Pennant Holdings Limited v. Commissioner of State Taxation (W.A.)

Judges: Malcolm CJ
Seaman J

Nicholson J

Court:
Full Supreme Court of Western Australia

Judgment date: Judgment handed down 14 June 1990.

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Nicholson J.

The issue raised by this appeal is the proper construction to be given to sec. 84 of the Stamp Act 1921 (``the Act''). The section provides:

``84(1) Where money to be paid or repaid, or which is ultimately recoverable, under an instrument of security is secured wholly or in part on property out of the State duty shall, subject to this section, be payable as provided under this Part and item 13 of the Second Schedule on the full amount of such money.

84(2) If the Commissioner is satisfied that any duty of a like nature to duty payable under subsection (1) has been paid in respect of the instrument, or any other instrument that secures the same money, in another State or Territory of the Commonwealth the duty calculated under subsection (1) shall be reduced by -

• (a) the same proportion of the duty payable under subsection (1) as the value of the property situated in that other State or Territory bears to the aggregate value of all property to which the instrument relates; or
• (b) the actual amount of the duty that is paid or payable in that other State or Territory,

whichever is the lesser.

84(3) The Commissioner shall note on the instrument the amount of the reduction that has been allowed, the date of the allowance, and the duty payable.

84(4) Notwithstanding subsection (2), where an instrument referred to in subsection (1) is produced to the Commissioner and the person liable to pay the duty thereon gives notice in writing to the Commissioner that he intends to pay or cause to be paid duty on the instrument, or any other instrument securing the same moneys, in another State or Territory of the

Commonwealth, the following provisions shall apply -

• (a) the instrument may be stamped under subsection (2) as if the duty had been paid in another State or Territory and may be released for that purpose to the person who produced it;
• (b) the Commissioner shall issue an assessment of duty for the difference between the amount of duty payable under subsection (1) and the duty paid under paragraph (a);
• (c) if the instrument is produced to the Commissioner within 3 months after the issue of the assessment, or where reasonable cause has been shown to the Commissioner such further period as he allows in the circumstances, together with proof of payment of the duty payable in another State or Territory the assessment ceases to have effect and the instrument shall be noted accordingly;
• (d) if paragraph (c) is not complied with -
  • (i) the assessment is payable at the expiration of the period of 3 months after it was issued, or any further period allowed by the Commissioner under paragraph (c), together with a fine under section 20(3);
  • (ii) no reduction shall be allowed for any duty paid in another State or Territory; and
  • (iii) the instrument is available only for the amount in respect of which duty has been paid under paragraph (a) as if the instrument related to property only in Western Australia until the assessment and penalty (if any) are paid in full.''

This appeal raises the question whether the section is only applicable to an instrument of security which secures on property out of the State wholly or in part the money to be paid or repaid or which is ultimately recoverable or whether the section is also applicable to an instrument of security which does not itself so secure such money.

The occasion for the application of the section arose as follows. On 14 May 1986 Perpetual Trustees W.A. Ltd. (``the trustee'')

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as trustee of the Centennial Plaza Trust granted a mortgage (``the mortgage'') over land (``the land'') in New South Wales to National Mutual Royal Bank Ltd. (``the manager'') as manager for a syndicate of lenders (``the banks''). The mortgage was executed in New South Wales and is not subject to stamp duty in Western Australia. By a deed of variation of mortgage (``the variation mortgage'') dated 5 July 1988 between the trustee as mortgagor and the manager, the land was further charged in favour of the manager for the purpose of securing repayment of moneys advanced under a document known as the facility deed (``the facility deed''). The mortgage and the variation mortgage were assessed for stamp duty in New South Wales and duty of $299,945 paid thereon.

