Citisecurities Limited v Commissioner of Stamp Duties

[1995] QCA 317

IN THE COURT OF APPEAL	[1995] QCA 317
SUPREME COURT OF QUEENSLAND

Appeal No. 229 of 1994

Brisbane

[CitiSecurities v. Commissioner of Stamp Duties]

BETWEEN:

CITISECURITIES LIMITED

Appellant

AND:

COMMISSIONER OF STAMP DUTIES

Respondent

Davies J.A. Pincus J.A. Shepherdson J.

Judgment delivered 28/07/1995

Judgment of the Court

THE QUESTIONS IN THE CASE STATED ARE AS FOLLOWS:

(A)	WAS THE CHARGE LIABLE TO BE UPSTAMPED PURSUANT TO S.68(3) OF THE STAMP ACT 1894 IN RESPECT OF ADVANCES MADE UNDER THE SYNDICATED FACILITY IN THE YEARS ENDING 31 MAY 1989, 1990 AND 1991?
(B)	IF 'NO' TO (A), IS THE CHARGE LIABLE TO BE STAMPED IN RESPECT OF THE SAID ADVANCES UNDER ANY OTHER PROVISION OF THE STAMP ACT, AND IF SO, WHICH PROVISIONS?
(C)	IF 'YES' TO (A) OR (B), IS THE DUTY PAYABLE ON THE SAID ADVANCES $4,778,086.80?
(D)	IF 'NO' TO (B), WHAT AMOUNT OF DUTY IS PAYABLE ON THE SAID ADVANCES?
(E)	HOW SHOULD THE COSTS OF AND INCIDENTAL TO THIS APPEAL BE BORNE AND PAID?

THEY ARE ANSWERED ACCORDINGLY:

(A)	YES, THE CHARGE WAS LIABLE TO BE UPSTAMPED PURSUANT TO S.68(3) OF THE ACT IN RESPECT OF ADVANCES MADE UNDER THE SYNDICATED FACILITY IN THE YEARS ENDED 31 MAY 1989, 1990 AND 1991;
(B)	UNNECESSARY TO ANSWER;
(C)	THE DUTY PAYABLE ON THE SAID ADVANCES IS $4,778,086.80;
(D)	UNNECESSARY TO ANSWER;
(E)	THE COSTS OF AND INCIDENTAL TO THIS APPEAL SHOULD BE BORNE AND PAID BY THE APPELLANT.
CATCHWORDS:	STAMP DUTY - amended assessment upon a fixed and floating charge; whether a charge which secures liability under a guarantee is a mortgage within s.65(3) Stamps Act 1894; whether "repayment" in s.65(3) implies that the charge must secure payment by the person to whom money was lent, advanced or paid; whether s.65(3) includes a security given by a third party guaranteeing the borrower's obligation; whether a charge which secures a contingent liability to pay money comes within s.65(3); whether s.68(2) is a charging section.
Counsel:	Mr. R. W. Gotterson Q.C., with him Mr. H. L. Alexander for the appellant
Mr. P. R. Dutney Q.C., with him Mrs. D. A. Mullins for the respondent
Solicitors:	Mallesons Stephen Jaques for the appellant K. M. O'Shea, Crown Solicitor for the respondent
Hearing Date:	26 May 1995

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

Appeal No. 229 of 1994

Brisbane

Before Davies J.A. Pincus J.A. Shepherdson J.

[CitiSecurities v. Commissioner of Stamp Duties]

BETWEEN:

CITISECURITIES LIMITED

Appellant

AND:

COMMISSIONER OF STAMP DUTIES

Respondent

REASONS FOR JUDGMENT - THE COURT

Judgment delivered the 28th day of July 1995

This is an appeal against amended assessments of stamp duty upon a fixed and floating charge dated 22 December 1988 given by John Fairfax & Sons Limited in favour of CitiSecurities Limited. The property the subject of the charge included property in Queensland. The charge was given to secure the liability of John Fairfax and others under a guarantee. The guarantee in turn guaranteed payment to CitiSecurities of monies owing by an associated company of John Fairfax under an agreement described as a syndicated facilities agreement. The guarantee provided, in cl.3, that:

"The Guarantor unconditionally and irrevocably guarantees payment to CitiSecurities of the Guaranteed Money. If the Debtor does not pay the Guaranteed Money on time the Guarantor agrees to pay the Guaranteed Money to CitiSecurities on demand from CitiSecurities (whether or not demand has been made by CitiSecurities on the Debtor). A demand may be made at any time and from time to time."

