[1998] PNGLR 364

PAPUA NEW GUINEA

[national court of justice]

DIVINE WORD INSTITUTE

V

COMMISSIONER GENERAL OF INTERNAL REVENUE COMMISSION

waigani: sevua j
12 March and 26 May 1998

Stamp Duty – Assessment of ad valorem duty – Exemptions – Conveyance or Transfer– Purchase of property by Institute – Whether the purchase was for the purposes of the Institute or charitable or educational purposes – Whether the Institute is exempted from stamp duty – Stamp Duties Act Schedule 1, Item 5(4).

Constitution – Fair and liberal interpretation – Constitutional Law – Schedule 1.5.

Facts

The appellant Institute had purchased a property containing of residential units in Port Moresby. The Commissioner General assessed ad valorem stamp duty on the purchase price of K1.55 million. The Institute objected to the imposition of stamp duty, claiming exemption as an educational institution.

Held

1.	There is no provision in the Divine Word Institute Act, 1980, which stipulates that the Institute may acquire, lease or transfer real property for the purpose of the Institute, or to generate income for the purpose of the Institute or for revenue producing purposes for use in carrying out its functions, objectives or activities under the Act.

2.	There is no evidence that the purchase of the property (the subject of this appeal) was for the purpose of the Institute, or to generate revenue necessary to further the objectives of the Institute, or is wholly ancillary to and/or directly facilitates the carrying out of the objects of the Institute pursuant to s 4 of the Divine Word Institute Act, 1980.

3.	The appellant is not exempted from payment of ad valorem duty on the basis that the property in question was not purchased for the purpose of the Institute.

4.	The appeal is therefore dismissed with costs to be taxed.

Papua New Guinea case cited

Mairi Mairi v Alkan Tololo & Ors [1976] PNGLR 125.

Other cases cited

Ryde Municipal Council v Macquarie University (1977-78) 139 CLR 633.
University of Western Australia v Commissioner of State Taxation (WA) (1987) 19 ATR 728 88 ATC 4020.

Counsel

J Kuwimb, for appellant.
M Miva, (by leave) for respondent

26 May 1998

Sevua j. This is an appeal against the decision of the Commissioner General, Internal Revenue Commission, for not exempting the appellant from payment of ad valorem duty under Item 5(4) of Schedule 1 of the Stamp Duties Act.

The brief facts were that the appellant had purchased a property consisting of a block of residential flats containing eight units at Touaguba, Port Moresby, from British Petroleum (PNG) Pty Ltd at the price of K1,550,000.00.

The purchase attracted duty assessed at K77,504.00, which the appellant had paid. Pursuant to s 20A of the Stamp Duties Act, the appellant filed an objection against the assessment on the ground that the appellant, as an educational institution, should be exempted from duty pursuant to Item 5(4), Schedule 1 of the Stamp Duties Act. The respondent refused to grant an exemption on the ground that Schedule 1, Item 5(4) only applies to situations where the real property is "transferred" or "conveyed" by means of instrument other than a contract or agreement for sale within the meaning of s 1 of the Stamp Duties Act.

The appellant now appeals against that decision on the ground that the respondent was wrong in law and fact in refusing the exemption. The only ground of appeal is:

"As a matter of law and fact, the Commissioner is wrong in refusing to grant an exemption because Schedule 1, Item 5(4) "only applies to situation where real property is transferred/conveyed to such Institutions by means of other instrument other than through a contract/agreement for sale, i.e., for a monetary consideration."

The issue in this appeal is whether the respondent is exempted from ad valorem duty pursuant to Schedule 1, Item 5(4) of the Stamp Duty Act. This appeal involves the construction of Item 5(4) of Schedule 1 of the Stamp Duties Act.

Item 5(4) of Schedule 1 provides:

5.	Conveyance or transfer on sale of real property.

Exemptions –

"(4)	Conveyances or transfers of real property to, or in trust for, registered friendly societies or corporations or bodies of persons associated for religious, charitable, recreational or educational purposes, and instruments for declaring or defining the trusts or for appointing new trustees in respect of real property so conveyed."

In determining the issue, I consider that other collateral issues need to be determined. Some of these have been raised in submissions by both counsels. One of these issues, raised by the appellant is, can the contract of sale of land in this transaction be said to be a "conveyance or transfer" pursuant to Schedule 1, Item 5(4)?

Certain definitions in the Stamp Duties Act are relevant in determining this question. Section 2(a)(ii) of the Stamp Duties (Amendment) Act 1988 (No. 26 of 1988) defines "conveyance" to, include, "any exchange, appointment, surrender, release, foreclosure, disclaimer and every other instrument (except a will), and a decree, judgment or order of a Court whereby any property in Papua New Guinea is transferred to, or vested in, or accrues to a person, but does not include a deed of gift or a deed of settlement." "Conveyance on Sale" is defined by s 1(a) of an amendment to the Act, (No 43 of 1994) as, "…any conveyance by which any real or personal property, upon the sale thereof, is legally or equitably transferred to, or vested in, the purchaser or any other person on his behalf or by his direction." "Transfer", includes conveyance and assignment, whilst "assignment", "in relation to a lease, includes a transfer, but does not include a deed of settlement or deed of gift."

