MILUC PTY LTD and COMMISSIONER OF STATE REVENUE
[2008] WASAT 68
•27 MARCH 2008
MILUC PTY LTD and COMMISSIONER OF STATE REVENUE [2008] WASAT 68
| STATE ADMINISTRATIVE TRIBUNAL | Citation No: | [2008] WASAT 68 | |
| TAXATION ADMINISTRATION ACT 2003 (WA) | |||
| Case No: | CC:1660/2007 | 31 JANUARY 2008 | |
| Coram: | JUSTICE M L BARKER (PRESIDENT) | 26/03/08 | |
| 16 | Judgment Part: | 1 of 1 | |
| Result: | Decision of the Commissioner of State Revenue affirmed Review application dismissed | ||
| A | |||
| PDF Version |
| Parties: | MILUC PTY LTD COMMISSIONER OF STATE REVENUE |
Catchwords: | Stamp duty Stamp Act 1921 (WA) Assessment Loan agreement Right to caveat 'Mortgage' Security by way of charge over property Implied equitable charge |
Legislation: | Real Property Act 1900 (NSW), s 74F(1) Stamp Act 1921 (WA), s 4(1ab), s 20(2), s 81, s 82, s 82(1), Second Schedule Taxation Administration Act 2003 (WA), Glossary Transfer of Land Act 1893 (WA), s 137 |
Case References: | Brick and Pipe Industries Ltd v Occidental Life Nominees Pty Ltd [1992] 2 VR 279 Caltex Australia Petroleum Pty Ltd v Commissioner of State Revenue [2000] WASCA 54; (2000) 22 WAR 299 Chiodo v Murphy [1995] V ConvR 54531 Coleman v Bone (1996) 9 BPR 16,235 Cradock v Scottish Provident Institution (1893) 69 LT 380 Crampton v French [1996] ANZ ConvR 156 Dominion Lifestyle Tower Apartment Pty Ltd v Global Capital Corporation Pty Ltd [2004] VSC 307; [2005] V ConvR 54 - 696 General Motors Acceptance Corporation Australia v Southbank Traders Pty Ltd [2007] HCA 19; (2007) 227 CLR 305 Graham v Chappell (1993) 9 WAR 157 Iaconis v Lazar [2007] NSWSC 1103 Midland Brick Co Pty Ltd v Welsh (2006) 32 WAR 287 Professional Services of Australia Pty Ltd v Mila Properties Pty Ltd [2004] WASC 30 Re Homann; Ex parte Richards (Trustee) [1959] Tas SR 58 Spunter Pty Ltd v Hall [2006] WASC 6 Swiss Bank Corporation v Lloyds Bank Ltd [1982] AC 584 Troncone v Aliperti (1994) 6 BPR 13,291 |
Orders | 1. The Commissioner's decision to assess the deed of acknowledgment of debt between Miluc Pty Ltd and Mr and Mrs MacKay made on or about 16 December 2006 on the basis that it constituted a "mortgage" under s 82(1)(a) of the Stamp Act 1921 (WA) is affirmed.,2. The review application of the applicant is dismissed. |
JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL STREAM : COMMERCIAL & CIVIL ACT : TAXATION ADMINISTRATION ACT 2003 (WA) CITATION : MILUC PTY LTD and COMMISSIONER OF STATE REVENUE [2008] WASAT 68 MEMBER : JUSTICE M L BARKER (PRESIDENT) HEARD : 31 JANUARY 2008 DELIVERED : 27 MARCH 2008 FILE NO/S : CC 1660 of 2007 BETWEEN : MILUC PTY LTD
- Applicant
AND
COMMISSIONER OF STATE REVENUE
Respondent
Catchwords:
Stamp duty - Stamp Act 1921 (WA) - Assessment - Loan agreement - Right to caveat - 'Mortgage' - Security by way of charge over property - Implied equitable charge
Legislation:
Real Property Act 1900 (NSW), s 74F(1)
Stamp Act 1921 (WA), s 4(1ab), s 20(2), s 81, s 82, s 82(1), Second Schedule
Taxation Administration Act 2003 (WA), Glossary
Transfer of Land Act 1893 (WA), s 137
(Page 2)
Result:
Decision of the Commissioner of State Revenue affirmed
Review application dismissed
Category: A
Representation:
Counsel:
Applicant : Mr S Steenhof
Respondent : Mr P Lochore
Solicitors:
Applicant : Cornerstone Legal
Respondent : State Solicitor's Office
Case(s) referred to in decision(s):
Brick and Pipe Industries Ltd v Occidental Life Nominees Pty Ltd [1992] 2 VR 279
