Greig and Another v Revenue Authority Kampala (Civ. App. No. 12/1938) [1938] EACA 65 (1 January 1938)

# COURT OF APPEAL FOR EASTERN AFRICA

# Refore SIR JOSEPH SHERIDAN, C. J. (Kenya); WHITLEY, C. J. (Uganda); and HAYDEN, J. (Kenya).

HUNTER & GREIG on behalf of Foster Bros., Ltd., Kampala, Appellants (Original Defendants)

$\mathbf{v}$

THE REVENUE AUTHORITY, KAMPALA, Respondent (Original Plaintiff)

Civ. App. No. 12/1938.

Appeal from decision of Johnston, Ag. J. (Uganda).

Company law—Contract relating to shares—Agreement to allot shares in payment of debt due for delivery of chattels—Stamp duty— Agreement or memorandum relating to the sale of goods-<br>Companies Ordinance (Cap. 33, Laws of Uganda), sec. 43-Stamp Ordinance (Cap. 161, Laws of Uganda), Schedule, items 5 and 21—Costs against Government.

Messrs. Foster Bros., a firm consisting of four partners delivered to Messrs. Foster Bros., Ltd., certain plant and other movable property valued by agreement at Sh. 31.640. In consideration of the premises. by parol agreement the Company agreed to allot to each of the members of the partnership and each of such members agreed to accept an allotment of $395\frac{1}{2}$ fully paid up shares of £1 each in full settlement of the amount owing by the Company to the partnership in respect of the plant and other movable property aforesaid. The Company filed the "particulars of a contract relating to shares" under section 43 (2) of the Companies Ordinance (Cap. 33, Laws of Uganda) in respect of the transaction, bearing no stamp duty.

*Held* $(29-7-38)$ .—(1) That no stamp duty was chargeable in respect of the particulars of a contract relating to shares because had the contract relating to the said particulars been effected in writing no stamp duty could have been payable in respect of it by virtue of the exemption to item 5 of the Schedule to the Stamp Ordinance (Cap. 161, Laws of Uganda).

(2) That the appellants, in view of the special circumstances and public importance of the case, were entitled to costs against the Government. (Johnson v. Rex (1904 A. C. 824) applied.)

The cause was instituted under section 57 of the Stamp Ordinance, Uganda, by way of a special case stated in the form following: —

1. Under section 43 of the Companies Ordinance (Cap. 33, Laws of Uganda Protectorate, 1935), where a Company has allotted shares for a consideration other than cash, the Company is required to file with the Registrar of Companies a contract in writing, with the annexures mentioned in subsection 1 $(b)$ thereof, all duly stamped, or, in absence of such a written contract the Company has to file "particulars of the contract stamped with the same stamp duty as would have been payable if the contract had been reduced to writing" under subsection 2 thereof.

2. Messrs. Foster Bros., Ltd., a company incorporated in Uganda on 3rd January, 1938, and having their registered office

at Bugondo in the Teso District, allotted 1,582 shares of the face value of Sh. 20 each, in consideration for "Loose Plant and Machinery, Stock-in-Trade and other chattels", taken over by them and their Advocates Messrs. Hunter and Greig filed the "Particulars of a Contract relating to Shares" (Company Form No. 8) under section 43 (2) on 17-2-38 in this respect, bearing no-Stamp Duty. The original form is attached hereto.

3. The Registrar of Companies pointed out to Messrs. Hunter and Greig that the document required a stamp duty of Sh. 640and impounded it.

4. If there had been any contract in writing embodying the transaction, it would have been required to be stamped as a deed of exchange with a stamp duty of Sh. 640 (at 2 per cent on Sh. 32,000) and this document therefore requires that amount of stamp duty under section 43 (2) of the Companies Ordinance.

5. The Revenue Authority informed Messrs. Hunter and Greig that the document did require the stamp duty whereupon Messrs. Hunter and Greig have requested me to state this case to the High Court under section 57 of the Stamp Ordinance (Cap. 161, Laws of Uganda Protectorate, 1935).

6. The decision by the High Court is solicited on the following points: -

Is the document-particulars of contract filed under section 43 (2) of the Companies Ordinance by Messrs. Hunter and Greig-liable to stamp duty and if so, the amount of such duty.

Three documents attached to the plaint were: —

(a) A form of "particulars of a contract relating to shares" (Company Form No. 8) showing that 1,582 fully paid up shares of Sh. 20 each were allotted in respect of the purchase of loose plant and machinery, stock-in-trade, and other chattels to the value of Sh. 31,640 and that in addition shares to the value of Sh. 8,360 were purchased in cash.

(b) A document entitled "A specimen of agreement which might have been reduced to writing to cover the terms between the partnership and the Company" in the following terms:—

An agreement made, etc., between C. W., G. W., F. B. L. and H. G. Foster (hereinafter called the partnership) of the one part and Foster Brothers, Limited (hereinafter called the Company) of the other part.

Whereas the Company is indebted to the partnership in the sum of Sh. 31,640 being the agreed value of the loose machinery plant, motor vehicles, cattle and other loose assets taken over by the Company from the partnership. Now it is hereby agreed that in pursuance of a request by the partnership and in consideration of the premises the Company will issue to each of the members of the partnership and each of such members will accept 395 $\frac{1}{2}$ fully paid shares of £1 each in full and final settlement of the amount owing to the partnership by the Company in payment of the aforesaid loose assets.

