Shakespeare Haney Securities Ltd v Crawford

SUPREME COURT OF QUEENSLAND

CITATION: Shakespeare Haney Securities Ltd v Crawford [2009] QCA 85

PARTIES: SHAKESPEARE HANEY SECURITIES LIMITED ACN 087 435 783 (applicant/respondent) v JOSEPHINE MARY CRAWFORD (respondent/appellant)

FILE NO/S: Appeal No 11325 of 2008 SC No 9480 of 2008

DIVISION: Court of Appeal

PROCEEDING: General Civil Appeal

ORIGINATING COURT: Supreme Court at Brisbane

DELIVERED ON: 9 April 2009

DELIVERED AT: Brisbane

HEARING DATE: 25 March 2009

JUDGES: Muir JA, Mullins and Douglas JJ Separate reasons for judgment of each member of the Court, each concurring as to the order made

ORDER: Appeal dismissed with costs.

CATCHWORDS: CONSUMER CREDIT – CREDIT PROTECTION – GENERAL – OPERATION OF CREDIT LEGISLATION – INTERPRETATION AND DEFINITIONS – REGULATED CONTRACTS AND REGULATED MORTGAGES – where under a loan facility deed the respondent provided a loan to the appellant – where the appellant declared the credit provided was to be applied wholly or predominantly for business or investment purposes – where the appellant argued that the declaration was ineffective as the respondent knew, or had reason to believe, that the credit was in fact to be applied wholly or predominantly for personal, domestic or household purposes and the transaction was therefore subject to the Consumer Credit Code – whether the primary judge erred in finding there was not a serious question to be tried as to the application of the Consumer Credit Code to the credit contracts / CONSUMER CREDIT – CREDIT PROTECTION – GENERAL – OPERATION OF CREDIT LEGISLATION – EXCEPTIONS FROM OPERATION OF CREDIT LEGISLATION – where the appellant argued the Consumer Credit Code applied to the loan facility deed between herself and the respondent as the loan was to be applied wholly or predominantly for personal, domestic or household purposes – whether the primary judge erred in finding the loan was for a predominantly commercial purpose / Consumer Credit Code (Qld), s 5, s 6, s 11(2), s 11(3), s 80(3) Property Law Act 1974 (Qld), s 84 / Bahadori v Permanent Mortgages Pty Ltd (2007) 69 NSWLR 49; [2007] NSWSC 79, cited Benjamin v Ashikian (2007) ASC 155-086; [2007] NSWSC 735, cited Culverden Retirement Village Ltd v Registrar of Companies [1997] AC 303, cited Dale v Nichols Constructions Pty Ltd [2003] QDC 453, followed Federal Commissioner of Taxation v Whitfords Beach Pty Ltd (1982) 150 CLR 355; [1982] HCA 8, cited Hyde v Sullivan (1956) SR (NSW) 113, cited Inland Revenue Commissioners v Rolls-Royce Ltd [1944] 2 All ER 340, cited Jonsson v Arkway Pty Ltd (2003) 58 NSWLR 451;[2003] NSWSC 815, cited Linkenholt Pty Ltd v Quirk (2000) ASC 155-040; [2000] VSC 166, cited Park Avenue Nominees Pty Ltd v Boon (2001) ASC 155-052; [2001] NSWSC 700, cited Rafiqi v Wacal Investments Pty Ltd (1998) ASC 155-024; [1998] QDC 215, cited Re Australian Industrial Relations Commission; Ex parte Australian Transport Officers Federation (1990) 171 CLR 216; [1990] HCA 52, cited The Commissioner of Taxes v The Australian Mutual Provident Society (1902) 22 NZLR 445, cited

COUNSEL: C J Garlick for the appellant K Dorney QC, with P Lane, for the respondent

SOLICITORS: QAS Law & Associates Pty Ltd for the appellant Mortimore & Associates for the respondent

1. MUIR JA: Introduction

The appellant appeals against the orders of a judge of the Supreme Court made on 3 November 2008 ordering that the respondent recover vacant possession of land at 104 Admiralty Drive, Paradise Waters and that the appellant pay the respondent's costs of the originating application to be assessed.