From these statutory definitions, counsel for the appellant conceded that, the appellant cannot be exempted, and that the Collector of Stamp Duties was correct in law and in fact in his assessment. However, he submitted that, considering the "purpose" (my emphasis) for which the property was acquired, the appellant should have been exempted from ad valorem duty. This argument is based on the following public policy considerations:-

•	charity organisations and educational institutions like the appellant rely on limited revenue resources to achieve their charitable objectives, therefore, to further these objectives and expand their activities and meet administrative costs, they require other forms of income in addition to income from school fees, government subsidy, aid, etc.

•	in Papua New Guinea where the majority live in villages with inaccessibility to or lack of government services such as schools, hospitals, water supply etc, they rely on charitable organisations such as churches or religious groups, like the appellant in this case, to provide these services.

•	to promote and continue these worthwhile activities, religious and charitable organisations need a secure continuous source of income. In this case, the profits from rentals from the property would be a secure source of revenue for the appellant.

•	imposition of taxes like ad valorem duty as in this case would constrain and inhibit religious and charitable organisations like the appellant from investing for profit for the purpose of advancing or promoting their objectives.

•		such taxes would force or curtail their operations and the repercussions are such that rural based economy would be affected, eg, a rural supplier of vegetables to an institution would no longer have a market.

•		if school fees are increased to meet escalating prices of goods and services forced on the consumers by economic factors like inflation (at 11% at present), students would be incapable of meeting these fees therefore resulting in denying them their education.

For these reasons, the appellant submitted, the Court should interpret the words, "conveyance" and "transfer" in Schedule 1, Item 5(4) to encompass sale or purchase of a property by a religious or charitable organisation like the appellant in the present case. Even if this argument fails by reason that the Court interprets the law and does not legislate, the Court is required by Constitution, Schedule 1.5(2), to give a fair and liberal meaning to Constitutional provisions. Even though the Stamp Duty Act is not a constitutional provision, it was submitted that, because it is an act of Parliament, this Court should be constrained to give a fair and liberal interpretation to Schedule 1, Item 5(4) of the Stamp Duties Act.

As a matter of construing Schedule 1, Item 5(4) of the Stamp Duties Act, I consider that the whole argument on public policy considerations is misconceived and must fail. The appellant has conceded that the respondent has not erred in law or in fact, and that is the end of the matter, as far as this Court is concerned.

Some reliance has been placed on two Australian cases, which I will refer to now.

In University of Western Australia v Commissioner of State Taxation (WA) (1987) 19 ATR 728; 88 ATC 4020, the University appealed to the Supreme Court of Western Australia against assessment of stamp duty totalling $1,831,855.00 in respect of the purchase of commercial properties, funds for which were derived from the sale of land endowed upon the trustees of the University Endowment and it was intended they be leased to ensure a reliable source of income.

In allowing the appeal, the Supreme Court held, "the effect of the University Endowment Act 1927 was that proceeds of the sale of any property vested in the appellant were to be reinvested in land used for revenue producing purposes. Accordingly, it was by statutory force that the properties purchased under the agreements with money derived from the sale of endowment land had been acquired for the purpose of a University. Therefore, the conveyances were exempted from duty under s 75AA of the Act" (Stamp Duty Act 1921 (WA))."

I think it is necessary to cite s 75AA of the Western Australia Stamp Duties Act, because, at the end of the day, one will see that there is a clear distinction between that case and the case before me. Section 75 AA provides: "When the Commissioner is satisfied that any deed of gift, conveyance, transfer, settlement or other instrument operating as a voluntary disposition of property, or any conveyance on the purchase of property, has been made for the purpose of a University or for charitable or similar public purpose, he may exempt from ad valorem duty, or refund ad valorem duty paid on that deed, conveyance, transfer, settlement or other instrument or conveyance on the purchase of property." I have emphasised the phrase "the purpose of a University," because, in my view, it is significant in this case, and I will refer to counsel’s submission on it.

As alluded to earlier, counsel for the appellant submitted that the purpose for which the appellant effected this purchase was "to generate revenue necessary to further the objectives of the Institute/appellant." I do not accept this submission simply because there is no factual or legal basis for it. Counsel referred me to ss 4 and 20 of the Divine Word Institute Act, 1980; however, I cannot find anything in these two provisions, which stipulate what counsel has argued. In my view, in order for the appellant to attract exemption from ad valorem duty, there must be a provision in its Act stipulating that the Institute may acquire, lease or transfer real property for the purpose of the Institute, that is, to generate revenue for the purpose of the Institute or for revenue producing purposes for use in carrying out the Institute objectives or activities.

