[COURT OF APPEAL]

ATTORNEY-GENERAL v. COHEN AND ANOTHER.

Revenue - Stamp duty - Conveyance on sale - Sale by auction by same vendors to same purchaser of land in several lots - Series of transactions - Finance (1909-10) Act, 1910 (10 Edw. 7, c. 8), s. 73 - Information - Procedure under Stamp Act, 1891 (54 & 55 Vict. c. 39), s. 5.

At a public sale by auction of dwelling-houses offered in twelve lots, the respondents bought from the same vendor six lots at prices, in two cases exceeding 500l., and in four cases not exceeding 500l., in respect of each lot, but in the aggregate exceeding 500l. Six contracts of sale were signed by the respondents, each separately stamped. Six deposits were paid and six separate abstracts of title were supplied, in respect of the six lots so purchased:-

Held (Romer L.J. dissenting), that each sale did not form part of a larger transaction or of a series of transactions in respect of which the aggregate amount or value of the consideration exceeded 500l., within the meaning of s. 73 of the Finance (1909-10) Act, 1910, and, therefore, that, in the four cases where the consideration did not exceed 500l., the double tax thereby imposed was not payable.

Decision of Lawrence J. [1936] 2 K. B. 246 affirmed.

Observations with regard to the method of procedure under which the question was submitted to the Court.

APPEAL from a decision of Lawrence J. (1)

Special Case stated by consent under Order XXXIV., r. 1, and Order LXVIII., r. 2, proceedings having been commenced by writ of subpoena, whereby the informant claimed a penalty under s. 5 of the Stamp Act, 1891.

At a public auction held at Newcastle-on-Tyne on September 27, 1934, certain dwelling-houses and other premises were offered for sale in twelve separate lots belonging to different vendors. At the auction the defendants' bids in respect of lots 3, 4, 5, 6, 7 and 8, all of which belonged to the same vendors, were accepted. The defendants' separate bids were made in respect of each lot separately and each of the said lots was separately sold to the defendants.

Lots 6 and 8 were each sold for more than 500l., the remaining lots being sold for less than 500l. each. Six separate formal contracts of sale in respect of the six separate lots were

(1) [1936] 2 K. B. 246.

signed by the defendants, and six deposits of 10 per cent. of the purchase price were paid by them. Each of the contracts of sale was separately stamped. Six separate abstracts of title were supplied to the defendants' solicitors.

Sect. 73 of the Finance (1909-10) Act, 1910, provides: "The stamp duties chargeable under the heading 'CONVEYANCE OR TRANSFER on Sale of any Property' in the First Schedule to the Stamp Act, 1891 (in this Part of this Act referred to as the principal Act), shall be double those specified in that Schedule: Provided that this section shall not apply to .... a conveyance or transfer where the amount or value of the consideration for the sale does not exceed five hundred pounds and the instrument contains a statement certifying that the transaction thereby effected does not form part of a larger transaction or of a series of transactions in respect of which the amount or value, or the aggregate amount or value, of the consideration exceeds five hundred pounds."

Four separate conveyances of the said lots 3, 4, 5 and 7 (each under 500l.) were presented by the defendants to the Commissioners of Inland Revenue for stamping. Each conveyance contained a certificate that the transaction did not form part of a larger transaction or of a series of transactions in respect of which the consideration exceeded 500l.

The question for the Court was whether each of the said four transactions formed part of a larger transaction or of a series of transactions.

Lawrence J. held that each sale did not form part of a larger transaction or of a series of transactions in respect of which the aggregate amount or value of the consideration exceeded 500l. within the meaning of the section and, therefore, that in the four cases where the consideration did not exceed 500l. the double tax thereby imposed was not payable.

The informant appealed.

Sir Donald Somervell A.-G. and J. H. Stamp for the appellant.

Laski K.C. and A. M. Hurwitz for the respondent.

The arguments were substantially the same as in the Court below.

