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Beddoes v Attorney General [2001] FJLawRp 33; [2001] 1 FLR 176 (3 May 2001)

TUNI BEDDOES & JACINTA BEDDOES v ATTORNEY GENERAL

High Court Civil Jurisdiction

Stamp duty – conditional exemption from second mortgage – land secured by first mortgage - further mortgage necessary to construct first home - whether mortgagor entitled to exemption for second mortgage drawn up to satisfy Consumer Credit Act 1999 requirements – purpose of exempting provisions of Stamp Duties Act to provide an incentive to first owner/occupiers and mortgagors – purpose of Consumer Credit Act to further protect consumers – whether Consumer Credit Act a barrier to exemption under Stamp Duties Act - Stamp Duties Act ss1 (1)(b) and 2(a)(ii) – Consumer Credit Act

The Plaintiffs purchased a piece of undeveloped land in September, 1998, and to finance their purchase the Plaintiffs mortgaged the land to a bank. The mortgage secured present and also further advances yet to be made. The Commissioner of Stamp Duties conditionally exempted the Plaintiffs from stamp duty under the provisions of Part III Section 1(1)(b) and 2(a)(ii) of the Stamp Duties Act. One and a half years later, the Plaintiffs decided to proceed to construct the house and sought a further $70,000.00, which had to be secured. Under the Consumer Credit Act 1999 the old form mortgage document was no longer acceptable for mortgages granted after its commencement, thus the Plaintiffs executed a new mortgage. The Plaintiffs applied for conditional exemption from stamp duty for the second mortgage, but the Commissioner refused the application on the grounds that a first mortgage was already exempted. She required the Plaintiffs to either execute a variation to their existing mortgage, which would then be granted exemption, or they have to be satisfied with the exemption already granted. Plaintiff's counsel submithed that the second mortgage was itself 'the only or principal or primary security', alternatively, the second mortgage 'secures further ... advances of moneyson account current' since it secured a further advance made made by the Bank. The Court reconciled the purposes of both legislation, and found that the Consumer Credit Act could not prejudicially affect purchasers from the exempting provisions of the Stamp Duties Act for their first home. The Court found that while for reasons of convenience, tidiness and clarity the Commissioner may not wish to see a proliferation of conditionally exempt mortgages, convenience was not a sufficient ground for excluding a second mortgage document from the exempting provisions of the Stamp Duties Act. The Court concluded that the reality was that the second mortgage in respect of the acquisition by an owner/occupier of a first home. It granted eclaration soug sought.

Held – The Consumer Credit Act, whose main purpose is to extend further protection to consumers, was not intend prejudicially affect aspiring home owning mortgagors who wwho wish to raise a further sum to construct their first home, by excluding that further loan from the exempting provisions of the Stamp Duties Act. There is nothing in the Stamp Duties Act restricting the exception to only one mortgage document.

[Note, although the Defendant appealed, the appeal was discontinued as s45(1) of the Stamp Duties Act states that the decision of the High Court is final.]

Case referred to in Judgment
Sargaison v Roberts [1969] 1 WLR 951; (1969) TC 612

Subhas Parshotam for the Plaintiff
Yashveen Singh for the Defendant

Scott, J

In these proceedings begun by way of Originating Summons issued in June 2000 the Plaintiffs seek a declaration that they are entitled to be granted conditional exemption from stamp duty in respect of a mortgage lodged by them with the Commissioner of Stamp Duties on 23 March 2000.

Two avits were filed:

(i) Tuni Beddoes, in support, 26 June 00;

(ii) Usenia Losalini, (Commissioner of Stamp Duties) in answer, 21 July 00.Written submissions were also filed by counsel:

(i) Plaintiff, 12 September 00;

(ii) Defendant, in answer, 23 October 00;

(iii) Plaintiff, in reply, 1 November 00.

The relevant fare not inot in dispute. The Plffs decided to buy abuy a piece of land on which to build themselves a home. On 9 September 199y purchaurchased a pie undeed land which is comprised in crown lease 13432 a432 at Waqadra, Nadi. In order to fito finance their purchase the Plaintiffs mged the land to the Bank of Hawaii. cation was mwas made to anto and granted by the Commissioner for the mortgage (455634-Exhibto the supporting affidavit) to be conditionally exempted fted from stamp duty under the provisions of Part III Section 1(1)(b) and 2(a) (ii) of the Stamp Duties Act (Cap 205) as amended by the Stamp Duties (Amendments) Act 1982.

