Collins v Commissioner for Inland Revenue

• Jurisdiction: South Africa
• Citation: 1990 (4) SA 619 (D)

Collins v Commissioner for Inland Revenue
1990 (4) SA 619 (D)

1990 (4) SA p619

Citation	1990 (4) SA 619 (D)
Court	Durban and Coast Local Division
Judge	Alexander J
Heard	March 26, 1990
Judgment	August 10, 1990

Flynote : Sleutelwoorde

Revenue — Transfer duty — Payment of — Transfer Duty Act 40 of 1949 — Sale of fixed property provided that it would be binding on purchaser only if he did not nominate a purchaser who accepted such nomination within ten days of date of sale — Upon such nomination original C purchaser becoming surety for and co-principal debtor with nominee — Purchaser nominating his nominee, a company which was incorporated some ten days after expiry date provided for in contract — Nominee accepted the nomination one month later in a document which provided for the date of its acceptance to be deemed to be the expiry date provided for by D contract — Transaction between seller and original purchaser 'cancelled, or dissolved by the operation of a resolutive condition' as intended in the exemption contained in s 5(2)(a) and duty not payable on that transaction but merely on the sale to the nominee.

Headnote : Kopnota

The applicant purchased certain fixed property from a company, E 'Chemhold'. In terms of the agreement, the agreement between the parties 'shall become binding upon the purchaser as a contract of purchase and sale only if the purchaser shall not have nominated a purchaser who shall have validly have accepted such nomination within ten days after the date hereof'. Upon the nomination and acceptance thereof by the nominee the applicant became bound as surety for and co-principal debtor with the nominee for the fulfilment by the nominee of all the nominee's obligations as purchaser. The applicant nominated a company, Hagart, as F the purchaser which company was incorporated some ten days after the period of ten days provided for in the agreement had expired. In its acceptance of the nomination approximately a month after incorporation Hagart stipulated that notwithstanding the date of signature thereof the date of nomination was deemed to be the end of the expiry period of ten days. Hagart paid duty on the transaction and the applicant did not. The G respondent was of the opinion that the applicant was liable to pay duty as the agreement revealed successive sales of the same property. The applicant accordingly sought an order declaring that no duty was payable on the transaction between himself and Chemhold. The respondent contended that when the applicant nominated Hagart as the purchaser the effect was to uncouple the link binding him to Chemhold and to substitute Hagart: this being the case no new agreement was brought into being between Hagart and Chemhold and transfer duty would therefore fall to be paid twice. The respondent argued further that however one H described the transaction it was not a 'cancellation' within the meaning of s 5(2)(a) so as to exclude the payment of additional duty.

Held, that the transaction was a transaction 'whereby property has been acquired, (and) before registration of the acquisition in a deeds registry, (is) cancelled, or dissolved by the operation of a resolutive condition' and accordingly fell within the exemption contained in s 5(2)(a) of the Act. The applicant was therefore not obliged to pay any I transfer duty arising out of the conclusion of the agreement of purchase and sale between applicant as purchaser and Chemhold as seller. Application granted.

Case Information

Application for a declaratory order. The facts appear from the reasons for judgment.

J M J D Wallis SC for the applicant.

1990 (4) SA p620

A P P Delport SC for the respondent.

Cur adv vult.

Postea (August 10). B

Judgment

Alexander J:

Three parties are involved in an agreement which gives rise to the present matter. They are the applicant, Mr R K Collins ('Collins'); Chemhold Investments (Pty) Ltd ('Chemhold') from whom he bought certain fixed property; and Nine Hagart Road (Pty) Ltd ('Hagart') to whom Chemhold transferred the property.

Hagart paid transfer duty in respect of its acquisition in terms of s C 2(1) of the Transfer Duty Act 40 of 1949. The Commissioner for Inland Revenue contends that Collins should also have done so. Collins disagrees and approaches the Court to declare that the Commissioner is wrong.

By way of introduction to what the case involves, the arguments centre on whether the agreement reveals successive sales between Chemhold to D Collins and Collins in turn to Hagart, in which event Collins would be liable to pay transfer duty; or whether by reason of certain stipulations in the agreement Collins would have ceased to be bound to Chemhold before transfer to Hagart, the effect of which would be to absolve him from any such duty.

Collins' agreement was concluded with Chemhold on 20 May 1987. The E date should be noted, as it figures prominently in the argument. That aside, the agreement follows the conventional pattern of sales in respect of fixed property with the purchase price having to be put up within a stated period (in this case 30 days of the seller's signature) by an approved guarantee. This particular provision was made subject to F the purchaser being granted such funds within seven days of acceptance. This was included in a hand-written addendum. Nothing turns on that, but a great deal turns on another part of this addendum which incorporates an annexure A. It provides:

'This agreement shall become binding upon the purchaser as a contract of purchase and sale only if the purchaser shall not have nominated a G purchaser (hereinafter referred to as a nominee) who shall validly have accepted such nomination within 10 days after the date hereof and

(i)

the parties undertake that pending such nomination or the expiry of the said period neither shall resile from this agreement unless in terms of specific provisions herein contained;

(ii)

H upon such nomination and acceptance hereof by the nominee the purchaser shall by the purchaser's signature hereto be bound as surety for and co-principal debtor "in solidum " with such nominee for the due and faithful fulfilment by the nominee of all the nominee's obligations as purchaser in terms of this agreement including any that may flow from breach of contract, hereby renouncing the benefits of all the legal exceptions I available to sureties with the full effect of which the purchaser acknowledges to be fully acquainted.

(iii)

the date of sale shall be the date of such nomination or the expiry of the aforesaid period as the case may be.'

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