[2] Under a loan facility deed dated 3 May 2006 the respondent agreed to lend $5,200,000 to the appellant at an interest rate of 10.75 per cent per annum for a term expiring on 15 November 2006. A first registered mortgage executed by the appellant on 28 April 2006 and by the respondent on 3 May 2006 secured repayment of the principal and interest. Extensions of the term of the loan and increases in the principal sum were recorded in the following registered variations of mortgage:

Date of execution by appellantDate of RepaymentPrincipal Sum

08.11.200615 May 2007$5,560,000

13.02.200715 May 2007$5,610,000

09.08.200715 November 2007$6,000,000

16.05.200815 July 2008$6,210,000

The loan facility deed was also varied from time to time to accommodate these changes in the principal sum and the term of the loan.

[3] The sum of $6,210,000 was not paid on 15 July 2008 and the respondent gave notice of exercise of power of sale dated 30 July 2008 pursuant to s 84 of the Property Law Act 1974 (Qld). A further notice dated 8 August 2008 was given by the respondent to the appellant calling on her to deliver up possession of the land. The appellant declined to do so and the respondent, by originating application to the Supreme Court, sought an order for recovery of possession.

[4] The appellant resisted the application on grounds that the loan facility deed as varied and the mortgage as varied were credit contracts within the meaning of the Consumer Credit Code and that the respondent had failed to comply with the Code's provisions. In particular, it was argued that the respondent had breached s 80 of the Code in commencing enforcement proceedings without first giving the appellant the "default notice" required by that section. The respondent contended that there were no credit contracts within the meaning of the Code as the credit was not provided "wholly or predominantly for personal, domestic or household purposes."

The evidence relied on by the appellant at first instance

[5] In an affidavit before the primary judge the appellant swore to the following matters. The land was purchased in the appellant's name more than six years prior to the hearing date so that she could construct her principal place of residence on it and "as such [she] paid appropriate Queensland stamp duty." At that time the appellant carried on a business of "developing houses" through a company. At the time of the first loan transaction with the respondent she had built a house on the land as a Queensland registered owner-occupier builder and paid "all appropriate insurances, registrations, sat official tests and took personal responsibility in the event of construction accidents." The house and land was valued at $10,000,000 "not including the electronic smart house technology and unique furnishings." Prior to obtaining finance from the respondent the appellant had borrowed substantial monies from Suncorp Metway but she was unable to get the bank to extend her loan.

[6] The home was her "retirement, superannuation, old age health care and most importantly [her] independence as a self funded baby boomer." Before she started building the house, the land was valued at approximately $4,000,000 and she had in excess of $500,000 in the bank.

[7] The appellant became friendly with Ms Gina Sly, the mortgage, compliance and finance manager of the respondent. She swore in relation to Ms Sly's knowledge:

"5.Gina always knew and I never tried to mislead her as to my loan request and its purpose. Gina was at all times aware I was now acting as a private consumer …

6.My previous loans were quite different and always through a company formula - which bought and sold through a trust/company and employed or contracted a builder, they built a house on my trust/company owned land - then the house was sold. Unfurnished - never ever lived in. BRAND NEW.

7.Gina was also aware that I deliberate (sic) purchased the land for private use and the purpose was to build my dream home for MYSELF as an OWNER BUILDER ..... and lived (sic) in the house for however long it took to find the right buyer for a luxury waterfront home.

8.I still live in my home as my principle (sic) place of residence."

[8] There is a document in the record headed "Objections to Affidavit of Josephine Mary Crawford". It identifies passages in the affidavit to which objection was taken and the basis of the objection. However, there is no reference in the transcript to the taking of objections. The primary judge's reasons do not refer to any objections to evidence or contain any rulings on admissibility.

[9] The primary judge received in evidence, without objection, a four page document which had the appearance of being prepared by the appellant. It contained the following:

"… in 1993 I moved from Melbourne to Queensland's Gold Coast for a new start with my children.

