Burns Philp Trustee Company Ltd. v. Commissioner of Stamp Duties (N.S.W.).

Judges:
David Hunt J

Court:
Supreme Court of New South Wales

Judgment date: Judgment handed down 21 July 1983.

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David Hunt J.

This is an appeal by way of stated case pursuant to the Stamp Duties Act, 1920, sec. 124. The appellant Burns Philp Trustee Company Limited is dissatisfied with the assessment made by the Commissioner of Stamp Duties of the amount of duty payable upon an instrument executed by it in the course of the purchase by it (as trustee) in 1981 of the property known as Australia Square, in Sydney.

On 8 May 1981, the appellant as purchaser executed a contract for the sale of the property for the sum of $85,000,000. That contract (by Special Condition 13) provided for payment of the purchase price in two equal instalments of $42,500,000, one payment upon completion (nominated to take place on 30 September 1981) and the other payment upon 31 May 1982 (subject to various provisions as to an extension of time, if required). Special Clause 13 went on to provide:

``As security for the payment to the Vendor of the amounts payable pursuant to this Special Condition by the Purchaser and as a condition of the execution of this

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Agreement the Vendor shall be entitled to receive on completion hereof a mortgage capable of registration as a specific legal mortgage over the property.''

On 29 July 1981, and pursuant to the obligation so imposed, the appellant executed the instrument in question. The operative covenant is expressed in the following terms:

``... the abovenamed MORTGAGOR pursuant to an agreement between the Mortgagor and the Mortgagee covenants with the undermentioned Mortgagee that the provisions set forth in the Schedule hereto shall be deemed to be incorporated herein, and, for the purpose of securing to the Mortgagee the payment of the moneys hereinafter referred to and all moneys mentioned herein or in the Memorandum, mortgages to the MORTGAGEE... all the Mortgagor's estate and interest in the land....''

This Schedule contains a number of clauses. Clause 5 must be quoted in full:

``5. The Mortgage has been entered into in consideration of and pursuant to an Agreement (hereinafter called `the Agreement') dated the 8th day of May, 1981 between the Mortgagor and Mortgagee for the sale by the Mortgagee to the Mortgagor of the whole of the mortgaged premises and for the purpose of securing to the Mortgagee the due payment of the balance of the purchase price and all other moneys payable to the Mortgagee by the Mortgagor under or pursuant to the Agreement as and when such moneys fall due for payment. The Mortgagor undertakes to duly and punctually perform and observe all its obligations under the Agreement and to pay to the Mortgagee the balance of purchase moneys and all other moneys payable pursuant thereto at the times and in the manner provided for payment thereof in the Agreement.''

By cl. 8 in the Schedule, the parties -

``... acknowledge that for the purpose of this Mortgage the Agreement provides in Special Condition 13 thereof as follows....''

Thereafter there are set out the terms of Special Condition 13 (omitting material which is here irrelevant), which provides for the payment of the purchase price by instalments. The effect of that Condition has already been stated.

The Commissioner assessed this instrument as liable to duty amounting to $169,945, being the ad valorem duty chargeable, in accordance with the Second Schedule, in respect of a ``loan security'' where the amount thereby secured is $42,500,000.

The instrument in question does not fall easily within the ordinary meaning of the phrase ``loan security'' in the Second Schedule. That phrase is, however, defined by sec. 83(1) as meaning:

``mortgage, bond, debenture or covenant.''

The Commissioner contends that the instrument in question is either a debenture or a mortgage within that definition. I turn first to consider whether it is a debenture.