Caltex Australia Petroleum Pty Ltd v Commissioner of State Revenue [2000] WASCA 54; (2000) 22 WAR 299
Chiodo v Murphy [1995] V ConvR 54531
Coleman v Bone (1996) 9 BPR 16,235
Cradock v Scottish Provident Institution (1893) 69 LT 380
Crampton v French [1996] ANZ ConvR 156
Dominion Lifestyle Tower Apartment Pty Ltd v Global Capital Corporation Pty Ltd [2004] VSC 307; [2005] V ConvR 54 - 696
General Motors Acceptance Corporation Australia v Southbank Traders Pty Ltd [2007] HCA 19; (2007) 227 CLR 305
Graham v Chappell (1993) 9 WAR 157
Iaconis v Lazar [2007] NSWSC 1103
Midland Brick Co Pty Ltd v Welsh (2006) 32 WAR 287
Professional Services of Australia Pty Ltd v Mila Properties Pty Ltd [2004] WASC 30
Re Homann; Ex parte Richards (Trustee) [1959] Tas SR 58
Spunter Pty Ltd v Hall [2006] WASC 6
(Page 3)
Swiss Bank Corporation v Lloyds Bank Ltd [1982] AC 584
Troncone v Aliperti (1994) 6 BPR 13,291
(Page 4)
Summary of Tribunal's decision
1 The applicant entered into a deed of acknowledgement of debt (as Debtor) in December 2006. The deed, in addition to recording a loan of $500,000 also granted the Creditor the right to lodge an absolute caveat over certain land in Western Australia owned by the applicant. The Creditor executed a caveat in respect of an "Equitable Interest as Chargee" over the land.
2 The Commissioner of State Revenue assessed the deed for the purposes of stamp duty, determined it to be a 'mortgage', and assessed the duty in the sum of $1,000.
3 The applicant challenged the determination that the deed was a mortgage and objected to the assessment. The Commissioner of State Revenue disallowed the objection.
4 The applicant then sought review in the Tribunal.
5 The Tribunal determined that the deed of acknowledgement did constitute a mortgage as defined under the Stamp Act 1921 (WA) and affirmed the decision of the Commissioner of State Revenue.
6 The Tribunal concluded that where authority to lodge a caveat is given in connection with an obligation by the Debtor to pay money to the Creditor, and there is no sufficient indication to the contrary, the implication of the agreement is that the interest granted is an equitable charge to secure payment of the money to the Creditor. Such an equitable charge constitutes a 'mortgage' under the Stamp Act 1921 (WA).
7 As a result the Tribunal dismissed the review application.
Issue
8 The primary issue in these proceedings is whether a deed styled as "deed of acknowledgement of debt" is a "mortgage" as defined in s 82(1)(a) of the Stamp Act 1921 (WA) (Stamp Act).
Facts
9 On or about 16 December 2006, Miluc Pty Ltd, the applicant (as Debtor), entered into a deed with a Mr and Mrs McKay (as Creditor).
(Page 5)
10 The deed recorded a loan of $500,000 from the Creditor to the Debtor, for a term of at least six months at 25% interest.
11 Pursuant to the deed, the Debtor granted to the Creditor the right to lodge an absolute caveat over certain land in Western Australia owned by the Debtor in consideration for the loan.
12 On 20 December 2006, the Creditor executed a caveat in respect of an "Equitable Interest as Chargee" over the land. The caveat was lodged on 22 December 2006.
13 The deed was assessed by the Commissioner of State Revenue (Commissioner) on 21 December 2006 for the purposes of stamp duty. The Commissioner determined the deed to be a mortgage and assessed duty in the sum of $1,000.
14 The applicant paid the duty as assessed but subsequently challenged the correctness of the Commissioner's determination that the deed was a mortgage.
15 The applicant formally objected to that assessment by letter dated 26 March 2007.
16 The Commissioner disallowed the objection by letter dated 3 September 2007.
17 The applicant then commenced these proceedings in the State Administrative Tribunal (Tribunal) seeking review of the Commissioner's decision to disallow the objection.
Tribunal's findings
18 In Pt IIIE of the Stamp Act, as it applied at material times, the word "mortgage" has the meaning given in s 82 of the Stamp Act, as provided for by s 81.
19 Section 82(1)(a) of the Stamp Act relevantly provides that for the purposes of Pt IIIE, a mortgage is an instrument that:
"is a security by way of mortgage or charge over property that is wholly or partly in Western Australia at the liability date."
20 The word "instrument" is defined in the Glossary of the Taxation Administration Act 2003 (WA), which is relevant to the interpretation of the Stamp Act by virtue of s 4(1ab) of the Stamp Act, to include any other
(Page 6)
- document of a kind referred to in the Second Schedule of the Stamp Act. Item 13 of the Second Schedule of the Stamp Act relates to mortgages. The deed will therefore be an "instrument" if it is in fact a "mortgage" as defined. The applicant accepts that this is so.
21 The applicant and the Commissioner both tend to agree that the instrument is not on its face "a security by way of mortgage" over property in Western Australia, but do not agree as to whether or not it may be characterised as "a security by way of … charge" over such property. The Commissioner says it is a security by way of charge over the relevant property; the applicant does not agree.
22 In my view, the instrument does constitute a security by way of charge over property that is wholly in Western Australia at the liability date, and so is a "mortgage" as defined by s 82(1)(a) of the Stamp Act. My reasoning for that conclusion now follows.
23 The meaning of the word "security" may vary according to context: General Motors Acceptance Corporation Australia v Southbank Traders Pty Ltd [2007] HCA 19; (2007) 227 CLR 305 at [16] (General Motors v Southbank Traders). It potentially is a very wide term, and, as defined by Stroud's Judicial Dictionary (6th ed, 2000) at 2390, may mean "anything that makes the money more assured in its payment or more readily recoverable": see General Motors v Southbank Traders at [12]. The notion of security usually conveys the giving of rights that are exercisable against some property: Brick and Pipe Industries Ltd v Occidental Life Nominees Pty Ltd [1992] 2 VR 279 at 371; Caltex Australia Petroleum Pty Ltd v Commissioner of State Revenue [2000] WASCA 54; (2000) 22 WAR 299 at [61].
24 While something may be generally described as a security, it is only a certain type of security that is a "mortgage" for the purpose of s 82(1)(a) of the Stamp Act. In this case, if the instrument is a "security by way of … charge over property that is wholly … in Western Australia" then it will be a mortgage as defined.
25 A charge may be created at law or in equity. In this case, the Commissioner accepts that there is no express legal charge created by the deed, but contends the deed creates an equitable charge over the relevant property. The applicant accepts that this is the central issue in this case.
26 It is generally accepted that an equitable charge is created where a property stands charged with the payment of debt: Spunter Pty Ltd v Hall [2006] WASC 6 at [20].
(Page 7)
27 No special form is required to create a charge: see ELG Tyler, PW Young and C Croft, Fisher and Lightwood's Law of Mortgage (2nd Australian ed, 2005) at [2.3].
28 Indeed, to constitute a charge in equity by deed or writing it is not necessary that any general words of charge be used. It is sufficient that a court can fairly gather from the instrument an intention by the parties that the property referred to should constitute a security: Cradock v Scottish Provident Institution (1893) 69 LT 380 at 382 per Romer J; Crampton v French [1996] ANZ ConvR 156 at 157 per Harper J; Dominion Lifestyle Tower Apartment Pty Ltd v Global Capital Corporation Pty Ltd [2004] VSC 307; [2005] V ConvR 54 - 696 at [19].
