IN THE HIGH COURT OF FIJI
(AT SUVA)

CIVIL ACTION NO. HBC 261 OF 2000S

Between:

TUNI BEDDOES
and
JACINTA BEDDOES
Plaintiffs

and

THE ATTORNEY-GENERAL
Defendant

S. Parshotam for the Plaintiff
Y. Singh for the Defendant

JUDGMENT

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 affidavits 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 facts are not in dispute. The Plaintiffs decided to buy a piece of land on which to build themselves a home. On 9 September 1998 they purchased a piece of undeveloped land which is comprised in crown lease 13432 at Waqadra, Nadi. In order to finance their purchase the Plaintiffs mortgaged the land to the Bank of Hawaii. Application was made to and granted by the Commissioner for the mortgage (455634-Exhibit C to the supporting affidavit) to be conditionally exempted 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 the Plaintiffs were in a position to proceed with the construction of the house on their piece of land. They obtained a further loan of $70,000 from the Bank of Hawaii which loan had, of course, to be secured.

As will be seen from the original mortgage 455634 it secured not only moneys already advanced by the Bank to the Plaintiff but also secured further advances yet to be made. In these circumstances there was, at first sight, no need for a further mortgage to be granted and executed in respect of the second loan. There was however a difficulty presented by the Consumer Credit Act 15/1999 which had by then come into force.

One of the consequences of the Consumer Credit Act 1999 was that the old form of mortgage document was no longer acceptable for mortgages granted after its commencement. The Plaintiffs legal adviser, I believe correctly, took the view that a second mortgage document would have to be executed, one complying with the requirements of the new Act. A copy of the second mortgage dated 16 March 00 is Exhibit D to the supporting affidavit.

On 16 March the Plaintiffs applied for conditional exemption from stamp duty for the second mortgage (Exhibit F). On 31 March the application was refused. The requisition (Exhibit G) was endorsed by the Commissioner:

“Return, applicant has already been granted conditional exemption from stamp duty. They are therefore liable 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 Plaintiffs have a choice. They can either submit a variation to their existing (i.e. original) mortgage which would then be granted exemption or they have to be satisfied with the exemption already granted. The Commissioner is not prepared to grant exemption 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. And neither did the written submission filed on behalf of the Defendant answer the question.

In my view it is important to bear in mind the purpose of the provision under consideration. That purpose is clearly set out in the Objects and Reasons to the Stamp Duties (Amendment) Bill 1982:

“this Bill is intended to give effect to the proposal outlined in the Budget Speech to provide an incentive to owner/occupiers 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 that it was 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 who wish to raise a further sum by excluding that further loan from the exempting provisions of the Stamp Duties Act.

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

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

“I appreciate that what I have to do is to construe the words used and not to insert words which are not there or to resort to a so-called equitable construction of a taxing statute. But even when I have given 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.”

In the present case I am satisfied that the reality is that the second mortgage is a mortgage in respect of the acquisition by an owner/occupier of a first home. I can find nothing in the Stamp Duties Act restricting the exception to only one mortgage document. The problem is in any event transitory since most people wishing to acquire a home will have obtained their entire loan either before or after the commencement of the 1999 Act.

I grant the declaration sought.

M.D. Scott
Judge

3 May 01.