|Date of judgement||07 February 2014|
|Judge(s)||Bathurst CJ, Ward JA and Tobias AJA|
|Court or Tribunal||NSW Court of Appeal|
TAXES AND DUTIES - stamp duties - assessment and amount payable including fines - whether a deed of variation extending the time for payment of principal and capitalised interest was an advance under s 206(a)(iii) of the Duties Act
AMP Inc v Utilux Pty Ltd (1971) 45 ALJR 123;  RPC 103
Thompson v Goold & Co  AC 409
Tozer Kemsley & Millbourn (Australasia) Pty Ltd v Point  61 SR (NSW) 751 at 764; (1961) 78 WN (NSW) 250
The Taxpayer in this case appealed against the decision of Gzell J at first instance that the Chief Commissioner of State Revenue was correct to assess a fixed and floating charge (“Charge”) to additional mortgage duty. The Chief Commissioner cross-appealed against the decision of Gzell J to not include the amount of capitalised interest as subject to additional mortgage duty.
The Court of Appeal found, unanimously, that Gzell J erred in finding that the Variation Deeds resulted in the Charge being liable to additional mortgage duty as an “advance” within s 206(a)(iii) of the Duties Act, and upheld the appeal. The Chief Commissioner’s cross-appeal was dismissed.
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”.
Relevantly, the term “advance” was defined as follows:
“advance means the provision or obtaining of funds by way of financial accommodation, by means of:
(a) a loan, being:
(iii) a forbearance to require the payment of money owing on any account whatever ...”
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 appellants 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.
Justice Gzell found at first instance 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). The appellants appealed against this decision, whilst the respondent cross-appealed against the decision of Gzell J to not include the amount of capitalised interest as subject to additional mortgage duty.
The Court of Appeal found, unanimously, that Gzell J erred in finding that the Variation Deeds resulted in the Charge being liable to additional mortgage duty as an “advance” within s 206(a)(iii) of the Duties Act. Accordingly, the Court of Appeal found that the appeal should be upheld and the Chief Commissioner’s cross-appeal should be dismissed.
In reaching this decision, the relevant issues for the Court to determine were:
In respect of each issue, the Court of Appeal found as follows:
Accordingly, the Court of Appeal ordered that the appeal be allowed and set aside the judgment and orders of Gzell J. The Chief Commissioner’s cross-appeal was dismissed.