By March 00 taintiffs wffs were in a position to proceed with the construction of the house on their piece of land. They obtained a further ofan of $70,000 from the Ba Hawaii which loan had, of course, to be secured.
#160;
As wilseen from thom the original mortgage 455634 it secured not moneys already advanced by the Bank to the Plaintiff but alut also secured further advances yet to be made. In these circumstanhere ats, at first sight, nht, no need for a further mortgage to be granted and executed in respect of the second loan. There wweverfficulty presepresented by the Consumer Credit Act 15/1999 which had by then come into into force.

One of the consees ofCohe Consumer Credit Act 1999 was that the old form of mortgage document was no longeronger acceptable for mortgages granted afts commencement. The Plaintiffs'l adviser, ser, I believe correctly, took the view thaw that a second mortgage document would have to be executed, one complying with the requirements of the new Act. A copy of the second mor dage dated 16 March 00 is Exhibit D to the supporting affidavit.

Onarch the Plaintiffs affs ap for conditional exemption from stamp duty for the second mond mortgage (Exhibit F). On 31 March theication wasn was refused.&#The requisition (Exhibit G) was endorsed by the Commissionesioner:

"Return, Applicant has already been granted conditionamption from stamp duty. They arrefore liable to e to e to pay stamp duty in this case".

As is clear from her letter of 14 June (Exhibit I) and paragraph 14 of her affidavit the Commissioner's view is that only one loan document may be granted exemption under the Stamp Duties Act. Accordingly, the Plaintifvs have a choice. They can eithbmit a variatariation to their existing (i.e. original) mortgage which would then be granted exemption or they have to be satisfied with the exemption alrerante60; The Commissioissioner is not prepared to grant exemptiomption to two mortgages given by the same mortgagor.

It was not disputed by Mr. Singh that Part III Section 2(a)(ii) applies to the Plaintiffs and therefore the only question is whether the second mortgage presented by the Plaintiffs to the Commissioner falls within Part III Section 1(1)(b), whether, in other words it is:

"A mortgage which is the only or principal or primary security for the payment or repayment of moneys or which secures further or future advances of moneys due on account current".

My initial reaction was that the second mortgage was not "the only or principal or primary security" for the Plaintiff's loans in view of the pre-existing mortgage but Mr. Parshotam argued that the pre-existing mortgage was irrelevant since the second mortgage was itself "the only or principal or primary security" for the repayment of the loan in respect of which it had been granted. Alternatively, he suggested that the second mortgage "secures further ... advances of moneys due on account current" since it secured a further advance made by the Bank to the Plaintiffs for the purpose of building of their house.

In response to these arguments Mr. Singh, who appeared to have made very little effort at all to master his brief could only submit that exemption may only be granted in respect of one mortgage for one mortgagor but why this should be the case he was unable to say. either did the written subn submission filed on behalf of the Defendant answer the question.

In my view it is important to bear in mind the purpose e provision under consideration. That purpose is&#160 clearly st in the Objects acts and Reasons to the Stamp Duties (Amendment) Bill 1982:

"this is intended to give eive effect to the proposal outlined in the Budget Speech to provi ince to owner/occupiecupiers byrs by abolishing stamp duty in respect of purchases of first homes and mortgages in respect of first homes."

As has already been noted, had it not been for the passage of the Consumer Credit Act 1999 there would have been no need for a second mortgage to be executed. I do not believe it was inas intended that the Consumer Credit Act, one of the main purposes of which was to extend further protection to consumers, should prejudicially affect aspiring home owning mortgagors ish to raise a further sum sum by excluding that further loan from the exempting provisions of the Stamp Duties Act.

Wh accept that the Comm Commissioner, for reasons of convenience, tidiness and clarity might not wish to see a proliferation of coonally exempt mortgages I do not think that convenience is a sufficient ground for excludinluding a second mortgage document from the exempting provisions of the Stamp Duties Act.

The Duties Act is a ta a taxing statute. As is well known, the conttruction of such statutes will not seldom involve looking at the substance of the transaction in question rather than its icali Usually suly such an approach ends up benefitting the Commissioner but I see no reas reason why the adoption of the approach should be excluded merely because it results in a benefit to the taxpayer. To quote Megarry J iname="ame="Sargaison_v_Roberts_Tuni_Beddoes_v_AG">Sargaison v Roberts [1969] 1 WLR 951; (1969) TC 612:

"I appreciate that what I ha do is to construe the words used and not to insert words wrds which are not there or to resort to a so-called equitable construction of a taxing statute. But when I have given full full weight to this consideration I think I am entitled to distinguish between the substance of a transaction and the machinery used to carry it through ....... where the technicalities of ... conveyancing and land law are brought into juxtaposition with a ... taxing statute I am encouraged to look at the realities at the expense of the technicalities."

I grant the declarationht.

Declaratlaration granted.

Marie Chan