29 The concept of an equitable charge was explained by Buckley LJ in Swiss Bank Corporation v Lloyds Bank Ltd [1982] AC 584 at 594 - 595 in the following terms:
"An equitable charge may, it is said, take the form either of an equitable mortgage or an equitable charge not by way of mortgage. An equitable mortgage is created when the legal owner of the property constituting the security enters into some instrument or does some act which, though insufficient to confer a legal estate or title in the subject matter upon the mortgagee, nevertheless demonstrates a binding intention to create a security in favour of the mortgagee, or in other words evidence as a contract to do so: see Fisher and Lightwood's Law of Mortgage, 9th ed (1977) [at 13]. An equitable charge which is not an equitable mortgage is said to be created when property is expressly or constructively made liable, or specially appropriated, to the discharge of a debt or some other obligation, and confers on the chargee a right of realisation by judicial process, that is to say, by the appointment of a receiver or an order for sale: see Fisherand Lightwood, [at 14]."
30 A question arises whether a simple statement in an instrument that a party has a right to lodge a caveat in respect of property of another party to the instrument can create a charge over the property and so constitute a security by way of charge over the property. In Graham v Chappell (1993) 9 WAR 157, the plaintiff, a registered builder, entered into a building contract with the first defendants to construct dwellings on the first defendants' land. The plaintiff performed the contract but the first defendants did not make the final payment as they had been declared bankrupt. Clause 6 of the contract provided that the first defendants
(Page 8)
- authorised and consented to "the Builder lodging an absolute caveat in respect of the Site to protect the Builder's interests herein". Relying on that clause, the plaintiff lodged a caveat. The plaintiff builder took proceedings in the Supreme Court of Western Australia to prevent the lapsing of the caveat. Justice White refused the application.
31 Justice White at 159 said that it was "difficult to know what the purpose of cl 6 really is". His Honour at 160 referred to s 137 of the Transfer of Land Act 1893 (WA) and then said it followed from that provision "that a person claiming any estate or interest in land under, inter alia, any charge does not need the permission of the chargor to lodge a caveat". His Honour then added that the section also makes it clear that the caveat is to protect some existing interest and that the caveat does not, of itself, create any interest in the land in question. In this regard, his Honour referred to Re Homann; Ex parte Richards (Trustee) [1959] Tas SR 58. Justice White at 160 expressly found that:
"cl 6, as it stands, does not suffice to confer on the plaintiff any interest in the property such as might sustain a caveat. In itself, a caveat does not confer an interest in land, albeit it may serve to protect an existing interest in the land, whether as chargee or as purchaser or otherwise as the case may be. No substantial argument to me by counsel for the plaintiff in support of the proposition that cl 6 charges the property by necessary implication. Counsel submitted that the matter was arguable and that was sufficient."
- Justice White further held at 160 - 161:
"It is clear that no express interest in the land has been created in favour of the plaintiff by writing signed by the first defendants. No authority was cited to me by counsel for the plaintiff suggesting that a clause in a written contract, such as cl 6, is sufficient to give rise to an interest in land created by implication, particularly where, as in this case, the creation of such an interest is not a necessary or the only reasonable inference from the words used."
(Page 9)
- those circumstances, the result is hardly surprising. What is clear though, is that White J did not reject the possibility that in an appropriate contractual situation, a contract may by implication create a charge over land.
33 Indeed, in other contexts courts have found that an equitable charge can arise where a right to lodge a caveat is given to a creditor by a debtor in a contract acknowledging a debt and providing for its repayment. A series of decisions in the Supreme Court of New South Wales in particular deal with this issue. Without traversing all of the decisions, I will mention those primarily relied on and cited to me by counsel for the parties in these proceedings.
34 The first is Troncone v Aliperti (1994) 6 BPR 13,291. In this case, Mr Aliperti, then a solicitor, borrowed money from a number of different people. He entered into a loan agreement with respect to each loan. The agreement provided, amongst other terms, for the repayment of the relevant loan and for interest. It did not in the terms provide for any security for the repayment of the loan. However, cl 5 provided:
"The Debtor authorises the Creditors to lodge a Caveat on any property owned by the Debtors [sic] to protect his interest."
- The question arose as to whether there was a sufficient interest under the Real Property Act 1900 (NSW), s 74F(1), to support the caveat, on the face of it, at an early stage of proceedings.
