Developer Glenkerrin Homes will have to pay some €2.56 million in stamp duty to the Revenue Commissioners arising from its purchase of lands in Palmerstown, Dublin, following a High Court decision yesterday.

In a case which rested on the proper construction of the Stamp Duties Consolidation Act 1999, Ms Justice Mary Laffoy ruled that a Revenue appeal commissioner had wrongly ruled that the amount of stamp duty on transfer of the lands was €284,400.

A proper construction of Section 40.2 of the 1999 Act meant Glenkerrin must pay €2.56 million stamp duty, or 9 per cent of the entire price, less a 10 per cent deposit of €31.6 million paid for the lands, Ms Justice Laffoy held. The appeal commissioner had wrongly decided that the amount due was 9 per cent of the deposit price of €3.16 million.

The case arose from an April 2004 contract for purchase by Glenkerrin of lands and premises at St Loman's Hospital, Palmerstown, Dublin, from the Eastern Regional Health Authority (ERHA) for €31.6 million. Under the contract, a deposit of €3.16 million was payable.

The judge said that completion took place on June 24th 2004, but not in the normal way (payment of the entire purchase money in exchange for an executed transfer and handover of the lands), as envisaged by the contract.

Instead, the ERHA facilitated a completion under which, instead of being paid the balance of the purchase money on completion, it was given two documents.

These were an undertaking, dated June 24th 2004 and signed by Glenkerrin director Rory Grehan, stating that it would undertake to pay the ERHA €31.6 million on June 30th 2004, that amount not being deemed due or payable prior to that date in return for delivery of the deed of transfer to Glenkerrin.

The second document was a guarantee from AIB, issued in favour of the ERHA, which stated that Glenkerrin had sought deferral of the balance of the total amount of €31.6 million payable under the contract, less the deposit, amounting to €28.44 million, until June 30th 2004, referred to as the payment date.

On that basis, the ERHA gave Glenkerrin an executed transfer of the lands and Glenkerrin presented that transfer for stamping.

The Revenue assessed stamp duty due as €2.84 million, being 9 per cent of the total purchase price. Glenkerrin argued that the chargeable consideration was limited to 9 per cent of the deposit of €3.16 million.

The appeal commissioner upheld Glenkerrin's claim that the security given for the remainder was a "non-marketable security" under Section 40.2 of the 1999 Act and that no amount was "due" on security on the date of the transfer within the meaning of Section 40.2.

Ms Justice Laffoy ruled that, as a matter of common and commercial sense, the type of non-marketable security envisaged was one which secured future payments of principal and interest.

The legislature must have intended that the amount due would include all sums, whether for principal or interest, in respect of which there was a legal liability on the material date, even though such sums were payable in the future.

The amount due for principal and interest, on the security given by the undertaking of June 24th 2004, was €28,440,000, and 9 per cent of that was stamp duty.