The charge was assessed to duty in respect of advances made under the syndicated facilities agreement in each of the years 1989, 1990 and 1991. It was assessed, in each case, on the basis that the charge was deemed to be a mortgage pursuant to s.65(3) of the Stamp Act 1894, that it was security for an unlimited amount and that consequently it was assessable pursuant to s.68(2) and the First Schedule upon the amount advanced in that year in excess of the amount covered by duty already paid.

On appeal to this Court the appellant submitted that the instrument was not a mortgage within s.65 and alternatively that it was not, in any event, assessable under s.68.

Section 65, which is headed "Meaning of Mortgage", relevantly provides in sub-s.3

that:

"An instrument creating or agreeing to create a charge over property ... for the repayment of money to be thereafter lent, advanced, or paid ... shall be chargeable with ad valorem duty as if it were a mortgage."

The main argument for the appellant that the charge was not a mortgage within that provision depended on the fact that it secured the obligations under the guarantee rather than the obligations of the principal debtor. The appellant submitted that those obligations were not to repay money because money had never been advanced to the guarantor; that the word "repayment" in s.65(3) implied that the charge must secure payment by the person to whom the money was lent, advanced or paid and that the guarantor was not such a person.

In our view there is no need to give the word "repayment" in the sub-section such a narrow construction. In Ansett Transport Industries (Operations) Pty. Ltd. v. Comptroller of Stamps (Vic.) [1981] V.R. 35 at 39 Tadgell J. refused to do so in respect of the analogous provision in the Stamps Act 1958 (Vic.). His Honour's judgment in that case was referred to with apparent approval by the High Court in Handeval Pty. Ltd. v. Comptroller of Stamps (Vic) (1985) 157 C.L.R. 177 at 195. There the Court explained the use of the word "repayment" as applying to the repayment of an amount previously paid as opposed to an original payment: at 194. Those decisions support the respondent's argument, which we would accept, that s.65(3) includes a security given by a third party guaranteeing the borrower's obligation. It is a security for the repayment of money by the borrower. And, as appears from what is said below, it is also a security for the contingent repayment by the third party of money paid to the borrower.

The second submission of the appellant with respect to s.65 was that, because the guarantor's obligation to pay arose only after the principal debtor had failed to pay and demand had been made of the guarantor, as provided for in the terms of the guarantee, this was not within the section. This submission must be, in effect, a submission that a charge which secured a contingent liability to pay money is not within the section because the guarantor's liability here was a contingent liability to pay the principal's debt: Sunbird Plaza Pty. Ltd. v. Maloney (1988) 166 C.L.R. 245 at 255-7. And as the respondent pointed out the view that a contingent liability is within s.65(3) is supported by authority of long standing: Lord Canning v. Roper [1852] El.& Bl. 164; 118 E.R. 400 at 117, 404; Ansett Transport Industries (Operations) Pty. Ltd. at 42-3. This submission must also be rejected.

The appellant's argument with respect to the operation of s.68 has even less merit. Section 68(1) is a charging section in respect of instruments coming within s.65(3) where the total amount secured is limited. Sub-section (2) then provides:

"Where such total amount is unlimited, the security is to be available for such amount only as the ad valorem duty impressed thereon extends to cover; but where an advance or loan is made in excess of the amount covered by that duty, the security shall, for the purpose of stamp duty, be deemed to be a new and separate instrument, bearing date the day on which the advance or loan is made."

Sub-section (3) then obliges the holder of such security, on or before the first day of June
in each year to deliver to the Commissioner a declaration stating the highest amount further

advanced on that security during the preceding 12 months accompanied by the duty thereon.

The appellant submitted that sub-s.(2) was not intended to be a charging section.

When read with sub-ss.(1) and (3) however it is plain that, together with the heading "Mortgage, Bond, Debenture and Covenant" in the First Schedule it has that effect. Where, as in this case, an advance is made in excess of the amount covered by the duty originally paid, the security is deemed by that sub-section to be a security for the excess, executed on the day of the advance. It then becomes dutiable under the above heading. That is also the view taken of materially identical provisions in O'Sullivan v. Loughnan [1927] I.R. 493 at 501. See also Coles Myer v. Comptroller of Stamps (1987) 18 A.T.R. 981.

The questions in the case stated should therefore be answered as follows:

(a) yes, the charge was liable to be upstamped pursuant to s.68(3) of the Act in respect of advances made under the syndicated facility in the years ended 31 May 1989, 1990 and 1991;

(b)           unnecessary to answer;

(c)           the duty payable on the said advances is $4,778,086.80;

(d)           unnecessary to answer;

(e)           the costs of and incidental to this appeal should be borne and paid by the appellant.