

Civil Jurisdiction 1997 No. 270

BETWEEN:

Edward Henry Simons

First Appellant

and

Catherine Olivia Louis Simons

Second Appellant

and

Hill Top Corporation Ltd.

Third Appellant

and

The Accountant General

Respondent

Mr. I. Kawaley for the Appellants

Mr. W. Pearce Q.C., Acting Attorney General for the Respondent

Fitch Lovell v Inland Revenue CommissionersUNK [1962] 3 All ER 685

Re Robb's ContractELR [1941] 1 Ch 463

Salomon v SalomonELR [1897] AC 22

The Gramophone and Typewriter Ltd v StanleyELR [1908] 2 KB 89

Denn d Manifold v DiamondENR (1825) 4 B & C 243

Daines v HeathENR (1847) 3 CB 938

Morley v Hall (1834) 2 Dowl 494

Partington v A.G. (1869) 4 HL 100

Tennant v SmithELR [1892] AC 150

In re Lonrho Plc (no. 2)WLR [1989] 3 WLR 1106

Stock v Frank Jones (Tipton) Ltd.WLR [1978] 1 WLR 231

Preston v BuckleyENR (1870) 5 QB 391

IRC v Dowdall O'Mahoney & Co.ELR [1952] AC 401

In re FindlayELR [1985] AC 318

Council for Civil Service Unions v Minister for the Civil ServiceELR [1985] AC 374

R v Board of Visitors of Prison, ex parte St. GermainELR [1979] QB 425

R v Secretary of State for the Home Deaprmtne ex part DoodyUNK [1993] 1 All ER 151

Lloyd v McMahonELR [1987] AC 625

Epping Forest DC v Essex Rendering Ltd.UNK [1985] 1 All ER 359

R v Jockey Club, ex parte RAM RacemcoursesUNK [1993] 2 All ER 225

Barnes v Minister of the Environment 1991 Civil Jur. No. 45

Kent Garment Factory Ltd v Attorney GeneralUNK (1991) 46 WIR 177

Commissioners of Customs and Excise v Hebson Ltd.UNK [1953] 2 Lloyds Rep 382

HTV Ltd v Price CommissionICR [1976] ICR 170

R v IRC, ex parte MFK Underwriting Agents Ltd.WLR [1990] 1 WLR 1545

R v IRC, ex parte Camacq Corporatio [1990] 1 LWR 191

Ex parte PrestonELR [1985] AC 835

R v IRC, ex parte Matrix Securities Ltd.WLR [1994] 1 WLR 334

R v Devon County Council ex parte BakerTLR TLR 21 Jan 1993

Stamp Duties Act, s. 39, Head 17

Stamp duty appeal — Doctrine of legitimate expectation — Voluntary conveyance from natural person to body corporate owned by that person — Whether stamp duty payable

JUDGMENT

PRELIMINARY

This is a stamp duty appeal. The questions for my determination are:

‘(a) whether, and if so, what stamp duty is payable when real property is voluntarily conveyed from a natural person to a body corporate which is 100% owned by that natural person.

(b) whether the Accountant General is estopped in equity from levying stamp duty on a voluntary conveyance from a natural person to a body corporate beneficially owned by him by virtue of a long-standing practice of not levying tax in such circumstances.

(c) whether the doctrine of legitimate expectation has any application with respect to the assessment of an instrument for stamp duty.

(d) whether Conveyance 1 and Conveyance 2 are liable to duty as assessed by the Respondent, and

(e) if not, to what duty, the two instruments are liable.’

The Court was invited by the parties to rule obiter on the application of the doctrine of legitimate expectation in order to avoid the necessity of separate court proceedings.

At the hearing the Appellants withdrew their appeal against the $5,000.00 assessment in relation to Conveyance 1.

FACTUAL BACKGROUND

I find the following facts. Conveyance 2, dated 28 January 1994, provides that in consideration of the sum of one dollar ($1.00) paid by the Third Appellant to the First Appellant, the First Appellant thereby conveyed to the Third Appellant the hereditaments described in the First, Second, Third and Fourth Schedules to Conveyance 2 to hold the same unto the Third Appellant in fee simple. The hereditaments so described were evaluated and found to be worth four million, seven hundred and fifty thousand dollars ($4,750,000.00) as at 28 January 1994.

