Kumar v Attorney General [2001] FJLawRp 7; [2001] 1 FLR 31 (18 January 2001)

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26 October, 2000, 18 January, 2001

HBC 0239/00S

Stamp duty - conditional exemption from – mortgage – refinancing – amount of duty chargeable on an instrument – whether assessable by 1% on amount of indebtedness less stamp duty paid earlier or earlier exempted or assessable to the extent of the indebtedness being refinanced - on wide ramifications - purpose of Stamp Duties Act 1998 amendment – rules in aid of interpreting revenue legislation - Stamp Duties Act s3, 43; Stamp Duties (Amendment) Act 1982 s2; Stamp Duties (Amendment) Act 1998 Schedule; Stamp Duties (Budget Amendments) Act 1999; Victorian Stamps Act 1958 22(a)

The Plaintiff borrower refinanced two mortgages and applied for exemption of stamp duty under the Stamp Duties Act. The amount sought to be refinanced was duly calculated, and stamp duty was assessable on the difference. The Commissioner of Stamp Duties assessed his liability at 1% of the amount of indebtedness less 0.5% of the exemption allowed for the two HFCo mortgages. The Plaintiff filed an originating summons asking the Court to determine the amount of stamp duty payable on the document evidencing the re-financing. He sought declarations that he was entitled to exemption from stamp duties on the refinancing of two mortgages being 1% of the difference between the amount of indebtedness and the exemption allowed for the two HFCo mortgages. Counsel gave an example which the Judge endorsed: "A mortgage is taken (prior to 1/1/99) by a lender to secure a debt of, say, $50,000.00. Ad valorem stamp duty is paid on this. This would be $250 (computed at the stamp duty rate of ½%). The debt is then reduced to, say $40,000.00 by the mortgagor at which time he seeks to have the same refinanced by another lender (again prior to 1/1/99). The 2nd lender then takes a mortgage security to secure its advance of $40,000.00 to the mortgagor. Under the Stamp Duties (Amendment) Act 1998, the mortgagor is entitled to exemption from stamp duties on the refinanced amount of $40,000.00 (i.e. $200 (computed at the rate of ½%)). If the mortgagor had incurred additional debt – say of a further $20,000.00 – then the mortgagor would be liable to pay stamp duty on the additional debt (at ½% on $20,000.00)." The Court examined the purpose of the 1998 amending Act, the purpose of revenue legislation generally, and the rules in aid of interpretation of revenue legislation. Finding that the bill reasons stated 'Stamp Duty is to be paid only once on the amount charged with duty' the Court held that there was no ambiguity in the purpose of the amendment, which was to assist mortgagors to re-pay their debts to existing credit providers without further additional stamp duty liability.

Held – Stamp duty is not a tax on transactions as such, but a tax on documents which record and give effect to certain transactions. Ad valorem duty is payable on a document which has the effect of transferring or creating a beneficial interest. If a document does not have this effect then, subject to any specific provisions in the Stamp Duties Act (or other legislation), it will attract one of the nominal fixed duties. The 1988 Amendment to the Stamp Duty Act was to allow mortgagors to borrow from other credit providers to help them re-pay their debts to existing credit providers without having to incur any additional stamp duty liability. If there was any ambiguity in the amending Act, it should be resolved in favour of the Plaintiff taxpayer.

[note: This case applies to applications for exemption of stamp duty lodged prior to 1/1/99. However, the case is invaluable for assisting with the method for calculating exemption of stamp duty, as provided in the example. In a refinancing situation, stamp duty is thus assessable only on the portion of additional debt (over and above the reconveyed or refinanced debt)].

Donald Bull and Anor v Commissioner of Inland Revenue [1998] ABU 17 and 18/97 Judgment 15 May 1998

From time to time borrowers under mortgages need to re-finance their loans, some times, as occurred in this case, from another lending institution. The question I have to decide is the amount of stamp duty payable on the document evidencing the re-financing.

Although in monetary terms the amount of stamp duty payable according to the Plaintiff and that claimed by the Defendant is not very large - in the case of the Plaintiff $56,00 in the case of the Defendant $348.00 - I am told by counsel that my decision will have much wider ramifications than involving the immediate parties.

The matter came before me by way of Originating under Section 45 of the Stamp Duties Act Cap. 205 which gives High Court the power of deciding finally all questions as to the amount of duty chargeable on an instrument which in Section 2 includes every written document.

Before turning to the relief sought in the Originating issued on the 16th of May 2000 it is convenient to mention the following facts which are not in dispute:

(2) The Plaintiff gave a mortgage over the land to Home Finance Company Limited (hereinafter "HFCo"); the mortgage is dated 7th September 1998 ("the first HFCo Mortgage").

(3) The Plaintiff gave another mortgage over the land to HFCo. This mortgage is dated 9th April 1999 ("the second HFCo Mortgage").

(4) The first HFCo Mortgage had earlier, on 8th October 1998, been stamped by the Commissioner under the Stamp Duties (Amendment) Act 1982.

(5) In particular, stamping was effected under Section 2 of the Stamp Duties (Amendment) Act 1982.

(6) Pursuant to this provision, the mortgage was exempted from payment of stamp duty but noted to secure indebtedness of $53,198.00.

(7) The second HFCo Mortgage had also earlier on 13th April 1999 been stamped by the Commissioner under the Stamp Duties Act.

(8) The second HFCo Mortgage was stamped to indebtedness $5,200.00 with stamp duty at rate of 0.5% paid (i.e. $26.00).

On 4th January 2000 the Plaintiff gave a mortgage to Colonial National Bank ("CN Bank") to secure the facilities proposed to be given by it to the Plaintiff set out in a letter to the Plaintiff dated 22nd November 1999.

The facility to be given by CN Bank was a total of $64,000.00 and was stated as being for the following purposes:

(1) To re-finance his debt with HFCo	-	$62000.00
(2) For documentation costs	-	$2000.00
		$64000.00

At that time, the amount that was owed by the Plaintiff as at 29th December 1999 was as stated in HFCo's letter of 29th September 1999 to the Plaintiff, namely $61,513,68.

On or about 26th January 2000, the Plaintiff made an application for exemption from stamp duty under the Stamp Duties (Amendment) Act 1998.
In this application, the Plaintiff requested that exemption from stamp duty be given to him to the extent of the stamp duties paid whether earlier exempted or paid on the first HFCo Mortgage and the second HFCo Mortgage.

The computation of this appears in a statutory declaration of Isikeli Kini Taoi, Bank Manager of CN Bank made on the 15th of December 1999 and is as follows:

No.	Date:	Amount
59530	1998	(exempt)
		($53,198.00)
19657	1999	($5,200.00)
		($58,398.00)

These stamp duties were paid on the HFCo Mortgages. The amount of $58,398.00 was rounded off to $58,400.00 for computation purposes.

The application was that exemption be granted to the Plaintiff to the extent of the stamp duty paid and/or exempted on the HFCo Mortgages, to the extent of the amount of indebtedness being re-financed, namely $58,398.00 with further stamp duty to be paid on the difference of $5,602.00.

The Commissioner allowed the application but the Plaintiff rejects the manner in which she has carried out her computations. These were as follows:

Amount of indebtedness to be stamped	$64,000.00
1.0% of this	$640.00
Exemption allowed for the two HFCo mortgages:	$292.00
(being 1/2% of $58,400.00)
Stamp duty payable:	$348.00

For his part the Plaintiff contends that he is liable to pay only $56.00 computed as follows:

Amount of indebtedness to be stamped	$64,000.00
Exemption allowed for the two HFCo mortgages	$58,400,00
Amount of indebtedness for which stamp duty is payable	$5,600,00
Stamp duty payable	$56.00

It is on these facts that the Plaintiff seeks the following relief in his Originating Summons:

A. A Declaration that the Commissioner of Stamp Duties had acted incorrectly in assessing stamp duty of $292.00 on a "Mortgage" as described herein) lodged for stamping by the Plaintiff at her office.

(i) That the Plaintiff is entitled to exemption from stamp duties on the said Mortgage lodged by him with the Commissioner of Stamp Duties for stamping, for indebtedness of $58,400.00;

(ii) That the Plaintiff is not obliged to make payment of any stamp duty to secure the said indebtedness of $58,400.00; and

(iii) That the Plaintiff is obliged to payment of stamp duty of only $56.00 for indebtedness of $5,600.00.

C. An Order that the Defendant do pay back to the Plaintiff the sum of $292.00 paid by him to the Commissioner of Stamp Duties as stamp duty on this instrument, together with interest at the rate of 7.75% per annum from 1 April 2000 till the date of payment.

D. An Order that the Defendant do pay the Plaintiff the costs of and incidental to this action.

It is not in issue that the Plaintiff is not seeking exemption on the entire loan that is being provided to him by CN Bank; he is only seeking exemption to the extent of the amount that he is re-paying to HFCo.

