UG Insurances Pty Ltd v Commissioner of Stamp Duties

The purchase agreement itself is conditional, in the sense that at least its performance if not its existence is conditional upon the acceptance of the loan application. But in either case this is to say no more than that the purchaser is only willing to make or carry out a purchase if he is able to obtain on loan enough money to enable him to pay the agreed purchase price. On the other side, the dealer is unwilling to part with the property in the goods without receiving the full purchase price, or without the appellant being able to pay him that balance because of an unaccepted application for a loan.

In my opinion, these differences in the circumstances of the two cases do not require any change in the conclusions I expressed in Barnett's case. The loan agreement is what it purports to be, an agreement to lend money. It does not afford time to pay the purchase price. Nor does the purchase agreement by being conditional on the acceptance of the loan application afford any time to pay the price or any part of it. Unless the loan is granted, there is no obligation to pay the price. When the loan agreement is made the price is immediately payable.

Thus, in my opinion, no credit in the sense of forbearance is involved in the transactions. They remain separate, the one a purchase agreement, albeit conditional on the making of the loan agreement and the other a loan agreement not dependent on the purchase agreement except in so far as the latter, with the aid of the standing agreement, makes it possible for the title to goods to be transferred to the appellant.

I would therefore reach the same conclusion in this case as I have expressed in relation to Barnett's case.

In this case the goods were not delivered to the purchaser on the making of the purchase agreement and the property in them remained with the dealer. The agreement to purchase was conditional on the acceptance of the application for loan, which was for an amount sufficient to pay the balance of the purchase price. Otherwise the facts and circumstances of this case were the same as those in Hennessy's case.

Consequently what I have said in the latter case applies in this case. The same conclusions are appropriate and result, in my opinion, in the allowance of the appeal.

Accordingly in each case the appeal, in my opinion, should be allowed.

These are three appeals by special leave from determinations by the Supreme Court of New South Wales in favour of the Commissioner on cases stated under the provisions of the Stamp Duties Act NSW. The Supreme Court held that the three contracts of loan made by the appellant fell within the description of "credit arrangement" as defined in s. 75A (1) of the Act and were dutiable accordingly [1] .

In each case a customer purchased electrical goods from a dealer - New Era Furniture Pty. Ltd. The dealer and the appellant had entered into what was called a dealer trader agreement for the purpose of providing finance for customers of the dealer under which the dealer submitted loan applications to the appellant on behalf of the customer. If the appellant accepted such applications it would enter into a chattel mortgage with the customer and would pay the price of the goods with certain deductions to the dealer.

In each case the customer purchased from the dealer goods at a purchase price of more than $400 and the amount payable was not less than the purchase price as defined "plus interest at a rate exceeding nine per centum per annum". A deposit of ten per cent was paid in cash at the time of the contract of purchase. At the time of making the purchase and on the dealer's premises the customer filled in an application for a loan from the appellant. The applications were subsequently accepted by the appellant. It entered into contracts of loan with each customer and paid the balance of the price of the goods to the dealer. In the case of the customer Barnett, the goods were delivered to him and the property in them passed immediately. In the case of the customer Hennessy, although the goods were delivered to him, the contract for the sale of the goods was conditional upon the application for loan being accepted by the appellant and it was agreed that no property in the goods would pass until this occurred. In the case of the customer Considine, the goods were not delivered to him until later. His contract for the sale of goods was conditional upon the application for loan being accepted by the appellant and upon the amount of that loan being paid by the appellant to the dealer. It was agreed that property in the goods would not pass until both these events took place. In the view which I have formed, nothing turns upon the differences between these three cases.

The Commissioner of Stamp Duties assessed each contract for loan on the basis that it constituted a "credit arrangement" within the meaning of s. 75A (1) of the Act. The appellant claimed that the contract for loan was an agreement under hand not otherwise specifically charged with any duty. The cases stated deal only with the liability to duty of each contract for loan made by the appellant. It was not sought to assess duty on any arrangement resulting from the combined effect of the dealer trader agreement and a contract of loan. Accordingly, the only relevance of the dealer trader agreement is that it explains why the customer entered into a contract of loan with the appellant rather than with some other finance company.