…I commenced a company trust and set about developing 7 houses on the coast while I raised my 4 kids ages 4 – 13.

…In 2004, I closed down my company trust and decided to build my own private home …

I owed (sic) my river block @ 104 Admiralty Drive, valued at $4 million +, and had in excess of $500,000 cash to commence my dream house building as a Queensland registered owner builder.

…

This house was to secure my position as a self funded retiree.

I lived in it with my kids, mother, and when an appropriate offer to purchase came up … I would sell the property, repay the loan. I did not expect the house to sell immediately. All the agents said these residences take several years to find the right buyer of luxury home. I had to be vigilant and patient. I was happy to live there with my family. But I immediately started to advertise with the locale (sic) and international prestige agents to let them know I was in the market if the right buyer came through their office.

…

Once the house was eventually sold I would live a simpler life with intermitted (sic) travel. My dream was to be a comfortable self funded retiree …

My aim was to set about providing for my retirement nest though (sic) my home …

So I built a home for pleasure and this kept me busy creating and working on what I love. I had no personal income: I could not make monthly payments – the only way to pay the interest was by drawing down and borrowing extra funds through the principle (sic) Mortgage.

…

There was only ever one additional valuation over the years to validate the homes (sic) current value.

The valuation was $10. Million without the smart house electronic extras and furnishings."

[10] Ms Sly deposed to the following in an affidavit sworn by her. She processed the appellant's application for the loan and at the time of the application she was told by the appellant that the loan was required to "re-finance an existing loan facility … with the Business Banking Sector of Suncorp Metway Limited." Ms Sly was also told that the property offered as security for the loan "was intended to be sold … and that a short term loan was required pending the sale of the property … she did not intend to reside at the property…"

[11] Neither the appellant nor Ms Sly were cross-examined and it was therefore not possible for the primary judge to resolve the conflict in their respective accounts. He thus, appropriately, proceeded to decide the matter by reference only to the appellant's version of the facts where they were in conflict with the evidence of the respondent's witnesses.

The consumer credit code declarations

[12] In connection with the entering into of the mortgage, the variations of mortgage and the variations of the loan facility deed, the appellant executed declarations headed, in each case:

"CONSUMER CREDIT CODE DECLARATION

(Section 11 of the Code

Section 10 of the Regulation)

Each such document provided:

"I/we declare that the credit to be provided to me/us by the credit provider is to be applied wholly or predominantly for business or investment purposes (or both).

… The loan referred to above is to be provided to me/us by Shakespeare Haney Securities Ltd

… AND I/WE MAKE the solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the 'Oaths Act 1867' (as amended)."

[13] In a rectangular box following the first paragraph of the declaration under the word "IMPORTANT" the following words appeared in bold type:

"You should not sign this Declaration unless this loan is wholly or predominantly for business or investment purposes.

By signing this Declaration you may lose your protection under the Consumer Credit Code."

[14] There are five such declarations dated respectively, 28.4.2006, 8.11.2006, 13.2.2007, undated 2007 and 16.5.2008.

[15] The respondent relied on s 11(2) of the Code under which such declarations give rise to a presumption that credit is not provided wholly or predominantly for "personal, domestic, or household purposes."

[16] The appellant relied on s 11(3) of the Code, claiming that the respondent "knew or had reason to believe, at the time the declaration(s) [were] made that the credit was in fact to be applied wholly or predominantly for personal, domestic or household purposes" and that by operation of sub-section (3), the declarations were ineffective.