It is also not in dispute that the Commissioner accepts that no distinction is to be drawn between:

(b) Stamp duty that has been exempted from being paid prior to 21/1/99 under the Stamp Duties (Amendment) Act 1982

for the purpose of determining whether an application for exemption from stamp duty under the Stamp Duties (Budget Amendments) Act 1999 applies and that if it applies a rate of one half percent is imputed on the exemption allowed under the 1982 amendment.

Section 3 of the Stamp Duties Act (as repealed replaced by Section 2 of the Stamp Duties (Amendment) Act 1982) provides for documents on which duty is to be charged. This section reads:

"3. Subject to the exemptions and provisions as to conditional exemptions contained in the Schedule, there shall be raised, levied, collected and paid unto Her Majesty for the public uses of Fiji upon and in respect of the several instruments specified in the column of Part 1 of the Schedule headed "Nature of Instrument" the several duties specified in the column of that Part of the Schedule headed "Amount of Duty"."

Section 43 of the Stamp Duties Act sets out what the Commissioner is required to do when documents are presented to her for stamping:

"43. Where an instrument is brought to the head office for assessment the Commissioner shall state whether it is liable to duty and if he is of the opinion that –

(a) it is not so liable, he shall impress thereon the Commissioner's seal and the particular stamp denoting that it is not so liable; or

(b) it is liable to duty or fine, he shall assess the duty or fine with which it is in his opinion chargeable and, on payment of the amount so assessed, shall stamp the instrument with the Commissioner's seal and a particular stamp denoting the amount of duty or fine so paid."

(b) Consider whether stamp duty on the instruments so presented to her is payable or not;

(c) If she is of the view that stamp duty is not payable, then she impresses her seal on the instrument and denotes that no stamp duty is payable; or

(d) If she is of the view that stamp duty (and any fine) is payable, then, on payment of the amount so assessed, she stamps the instrument with her seal and denotes what stamp duty (and any fine) has been paid.

Again these matters are not in dispute between the Plaintiff and the Commissioner.

Under this, Part 1 of the Schedule to the Stamp Duties Act (as amended), provision is made for exemption from payment of stamp duty on a Debenture or a Mortgage where these are taken for "refinancing or reconveyance".

"This Bill seeks to amend the Stamp Duties Act as a result of the 1998 Budget. The Bill is designed to provide greater flexibility in refinancing or reconveyance of mortgages and debentures. Stamp Duty is to be paid only once on the amount charged with duty. However, stamp duty is still payable on any amount above the original amount."

I take this to mean that if a debt owing under a Debenture or Mortgage is being reconveyed or refinanced duty has already been paid on the original Debenture or Mortgage (to secure the indebtedness), then a Debenture or Mortgage taken to secure the same debt being reconveyed or refinanced is exempt from payment of any stamp duty - to the extent of the debt being reconveyed or refinanced.

If, however, any additional debt is being taken (that is, a debt over an above the reconveyed or refinanced debt), then stamp duty is payable (at the ad valorem rate) for the additional debt.

Counsel for the Plaintiff in his very helpful written submissions gives the following as an example, and I agree:

"A mortgage is taken (prior to 1/1/99) by a lender to secure a debt of, say, $50,000.00. Ad valorem stamp duty is paid on this. This would be $250.00 (computed at the stamp duty rate of 1/2%).

The debt is then reduced to, say, $40,000.00 by the mortgagor at which time he seeks to have the same refinanced by another lender (again prior to 1/1/99).

The 2nd lender then takes a mortgage security to secure its advance of $40,000.00 to the mortgagor.

Under the Stamp Duties (Amendment) Act 1998, the mortgagor is entitled to exemption from stamp duties on the refinanced amount of $40,000.00 (i.e. $200.00 (computed at the rate of 1/2%)).

If the mortgagor had incurred additional debt - say of a further $20,000.00 - then the mortgagor would be liable to pay stamp duty on the additional debt (at 1/2% on $20,000.00)."

Again, there is no dispute between the Plaintiff the Commissioner on this legal position.

The Act was brought in pursuant to the 1999 Budget under which it was sought to increase stamp duty payable on mortgage financing.

I am informed by both counsel that whilst the Act does not specify this, under the Budget announcement (and as also announced by the Commissioner), the new rate was to be applied on Mortgages presented to the office of the Commissioner of Stamp Duties on and after 1/1/99.

The issue therefore is simply this, should the Commissioner assess stamp duty (and therefore, the exemption (if any)) by computing stamp duty at the rate of 1.0% on the amount of indebtedness being refinanced (and give credit for the stamp duty paid or earlier exempted (as the case may be)) or should she allow exemption to the extent of the indebtedness being refinanced i.e. $5,600.00?

