|Date of judgement||30 January 2013|
|Court or Tribunal||Supreme Court of New South Wales|
TAXES AND DUTIES - Stamp Duties - mortgage duty - charge stamped at $5 on execution as securing no amount - variation deed extending time for payment - whether a forbearance under s 206(a)(iii) of the Duties Act 1997 is an advance - whether charge required to be upstamped under s 208(2) - whether capitalised interest included in amount secured - deferred purchase price scheme – forbearance - capitalised interest
Tozer Kemsley & Millbourn (A/Asia) Pty Ltd v Point (1961) SR (NSW) 751
A fixed and floating charge granted in 2007 as part of a “deferred purchase price” arrangement was initially stamped with mortgage duty of $5 on the basis that it did not secure any “advances” at the time of its execution.
The Chief Commissioner assessed additional duty on 24 Dec 2010 in respect of “advances” plus capitalised interest totalling $102,600,000, following execution of a variation deed.
On 30 January 2013 Justice Gzell found that the Chief Commissioner was correct to assess the Charge to additional mortgage duty, on the basis that the Variation Deed constituted an “advance” under s 206(a)(iii) of the Duties Act. However mortgage duty should only be imposed in respect of amount totalling $92,006,545, which excluded the capitalised interest.
The taxpayers applied for a review of the Chief Commissioner’s decision on 24 December 2010 to assess a fixed and floating charge (“Charge”) to additional mortgage duty (of $410,486) based on a further advance of $102,600,000.
The Charge was granted in 2007 and, upon execution, was stamped with duty of $5 on the basis that it did not secure any “advances” at the time of its execution.
The Charge formed part of a “deferred purchase price” arrangement (“DPP Scheme”). In essence, a DPP scheme is one under which a financial institution may subscribe for and sell loan notes for a price. In this case, the Charge secured payment of that price, but payment could be deferred. As the Charge secured the payment of an unpaid purchase price rather than the repayment of a loan, this arrangement fell outside the provision in s 206 of the Duties Act 1997 (NSW) (“Duties Act”) defining what, for mortgage duty purposes, was an “advance”.
The Charge secured notes issued in 2007 that had a face value of $92,006,545. Interest was capitalised on the value of the notes issued, and as at 1 July 2009, the total amount outstanding which was secured by the Charge was $102,600,000.
Under various Variation Deeds, the taxpayers elected to defer (or extend) the due date for payment of the purchase price on several occasions, including on three occasions after 1 July 2009.
The Chief Commissioner assessed the Charge to additional duty (based on an advance of $102,600,000) on 24 December 2010 (“Assessment”) in respect of those deferrals (or extensions), after 1 July 2009, of the date for payment of the purchase price.
The Assessment was made under s 208(2) of the Duties Act which provided:
“A mortgage becomes liable to additional duty on the making of an advance or further advance if, as a result of that advance or further advance, the amount secured by the mortgage exceeds the amount secured by the mortgage at the time a liability to duty last arose under this Act.”
Justice Gzell ultimately found that the Chief Commissioner was correct to assess the Charge to additional mortgage duty, however mortgage duty should only be imposed in respect of an amount of advances totalling $92,006,545 (and not $102,600,000 as originally assessed).
In reaching this decision, the relevant issues for the Court to determine were:
In respect of each issue, Justice Gzell found as follows:
Accordingly, Justice Gzell ordered: