Oughtred v Inland Revenue Commissioners

Stamp duty is imposed on instruments, rather than transactions. Nevertheless, an instrument which completes a sale by transferring the property sold, or property representing the interest sold, is a conveyance on sale. This remains so where an earlier specifically enforceable contract has conferred an equitable proprietary interest on the purchaser.

A transfer may be on sale although trustees or nominees execute it instead of the vendor, provided they act at the vendor’s direction. The instrument need not reproduce the precise form of the interest described in the contract where it transfers the property into which that interest has merged or which represents it.

A life tenant and the owner of the absolute reversion in settled company shares orally agreed to exchange the reversion for other shares. The life tenant transferred the consideration shares. The beneficiaries released the settlement trustees, who then transferred the settled shares to the life tenant absolutely.

Upjohn J held that the trustees’ transfer attracted only fixed duty. The Court of Appeal reversed that decision and held that the transfer attracted ad valorem duty. The central issue before the House was whether the transfer was a conveyance on sale under section 54 and the First Schedule to the Stamp Act 1891, notwithstanding the possible constructive trust arising from the oral agreement and section 53 of the Law of Property Act 1925.

1. Appeal dismissed by a majority of three to two. Lord Jenkins delivered the principal majority speech. Lord Keith of Avonholm agreed with it, and Lord Denning reached the same conclusion. Lord Radcliffe and Lord Cohen dissented.

2. Per Lord Jenkins, stamp duty is imposed on instruments rather than transactions. An oral sale completed without a transferring instrument may escape duty. Where, however, full title to the property sold can be transferred only by an instrument, an instrument executed to complete the sale is a conveyance on sale. A constructive trust arising from the contract does not prevent that result. The purchaser’s anticipatory equitable interest differs from the full title secured by the eventual transfer.

3. Lord Jenkins found it unnecessary to decide whether section 53(2) of the Law of Property Act 1925 excluded the transaction from section 53(1)(c). Even assuming that the oral agreement created an effective constructive trust, the trustees’ transfer completed the agreed sale and attracted ad valorem duty under section 54 and the First Schedule to the Stamp Act 1891. Lord Denning considered, additionally, that section 53(1)(c) required writing and that section 53(2) did not remove that requirement.

4. Per Lord Jenkins, the interest sold was the reversion in the settled shares. The agreement contemplated merger of the life interest and reversion, thereby bringing the reversion and the shares representing it into immediate possession. The transfer of the shares therefore transferred property representing the interest sold. Alternatively, if the interests remained separate, the transfer included the purchased reversionary interest.

5. Per Lord Jenkins and Lord Denning, a transfer by trustees or nominees at the vendor’s direction may constitute a transfer on sale, even though the vendor does not execute it. Attorney-General v Brown (1849) 3 Ex. 662 was applied to that point.

6. Lord Radcliffe and Lord Cohen would have allowed the appeal. They considered that the son became a constructive trustee and that the trustees transferred only the legal title. In their view, the equitable reversion was neither vested in the trustees nor transferred by the disputed instrument.

1. House of Lords: Dismissed the taxpayer’s appeal by a majority of three to two and affirmed the Court of Appeal’s conclusion that the transfer attracted ad valorem duty.

2. Court of Appeal: Allowed the Commissioners’ appeal, held that the transfer attracted ad valorem duty of £663 rather than fixed duty of 10 shillings, and ordered repayment of the resulting balance.

3. High Court: Upjohn J allowed the taxpayer’s appeal by case stated, held that the transfer attracted only fixed duty of 10 shillings, and ordered repayment of the ad valorem duty.