Accountants are often accused of knowing the price of everything but the value of nothing, in this case we knew both.
We were able to recently appeal a stamp duty assessment of EC$2.5m based on what we believed to be an inflated valuation of a property of EC$25m. The eventual stamp duty payable was EC$772k, saving a significant EC$1.7m in stamp duty for the estate.
Marcus Wide and Hordley Forbes were appointed as Joint Liquidators of Stanford Development Company Ltd (SDC), a company owning various land and property in Antigua.
Part of the assets held were various parcels of freehold land within the confines of the Antiguan airport (the Property) including a 38,000 sq ft high spec hangar (the Hangar). A small portion of the Property was subject to a 50 year lease in favour of a commercial tenant (FBO). The boundaries of the leased portion were not demarcated, and the lease was not in writing, however the existence of the lease had been confirmed by a Privy Council decision.
FBO claimed that the Hangar, being the most valuable asset within the Property, encroached their leased land. FBO obtained an interim injunction preventing the use of the Hangar for aviation purposes until the claim had been resolved. SDC disputed the claim and a stalemate remained.
SDC eventually came to a settlement where all the claims in the litigation would be settled with FBO and SDC would sell the entire property to FBO for EC$5.5m.
The Commissioner of the Antiguan Inland Revenue (the Commissioner) assessed the value of the Property at EC$25m for stamp duty purposes, some $19.5m higher than the sale price and so SDC appealed the assessment to the Court.
Right to Appeal and Challenge to the Commissioner’s discretion
In order for the Court to intervene and to launch a successful appeal SDC had to show that the standard of review under Dufour and Others v Helenair Corporation Ltd and Others applied, being
" ... an appeal against a judgment ... in the exercise of a judicial discretion ... will not be allowed unless the appellate court is satisfied (1) that in exercising his or her judicial discretion, the judge erred in principle either by failing to take into account or giving too little or too much weight to relevant factors and considerations, or by taking into account or being influenced by irrelevant factors and considerations; and (2) that, as a result of the error or the degree of the error, in principle the trial judge's decision exceeded the generous ambit within which reasonable disagreement is possible and may therefore be said to be clearly or blatantly wrong."
SDC’s main argument was that the Commissioner’s decision was clearly or blatantly wrong because the Government’s valuation failed to take into account that the Hangar couldn’t be used for aviation purposes because of the FBO injunction and there being an absence of planning permission for two other hangars on the Property.
The Commissioner argued that these points were irrelevant because
- The legal dispute in relation to the Property had ended with the decision of the Privy Council in 2008 and was therefore irrelevant to the valuation. Furthermore, it only related to a very small portion of the land.
- The hangars without planning permission had been standing for 20 years and had no demolition orders attached. Therefore it should be assumed that they had been lawfully erected.
Furthermore the Commissioner’s position was that the valuations produced were in the permissible range of the Commissioner’s discretion.
The court held that:
- The Commissioner based his assessment of stamp duty upon a valuation of the property which wrongly did not take into account numerous factors which were likely to have a substantial impact upon its market value, but which could reasonably have been ascertained by a buyer acting knowledgeably and prudently, in a purchase from a seller also acting knowledgeably and prudently. The Chief Valuation Officer had adopted a method for calculating market value which did not accord with the definition of market value adopted by him, by failing to take into account that a hypothetical buyer acting knowledgeably and prudently would probably inspect the property and direct questions to the seller. Thus his methodology and the Commissioner's stamp duty assessment based on it, were clearly, or blatantly, wrong.
- Since due consideration of the various factors that had not been included is likely to have a substantial impact upon the market value of the property, the court exercised its discretion to set aside the assessment and ordered that it be redone.
The Court therefore ordered both parties to obtain updated valuations and return for a hearing to decide a more appropriate valuation and resultant quantum of Stamp Duty payable
Quatum of Stamp duty payable
Having reviewed and critiqued both parties valuations the Judge ordered on 20 February 2017, the valuation that was to be adopted for Stamp Duty calculations was EC$7,718,333.33 and thus the stamp duty payable at 10% was EC$771.833.33.
The estate had previously paid the original stamp duty figure, so the Commissioner was ordered to repay the excess duty of EC$1,728,166.67.
Primarily we were very happy with the result as it obviously created a significant saving for the estate.
But, one of the main reasons that we were willing to fight the decision was that if we had allowed the original valuation to stand it would have set a dangerous precedent for future property sales that SDC have in the pipeline.
SDC still hold significant assets in Antigua and it is hoped that this victory will assist in obtaining reasonable Stamp Duty valuations for the remaining property deals.