35 In the Court of Appeal, Mahoney JA, with whom Priestley JA agreed, stated at 13,292 - 13,293:
"In order to determine the present appeal, it is not necessary to determine what is the precise nature of the interest in the land which, by this implied grant, was passed to the creditors. It is, in my opinion, sufficient to conclude that it was an interest which, within the Real Property Act 1900, would support the lodgement of the caveat. However, three things may be said about it. First, the interest would, of necessity, be an equitable and not a legal interest. A 'legal' or statutory interest in land under the Real Property Act 1900 may be effectively created or granted only by the registration of an instrument. A promise to grant or the purported grant of an interest in registered land will, to the extent that it is effective, create only an interest in equity.
(Page 10)
- Second, there is in my opinion no rule of law which prevents the creation of a limited equitable interest of this kind. Thus, if the registered proprietor of land covenants by deed that, until a loan be repaid, he will not sell or deal with the land, that covenant would, in my opinion, create in favour of the covenantee an interest in the land to the extent at least that an injunction would go to restrain the covenantor from dealing with the land in a manner inconsistent with the covenant ... The right, by the enforcement of an express or an implied negative covenant, to restrain a dealing with land is in my opinion an interest in land within this branch of the law ...
Third, I do not mean by this that the rights of a creditor under cl 5 are necessarily limited to the creation, by lodgment of a caveat, of (as it is sometimes described) a statutory injunction. It is arguable that that which was granted by cl 5 was not merely the power to induce repayment of the loan by preventing dealing with the land; it may be that the implication would extend further, to include the appointment of a judicial receiver or the like. However, on this matter I express no opinion."
36 In the proceedings before me, counsel for the applicant relies strongly on this analysis of rights provided by Mahoney JA. Counsel therefore contends that under the deed all that the Creditor obtained was a right to seek a statutory injunction if a negative implied covenant not to deal with land looks like being breached. In that sense, it is sufficient to support a caveat, but not to imply the grant of security by way of equitable charge over the relevant land.
37 In this same case, however, Meagher JA at 13,293 said he agreed with the judgment of Mahoney JA but wished to add certain observations, as follows:
"First, once one reaches the conclusion that Mr Aliperti did intend to grant each of his lenders an interest in his land, that interest in the circumstances can only be an equitable charge.
Secondly, since the clause in question was of obvious importance to the parties to the transaction, one can assume it was not intended to be meaningless; and, unless one construes it as granting a charge, it would be meaningless."
38 The decision of the New South Wales Court of Appeal in Troncone v Aliperti gave rise to a renewed interest concerning the effect of a caveat
(Page 11)
- clause in a loan agreement or acknowledgement of debt. The case and those following it have led to a great deal of practical and academic legal comment. For example, in an article by L Aitken, 'Many Shabby Manoeuvres' - The Use and Abuse of Caveats in Theory and Practice (2005) 26 Australian Bar Review 205 at 216, the author observes:
"However, an ever-widening series of cases flowing from Murphy v Wright and Troncone v Aliperti and culminating most recently in Nudd v Official Trustee make it absolutely clear how easy it is to charge land. Professor Peter Butt has commented as follows:
'In reality, the law has come down to this: if, as part of a loan arrangement, the borrower authorises the lender to lodge a caveat on the borrower's property, then, regardless of whether the authority is express, or implied, or is to be gathered from some separate document signed by the borrower, the lender has sufficient interest to sustain a caveat" (footnotes omitted).
40 The cases to which Mr Aitkin and Professor Butt refer include the following. First, Coleman v Bone (1996) 9 BPR 16,235, in which McLelland CJ in Equity in the Supreme Court of New South Wales confirmed the view expressed by Meagher JA in Troncone v Aliperti to the effect that where a caveat clause in a loan contract raises the implication of an interest in land, it must constitute an equitable charge in respect of the land. The Chief Justice in Equity stated at 16,239:
"So far as the 'caveat' is concerned, it has been held by the Court of Appeal [in Troncone v Aliperti] that if in a contract between A and B, A grants B authority to lodge a caveat in respect of property of A, that grant carries with it by implication such estate or interest in the property as is necessary to enable that authority to be exercised. Where the authority to lodge a caveat is given in connection with an obligation by A to pay money to B, and there is no sufficient indication to the contrary, the implication is that the estate or interest granted is an equitable
(Page 12)
- charge to secure payment to B of that money [per Meagher JA]."