A "credit arrangement" is defined by s. 75A (1) as follows:

an arrangement or an offer to enter into an arrangement under which when goods are purchased or where subsequent to the purchase of goods an option to pay by instalments is exercised the amount payable or paid is not less than the purchase price of the goods plus interest at a rate exceeding nine per centum per annum, such rate being calculated as hereinafter provided, and where the purchase price is four hundred dollars or more. Section 75A is one of a number of sections which appear under the short heading "Instalment Purchase Arrangements". An instalment purchase arrangement is defined in s. 75A as being "a credit arrangement, a credit purchase agreement or a high purchase agreement". Each of these phrases is defined. Furthermore, it is provided by s. 75A that "vendor" means "(b) in the case of a sale to which a credit arrangement relates, the person to whom payment is to be made". The definition of "credit arrangement" does not itself refer to a "vendor" but the definition of vendor is given substance by the requirements of other sections, e.g. 75b and 75d.

In all three cases there was, at the time of the making of the contract of purchase, no arrangement for credit - the contract of loan followed the contract to buy. This circumstance might itself occasion some difficulty for the Commissioner, particularly in Barnett's case, but I do not decide any of the matters upon such a narrow ground. In my opinion none of the loans which the appellant made was a "credit arrangement" as defined because to fall within the definition an arrangement must be one which concerns the amount paid or payable for the goods being purchased. This necessitates that the arrangement is with the person contracting to sell the goods. A contract by a third party to lend money with which to pay for goods is not, in my opinion, a credit arrangement within the definition.

My conclusion rests upon the language of the definition, not upon any narrow conception of what is understood by the word "credit", for I have no doubt that in each case the purchaser here under consideration did, in a very real sense, obtain credit. That credit, however, was obtained from a third person outside the contract to purchase, not from New Era Furniture Pty. Ltd. by a "credit arrangement" with that company.

It may be objected that my construction of the words "credit arrangement" would leave little room for the application of the special definition of the word "vendor". However, as I have said, that word does not appear in the definition. Moreover, I can envisage a case where it would have an application such as where there is a "credit arrangement" made by the owner of goods with a purchaser which provides that the amount payable should be paid to a person other than the owner, e.g. a person financing the owner.