The primary judge's findings

[17] The primary judge was not persuaded that there was a serious question to be tried as to whether the presumption arising from s 11(2) of the Code had been rebutted. His Honour explained:¹

"… it is difficult to regard the loans as being other than for a predominantly commercial purpose let alone predominantly for personal, domestic or household purposes, having regard to the respondent’s evidence alone. The tenor of her evidence is that her intention was to build the house and sell it once a suitable buyer was found. As she says, it is a legitimate means of accumulating wealth to operate in this way, but it is difficult to escape the conclusion that living in the house while a buyer is found is somewhat incidental to the underlying strategy. Her explanation (quoted in paragraph [4] above), including the fact that she immediately let agents know that the house was available for sale if the right buyer came though (sic) their doors is consistent with that view of the matter. Further, signing the declarations in the presence of a solicitor of her choice suggests that nothing was said to the solicitor that caused alarm bells to ring about the appropriateness of making the declarations."

The appellant's contentions

[18] Counsel for the appellant did not devote a great deal of time in oral or written submissions to advancing reasons as to why the primary judge erred in finding, by implication, that the subject credit was not to be applied wholly or predominantly for personal, domestic or household purposes. He pointed to the following: the appellant had ceased at relevant times to carry on business through a company; the property became the appellant's primary place of residence; the appellant was never registered for "the GST and as such has made no GST claims against her home"; the appellant intended that when she sold the property there would be no capital gains tax payable; and that the appellant had lived in the property since February 2005.

[19] There is no evidence of when the construction of the house was completed or of when the appellant commenced to live in it, but there is no reason to doubt, at least for present purposes, that the house was completed and the appellant was living in it at the time she applied to the respondent for finance. Nor is there reason to doubt that the appellant would have wished to have organised any sale so as to avoid capital gains tax, if that were feasible in the circumstances.

[20] The appellant's counsel advanced a number of other arguments not within the scope of the notice of appeal. This omission was brought to his attention but no application to amend the notice of appeal was made. Those other arguments were relevant only if the Code applied to the subject contracts and mortgages.

The respondent's contentions

[21] The appellant, in order to rely on s 11 of the Code, must establish:

(a)That the purpose for which the credit was in fact to be applied was wholly or predominantly personal; and

(b)That the credit provider knew or had reason to believe the credit was in fact to be so applied.

[22] The primary judge's conclusions are amply supported by the evidence. The initial period of the loan was for six months and interest was paid by a sum being retained from the initial advance. The appellant had no other income to service the loan and was dependent on the sale of the property to repay it. These matters are inconsistent with the provision of the loan for the personal purpose of acquiring, or retaining, a principal place of residence.

[23] The loan was acquired for the business or commercial purpose of refinancing a property built to be sold for a profit. The appellant thus failed to discharge the onus on her of showing that the loan was for a personal, domestic or household purpose.

[24] The respondent served on the appellant a notice of exercise of power of sale pursuant to s 84 of the Property Law Act 1974. That notice complied with the requirements of s 80(3) of the Code that the default and the actions to remedy be specified. The notice allowed the period of 30 days for the appellant to remedy the default. It did not, however, include the words "that a subsequent default of the same kind that occurs during the period specified in the default notice for remedying the original default may be the subject of enforcement proceedings without further notice if it is not remedied within the period." Here, the default was to repay the principal sum. There could be no subsequent default of the same kind. The failure to pay by the due date had occurred once and for all and the appellant was obliged to remedy the default by paying the principal sum. On the proper construction of s 80(3) of the Code there is no requirement for a notice to refer to a subsequent default of the same kind if it is not possible for there to be such.

[25] If contrary to the respondent's contentions the notice does not comply with s 80(3) of the Code, it should be held that the respondent remains entitled to enforce its security. There are conflicting decisions as to whether non-compliance with s 80 prevents a credit provider from taking enforcement steps.² The decision of McGill DCJ in Dale v Nichols Constructions Pty Ltd should be followed: breach of s 80 exposes the credit provider to a penalty but does not prevent enforcement of the security.

[26] If the Court were to order the respondent to pay a civil penalty for breach of a key requirement of the Code, the amount of the penalty can be ordered to be set off against any amount due by the appellant to the respondent. The maximum civil penalty that can be imposed is the amount of interest charges payable under the contract unless the appellant can demonstrate she has suffered a greater loss as a result of the contravention.³ There is no such contention. Even if the appellant were to successfully apply for relief under the Code she would still be liable for the principal debt and she has conceded that she has no capacity to meet it.