41 McLelland CJ in Equity found that the terms of the loan documents supported such an implication. The result of the transaction was that the plaintiff became entitled to an equitable charge over the property to secure the payment of a $50,000 debt and any share of capital gain to which she might be entitled under the agreement.
42 The particular agreement was constituted by letter passing between the parties which materially stated:
"About the $50,000 I shall want to put caveat on the property.
If you wish to sell you shall repay me $50,000 plus one-third share of capital gain …
As the caveat will safe guard my investment, and you are over borrowing, I will not remove it unless you can (when you wish to sell) repay the $50,000 plus my share of capital gain … Other than this reason I will not stand in your way when you wish to sell."
43 The Chief Justice in Equity added, at 16,239:
"It does not however follow that the plaintiff became entitled to have a mortgage registered over the title to the property. An equitable charge is a security of a different kind from a mortgage and there is nothing in the evidence to support the latter."
44 The point made by the Chief Justice in Equity, with respect, is that not every contract that mentions a caveat in connection with an obligation to pay money will necessarily result in an equitable charge by way of security over the land mentioned being implied. That will, however, be the proper legal conclusion where there is "no sufficient indication to the contrary".
45 At about the same time, the same general approach was also adopted in the Supreme Court of Victoria: see for example Crampton v French and Chiodo v Murphy (1995) V ConvR 54531 - 531. This and other relevant cases were also referred to in Dominion Lifestyle Tower Apartment Pty Ltd v Global Capital Corporation Pty Ltd in which Habersberger J adopted a similar approach when construing the terms of
(Page 13)
- the contract to see whether or not it was arguable that the parties had agreed to charge the land in question.
46 The same general issue again came before the New South Wales Supreme Court in Iaconis v Lazar [2007] NSWSC 1103 before Young CJ in Equity. Under an Exclusive Mandate to Act, by cl 7 the parties agreed:
"In the event of default of payment of brokerage fee, application fee, management fee and/or disbursements by the Owner to BAA, the Owner hereby charges the land listed in the schedule … with a payment to BAA …"
47 Young CJ in Equity stated of the effect of cl 7, at [23]:
"The current commercial enthusiasm for this sort of clause in a contract and for lodging a caveat was given a great boost by the decision of the Court of Appeal in Troncone v Aliperti … This decision has often been interpreted by persons seeking charges as meaning that every time there is an agreement that X can lodge a caveat over any property Y may own, that an equitable charge is created. It should be remembered, as McLelland CJ in Eq said in Coleman v Bone … that the true principle is that 'Where the authority to lodge a caveat is given in connection with an obligation by A to pay money to B, and there is no sufficient indication to the contrary, the implication is that the estate or interest granted is an equitable charge to secure payment to B of that money."
- Chief Justice Young in Equity then added at [24]:
"The probabilities would be that if the facts show that there is a pro forma document and a person of limited commercial experience has signed it without evidence being proffered by the lender that the clause has been properly explained to the person who is said to have given the charge by or on behalf of the person providing the financial benefit, that the court may very well come to the conclusion that the former person never intended to give a charge notwithstanding the words used in the document."
The Chief Justice in Equity further added at [25]:
"I should also note, whilst endeavouring to clarify the position in equity of the sort of clause in question in the instant case, that whilst this court has said that the court will not set aside a
- transaction merely because a very high interest is charged, that does not mean that the court will take no cognizance at all of the interest rate."
48 It seems to me, in all of the circumstances, that the true position is that explained by McLelland CJ in Equity in Coleman v Bone and confirmed by Young CJ in Equity in Iaconis v Lazar. That is, where an authority to lodge a caveat is given in connection with an obligation by the debtor to pay money to the creditor, and there is no sufficient indication to the contrary, the implication of that agreement is that the estate or interest granted is an equitable charge to secure payment of the money to the creditor.