SLESSER L.J. This case is, in form, a claim for a penalty under s. 5 of the Stamp Act, 1891, which provides that all the facts and circumstances affecting the liability of any instrument to duty with which any instrument is chargeable are to be fully and truly set forth in the instrument, and that every person who, with intent to defraud His Majesty, being employed in the preparation of any instrument, neglects or omits fully and truly to set forth therein all the said facts and circumstances shall incur a penalty of 10l. The liability is limited to cases where there is intent to defraud, but the proceedings in the present case, which are said to have been raised in order to obtain a decision of the Court upon a question of law, do not rely upon any such guilty intention, and, indeed, it is upon the basis of the absence of mens rea that the parties have concurred in stating the question of law contained in the case.

In my view, this method employed for the elucidation of the problem to be considered is seriously to be deprecated. In a case where fraud is of the essence of the complaint, where therefore precision, in that personal reputation is involved, is peculiarly necessary, a fraudulent intention on the part of the subject, which alone would justify the infliction of the penalty, has been assumed which is admitted by the Crown not to be present.

On a strict interpretation of the Statute, for absence of that fraud the case should in any event necessarily be answered in favour of the defendants. Yet it is provided that if the information be right, judgment shall be entered for the Crown for 9l. without penalty notwithstanding the fact that no intention to defraud is suggested. I find it difficult to understand on what principle in these circumstances liability could arise, and I think it entirely undesirable to attempt to produce the results of penal action, albeit the penalty is to be waived, when in fact no more is sought than a bare declaration.

In the circumstances, however, having made my protest, I think it right, in order that the matter may finally be disposed of, to deal with the case as it was argued, though I am by no means saying that, had I thought the Crown right in their contentions, I should not, nevertheless, for absence of fraudulent intention, have found in favour of the subject.

The material facts of the case are as follows: At a sale by auction, which had previously been advertised, certain dwelling-houses were offered for sale by the auctioneers in twelve separate lots belonging to different vendors. The defendants made separate bids during the auction for certain of the premises comprised in six lots, two of which were sold for sums in excess of 500l. and the four remaining lots were sold for less than 500l. for each lot. Six separate contracts of sale were signed on behalf of the purchasers for each separate lot, and each was separately stamped with adhesive stamps.

Nothing turns upon those lots which sold for sums in excess of 500l., but as regards the remaining lots, four separate conveyances were duly executed and presented for stamping, and each of them contained a certificate in the following terms: "It is hereby certified that the transaction hereby effected does not form part of a larger transaction or of a series of transactions in respect of which the amount or value or the aggregate amount or value of the consideration exceeds 500l."

The question raised in the case must depend upon the proper construction of the Finance (1909-1910) Act, which provides by s. 73: [His Lordship read the section and continued:] It is said by the Crown that the transaction of the purchase and conveyance of each of the lots under consideration which do not exceed 500l., though it is not part of a "larger transaction," forms part of a "series of transactions" within the language of the section in respect of which the amount or value of the consideration exceeds 500l. The learned judge has come to the conclusion that though the parties are the same, the times of transaction close and

the places, the subject-matter of the various conveyances, contiguous, these are casual matters which do not make it proper to say that they constitute parts of a series within the meaning of the section and that there was no evidence of any interdependence. In my view, the conclusion at which the learned judge has arrived is correct. It has to be remembered that what is required under the section is a certificate, given without intent to defraud, which must appear on the conveyance, and such a certificate, from its very nature, must state that which is, or reasonably ought to be, within the knowledge of the parties. It cannot be because some third person, looking at the matter objectively, can discover by casual coincidence some serial incident that a series of transactions inter-partes can be said to arise. I think that the preceding words relating to a "larger transaction" point to the order of series mentioned in the later limb which was in the minds of the Legislature. The mischief to be considered was that persons in reality conveying for more than 500l. should not evade their liability to double duty merely by breaking up that large transaction into a number of smaller transactions each of less than 500l.

Similarly, where co-ordinated or interdependent transactions might not be so treated as to amount strictly in law to parts of "a larger transaction," nevertheless they might be so related that, in effect, one would cause or qualify another. In such a case, where the total amount of the consideration for the series was more than 500l. and so might otherwise attract to itself a higher rate of duty, the series is not to escape the full rate by being dissected into artificially discrete parts. In other words, only genuine disparate transactions of less than 500l. are to be favoured. It is significant in this connection to note that the language used is "part of a series of transactions" and not "part of a transaction in series."