The Respondent gave an opinion that Conveyance 2 was an instrument of conveyance to effect or having the effect of a voluntary disposition inter vivos, and was liable to duty under Head 17 of the Schedule to the Stamp Duties Act 1976 (hereafter referred to as ‘the Act’).

The Respondent assessed Conveyance 2 to ad valorem duty on the value of the property and assessed at 1 per centum on the first $100,000.00 of the value, 2 per centum on the next $400,000.00, 3 per centum on the next $500,000.00 and 4 per centum on the remaining $3,750,000.00 the total of which amounted to $174,000.00.

With respect to Conveyance 2, the First, Second and Third Appellants contended that no stamp duty is payable on a voluntary conveyance from a natural person to a body corporate which was 100% owned by that natural person. The First, Second and Third Appellants further contended that the Respondent was estopped in equity from levying a stamp duty on a voluntary conveyance from a natural person to a body corporate beneficially owned by the natural person because of a long-standing practice of not levying tax in such circumstances. The First, Second and Third Appellants further contended that they had a legitimate expectation that they were not liable to pay tax in such circumstances which entitled them in law to an exemption.

The former Accountant General, James Hannam, became the Accountant General on 10 June 1975 and thereafter at some point he assessed instruments submitted to him under section 22 of the Act evidencing a conveyance or transfer from an individual to a corporate body owned by that individual as not being chargeable with any stamp duty, usually on the representation that there was no change in beneficial ownership Mr. James Hannam ceased to be Accountant General as at 31 December 1993. His practice of adjudicating such instruments in that manner would have been known to those members of the Bermuda Bar who were regularly engaged in stamp duty work for at least several years before his retirement.

Heather Jacobs Matthews was appointed Accountant General with effect from January 1994. When presented with instruments of a similar nature she obtained legal advice to the effect that those transactions caused a change in beneficial ownership. As a consequence she assessed those transactions as being chargeable with stamp duty.

It had been the practice of both the former Accountant General and the current Accountant General to send out information letters to the Bermuda Bar from time to time respecting matters relating primarily to the administrative practice of stamp duties. Between 1981 and today no such information letters have been sent out by the Accountant General to the Bermuda Bar concerning whether a particular type of conveyance or transfer was chargeable with stamp duty. No notice was sent out by the previous Accountant General concerning the non-charging of duty on the type of transaction at issue nor was a notice sent out by the present Accountant General concerning the charging of duty on similar type of transaction.

It had been the practice of the former Accountant General and the current Account General up to June 1998 to provide an opportunity to those individuals who received an adjudication from the Account General under section 22 of the Act that an executed instrument was dutiable to withdraw the instrument and cancel the transaction without payment of duty. Since June 1998 individuals who have been party to an executed instrument are not afforded that privilege.

The Appellants, being dissatisfied with the assessment made on Conveyance 2 and having paid the duty, now appeal against the assessment to the Supreme Court.

At the hearing the parties consented to the filing of supplementary affidavit evidence by the Appellants within seven days. Affidavit evidence of O. Smith and E. Simons, was duly filed. O. Smith, Managing Partner of Milligan-Whyte & Smith, Attorneys for the Appellants, deponed that he acted for the First and Second Appellants for over five years in respect of the incorporation of the Third Appellant, the conveying of land owned by the First and Second Appellants to the Third Appellant, that is to say, Conveyances 1 and 2 in this case, the estate planning matters generally, including in particular stamp duty issues.

He deponed that the First and Second Appellants sought his advice about transferring their property to their children in their lifetime while retaining some interest in the property and thereby minimizing stamp duty exposure. He deponed that he had been practising conveyancing work since on or about 1984 and by 1993 he was well aware that although a voluntary conveyance from a natural person to a company wholly owned by him had to be submitted for assessment under the Act it was the well established and consistent practice of the Accountant General not to treat such a conveyance as liable for stamp duty under the Act on the ground that no beneficial interest passed on such a transfer. He had no reason to question the merits or validity of the Accountant General's interpretation in that regard nor indeed any reason to anticipate that a new interpretation would be applied to the executed instruments he submitted for assessment in early 1994. In reliance of the practice he advised his clients to incorporate the Third Appellant for the specific purpose of the First and Second conveyances, which incorporation took place in August 1993. The conveyances were executed in January 1994. He deponed that although in the final sentence of the Accountant General's letter dated 14 July 1996 confirming that duty was payable under the Act on the Second Conveyance the Accountant General offered to return the deed if he did not wish to proceed, he did not consider it was legally possible ‘not to...