A ``debenture'' is also defined by sec. 83(1), in these terms:

```Debenture' includes debenture stock, bonds, notes and any other securities, whether constituting a charge on the assets of a body corporate or not, of a body corporate, whether incorporated in New South Wales or not.''

This definition was inserted in the Act in 1974. Except for the reference to ``whether incorporated in New South Wales or not'', it is in terms largely identical to the definitions of ``debenture'' in the (N.S.W.) Companies Act, 1961, sec. 5(1), and in the (U.K.) Companies Act, 1929, sec. 380. In relation to the latter statute, the House of Lords has held that the words ``any other securities'' are not to be read ejusdem generis, but refer to all other securities of any kind whatsoever, including a mortgage of land:
Knightsbridge Estates Trust Ltd. v. Byrne (1940) A.C. 613 at pp. 628-630.

The appellant argues, that, if this interpretation were to be taken literally in relation to the definition of ``debenture'' in the Stamp Duties Act, there would be no need for the detailed and elaborately analytical definition of ``mortgage'' which is also to be found in sec. 83(1) for the purposes of defining ``loan security'', as the definition

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of ``debenture'' so interpreted would include every instrument which would otherwise have fallen within that definition of ``mortgage''. I do not pause to consider whether or not this is so, for the interpretation placed upon the definition of ``debenture'' in the (U.K.) Companies Act has already been applied to the largely identical definition in the Stamp Duties Act:
Broad v. Commr. of Stamp Duties 80 ATC 4578 at p. 4585; (1980) 2 N.S.W.L.R. 40 at p. 50. In my view, the adoption by the Legislature in 1974 of that definition from the companies legislation points to its acceptance also of the interpretation which had previously been given to that definition in the United Kingdom: cf.
Bacon v. Salamane (1968) 112 C.L.R. 85 at pp. 90 and 97. I agree, with respect, with the application in Broad's case of that interpretation to the largely identical definition in the Stamp Duties Act.

The Commissioner submits that the instrument in question in the present case is a security of the type contemplated by that interpretation. The word ``securities'' denotes a debt or claim the payment of which is in some way secured; the security generally consists of a right to resort to some fund or property for payment:
Singer v. Williams (1921) 1 A.C. 41 at p. 49. It connotes an additional right which tends to render more certain or probable the discharge of that debt or claim than if satisfaction were depending only upon the person primarily liable:
Maddaford v. De Vantee (1951) S.A.S.R. 259 at p. 267; Broad's case (supra) at ATC pp. 4580-4581; N.S.W.L.R. pp. 44-45. The instrument in question (by the passages which I have quoted) itself acknowledges that its purpose was to secure to the vendor the payment of the purchase price when due; this purpose is achieved by charging the purchaser's interest in the land being sold. Such a charge, the Commissioner says, clearly tends to render more certain the payment of the purchase price instalments when due. As such a security, the Commissioner argues, the instrument falls within the definition of ``debenture'', and in turn within the definition of ``loan security'', in sec. 83(1).

The appellant disputes this. It submits that the instrument cannot be a debenture unless it amounts to an acknowledgement of an existing indebtedness. The appellant argues that the instrument in question does not make such an acknowledgement. The debt which it acknowledges, it is said, did not crystallize as such until after the mortgage was executed on 29 July 1981; that is to say, the debt did not come into existence until the first instalment of the purchase price was due for payment on completion on 30 September 1981, and the second on 31 May 1982. Thus, it is claimed, the indebtedness which it did acknowledge was not an existing one.

The various definitions of a debenture, apart from that found within sec. 83(1), are conveniently collected in the judgment in Broad's case (supra) at ATC pp. 4583-4584; N.S.W.L.R. p. 48. There is no need for me to repeat those definitions here. They do indeed consistently require the instrument which is claimed to be a debenture to amount to an acknowledgement of an indebtedness. That the indebtedness must be an existing debt is also clear:
R. v. Findlater (1939) 1 K.B. 594 at p. 599.

The present existence of a debt does not, however, disappear because it is payable only at some time in the future. It is debitum in praesenti solvendum in futuro; that is, it is an immediate debt notwithstanding that it is payable only in the future:
Webb v. Stenton (1883) 11 Q.B.D. 518 at p. 529;
Lemon v. Austin Friars Investment Trust Ltd. (1926) Ch. 1 at p. 19. The latter case is in fact quoted in Findlater's case (supra). There is, in my view, no question of the debt here not crystallizing until it became payable, as the appellant claims.

The appellant nevertheless replies that the indebtedness acknowledged by the instrument in the present case is not of the relevant type: that acknowledgement, according to cl. 5 and 13 of the Schedule, is only of the appellant's obligation to pay the two instalments of the purchase price on the due dates. The instrument does not, it is pointed out, grant any postponement of the obligation to pay which is imposed by the contract for sale; nor does it grant any other form of credit. Thus, it is said, it cannot amount to an acknowledgement of an existing indebtedness.

In my view, the absence of such considerations does not affect the matter. I earlier stated that the instrument in question

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does not fall easily within the meaning of the phrase ``loan security''. But it is to overcome such difficulties that statutory definitions are enacted. Whether a particular instrument is rendered dutiable by the Stamp Duties Act must be determined by the definition which that statute provides, not by the ordinary meaning of the phrase used in the Second Schedule. The instrument in question in the present case in my view falls squarely within that definition of ``loan security'' in sec. 83(1) because it falls squarely within the definition of ``debenture'' in the same section.

In these circumstances, it is unnecessary for me to consider whether the instrument also falls within the definition of ``mortgage'' in that section, or whether that definition extends or merely illustrates the definition of ``mortgage'' supplied by sec. 3(1), and I do not propose to do so.

There is no dispute that, if the instrument is a ``loan security'' for the purposes of the Act, the amount of duty charged by the Commissioner is correct. I therefore answer the questions posed by the stated case for my determination as follows:

(a) Whether the mortgage from the appellant to the vendor dated 29 July 1981 is a loan security for the purposes of the Stamp Duties Act, 1920:

Answer: It is.

(b) Whether the stamp duty properly chargeable upon that instrument is -

• (i) $169,945
• (ii) $6
• (iii) some other, and if so what, amount.

Answer: $169,945

(c) How should the costs of these proceedings be borne and paid?

Answer: I order the appellant to pay the Commissioner's costs.

I direct the entry of judgment accordingly.