The relevant provisions of the Code

[27] Sections 5, 6 and 11 of the Code relevantly provide as follows:

"5****Meaning of credit contract

For the purposes of this Code, a credit contract is a contract under which credit is or may be provided, being the provision of credit to which this Code applies.

6****Provision of credit to which this Code applies

(1)This Code applies to the provision of credit (and to the credit contract and related matters) if when the credit contract is entered into or (in the case of precontractual obligations) is proposed to be entered into –

(a)the debtor is a natural person ordinarily resident in this jurisdiction or a strata corporation formed in this jurisdiction; and

(b)the credit is provided or intended to be provided wholly or predominantly for personal, domestic or household purposes; and

…

(4)For the purposes of this section, investment by the debtor is not a personal, domestic or household purpose.

(5)For the purposes of this section, the predominant purpose for which credit is provided is –

(a)the purpose for which more than half of the credit is intended to be used; or

(b)if the credit is intended to be used to obtain goods or services for use for different purposes, the purpose for which the goods or services are intended to be most used.

11****Presumptions relating to application of Code

(1)In any proceedings (whether brought under this Code or not) in which a party claims that a credit contract, mortgage or guarantee is one to which this Code applies, it is presumed to be such unless the contrary is established.

(2)Credit is presumed conclusively for the purposes of this Code not to be provided wholly or predominantly for personal, domestic or household purposes if the debtor declares, before entering into the credit contract, that the credit is to be applied wholly or predominantly for business or investment purposes (or for both purposes).

(3)However, such a declaration is ineffective for the purposes of this section if the credit provider (or any other relevant person who obtained the declaration from the debtor) knew, or had reason to believe, at the time the declaration was made that the credit was in fact to be applied wholly or predominantly for personal, domestic or household purposes. For the purposes of this subsection, a relevant person is a person associated with the credit provider or a finance broker (or a person acting for a finance broker) through whom the credit was obtained."

Did the Consumer Credit Code apply?

[28] The Court was referred to a number of cases in which sections 6 and 11 of the Code and their analogues in other States were considered. In three such decisions it was considered that in determining whether "credit is provided or intended to be provided wholly or predominantly for personal, domestic or household purposes" regard should be had to what a reasonable person standing in the shoes of the credit provider would have understood.⁴

[29] In Dale v Nichols Constructions Pty Ltd⁵ McGill DCJ, after a careful analysis of the subject provisions, concluded that "whether credit is provided for a particular purpose for the purposes of s 6(1) depends on the intention of the borrower at the time the credit is provided."

[30] In Linkenholt Pty Ltd v Quirk⁶ Gillard J observed:

"… it is appropriate to consider what the money was used for in order to determine the purpose of the provision of the credit. In considering the question it is important to consider the substance of the transaction in the context of its performance."

That passage was referred to with approval by Shaw J in Jonsson v Arkway Pty Ltd.⁷ He remarked that, "His Honour's emphasis was that the court should consider the substance and reality of the transaction."

[31] An approach to the construction of s 6(1)(b) which considers the substance of the subject transaction and requires an objective assessment would, in my view, be preferable to one which looks to the actual intention of either the borrower or the lender. Plainly, "the purpose" for which credit is provided or intended to be provided has nothing to do with the lender's general commercial purposes: the reference is to the use to which the credit is to be put. In the great majority of transactions there would be no difficulty in determining the relevant purpose by reference to the terms of the application for credit and of the approval. If the borrower requests credit for a stated purpose and the lender approves the request and makes the loan, there should be no difficulty in concluding that the purpose for which the loan was made was the purpose for which it was requested.

[32] The focus of s 6(1)(b) is on the provision of credit rather than on the obtaining of credit. That is inconsistent with a construction which looks to the debtor's state of mind. Also, one would think that if the legislature had in mind that, in determining the purpose for which credit was provided, the debtor's intention was the governing consideration, s 6(1)(b) would have been worded along these lines:

"The debtor intended to apply the credit wholly or predominantly for personal, domestic or household purposes."

