By Barbara Gayle, Staff ReporterTHE LEGAL battle between the Carreras Group and the Stamp Commissioner ended yesterday when the United Kingdom Privy Council ruled that firm must pay the Government $110 million in transfer tax, arising from a transfer of shares to Caribbean Brands in 1999 for US$37 million.
After Carreras transferred its shares in the Jamaica Biscuit Company in 1999 to Caribbean Brands, the Stamp Commissioner ruled that the company should pay transfer tax amounting to $110 million.
Carreras had challenged the Commissioner's ruling in the Court of Appeal on the grounds that it was not obligated to pay transfer tax.
The legal battle between the parties was first decided by the Revenue Court which ruled on November 14, 2001 in Carreras' favour. The Stamp Commissioner was then ordered to repay the $110 million with interest.
The Stamp Commissioner, who was represented by Michael Hylton, Q.C., Solicitor-General, and attorney-at-law Garfield Haisley, took the matter to the Court of Appeal, comprising the Hon. Ian Forte, president, Justice Seymour Panton and Justice Neville Clarke (now deceased). By a majority decision, the Court of Appeal ruled in July 2002 that transfer tax was payable. Justice Panton dissented.
Carreras took the case to the United Kingdom Privy Council asking the Privy Council to determine whether the transfer of shares was subject to transfer tax.
The Privy Council, after interpreting the Transfer Tax Act of Jamaica, ruled yesterday that it agreed with the majority decision of the Court of Appeal "that the relevant transaction for the purposes of this legislation comprised both the issue and the redemption of the debenture and that such transaction, taken as a whole, could not be appropriately characterised as an exchange of shares for a debenture."
ARGUING OVER TERMS
Carreras had transferred the shares to Caribbean Brands Ltd., a subsidiary of General Holdings Ltd., in exchange for a debenture. Caribbean Brand issued a debenture in favour of Carreras for a total of US$37.7 million. The terms were that the debenture would not be secured or would it be transferable.
The lawyers representing the Stamp Commissioner argued in the Court of Appeal that Revenue Court Judge Roy Anderson erred in his finding because he failed to consider the evidence which was before him and to hold that the transaction was really a sale of shares disguised to look like a re-organisation and not a simple exchange of shares for a debenture.
In its majority decision, the Court of Appeal said it was indisputable that at the time of the agreement the parties contracted to and intended for the passing of money in consideration for the shares by way of issuing an unsecured debenture without interest, and thereafter redeeming it on a specified date, shortly thereafter.