For instance, in the University of Western Australia case, the University Endowment Act 1927 provided the basis for the University to use the proceeds of the sale of property vested in it for reinvestment in land to be used for revenue producing purposes. The consequences of this was that by law, properties purchased by the University under agreements with money derived from the sale of endowment land were acquired for the purpose of the University. The phrase, "for the purpose of" in s 75AA alluded to, meant, "in carrying on the activities of". Smith, J said at 732, "in my opinion, the words of s 75AA, "for the purpose of a University or for charitable purposes include by necessary implication the acquisition of property for revenue producing purposes for use in carrying out the activities of a University or a charitable purpose." His Honour consequently concluded that the appellant had acquired the properties in question for the purpose of a University and had satisfied the precondition of s 75AA. 

The other case referred to was, Ryde Municipal Council v Macquarie University (1977-78) 139 CLR 633. In that case, parts of a two level building at the University premises were leased to tenants for commercial purposes. There were retail shops, a travel centre, two bank branches, a chemist, etc. The municipal council issued a rate notice in respect of the whole of the land on which the building stood. The University sued the Council and obtained from the NSW Supreme Court (Waddell, J), a declaration that certain land which forms part of the land owned by the University and on which the University is situated, is not ratable under the Local Government Act, 1919 (NSW). The Court of Appeal, by a majority, dismissed an appeal by the Council, and the Council then appealed to the High Court by special leave.

The issue was whether the subject land was ratable. Both parties in that case agreed that this question should be determined. 

However, it is important to note that Waddell, J and the majority of the Court of Appeal held that the land was used by the University solely for the purposes thereof within par (fii) of s 132(i) of the Local Government Act 1919 (NSW) and therefore not ratable under that Act.

It is obvious, in my view, that in those two cases, the issues considered related to the "purpose" and "sole use", of the property respectively. Counsel for the appellant relied on these cases, however, in my view, they do not support his arguments. Although the decision in those cases are persuasive and of great assistance, and though they may not be binding on this Court under Constitution Schedule 2.2, I do not see why those principles cannot be adopted and applied in this case.

I am inclined to follow the principles in those Australian cases and apply them in the present case, because I consider they are sound principles of law. In both cases, there were enabling legislations, which empowered both Universities to generate income from proceeds of real estate for the purposes of the Universities. In the present case, there is no provision in the Divine Word Institute Act, 1980, empowering the Institute to generate income from real estate for the purposes of the Institute.

I do not think I can accept the appellant’s counsel’s contention that I should apply a fair and liberal interpretation to Schedule 1, Item 5(4), and there are several reasons for this. Firstly, Schedule 1, Item 5(4) is not a constitutional law. Constitution Schedule 1.5(2) specifically refers to a constitutional law. The Stamp Duties Act is not a constitutional law. Secondly, there is no evidence at all that the appellant purchased the property, the subject of this appeal, for the purposes of the Institute. Contrary to what Mr Kuwimb submitted, there is no evidence before this Court that the property purchased by the Institute was to generate revenue necessary to further the objectives of the Institute.

And furthermore, there is no evidence before this Court that the purchase was wholly ancillary to, and or directly facilitates the carrying out of the appellant’s objects in s 4 of the Divine Word Institute Act, 1980.

Finally, it is not the Court’s function to import into a legislation, what the legislature has not done or omitted to do. To do so, would be, to usurp the legislative function of the legislature. This Court cannot read into the Stamp Duties Act, what is not in it, nor can it imply what is not stipulated in the Act. The Court can only interpret what is stated in a law and cannot import into the law what is not stipulated. My view is fortified by what the Supreme Court said in Mairi Mairi v Alkan Tololo & Ors [1976] PNGLR 125 at 139. The Supreme Court was following a rule of construction that is historical throughout Commonwealth jurisdictions. Their Honours, Prentice, DCJ & Williams, J said:

"In a taxing Act, one has to look at what is clearly said. There is no room for intendment. There is no equity about tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied, one can only look fairly at the language used….

If the case is not brought within the words of the statute, interpreted according to their natural meaning; and if there is a case which is not covered by the statute so interpreted, that can only be cured by legislation and not by any attempt to construe it benevolently in favour of the State."

It is noted that in that case, the argument of fair and liberal meaning in Constitution, Schedule 1.5 also arose and it gave rise to the statement of law that I have cited in full above. Craies on Statute Law, 6th ed., Sweet & Maxwell, 1963 at pp 113-115 provides some very good common law authority on this subject, which is applicable in this jurisdiction by virtue of Schedule 2.2 Constitution.

On the basis of that Supreme Court decision, I consider that the appellant’s argument of fair and liberal interpretation must fail.

For these reasons, it is my judgment that the appellant is not exempted from payment of ad valorem duty or stamp duty pursuant to Schedule 1, Item 5(4) because the property it purchased was not purchased for the purposes of the Institute.

I therefore order that the appeal be dismissed with costs to be taxed.

Lawyer for appellant: Warner Shand Lawyers.
Lawyer for respondent: Bill N. Nouairi.