[33] Section 6(1)(b) however cannot be construed in isolation. Section 6(4), in effect, deems an "investment" not to be "a personal, domestic or household purpose." It is consistent with the view that the "purpose" is to be determined objectively by reference to the substance of the transaction. Sections 6(5) and 11, however, may cast doubt on the correctness of this construction. The focus of s 6(5) is on the use rather than the provision of credit. Section 6(5)(a) deems the predominant purpose for which credit is provided to be "the purpose for which more than half of the credit is intended to be used." Where "the credit is intended to be used to obtain goods or services for use for different purposes", subsection (5)(b) deems "the predominant purpose for which [the] credit is provided" to be "the purpose for which the goods or services are intended to be most used."

[34] It is arguable that the intention with which each limb of s 6(5) is concerned is that of the debtor. It may be thought exceedingly rare that a debtor would not have an intention to use credit acquired by him or her in a particular way but that is not necessarily true of the lender. Particularly in small transactions, the lender may be indifferent to the use to which the subject monies may be put.

[35] It may be arguable that the intentions to which subsection (5) refers are the intentions of the parties to be objectively ascertained as if ascertaining the intention of the parties in construing a contract. But the intentions referred to in subsection (5) are intentions as to use of credit in the case of subsection (5)(a) and as to the use of goods and services in the case of subsection (5)(b). If the words of these paragraphs are construed literally they appear to relate to the actual intention of the debtor. In the case of subsection (5)(b), in many cases, the lender would not know or care about the intended differing uses of goods and services but, presumably, the provision is intended to operate even if a lender has no relevant knowledge and the loan documentation does not address the matter.

[36] Subsections (2) and (3) of s 11 also seem to make relevant the debtor's intention. The declaration by the debtor that the purpose or purposes to which the debtor intends to apply the credit are wholly or predominantly for business or investment purposes is a combined statement of the debtor's intended conduct and an expression of opinion. In subsection (3) the reference to the credit provider's knowledge "that the credit was in fact to be applied … for personal, domestic or household purposes" would appear to refer to the credit provider's knowledge of what was intended by the debtor. Arguably s 11, in itself, does not provide much support for the view that the purpose for which credit is provided depends on the debtor's state of mind: it merely provides a mechanism by which a credit provider may ensure that the Code has no application to a proposed credit transaction as long as it and its agents are unaware that the credit is in fact to be applied "wholly or predominantly for personal, domestic or household purposes." Where no declaration pursuant to s 11(2) is obtained, the Code is presumed to apply in proceedings in which a party claims that the Code applies.

[37] These provisions of the Code thus give rise to considerable difficulties of construction but it is unnecessary to resolve them to decide this appeal. The same outcome would follow whichever construction was adopted. And as the Court has not heard full argument on the relevant questions of construction, it would be inappropriate to express any concluded opinions on them.

[38] On the appellant's version of the facts, the purpose for which the credit was provided was to refinance the Suncorp loan so that the property could continue to be held by her until sold at a profit acceptable to her. To that must be added the appellant's purpose or intention of residing in the house until the property was sold and her intended use of part of the proceeds of the loan to meet living expenses.

[39] The fact that a dwelling may be acquired and/or held with a view to increasing the value of the acquirer's assets through resale of the property at a profit does not lead inexorably to the conclusion that the acquirer is thereby engaged in "business or investment" activities. It is commonplace for people in this country to increase their net worth over time by making capital gains on the sales of their dwelling house and applying those gains in the purchase of a more expensive home. Normally that activity would not be regarded as engaging in "business" or making an "investment". Nor would it be thought, in the normal run of things, that a person's acquisition and sale of his or her own dwelling house, however expensive or exotic and however the person contemplated utilising any profit on its resale, was anything but a personal or domestic transaction.