Stamp duty is not a tax on transactions as such, but a tax on documents which record and give effect to certain transactions: Section 3 of the Stamp Duties Act as amended in 1982.

A second, and fundamental, principle is that ad valorem duty is payable on a document which has the effect of transferring or creating a beneficial interest. If a document does not have this effect then, subject to any specific provisions in the Stamp Duties Act (or other legislation), it will attract one of the nominal fixed duties.

The cardinal principle governing the construction of revenue laws is that the subject is not taxable by inference or by analogy, but only by the plain words of a statute applicable to the facts and circumstances of his case, and any ambiguity construed in favour of the taxpayer. Thus in Russell (Inspector of Taxes) v Scott [1948] 2 All ER 1 HL, Lord Simonds said at p.5.

"My lords, there is a maxim of income tax law which, though it may sometimes be over-stressed, yet ought not to be forgotten. It is that the subject is not to be taxed unless the words of the taxing statute unambiguously impose the tax on him. It is necessary that the maxim should on occasion be reasserted and this is such an occasion."

Similar statements may be found in McGrath v Commissioner of Stamp Duties [1939] NZLR 950 at p. 953 and I.R. Commissioners v Ross and Coulter and Others (Bladnoch Distillery case) [1948] 1 All ER 616 at p.625 per Lord Thankerton.

These are just three examples and there are many others including the Fiji Court of Appeal decision in Donald Bull and Another v Commissioner of Inland Revenue Civil Appeal No. ABU 17 and 18 of 1997 unreported judgment of 15th May 1998.

Until the House of Lords decision in Pepper v Hart [1992] UKHL 3; [1993] AC 593 there was an almost inflexible rule excluding reference to parliamentary materials as an aid to statutory interpretation but this rule was relaxed so as to permit reference when:

(2) the material relied upon consists of statements by a Minister or other promoter of a Bill together with such Parliamentary materials as is necessary to understand such statements; and

When Bull's case went to the Supreme Court in March 1999 the Court perhaps went a little further than the House of Lords when it said at pages 7-8 of the majority judgment of Lord Cooke of Thorndon and Sir Anthony Mason:

"In our view, the extrinsic materials to which reference can be made as an aid to statutory construction are not limited to Parliamentary materials. In the past, at least for the purpose of identifying the "mischief" sought to be remedied by legislation, resort has been made to the reports of committees of experts or other persons on which legislation has been based. We see no reason why reports of that kind cannot be used as an aid to statutory construction, without being confined in their use to the identification of the mischief aimed at. Indeed, we consider that it would be unwise to limit the extrinsic materials to which a court can legitimately have regard, so long as the pre-conditions of ambiguity and clarity are observed and the materials are of such a kind that they do throw significant light on the statutory intention."

Thus on these authorities the Court is entitled to consider the objects and reasons to the Bill preceding the Stamp Duties (Amendment) Act 1998 which I have already quoted.

"The Bill is designed to provide greater flexibility in refinancing or reconveyance of mortgages and debentures."

"But in any case, as one is constantly reminded, principle and reason afford no sure guide to the law on the subject of stamps, which is a matter positivi juris depending on the language of the legislature: see, for example, John Danks Pty. Ltd. v Collector of Imposts [1944] VicLawRp 11; [1944] VL.R. 172, at p. 174 sub. nom.John Banks & Son Pty. Ltd. v Comptroller of Stamps [1944] VicLawRp 11; [1944] A.L.R. 345."

At p. 374 Adam J. referred to Section 22(a) of the Victorian Stamps Act 1958 which he said dealt with the case of one instrument and would appear to be directed to protecting the revenue.

The only comment I make on that statement is that Section 22 of the Victorian Stamps Act is in terms noticeably different from the legislation with which I am concerned here.

Adopting therefore what Adam J. said in Martin's at p.372 I am satisfied that the 1988 Amendment was designed to allow mortgagors to borrow from other credit providers to help re-pay their debts to existing credit providers without having to incur any additional stamp duty liability. I can find no ambiguity in the 1998 Amendment Act but, should I be wrong in that, then I consider that ambiguity should be resolved in favour of the taxpayer, in this case the Plaintiff.

Accordingly I make the declarations sought in the Originating Summons. As to costs I order the Defendant to pay the Plaintiffs costs which I fix at $500.00 together with all reasonable disbursements. For the purposes of completeness I note that the Defendant made no submission opposing the interest rate of 7.75% per annum from the 1st of April 2000 until the date of payment.

Fiji Law Reports

Kumar v Attorney General [2001] FJLawRp 7; [2001] 1 FLR 31 (18 January 2001)