49 There is no decided case in Western Australia that suggests the contrary. As explained earlier, White J in Graham v Chappell did not doubt that in an appropriate case an equitable charge by way of security over property might be implied. In Midland Brick Co Pty Ltd v Welsh (2006) 32 WAR 287 at [224], Hasluck J decided as much by reference to Troncone v Aliperti. In Professional Services of Australia Pty Ltd v Mila Properties Pty Ltd [2004] WASC 30 at [28], Le Miere J also acknowledged, as I read his Honour's judgment, the general principle I have stated.
50 The question here is whether, by reference to the deed between the Debtor and the Creditor, there is a charge to secure payment of the loan granted.
51 There is, in my view, little or no doubt that the right of the Creditor here to lodge the caveat under the contract is given in connection with the obligation of the Debtor to pay money to the Creditor. This is evident from the terms of cl 5 of the deed which grants the Creditor the right to lodge an absolute caveat "in consideration for the loan of the Debt".
52 It is also pertinent to note that under cl 8 the parties expressly agree:
"The Creditor shall withdraw the caveat over the Land within three days of this Deed terminating in accordance with clause 7 and shall give notice to the Debtor confirming that withdrawal, or if in the event the Parties agree in writing to continue this Agreement such other property as provides sufficient security in support of the amount of the Debt set out in this Agreement."
(Page 15)
- The means thereby agreed to continue the agreement if an alternative "sufficient security" was provided, rather confirms the fact that the parties thought they were providing for security in the first place.
53 Further, the terms of cl 16 and cl 17 are also relevant to the proper construction of the deed. They are as follows:
"16. The Debtor shall improve the value of the Land by developing and subdividing the Land.
17. After such time as a Mortgage by any Bank over the title for the Land is lodged the Debtor [shall] not lodge any charge or encumbrance over the title."
54 The first thing to note here is that this deed is not a simple acknowledgment of debt. It actually imposes a positive obligation on the Debtor, the applicant, to improve the land by developing and subdividing it. The parties to the agreement plainly have entered into this agreement in the context of land development. That helps to explain, in my view, the inclusion of cl 17 in the agreement. In order to achieve the development and subdivision of the land, the parties obviously anticipate that at some point additional finance will be required and that a "Bank" will wish to lodge a "Mortgage" over the title to the land to facilitate such additional financing. Clause 17 is not entirely clear, so far as its commercial efficacy is concerned, but it does seem to anticipate that the Debtor will remove the absolute caveat for the purpose of enabling a "Bank" to register its "Mortgage". However, cl 17 goes on to make sure that apart from the bank registering its security, noone else should be able to lodge any charge or encumbrance over the title. This may be in recognition of the fact that once the Creditor loses the protection of the absolute caveat it may not be in a position to lodge a further caveat to protect its interest. Rather, it would then be dependent on its contractual rights to prevent the lodgement of any other charge or encumbrance over the title. Whether or not the expression "lodge" in cl 17 means creation or lodgement for registration need not be decided.
55 In my view, in circumstances where the parties were legally represented in relation to the deed of acknowledgement of debt and cannot be seen to have been commercially unsophisticated, lacking in proper advice or representation, or to have been at the mercy of some shyster, the proper conclusion is that the deed as made constitutes a security by way of charge, being an equitable charge, over the property referred to in the deed.
(Page 16)
56 To that end, it is not necessary to have regard to the fact that when the caveat was in fact lodged by the Creditor to protect its interest, the claim was an equitable charge over the land. However that fact may be noted as it at least suggests that the Creditor understood the deed was security by way of charge over the land mentioned in cl 5.
The conclusion and order
57 For the reasons given above, I consider that the Commissioner was right to refuse the objection and to maintain the assessment of stamp duty on the basis that the deed of acknowledgment in question constituted a "mortgage" as defined under s 82(1)(a) of the Stamp Act.
58 I would therefore affirm the Commissioner's decision and reject the review application.
59 The Tribunal orders:
1. The Commissioner's decision to assess the deed of acknowledgment of debt between Miluc Pty Ltd and Mr and Mrs MacKay made on or about 16 December 2006 on the basis that it constituted a "mortgage" under s 82(1)(a) of the Stamp Act 1921 (WA) is affirmed.
2. The review application of the applicant is dismissed.
I certify that this and the preceding [59] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
___________________________________
JUSTICE M L BARKER, PRESIDENT
2
7
4