[40] Here, the credit was to be applied, at least in part, for personal, domestic or household purposes. The appellant's living expenses were of that nature. Her purpose of residing in the house until the property could be sold was also personal or domestic in nature. On her account she had no other dwelling in contemplation until the property was sold. The critical question then is whether, despite these matters, it must be concluded that the credit "was [not] in fact to be applied … predominantly for personal, domestic or household purposes." For present purposes it must be assumed that the respondent knew or had reason to know the purpose to which the credit was to be applied.

[41] The matters which are suggestive of business or investment purposes are: the acquisition and development of the land for resale at a profit; the fact that the loan was an extension of a business loan obtained primarily to enable the appellant to complete the construction of the house on the land; the short term of the loan and the intention that it continue only until such time as the property could be sold and the purchase price be obtained; the fact that the appellant had no income or means of obtaining an income until such time as the proceeds of sale of the property were realised and invested; the fact that the duration of the proposed residence in the house was dependent on when it could be sold; the placing of the house on the market immediately after completion of construction and the likelihood that if the appellant were to purchase a replacement dwelling house it would be much more modest than the subject house because of the appellant's plan to use the balance proceeds of sale to provide a retirement income; the magnitude of the borrowing relative to the appellant's assets and the absence of an income to service interest on and repayment of the loan.

[42] In Re Australian Industrial Relations Commission; Ex parte Australian Transport Officers Federation,⁸ Mason CJ, Gaudron and McHugh JJ observed "Of all words, the word 'business' is notorious for taking its colour and its content from its surroundings."

[43] In the context of statutory or contractual provisions referring to the carrying on of a business, system, continuity and/or regularity are frequently identified as necessary features of a business.⁹ In that regard it was said in Hyde v Sullivan:¹⁰

"Speaking generally, the phrase 'to carry on business' means to conduct some form of commercial enterprise, systematically and regularly, with a view to profit and implicit in this idea are the features of continuity and system."

[44] But a "one off" transaction or venture may have a business character.¹¹

[45] In Federal Commissioner of Taxation v Whitfords Beach Pty Ltd¹² Mason J, in considering the concept of "business" in relation to s 26(a) of the Income Tax Assessment Act 1936 (Cth) said:

"Unfortunately there is an element of ambiguity in the expressions 'business deal' and 'operation of business' as there is in the adjectives 'business', 'commercial' and 'trading' which have about them a chameleon-like hue, readily adapting themselves to their surroundings, different though they may be. In some contexts 'business deal' and 'operation of business' may signify a transaction entered into by a person in the course of carrying on a business; in other contexts they denote a transaction which is business or commercial in character."

[46] In s 11 of the Code the word "business" is used in contradistinction to "personal, domestic or household." In order to cause a borrowing for the purpose of constructing, holding and maintaining one's own house to be for a business rather than a personal or domestic purpose, there must be more than the mere enterprising realisation of an asset.¹³ To my mind, there needs to be a commercial aspect to the transaction. That commercial aspect may exist where property is acquired with the intention of resale at a profit. In Federal Commissioner of Taxation v Whitfords Beach Pty Ltd,¹⁴ Mason J, said of Barwick CJ's reasons in Steinberg v Federal Commissioner of Taxation:¹⁵

"In Steinberg his Honour made an important comment with which I agree. It was that 'the acquisition of property by the taxpayer with the purpose of its resale at a profit … is in truth a commercial dealing.' "

[47] Section 6(4), by excluding "investment" and not "business" activities from "personal, domestic or household purposes", suggests that investment purposes, in some circumstances, may come within the scope of "personal, domestic or household." As the subsequent discussion shows, it is not necessary for a transaction to exhibit much in the way of financial sophistication for it to be regarded as investing or as establishing an investment.

[48] In Culverden Retirement Village Ltd v Registrar of Companies,¹⁶ it was observed in the judgment of the Court:

"As the courts below recognised, one of the everyday meanings of investment is the laying out of money in the acquisition of property in the hope of return. The return may come in the form of capital or income or both. It may be in cash, or it may be in kind such as the provision of services. There may be no prospect of capital growth, as with the purchase at par of short dated government stock. There may be no prospect of any lump sum return at all, as happens with an annuity. The purchaser of an annuity would readily say that he has invested his money in buying an annuity.

