Howard Chen and Liang Zuoming and Zheng Weiting v Betty Palaso (2011) N4374

• Jurisdiction: Papua New Guinea
• Judge: Sawong, J.
• Judgment Date: 18 August 2011
• Docket Number: CIA No. 167 of 2010
• Citation: (2011) N4374
• Court: National Court
• Year: 2011
• Judgement Number: N4374

Full Title: CIA No. 167 of 2010; Howard Chen and Liang Zuoming and Zheng Weiting v Betty Palaso (2011) N4374

National Court: Sawong, J.

Judgment Delivered: 18 August 2011

N4374

PAPUA NEW GUINEA

[IN THE NATIONAL COURT OF JUSTICE]

CIA. NO. 167 OF 2010

BETWEEN:

HOWARD CHEN and

LIANG ZUOMING and

ZHENG WEITING

V

BETTY PALASO

Waigani: Sawong, J.

2011: 02 June & 18th of August

COMMERCIAL LAW – Stamp Duties – Duty payable on Trust Deed –s.61 of Stamp Duties Act, Ch. 117

COMMERCIAL LAW – Stamp duties – deeds of Settlement or gifts – whether Trust Deed is deed of settlement – appropriate duty payable.

Facts:

The existing shareholders of a company created a Trust Deed under which they transferred 50% of their shares worth K1.5 million to two new shareholders. However these transfers were to be held in trust for the new shareholders. No consideration was paid by the new shareholders. The Trust Deed was subsequently sent to the stamp duties office for stamp duty with an application for nominal stamp duty. The Commissioner General of the Internal Revenue Commission reviewed the duty together with penalty and assessed the dutiable to K155, 732.88. The Appellants paid the duty under protest. The Appellants appealed to the Commission for further reassessment but this was rejected.

The Appellants then appealed to the National Court against the assessment.

Held:

(1) A trust deed is a deed of settlement within the meaning of s. 61(1) of the Stamp Duties Act and is dutiable.

(2) The appropriate duty is under item 14 of schedule 1 of the Act.

(3) There was no error on the assessment made by the Internal Revenue Commission.

(4) Appeal Dismissed.

Case Cited:

Papua New Guinea Cases

Investment Corporation of Papua New Guinea v. Paul Pora & The State [1993] PNGLR 45.

Overseas Cases

Commissioner for Stamp Duties (Queensland) v. Hopkins [1945] 71 CLR 351

Counsels:

F. Griffin, for the Appellant

K. Maken, for the Respondents

18th August, 2011

1. SAWONG, J: The Appellant’s challenge an assessment of duty made by the Commissioner General in respect of a certain instrument namely, a Deed of Trust, entered into between the first appellants as Trustees and the second and third Appellants as beneficiaries of certain shares in a company called Mamosa Investment Ltd (the company). It is the Appellants contention that while the document is stampable or dutiable at a nominal rate, they are not liable to pay more duty as the commissioner has assessed it.

2. The matter comes before this court by way of appeal under s. 21 of the Stamp Duties Act. Ch. 117. The appellants have paid the duty assessed under protest. The essential facts backgrounding this appeal are not in dispute.

3. On 22 May 2009, the Appellant had signed and entered into a Deed of Trust for the First Appellant to hold in trust shares in the company for and on behalf of the Second and Third Appellant (“the Deed”).

4. On 25 February 2010, under cover of letter dated 24 February 2010 from Young & William Lawyers, the Appellants lodged the Deed with the stamp duty officer with an application for impressed stamp duty.

5. On 26 March 2010, the Respondent informed the Appellants (by letter dated 9th March 2010) that she had “reassessed” the stamp duty pursuant to section 13A as duty payable under Item 14 (Deed of Settlement) at the amount of K155, 732.88).

6. On 9 April 2010, the Appellants lodged their objection against the assessment pursuant to section 20A of the Act.

7. In their objection, the Appellants also paid K155, 732.88 as payment of duty and in conformity with the assessment, to the Internal Revenue Commission pursuant to section 20A(1).

8. On 23 September 2010, the Respondent, by letter dated 21 September 2010, informed the Appellants that their objection had been considered and have been rejected in full.

9. On 22 October 2010, the Appellants dissatisfied with the decision of the Respondent of 21 September 2010, filed the appeal herein to the National Court pursuant to section 21 (1) of the Act.