These three appeals from the Court of Appeal of New South Wales are concerned with the proper construction to be given to the words of the definition of credit arrangement in s. 75A of the Stamp Duties Act, 1920 NSW, as amended ("the Act") [1] . The appellant company had a standing arrangement with a retail trader ("the dealer") under which the dealer submitted to the appellant applications by customers who wished to borrow money to enable themselves to purchase goods from the dealer. Under this arrangement if the appellant accepted an application it would make payment direct to the dealer who agreed that the property in the goods should thereupon pass to the customer (if it had not already done so) and that the appellant would take a mortgage of the goods from the customer. In each of the cases now before us the customer ("the purchaser") agreed to buy goods from the dealer for a specified price and paid to the dealer a sum on account of the purchase price. The purchaser before leaving the dealer's premises completed and signed an application which the dealer transmitted to the appellant. The application was "for a loan of the amount set out in Items (3) (4) (5) & (6) Pt II of the schedule below to enable me to purchase from the above dealer the goods described in Pt I of the Schedule". In each case Pt I of the schedule gave what were called "Details of Goods Purchased" and Pt II of the schedule set out an amount described as "Cash Price of Goods" (item (1)), deducted the amount which had been paid by the purchaser to the dealer and which was described as "Deposit" (item (2)) and thus arrived at "Balance of Price" (item (3)). Items (4), (5) and (6) ("Freight", "Maintenance" and "Insurance") in each case were left blank as irrelevant. The schedule then set out the "Total amount to be paid by you on my behalf (being amount of principal of loan)" (item (7)) which in the circumstances was the same amount as that shown as item (3), and added "Terms Charges" (item (8)) to give the "Total amount repayable" (item (9)). The application contained an agreement by the purchaser to repay the total amount of principal and terms charges by twelve consecutive equal monthly instalments of which the first should be paid one month from the date of acceptance by the appellant of the purchaser's request, and the purchaser further agreed to give a mortgage over the goods as security for the loan. The application also provided that the appellant might "disburse the loan on the date of acceptance as implied in items (3) to (6) of Pt II of the schedule by credit to the dealer's account with you or by payment to the dealer or as directed by the dealer". It further provided that the purchaser's request should be deemed to be accepted, and that a binding contract should arise, when the appellant's officer signed the acceptance on the form of application. In each case the application was duly accepted about seven days after it was signed by the purchaser and the appellant then paid the requisite amount to the dealer. The only differences that existed between the circumstances of the three cases were the following. In the first case the property in the goods passed to the purchaser on the making of the contract between himself and the dealer and the goods were immediately delivered to the purchaser. In the second case, although the goods were delivered immediately, the contract was conditional upon the application being accepted by the appellant and it was a term or condition of the contract that notwithstanding delivery the property in the goods would not pass from the dealer to the purchaser until acceptance of the application by the appellant. In the third case the contract was conditional upon the application being accepted by the appellant and the amount of the loan thereby sought being paid over by the appellant to the dealer and the dealer did not in fact deliver the goods to the purchaser, and property in them did not pass, until after such payment had been made by the appellant.

In each case the Commissioner assessed the instrument embodying the accepted application to duty at the rate fixed in respect of an "instalment purchase arrangement", a term which is defined by s. 75A of the Act to mean "a credit arrangement, a credit purchase agreement or a hire purchase agreement". All these terms are defined in s. 75A. It is not necessary to refer in full detail to the definitions of "credit purchase agreement" and "hire purchase agreement", but it is desirable to state their general effect, without reference to immaterial provisos and qualifications. The former expression means an agreement for the purchase of goods under which, irrespective of the time at which the property in the goods passes or is to pass, the purchase price or any part thereof is paid or payable not before the expiration of six months from the date of the agreement by not less than two instalments and under which any of the instalments are to be paid after the goods have been delivered to the purchaser. The latter expression includes a letting of goods with an option to purchase and an agreement for the purchase of goods by instalments, but does not include an agreement whereby the property in the goods passes at the time of the agreement or upon or at any time before delivery. The definition of credit arrangement contained in s. 75A is as follows:

"Credit arrangement" means an arrangement or an offer to enter into an arrangement under which when goods are purchased or where subsequent to the purchase of goods an option to pay by instalments is exercised the amount payable or paid is not less than the purchase price of the goods plus interest at a rate exceeding nine per centum per annum such rate being calculated as hereinafter provided, and where the purchase price is four hundred dollars or more. The expression "purchase price" which appears in this definition is itself defined as follows: "Purchase price" means, in the case of a credit purchase agreement, a hire purchase agreement and a sale to which a credit arrangement relates, the price at which the goods might have been purchased for cash less any deposit or initial payment made at the time of purchase and for this purpose the amount allowed by way of a discount or a trade-in shall be deemed to be a deposit or part thereof. The person primarily liable to the duty payable on an instalment purchase arrangement is "the vendor" (see 2nd Sch. to the Act) and further obligations are cast on "the vendor" by s. 75B of the Act, the material provisions of which read as follows:

(a) Subject to the provisions of paragraph (d) of this subsection a vendor shall make out an instrument -

(i) in the case of a credit purchase agreement and a hire purchase agreement, at the time of the making of the agreement; or

(ii) in the case of a sale or an exercise of an option following the sale as the case may be to which a credit arrangement relates within seven days of each such sale or each exercise of an option.