Likewise in the present case, their Lordships consider that, without any strain of language, buyers of units would say they have invested their money in buying a townhouse in Culverden Retirement Village on terms that they will occupy this, with necessary services provided, for so long as they wish and that they will then get back all or a large part of their outlay. The return from their outlay is to be found in the totality of these benefits, not just the financial repayment at the end."

[49] In Inland Revenue Commissioners v Rolls-Royce Ltd,¹⁷ Macnaghten J said:

"The word 'investment', though it primarily means the act of investing, is in common use as meaning that which is thereby acquired; and the primary meaning of the transitive verb 'to invest' is to lay out money in the acquisition of some species of property."

[50] In The Commissioner of Taxes v The Australian Mutual Provident Society,¹⁸ Edwards J regarded the popular meaning of "investment" as embracing "… every mode of application of money which is intended to return interest, income, or profit."

[51] The matters set out in paragraph [41] above, taken in combination, make it difficult to avoid the conclusion that the credit was predominantly for investment purposes. The appellant ventured virtually all her capital and the money borrowed from Suncorp in the development of the land by the construction on it of a luxury house to be sold at a profit in order to increase her capital. That increased capital was to be used to provide a more modest dwelling and investments which would generate a retirement income. The credit was provided with a view to assisting the realisation of this plan. The matters listed in paragraph [41] show the appellant's course of action to be far removed from a normal domestic or household arrangement. She recognised the true character of her dealings by declaring that "the credit to be provided … is to be applied wholly or predominantly for business or investment purposes or both."

[52] In my respectful opinion, the primary judge was correct to conclude, in effect, that the personal or the domestic purposes were incidental to the appellant's plan of undertaking a particular investment to increase the capital to be invested for her retirement. If the subject credit was not to be applied predominantly for business purposes it was to be applied, and was applied, predominantly for investment purposes. It was not to be applied predominantly for personal, household or domestic purposes.

Conclusion

[53] For the above reasons the appellant has failed to show any error in the conclusions of the primary judge. It is therefore unnecessary to consider the arguments based on the assumption that the Code applied. I would dismiss the appeal with costs.

[54] MULLINS J: I agree with Muir JA.

[55] DOUGLAS J: I agree with the reasons for judgment and order proposed by Muir JA.

Footnotes

1. Shakespeare Haney Securities Limited v Crawford [2008] QSC 265 at [12]. ↩

2. Dale v Nichols Constructions Pty Ltd [2003] QDC 453 c.f. Benjamin v Ashikian (2007) ASC 155-086 at 201,551 [86]. ↩

3. Consumer Credit Code (Qld), ss 102, 103 and 104. ↩

4. Rafiqi v Wacal Investments Pty Ltd [1998] ASC 155-024, Park Avenue Nominees Pty Ltd v Boon [2001] ASC 155-052 and Bahadori v Permanent Mortgages Pty Ltd (2007) 69 NSWLR 49. ↩

5. [2003] QDC 453. ↩

6. [2000] ASC 155-040 at 200,341 [98]. ↩

7. (2003) 58 NSWLR 451 at 456. ↩

8. (1990) 171 CLR 216 at 226. ↩

9. See e.g., Federal Commissioner of Taxation v Whitfords Beach Pty Ltd (1982) 150 CLR 355 at 381 and 383. ↩

10. (1956) 56 SR (NSW) 113 at 119. See also Hungier v Grace (1972) 127 CLR 210 at 215 – 216; Federal Commissioner of Taxation v Radnor Pty Ltd (1991) 102 ALR 187; and Federal Commissioner of Taxation v St Hubert's Island Pty Ltd (In liq) (1978) 138 CLR 210, per Jacobs J at 236 – 237. ↩

11. Federal Commissioner of Taxation v Whitfords Beach Pty Ltd (1982) 150 CLR 355 at 376 – 377 and 383.