But in this case, in law, each lot was genuinely the subject of a separate contract for sale (Emmerson v. Heelis (1)); there is no evidence at all that the lots were not entirely independent. I agree with the learned judge in being unable

(1) (1809) 2 Taunt. 38.

to see that the arbitrary coincidence of time or place constituted any such interdependence as to form a series. The learned judge has found that the coincidence of the dealings was a matter of accident, and I agree with him.

I think, therefore, that this appeal should be dismissed with costs.

ROMER L.J. In the month of September, 1934, a number of houses in Walker Road, Newcastle, belonging to a Mrs. Waller and another as trustees were, together with certain other properties belonging to different owners, offered for sale by public auction. For the purposes of the sale the houses were divided into six separate lots numbered 3 to 8 inclusive. The defendants duly bid for and became the purchasers of all the six lots for sums which in the case of lots 3, 4, 5 and 7 were under 500l., though the aggregate purchase money of the four lots was considerably in excess of that sum. The sales of the four lots were completed in due course by four separate conveyances to the defendants, each conveyance containing a clause in the words following: "It is hereby certified that the transaction hereby effected does not form part of a larger transaction or of a series of transactions in respect of which the amount or value or the aggregate amount or value of the consideration exceeds five hundred pounds."

The object of inserting this clause in each conveyance was to bring the case within the proviso contained in s. 73 of the Finance Act, 1910. The section is in these terms: [His Lordship read the section and continued:] The question to be determined upon this appeal is whether in the circumstances of the case such a certificate as is mentioned in the section could properly be given in respect of any of the four conveyances. Before investigating those circumstances in detail, I would call attention to the fact that what has to be considered under the section is not whether the conveyance or transfer itself forms part of a larger transaction or series of transactions, but whether the transaction which is effected by the instrument can be said to do so. Now the effect of a conveyance on sale is no doubt

to vest in the purchaser the property conveyed. But the vesting itself is not a "transaction," though the conveyance that brings about the vesting may be. The section must, therefore, be referring to the transaction that is "carried into effect" by the conveyance or transfer; that is to say, in a case like the present, the contract for sale. I propose, therefore, to examine the facts of this case with a view to ascertaining whether the contract of sale in respect of any one of the four lots in question formed part of a series of transactions within the meaning of the section. For it is not, and could not be, suggested that it formed part of a larger transaction; that is to say a larger contract of sale. That would have been the case had the defendants been taking separate conveyances of two or more properties included in the one contract. Lot 8, for instance, contained three houses and was purchased by the defendants for a sum exceeding 500l. Had the defendants chosen to take a separate conveyance of one of those houses, the transaction carried into effect by the conveyance, that is to say the contract to purchase that house, would have formed part of a larger transaction - namely, the contract to purchase the three houses included in lot 8.

I must now state the facts of the present case in more detail than I have done at present.

The property of Mrs. Waller and her co-trustee consisted of fourteen houses in flats in Walker Street, Newcastle, each of the two houses included in lot 3 being stated in the advertisement of the sale to contain two rooms and scullery downstairs and two rooms and scullery upstairs, and the other twelve houses being therein described as "similar" to those two. The houses were numbered 935 to 969 (odd numbers) inclusive, and 979 to 997 (odd numbers) inclusive, each house apparently possessing two numbers. Mrs. Waller and her co-trustee can therefore be properly described as having been the owners of a series of houses, unless I am greatly mistaken as to the meaning of the word "series". For the purpose of the sale the houses were, as already stated, divided into six lots numbered 3 to 8 inclusive, each of the lots 3, 4, 5 and 7 consisting of two houses and each of the

lots 6 and 8 consisting of three houses. At the auction, the defendants bid for and became the purchasers of all six lots. Immediately thereafter six separate formal contracts of sale in respect of the said six separate lots were signed by or on behalf of the defendants, and all six contracts were, mutatis mutandis, in the same form. In my opinion the contracts can be accurately described as a series of contracts. They were entered into as the result of a series of houses belonging to the same vendors having been offered for sale at one and the same auction in a series of lots all of which were then and there bought by the same purchasers.