The facility deed was also entered into on 5 July 1988 and was concluded between the trustee, the appellant as covenantor, Pennant Properties Ltd. as developer, the manager and the banks to provide from a credit facility of up to $95m. The deed defined ``the initial security'' by reference to a set of security documents, namely the mortgage, the variation mortgage, a guarantee (``the guarantee'') given by the appellant in favour of the manager on behalf of the banks; and an assignment by way of security of a building contract and a development agreement. The guarantee was dated 29 June 1988 and was given in respect of the due and punctual payment to the banks of inter alia the moneys owing as defined in the facility deed in an amount not exceeding $30m. It was accepted in the court below that the moneys thus secured by the guarantee were also secured by other instruments of security, namely the mortgage, the variation mortgage and the facility deed. It was accepted on the appeal that the guarantee was executed in Western Australia so that a prima facie liability to stamp duty in this State existed: sec. 27 of the Act.

The guarantee together with the mortgage, the variation mortgage, the facility deed, and three other documents were lodged at the State Taxation Office for assessment of duty together with a letter in which the solicitors for the appellant claimed a reduction of duty pursuant to the provisions of sec. 84 of the Act in respect of the stamping of the guarantee. The respondent assessed the guarantee in accordance with sec. 83 of the Act and, being of the opinion that the reduction provided for in sec. 84 of the Act applied only to an instrument of security which itself secured property wholly or partly outside Western Australia, allowed no reduction of duty pursuant to sec. 84. The respondent therefore issued an assessment on 30 September 1988 in the amount of $75,000. An objection was duly lodged in which it was claimed the guarantee was assessable for duty under sec. 84 and, for the purposes of sec. 84(2), the proportion which the value of the property situated in New South Wales bore to the aggregate value of all property to which the mortgage and the variation mortgage related, was 100%, so that the duty payable should be reduced to nil. Following disallowance of the objection, an appeal was duly made pursuant to sec. 33 of the Act to a single Judge of this Court who found in favour of the respondent's contention and dismissed the appeal. The matter now arises by way of appeal from that decision.

The grounds of appeal contend in various ways that the construction found by his Honour was wrong in law. That being the essential point of the six grounds of appeal it is not necessary to recite them here.

Although in my opinion they are not decisive of the issue raised by this appeal, it is appropriate to have regard to the recognised canons of statutory construction applicable to the section which were referred to in argument. Although the Act is a taxing or fiscal provision, the function of the Court in interpreting it, as in interpreting any other type of statute, is to ascertain the legislative intention from the terms of the instrument viewed as a whole:
Cooper Brookes (Wollongong) Pty. Ltd. v. F.C. of T. 81 ATC 4292 at p. 4305; (1981) 147 C.L.R. 297 at p. 320 per Mason and Wilson JJ. While recent authority thus minimises distinctions between taxing and other legislation, there is long-standing authority that taxing or fiscal provisions should be interpreted strictly but not in such a way as to defeat the legislature and that a person is only to be taxed if clearly falling within the words of the section: see generally D.C. Pearce, Statutory Interpretation in Australia (1988) pp. 174-175. In relation to exemption and exception provisions, into which category sec. 84 arguably falls, Barton J. in
Burt v. F.C. of T. (1912) 15 C.L.R. 469 at p. 482 said ``... where the construction... is seriously in doubt, the

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interpretation should favour those whose claims are based upon the exceptions''.

In interpreting the Act this Court may have regard to its legislative history. The headings of Parts, Divisions and Subdivisions of the Act are part of the written law to be taken into account for the purposes of interpretation but a heading of a section is not part of that law: Interpretation Act 1984 , sec. 32. It may, however, form part of the matters set out in the document containing the written law to which reference may be had as extrinsic material provided the conditions contained in sec. 19(1) of that Act to enable such reference are satisfied. In his reasons his Honour concluded that sec. 84 was neither ambiguous, obscure and its ordinary meaning did not lead to a result which was manifestly absurd or unreasonable and that accordingly the conditions for reference to extrinsic material were not satisfied. I concur in that view. Although again nothing turns on it, it should also be noted here, as it was by his Honour in his reasons, that sec. 2A of the Act provides that the Act should be read and construed subject to the limits of the legislative powers of the State.