Signed by the said C. W. Foster. G. W. Foster, F. B. L. Foster and H. G. Foster in the presence of

The Common Seal of the said Foster Brothers, Limited, was hereto affixed in the presence of: $-$

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

### Directors.

(c) A letter dated 21-2-38, addressed to the Registrar of Companies from the appellants' advocates. The contents of the letter were as under: $-$

> Kampala, 21st February, 1938.

Sir.

## Foster Brothers, Ltd.

We have the honour to acknowledge your letter of 19th instant. The loose plant, etc., valued at Sh. 31,640 all passed by manual delivery and was all in a state of severance.

2. Messrs. Foster Brothers formerly carried on business in partnership. At the end of the 1937 trading year they were owners of four cotton ginneries and a number of cotton stores. They also had loose assets to the value mentioned above. The ginneries and stores are being leased by them to the Company and remain the property of the partnership. The movable property was taken over by the Company at the above mentioned figure.

3. The transaction could of course have been carried out by each of the partners passing a cheque to the Company for the full value of the shares and the Company in turn paying each partner a quarter of the value of the moveable property.

4. The transaction was not reduced to writing but had it been in writing and stated that the partnership agreed to hand over its movable assets in part payment for shares, the document would not have been liable to *ad valorem* duty.

We have the honour to be,

### Sir.

Your obedient servants.

HUNTER & GREIG.

## The Registrar of Companies, Kampala.

The trial Judge held that the agreement was a conveyance and that stamp duty was payable under item 22 of the Schedule to the Stamp Ordinance in respect of the particulars of the contract.

The appellants appealed.

Atkinson for the appellants.—The test to be applied is whether the agreement would have been subject to stamp duty if it had been made in writing.

The agreement was not a conveyance. It did not cause any right of property to pass. It gave rise to a right in personam to an allotment of a number of shares but it did not pass any property in any shares nor did it relate to any particular shares. The property in the plant, etcetera, passed by delivery. It is impossible to reduce a delivery into writing.

The agreement was an agreement relating to the sale of goods and so is exempt from duty under the exception in item 5 of the Schedule to the Stamp Ordinance. A contract of sale includes an agreement to sell.

Hone, K. C. Attorney General (Uganda) for the respondent.—The consideration for the delivery of the chattels was a right to an allotment at a future time. The agreement created the right to the allotment and so the movable property was transferred. It was a contract of sale and therefore it comes within the definition of a conveyance in section 2 of the Stamp Ordinance.

As a conveyance it would *prima facie* attract stamp duty under item 21, but section 3 brings into operation item 5 and its exemption in favour of an agreement or memorandum of agreement relating to the sale of goods exclusively.

Atkinson on the question of costs referred to the case of Johnson $v$ . The King (1904 A. C. 824).

The JUDGMENT of the Court was delivered by Sir Joseph Sheridan, C. J.—We have had a very interesting submission made to us in this appeal in which Counsel for the appellants, Mr. Atkinson and the learned Attorney General of Uganda are at one. Their submission is that if the transaction of which particulars had been furnished to the Registrar of Companies under section 43 (2) of the Companies Ordinance, Cap. 33, had been reduced to writing there would have been no duty exigible in regard to it by reason of the exemption appearing in item 5 of the Schedule to the Stamp Ordinance, Cap. 161. Counsel were not only at one in the submission they made, but at the conclusion of the hearing were also at one as to the reasons therefor. The transaction between the parties thereto on any view must be regarded as a contract of sale within the meaning of the definition of contract of sale in the Sale of Goods Ordinance, Cap. 157, and if reduced to writing would be regarded as a Memorandum of Sale or an agreement to sell. The definition reads "contract of sale<br>includes an agreement to sell as well as a sale." In the absence of any information as to whether it was in fact a completed contract of sale or an agreement to sell did any question arise when the consideration of the provisions of the Stamp Act is concerned, it would have to be taken as a transaction of the more beneficial nature to the subject. In the circumstances of this case it so happens that whichever of the two views be accepted the result will be the same for whether it be a memorandum of a sale which has taken place (where goods or merchandise are concerned), or of an agreement to sell, the transaction if reduced to writing for the purpose of section 43 (2) of the Companies Ordinance would be exempted from stamp duty by reason of the first exemption in item 5 of the Schedule to the Stamp Ordinance. There has been some argument as to what meaning should be given to the word "exclusively" appearing in the first exemption to item 5 of the Schedule to the Stamp Ordinance. Again referring to the circumstances of this case the transaction in so far as section 43 (1) of the Companies Ordinance is concerned was, as we have said, either a sale of or an agreement to sell certain chattels in consideration for a right to an allotment of shares. That was the transaction of which particulars had to be furnished under section 43 (2). It so happens that the purchase of shares to the value of Sh. 8,360 was also included in the form embodying the particulars, evidently because the form makes provision for this. But on a correct construction of section 43 $(1)$ $(b)$ there is no necessity for including this information for the Registrar of Companies obtains it under section 43 (1) (a). We find ourselves in agreement with the submission made and the reasons therefor and in consequence allow the appeal.

On the question of costs, we have come to the conclusion that this case should be treated as an exceptional case where the public as well as the individual concerned have benefited by a decision of the Court of Appeal on a somewhat confused provision of law in legislation which intimately concerns the Crown and the subject. We do not think that in such a case the subject should be put to the hardship of not being allowed costs. We have referred to the case of Johnson v. The King (1904 A. C. 817) where the judgment of the Board lays down that the Crown should pay costs in exceptional cases where justice requires it. We treat the present case as such a one. Besides, this case may be favourably contrasted with Johnson's case where the Lords of the Privy Council decided that the appellant Johnson had succeeded "in spite of demerits". The appellants accordingly will have the costs of the appeal.