It was contended on behalf of the respondents, and the contention found favour with the learned judge, that there cannot be a series of transactions within the meaning of the section unless there be some interdependence between them. The contention is stated in the judgment of the learned judge in these words: "Mr. Laski, on behalf of the defendants, contends that 'series' cannot be read in that wide sense, and that there must be, in the sort of series that are referred to in that section, some interdependence between the individual transactions which form the series. He has referred me to a number of cases which show that the buying of lots at auction constitutes separate contracts, and they only relate to each other so as to be in equity one contract where there are circumstances known to both parties at the time of the auction which show that the bids of the purchaser were dependent upon his obtaining a good title to the other lots."

He then refers to some of the authorities that Mr. Laski had cited, which included Emmerson v. Heelis (1) and Holliday v. Lockwood. (2) But though these authorities undoubtedly show that there must be some interdependence between two or more contracts before they can be treated as one, they do not, with great respect to the learned judge, have any bearing upon the present question. As I have already pointed out, no one has suggested that the contracts in the present case or any two or more of them constitute one contract. The question is whether they constitute a series of contracts,

(1) 2 Taunt. 38.

(2) [1917] 2 Ch. 47.

and upon that question those authorities throw no light. Take, for example, the case of Emmerson v. Heelis. (1) It was held that the contracts for the purchase of several lots of turnips at an auction did not form one contract. Had the question been whether they formed a series of contracts, the answer should, in my opinion, have been in the affirmative.

But, as I understand the argument of the respondents, they do not contend that the contracts in the present case do not form a "series" in the ordinary acceptation of that word, but that the Legislature must have intended to use the word in some more restricted sense as connoting an interdependence between a number of transactions, yet one not sufficiently pronounced to constitute them one transaction within the meaning of the authorities that were cited. If this were the intention of the Legislature, I can only regret that it did not give some intimation of the kind of transactions that it had in mind. For myself I am unable to think of any that would constitute a series within this restricted meaning. But what reason is there to suppose that the Legislature did not use the word in the sense in which it is ordinarily used? I can see none. It is plain that if the eight houses included in lots 3, 4, 5 and 7 had been included in one lot, or even in two lots, as they might well have been, the defendants would have been obliged to pay the increased stamp duty imposed by s. 73 even if they had taken separate conveyances of the houses included in each of those lots. It is equally clear that had all the eight houses, though bought by four separate contracts, been included in one conveyance, as might well have happened, the considerations being aggregated for this purpose into one sum, the stamp duty on the conveyance would have been at the increased rate. I cannot understand why, in the circumstances, it should be thought that the Legislature did not intend the increased stamp duty to be paid merely because the defendants chose to take four separate conveyances. I should have expected its intention to be precisely the contrary. I can see no reason whatsoever for supposing that it intended to use the word "series" in

(1) 2 Taunt. 38.

a sense that would relieve the purchaser in the present case from the increased duty. That cases may arise in which it will be difficult to say whether or not the conveyance or transfer carries into effect a transaction that forms part of a series of transactions, as I construe the word "series," no one will deny. But that, one would think, must be the case whatever construction be placed upon the word "series." In any case the fact that such difficulties may, and perhaps must, arise is no reason for not attributing to the word "series" its ordinary meaning. If given that meaning, I am of opinion that it covers the case with which we are now concerned.

In my opinion the appeal should be allowed.

Although, to my regret, I find myself in disagreement with the other members of the Court upon this question, I desire to express my entire concurrence in what Slesser L.J. has said as to the form of procedure adopted in this case.

GREENE L.J. The question raised by this appeal arises under s. 73 of the Finance (1909-1910) Act, 1910, and is stated in the special case to be "whether each of the transactions effected by the four conveyances aforesaid formed part of a larger transaction or series of transactions in respect of which the amount or value or the aggregate amount or value of the consideration exceeds 500l." The facts of the case have already been sufficiently stated, but I shall have something to say at the conclusion of my judgment as to the manner in which the question is brought before the Court.