Section 84 is only to be properly understood in close regard to its neighbouring sections ( Cooper Brookes (supra) at ATC p. 4299; C.L.R. p. 310 per Stephen J.). It is preceded by sec. 83 which reads:

``83(1) A security for the payment or repayment of money to be lent, advanced, or paid, or which may become due upon an account current either with or without money previously due is to be charged, where the total amount secured or to be ultimately recoverable is in any way limited, with duty under item 13 of the Second Schedule as a security for the amount so limited.

83(2) When the total amount secured or to be ultimately recoverable by or under an instrument of security is not in any way limited, the instrument concerned shall be chargeable with ad valorem duty at the rate set out under item 13(2) of the Second Schedule on -

• (a) the total amount secured or to be ultimately recoverable thereunder; or
• (b) an amount of $2 000,

whichever is the greater.

83(3) A security referred to in subsection (2) shall be available only for the amount in respect of which duty is denoted on that instrument , but when an advance or loan in excess of that amount is made or the indebtedness thereby secured is increased, the instrument of security concerned shall be chargeable with additional ad valorem duty in respect of the excess or increase and the additional advance or loan or indebtedness is, for the purpose of duty, deemed to be a new and separate instrument of security executed in Western Australia on the day on which that advance or loan is made or that indebtedness is increased and, without prejudice to any other provisions of this Act, subject to the provisions of sections 20 and 39 accordingly.

83(4) Each mortgagor or obligor and each mortgagee or obligee under an instrument of security referred to in subsection (2) or a deemed instrument of security under subsection (3) is liable to pay duty with which the instrument or the deemed instrument, as the case may be, is chargeable.

83(5) If a security referred to in subsections (2) and (3) is registered under any Act relating to the registration of securities, that registration shall be effective in respect of the additional advance or loan or indebtedness, but subject in the case of a bill of sale to section 6(4) of the Bills of Sale Act 1899 .

83(6) Additional duty referred to in subsection (3) may be paid and denoted from time to time as further advances or loans are made or as indebtedness is further increased by stamps impressed on or affixed to the security concerned and, in the case of adhesive stamps or adhesive coupons, duly cancelled or by endorsement under section 112V.

83(7) When the original security concerned is deposited in the Office of Titles or any other public office in which registration is required, any duplicate or counterpart of the original instrument may be stamped with the additional duty referred to in subsection (3) and that stamping shall have the same effect as if the stamps concerned had been

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impressed on or affixed to the original instrument .

83(8)...''

(emphasis added)

It is apparent from these subsections that the references in sec. 83 to the ``security'' are a reference to an ``instrument of security''. Section 83 therefore purports to apply to the same type of instrument as sec. 84.

Section 83(1) refers to item 13 of the Second Schedule to the Act. Section 16 of the Act provides that the duties of or in respect of the instruments specified in the Second Schedule shall be the duties specified opposite those instruments. A schedule to an Act and any notes thereto form part of the written law: Interpretation Act 1984 sec. 31(2). In the case of the Act that Schedule has a particularly important part because in addition to prescribing the amount of duty payable on instruments and the persons liable to pay such duty it also defines those instruments to which such prescriptions relate. It is a Schedule to which regard must be had to comprehend the overall scheme: cf.
Brayson Motors Pty. Ltd. (in liq.) v. F.C. of T. 85 ATC 4125 ; (1985) 156 C.L.R. 651 at p. 652 . Item 13 is headed ``Mortgage (legal or equitable), bond, debenture, covenant, bill of sale, guarantee, lien or instrument of security of any other kind whatsoever''. It is apparent therefore that sec. 83 and item 13 are applicable to an instrument of security which does not itself necessarily secure on property the moneys owing under it and that the section is applicable to a guarantee, being an instrument which itself does not secure the moneys owing under it on property.

As a consequence of repeal of intervening sections, sec. 87 immediately follows sec. 84. It provides (so far as is relevant):

``87(1) Where an instrument of security for moneys is duly stamped under item 13 of the Second Schedule (in this subsection called `the stamped instrument') and there are one or more other instruments that are security for the same moneys , the duty chargeable in respect of each of those other instruments shall be reduced -

• (a) where each such other instrument is security for the whole of the same moneys, by the amount of duty that was paid on the stamped instrument; and
• (b) where any of such other instruments is security for part of the same moneys, by an amount of equal to the same proportion of the duty that was paid on the stamped instrument as the amount for which that other instrument is security bears to the amount for which the stamped instrument is security....''

