PRIME WHEAT ASSOCIATION LTD v CHIEF COMMR OF STAMP DUTIES (NSW)

Judges: Gleeson CJ
Handley JA

Sheppard AJA

Court:
NSW Court of Appeal

Judgment date: Judgment given on 5 November 1997

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Sheppard AJA

In this matter I have had the advantage of reading the judgments to be delivered by the other members of the Court. Except in one respect, I am in agreement with the judgment of the Chief Justice. My disagreement arises in relation to the question whether the share mortgage and the mortgage of real estate are mortgages for purposes of the definition of ``mortgage'' in s. 83(1)(a) of the Stamp Duties Act 1920. I have reached the conclusion that each of the instruments in question is such a mortgage. My reasons for this conclusion are as follows.

Clause 10.1 of the share sale agreement provides that, to secure the full performance of the purchaser, securities specified in the clause will be granted or procured by the purchaser. The securities include a first priority mortgage

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ATC 5024

over the purchaser's shareholding in Grains Services Australia Limited and first priority registered mortgages over what are described as ``Key Property Interests'' in the forms annexed as M, N, O and P to the share sale agreement. The Commissioner's cross-claim specifies the two instruments claimed to be mortgages as a share mortgage dated 30 September 1992 and a mortgage under the Real Proper Act 1900 dated 30 September 1992 from NSW Grain Corporation Limited to the Crown. Both the share mortgage and the Real Property Act mortgage refer to consideration in clause 2.1 of each security. Each clause provides that the mortgagor has entered into the deed (or the mortgage of real estate) for valuable consideration from the mortgagee. Receipt of the consideration is acknowledged.

Section 83(1)(a) of the Stamp Duties Act defines ``mortgage'' as a security by way of mortgage or charge given in consideration of the conveyance or transfer of any estate or interests any real or personal property. The definition is inclusive and does not limit the meaning of the expression ``mortgage'' in s. 3(1) of the Act. Nevertheless, nothing turns on the definition not being an exhaustive one nor on its not limiting the means of ``mortgage'' in s. 3. Accordingly, the question is whether the two securities were given in consideration of the conveyance or transfer of an estate or interest in real or personal property.

The two mortgages are part of the documentation of the overall transaction. The various documents make up a whole as a result of which the intended transaction is effected. The central document is the share sale agreement. On ordinary principles, the consideration referred to in clause 2.1 of each of the mortgages is to be identified by reference to the share sale agreement, particularly clause 10. If one reads clause 2.1 of each of the mortgages instructed by the provisions of clause 10.1 of the share sale agreement, it becomes clear that, in order to secure the full performance of the purchaser under the agreement, the purchaser is to grant or procure the securities including the two mortgages. The purpose of the mortgages is thus to secure the performance of the contract by the purchaser. The purchaser is the purchaser of shares from the vendor: see clause 2.1 of the share sale agreement. In this way each of the mortgages is a security given in consideration of the conveyance or transfer of an estate or interest in personal property, namely the shares. Each mortgage is, accordingly, within the provision. Each thus becomes a ``Loan security'' within the meaning of s. 83(1), and s. 84(3) becomes applicable. No ad valorem duty is payable under s. 83(1)(a) because the total amount secured is not expressed. The amount of duty on each security is a fixed duty of $5.00.

In the result I would agree with the orders proposed by Handley JA.

Orders:

The Court should make the following orders.

1 The appeal is allowed.

2 The orders made by Dunford J are set aside.

3 The decision of the respondent disallowing the first appellant's Notice of Objection to Assessment dated 8 March 1993 is set aside.

4 Declare that no loan security duty is payable under Division 21 of Part 3 of the Stamp Duties Act 1920 (the Act) on the Share Sale Agreement dated 4 September 1992 referred to in the Notice of Objection.

5 Declare that the Share Mortgage dated 30 September 1992 between the first appellant as Mortgagor and the State of New South Wales as Mortgagee over all the issued shares in the capital of Grain Services Australia Limited is not a ``loan security'' for the purposes of Division 21 of Part 3 of the Act.

6 Declare that the Mortgage dated 30 September 1992 between the second appellant as mortgagor and the State of New South Wales as mortgagee, over the whole of the land the subject of Folio Identifier 10/81965 is not a ``loan security'' for the purposes of Division 21 of Part 3 of the Act.

7 Order that the respondent repay to the appellants any duty paid by them as duty on any loan security constituted one or other of the above instruments together with interest thereon at the prescribed rate under section 124C of the Act.

8 The respondent is to pay the costs of the appellants of the proceedings at first instance and of this appeal.