Sect. 73 of the Finance (1909-1910) Act, 1910, provides in its opening words that "The stamp duties chargeable under the heading 'CONVEYANCE OR TRANSFER on Sale of any Property, in the First Schedule to the Stamp Act, 1891, .... shall be double those specified in that Schedule." By s. 54 of the Stamp Act, 1891, the expression "conveyance on sale" includes "every instrument, and every decree or order of any court or of any commissioners, whereby any property, or any estate or interest in any property, upon the sale thereof is transferred to or vested in a purchaser, or any other person on his behalf or by his direction." Sect. 6 of the

Finance Act, 1898, declares that the definition of a "conveyance on sale" in s. 54 of the Stamp Act, 1891, includes a decree or order for, or having the effect of an order for, foreclosure. Sect. 74 of the Finance (1909-1910) Act, 1910, provides that conveyances operating as voluntary dispositions inter vivos shall be chargeable with stamp duty as if they were conveyances on sale with the substitution of the value of the property for the amount of the consideration.

The documents, therefore, which are to be charged with double duty are documents effecting a variety of transactions, and this circumstance in my opinion explains the use of the general term "transaction" in the proviso to s. 73 of the Act of 1910 to which I now turn. [His Lordship read the proviso and continued:] In my opinion the "transaction effected" by the documents now in question was in each case the conveyance of the property comprised therein to the purchaser. I do not take the view that the transaction effected is the antecedent contract. Each of the transactions effected by the four conveyances was a separate and independent transaction unconnected with the others. Each of them carried out a separate and independent contract unconnected with the contract carried out by the others. There was no relationship between the transactions effected by the conveyances except that the houses were all situate in the same street, the parties were the same, the conveyances all bore the same date and the contracts which they carried out were all made on the same day and at the same place. The question which arises in this case is whether the mere existence of this relationship is sufficient to constitute each of these separate and independent transactions "part of a series of transactions" within the meaning of the section since it was not and could not be contended that they formed part of a larger transaction. The learned judge held that the transactions did not form part of a series of transactions, and I agree with him.

In approaching the construction of the relevant words of the section, there are, in my opinion, three matters which it is important to bear in mind. The first is that it is the presence of the certificate in the conveyance which by the

section gives rise to the exemption from double duty. In so far as it is open to the Crown by some appropriate method to challenge the propriety of a certificate it is, I think, proper to apply the rule that a tax is not to be imposed except by clear language. In my judgment, if the Legislature had intended that a relationship such as that which exists in the present case between separate and independent transactions should constitute each transaction part of a series, it should have said so in clear terms, for example, by using some such words as "one of a number of substantially contemporaneous transactions".

The second matter is that once the facts are ascertained the question whether they fall within the language used in the section is a question of the construction of the section, and therefore a question of law see Farmer v. Cotton's Trustees (1), per Lord Parker): It is, therefore, in my judgment, illegitimate to treat the question as a question of fact or, as it is sometimes put, a question of degree, which is the same thing expressed in a different way. The statement that a transaction forms part of a series involves a tacit finding as to the meaning of the word "series" in its context, and for my part I am unable to take so easy a path in order to arrive at a solution of the present difficulty. It is, in my judgment, incumbent upon those who assert that a number of transactions constitute a series within the meaning of the section at least to point to some quality in them which upon some intelligible ground removes them from the category of separate transactions and unites them under the head of a series. In the arguments addressed to us on behalf of the Crown, I have been unable to discover any such intelligible ground, since the elements which it was suggested will convert what is not a series into a series, appear to me to be quite fortuitous and incapable of being referred to any intelligible ground of differentiation.

The last matter is this. The proviso leaves it to the parties to determine and certify whether or not the transaction forms part of a series of transactions. Presumably, therefore,

(1) [1915] A. C. 922, 932.

the Legislature thought that the question whether or not a certificate could properly be given would be readily determined and would not require a consideration of the exact weight to be given to a number of matters of fact, a question upon which different views might well be taken. The certificate is to be the certificate of both parties to the transaction, - or, it may be, of a number of parties, and it can scarcely be supposed that the Legislature intended to confront them with nice questions upon which there might well be acute differences of opinion. Yet the refinements by reference to which, according to the Crown's contention, the question would fall to be decided, will inevitably lead to such a result.