(emphasis added)

Section 87 therefore recognises that an instrument of security may be one which itself secures on property the moneys owing under it or one which does not do so.

The remaining section in the same Part of the Act (sec. 90A) adopts the language of item 13 and consequently refers to instruments of security whether or not they provide for security on property. It reads:

``90A When the Commissioner is satisfied that any mortgage, bond, debenture, covenant, bill of sale, guarantee, lien or other instrument of security has been given or made for the purpose of securing the payment or repayment of money that is being or is to be used for, or has been used for, a university or any charitable or similar public purpose, he may exempt from duty, or refund any duty paid on, that mortgage, bond, debenture, covenant, bill of sale, guarantee, lien or other instrument of security.''

When reference is made to sec. 84(1) it is seen that it is expressly related to its neighbouring provisions. The subsection provides that if its conditions of application are met duty shall, subject to the section, be payable `` as provided under this Part and item 13 of the Second Schedule...'' (emphasis added). The subsection does not itself purport to be a provision imposing duty but rather speaks only of a liability which has become payable ``under this Part''. In my view those words are a reference to sec. 83 which is the provision creating the relevant liability. The reference back to the Part is an affirmation that in the case of money secured wholly or in part on property ``out of the State'' the usual rule of liability under sec. 83 is applicable.

It seems to me therefore that because ``instrument of security'' is used in the neighbouring provision to sec. 84 to include instruments providing security on property and otherwise and because sec. 84(1) expressly

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relates itself to the other provisions of the Part, the prima facie position is that the words ``instrument of security'' in sec. 84(1) are intended to apply with similar scope. Such an understanding is consistent not only with the neighbouring provisions of sec. 84 but also with the general thrust of the Act which, as sec. 16 provides, is to impose duties upon instruments (with limited exceptions such as the duty imposed on marketable securities by Pt IVAB of the Act and on rental business pursuant to Pt IVB of the Act).

The predecessor provision to the present sec. 84 was inserted by the Stamp Amendment Act (No. 2) 1984 which came into operation on 1 January 1985. It read:

``84(1) Where money to be paid or repaid under an instrument of security is secured both on property in Western Australia and on property out of Western Australia, duty shall be payable under this Part in respect of the part of the amount of that money which bears the same proportion to the total amount of that money as the value of the property in Western Australia bears to the aggregate of the values of both the property in and the property out of Western Australia.

84(2) Where money to be paid or repaid under an instrument of security is secured wholly on property out of Western Australia, duty shall be payable on the instrument under item 8 of the Second Schedule as if that instrument were a deed.''

As his Honour pointed out in his reasons, the Second Reading Speech of the Minister introducing the present provision in the Stamp Amendment Act (No. 2) 1987 made it apparent that it had been found that in many instances duty was not paid in the other place where the property was situated and consequently it was desired to amend the provision. It will be observed that the wording of the previous sec. 84(1) refers to an instrument of security ``both on property in Western Australia and on property out of Western Australia''. Those words arguably result in that former provision being applicable only to instruments of security secured on property. Whatever may have been the position under that former provision, it is not the position which in my opinion pertains under the present provision where different words have been used. Although not explicative of the meaning of the former or the present provision, it is to be noted that the marginal note to the former section read ``Charges secured on property in and out of the State'' and that, without change, this has been repeated as a heading to the present sec. 84.

The prima facie position to which I have referred is, in my opinion, seen to represent the proper meaning of sec. 84 when the words of the section are considered. In sec. 84(1) the words ``to be paid or repaid, or which is ultimately recoverable, under an instrument of security'' are words which are adjectival to the noun ``money''. Putting to one side those adjectival words, the subsection then reads:

``Where money... is secured wholly or in part on property out of the State duty shall, subject to this section be payable as provided under the Part and item 13 of the Second Schedule on the full amount of such money.''