10. The grounds of Appeal as pleaded in the Notice of Appeal are:

(a) The decision of the Respondent made on 21st September 2010 to reject in full the Appellants’ Objection dated 9th April 2010 is unlawful and amounts to an error of law in that the Assessment dated 9 March 2010 was made under the wrong and incorrect Duty under item 14 when the nature of the instrument was not in the nature of a Deed of Settlement and that the Deed of Trust the Appellants seek to impressed duty for does not relate to “property” as defined under section 1 (1) and 61 (b) of the Stamp duties Act.

(b) The Appellants’ Deed of Trust was required to have been assessed and charged duty under item 6 (“Deeds of Agreements under Seal”) of schedule 1 of the Stamp Duties Act, which assessment should have been assed as “Nil”, and the duplicates of the Appellants’ instruments should have been assessed and charged duty under item 7 of the Stamp Duty Act, which provides for Duplicates and Replicas of Instruments.

11. There is no issue that duty was payable on the instrument. In this case the Commissioner General treated the Deed as a Deed of Settlement under s.61 of the Stamp Duties Act and assessed the stamp duty payable at K75, 000.00 plus penalty of K75, 000 and interest with a total figure of K155, 732.88.

12. The Stamp Duties Act (the Act) requires certain instruments to be stamped. It also sets out, inter alia, the assessments to be made and paid on those instruments. It is not necessary to go into any greater detail on the various types of instrument and how the various assessments could be made on those for stamp duty purposes.

13. However, for the present purpose the relevant provision is Division 7, which relates to Deed of Settlement and Deed of Gifts. This division contains ss 59 and s. 61 inclusive. Section 59 of the Act provides for stamp duty to be paid on deed of settlements and gifts.

14. Turning now to s.61, it defines what is a deed of settlement or a deed of gift. It reads:

“61 (1) For the purpose of this Act, an instrument, whether revocable or not, and whether made voluntarily or for good or valuable consideration (other than for a bona fide adequate pecuniary consideration), by which-

(a) The property is settled or agreed to be settled; or

(b) The person executing the instrument is to hold in trust, for a person mentioned in the instrument, property vested in himself otherwise than by way of a religious, charitable or educational trust, or

(c) A trust, created orally, is acknowledged, evidenced or recorded by the creator of the trust or by the trustee, where duty would have been chargeable by the virtue of this section had the trust been originally created by instrument,

(1) For the purposes of this Act, but subject to Subsection (4)-

(a) An instrument by which property is –

(i) Given or agreed to be given; or

(ii) Directed to be given or to be allotted; or

(iii) Transferred or agreed to be transferred,

Otherwise than for a valuable consideration not less in amount or value than the value of the property, is deed of gift; and

(b) The value of the gift is the value of the property or, where there is valuable consideration, the amount by which the value of the property exceeds the amount or value of the consideration.

(2) The liability of an instrument of stamp duty as a deed of gift does not affect the liability of the instrument to stamp duty as a transfer on sale of real property, or otherwise, based on the amount or value of the consideration.

(3) 268 269 Where the Collector of Stamp Duties is satisfied that the amount or value of the consideration expressed in the instrument referred to in Subsection.

(2)-

(a) was agreed to as representing the true market value for the property given or agreed to be given, directed to be given or to be allotted, or transferred or agreed to be transferred, by the instrument; and

(b) is not less than 50% of the value of the property, the instrument shall not be deemed to be a deed of gift for the purpose of this Act, and for the purposes of assessing stamp duty on it every direct or indirect reference in Schedule 1 to the amount or value of consideration in relation to the assessment of duty shall be deemed to be a reference to the value of the property.

15. The rate of duty to be paid for a deed of settlement or a gift is set out in item 14 of schedule 1 of the Act. It reads.

“Where the value of the property in relation to which an instrument is a deed of settlement

Exceeds K25, 000.00 but does not exceed K50, 000.00	10, 00-------- an amount equal to 2 per cent of the value of the property whichever is the greatest.
Exceeds K50, 000.00 but does not exceed K100, 000.00	An amount to 3 percent for the value of the property
Exceeds K100, 000.00	An amount equal to 5 percent to the value of the property.

Duty is payable by the settler

Exemptions –

(1) Wills

(2) Instruments made before and in consideration of marriage.

...