I now turn to a consideration of the crucial words of the section. The word "series" must be read in its context, which is "part of a larger transaction or of a series of transactions." The expression "part of a series" suggests, to my mind, that by a series is meant something of which it can be said there is some integral relationship between its parts. It does not, I think, convey the idea that all that is required is that the transaction should be one of a number of transactions related to one another in time or space or both. This view is, I think, strengthened by the fact that the expression "part of a series of transactions" stands in juxtaposition to the expression "part of a larger transaction". Many instances can be thought of where it might be doubtful whether a transaction could properly be described as "part of a larger transaction" but where by reason of the presence of an integral relationship with other transactions it could be said to form "part of a series of transactions". And here it is of importance to remember that the class of transactions effected by documents covered by the section is a varied one. Thus it covers the case where in one action (or under one reference) by successive orders of the Court (or of Commissioners) different parts of a property become vested in a purchaser. Again, a builder developing a building estate might have under one contract an option to purchase different plots at different times, so that each option, when exercised, would create a separate contract. In each of these cases

it would at the least be a matter of doubt whether a particular order or conveyance could be said to form part of a larger transaction, but there would, I think, be in each case such an integral relationship between the transactions as to constitute each indubitably part of a series of transactions. In my opinion, read in its context, the phrase "part of a series of transactions" is intended to sweep in cases where the relationship between the transactions is an integral and not a fortuitous one depending merely on such circumstances as contiguity in time or place, but is such that it would not or might not be sufficient to bring them within the phrase, "part of a larger transaction".

Apart from the fact that in order to constitute a series the vendor and the purchaser must in each transaction be the same, the Crown's argument requires no relationship between the various transactions except one which is to be built up by means of a number of matters of fact. Thus in the present case the facts that the houses were all of the same type, that they were all situated in the same street, that they were sold at the same auction sale on the same day, were all added together in order to make the required "series". But what if they had been of different types, or in different streets, or had been sold on two successive days, or on the same day in two different auction rooms? And what if contracts made on different days were all carried out by conveyances made on the same day? It is, in my judgment, no answer to the criticism involved in these questions to say that it is the combination of facts which constitute the transactions a series, since this statement tacitly involves an answer to the question, "What is a series?" and begs the question of construction. Indeed, my criticism of the Crown's contention is that it shirks the difficulty. Mr. Stamp contended that mere contiguity in time would convert into a series something which would not otherwise be a series. I cannot myself accept the view that the question falls to be determined by such nice considerations. In the course of the argument I put to the Attorney-General the question whether, if a mortgagee of four separate properties under four

separate mortgages began four separate foreclosure actions on the same day and obtained four separate foreclosure decrees on the same day, these decrees would each form part of a series of transactions. His reply was that it would depend on such matters in the history of the mortgages as whether or not they were executed on the same day and whether or not the mortgagor had been in the habit of paying the interest by one cheque. Indeed, whenever the Crown's contention was closely examined it did not appear, to my mind at any rate, to provide any satisfactory principle for distinguishing what is from what is not a series in this taxing Statute.

The question is, no doubt, one of difficulty, but on the whole, giving the matter the best consideration that I can, I have come to the conclusion that the appeal should be dismissed.

Before concluding this judgment, I wish to say a word as to the manner in which the question has been raised before the Court. The proceedings take the form of a claim by the Attorney-General on behalf of His Majesty for a penalty under s. 5 of the Stamp Act, 1891. It was not explained to us how, in the absence of the intent to defraud the Crown which that section requires, a penalty could be recovered - it certainly cannot be suggested in the present case that there was any intent to defraud. But it is said (whether rightly or wrongly) that proceedings under s. 5 afford the only means of having the substantial question determined, and that the respondent has agreed to have it determined in this way. Speaking for myself, I do not think that the Court should be asked to adjudicate on a matter which is raised before it upon an assumption of fact which is not true, particularly when that assumption is based on an agreement between the Crown and a subject by which the subject is to be treated as having committed a criminal offence of which he is quite clearly not guilty.

Solicitors: Solicitor of Inland Revenue; Gale & Phelps, for Sebag Cohen & Co., Sunderland.

J. L. D.