So viewed, this subsection is clear in its intent. In my opinion it is a misreading of the subsection to regard the words ``an instrument of security'' as qualified by the words ``is secured wholly or in part on property out of the State''. If the words ``an instrument of security'' were meant to stand as a noun in relation to the verb ``secured'' it would be necessary for the preposition ``which'' or some other word to have been additionally introduced into the provision. In this respect the present words stand in contrast to those in the former sec. 84 in which the preposition ``on'' appeared.

In sec. 84(2) the words of preamble refer to ``the instrument, or any other instrument that secures the same money'' whereas in para. (a) of that subsection the provision refers only to ``the instrument''. His Honour was of the opinion that this second reference must be to the instrument tendered for stamping and could not therefore be applicable to a mortgage over land in any State to which no liability to tender attached in Western Australia. In my opinion that does not follow from the opening words of sec. 84(2) where the reference to ``any other instrument'' leaves it open to the party tendering the instrument for stamping to produce evidence either in relation to that instrument or to any other instrument of payment of the duty elsewhere within the Commonwealth. Section 10(c) of the

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Interpretation Act 1984 provides that in any written law words in the singular number include the plural so that the reference in para. (a) is capable on a natural construction of including the plural reference, that is, to both the instrument and any other instrument.

In relation to sec. 84(2)(a) the appellant supported its arguments by contending that the word ``relates'' has been used in contradistinction to the word ``secures''. As in my view the result contended for by the appellant is reached on a plain reading I do not need to place any reliance on this understanding of the word ``relates''. For the same reason it is not necessary for the appellant to rely on the argument that the guarantee is ``related to'' the property because the appellant may be subrogated to the interest of the banks in the land under the mortgage. The appellant also points to the reference in para. (a) to the need to produce a ``proportion'' saying that a proportion can only be properly obtained if it is a proportion of the whole and that would not be the result if the reference to ``the instrument'' was a reference only to the instrument which itself secured the moneys. It supported this contention by reference to examples, the details of which it is not necessary to canvass, but which point to anomalies which would arise in the operation of the paragraph if the construction found by his Honour was to be applied. These contentions are supportive of the interpretation which, in my opinion, are in any event open on a plain reading of the section.

In sec. 84(4)(d) reference is made to ``the instrument related to property only in Western Australia''. His Honour thought this reference supported the construction contended for by the Commissioner before him because it emphasised that the instrument which is produced to the Commissioner is an instrument which relates to property. In my opinion that reasoning overlooks the significance of the words ``as if'' and the context in which para. (d)(iii) appears. The purpose of that paragraph is to import as a sanction against failure to pay duty payable in another State or Territory the provisions of sec. 27 of the Act which make unavailable, except in criminal proceedings, instruments chargeable with duty which are not duly stamped when first executed. Section 27(1) reads:

``27(1) Except as otherwise provided by this Act no instrument chargeable with duty and executed in Western Australia, or relating, wheresoever executed, to any property situate or to any matter or thing done or to be done in Western Australia , shall, except in criminal proceedings, be pleaded or given in evidence or admitted to be good, useful, or available in law or equitable, unless it is duly stamped in accordance with the law in force at the time when it was first executed.''

(emphasis added)

The words ``as if the instrument related to property only in Western Australia'' have been introduced into para. (d)(iii) only for the purposes of equating that provision with the general provision in sec. 27(1).

For these reasons I consider sec. 84 is applicable to ``an instrument of security'' which does not itself secure money to be paid or repaid, or which is ultimately recoverable, under it. Accordingly I consider it is applicable to the guarantee the subject of the Commissioner's ruling to the contrary. I therefore consider his Honour erred in law in holding that the Commissioner's assessment was correct and not holding that the stamp duty payable on the guarantee should be reduced in accordance with the provisions of sec. 84.

It follows I consider the appeal should be allowed, the order of the court below set aside, and, pursuant to the provisions of sec. 33(4) of the Act, the duty chargeable on the guarantee under the Act reduced to nil and the Commissioner ordered to refund the amount of the duty paid on the guarantee.