(b) Such instrument shall clearly and truly set out -

(iii) a description of the goods sufficient to indicate their nature;

(iv) the total amount payable by the purchaser on any account whatsoever under the instalment purchase arrangement;

(v) the total amount payable for or by way of interest or insurance or any other charge under the instalment purchase arrangement;

"Vendor" is defined in s. 75A, for relevant purposes, as follows:

(a) in the case of a credit purchase agreement and a hire purchase agreement, the person by whom goods are let, hired or sold or agreed to be let, hired or sold; and

(b) in the case of a sale to which a credit arrangement relates, the person to whom payment is to be made.

"Purchaser" is also defined, and for relevant purposes means "the person to whom goods are let, hired or sold or agreed to be let, hired or sold".

The Commissioner submitted that in the present case the appellant was the vendor within the above definition and therefore primarily liable to duty. In my opinion, if it were accepted that the instrument answered the description of a credit arrangement as defined in s. 75A no difficulty would be created for the Commissioner by the words "a sale to which a credit arrangement relates" which appear not only in the definitions of "vendor" and "purchase price" but also in s. 75B. The instrument, in my opinion, related to the sale of the goods; it was not only in fact connected with the sale, having been made only to enable the sale to be completed, but it contained a number of express references to the sale. If, therefore, the application was a credit arrangement, the sale of the goods was one to which that arrangement related. It would not, however, be so clear that the appellant was the person to whom payment was to be made within the definition of "vendor", since that definition suggests that what is meant is the person to whom payment is to be made for the purposes of the sale.

Before considering further the definition of "vendor", it is convenient to turn to the definition of "credit arrangement". It was conceded that the principal sum lent in each case (the amount of the cash price less the deposit) exceeded $400 and that if the terms charges were to be regarded as interest on the purchase price the rate exceeded nine per cent per annum. However, the appellant submitted that the definition did not apply for two main reasons. First, it was said that an arrangement to make a loan is not an arrangement for the giving of credit within the ordinary meaning of the words. Even if that argument were correct, which I do not find it necessary to consider, it would not in my opinion follow that the instrument in the present case was not a "credit arrangement" within the meaning of the definition. To determine whether an arrangement is a "credit arrangement" it is unnecessary to inquire whether it was an arrangement to give credit in the ordinary sense of the term. The expression as used in s. 75A is purely artificial and its meaning can be found only by reference to the words which define it. Those words do not refer to "credit" and do not render it necessary to consider whether an arrangement sought to be brought within the definition could correctly be described as a "credit arrangement" within the ordinary sense of those words.

The second submission of the appellant was that the definition contemplates an arrangement under which a sale is subsequently effected and under which the purchase price of the goods is paid or payable, that is, an agreement between a prospective vendor and a prospective purchaser, rather than an agreement between a prospective purchaser and a third person. The learned Solicitor-General, in contending that this construction should not be accepted, referred to the history of the legislation. The provisions now in question were inserted in the Act by the Stamp Duties (Amendment) Act, 1966. Before that amending Act was passed s. 75A referred only to "hire purchase agreements" which were defined in terms whose effect was similar to that of the present definition of "hire purchase agreement". The definitions of "hire purchase agreement" and of "vendor" in the Act before it was amended clearly showed that the section was limited to transactions between sellers and buyers, or prospective sellers and prospective buyers, in the ordinary sense. In the present Act two new classes of agreement are included. A "credit purchase agreement" is still an agreement between seller and buyer but it was submitted the definition of "credit arrangement", particularly when read in the light of the definition of "vendor", was introduced to include arrangements between persons who are not, and did not intend to be, parties to a contract of sale. It was pointed out that the section in defining "credit purchase agreement" and "hire purchase agreement" does not make any reference to an interest rate and this circumstance was said to provide some further support for the view that a "credit arrangement", unlike the other two categories, may extend to an arrangement made by a financier who is not a party to the contract of sale.

It is clear enough that by the amendments made in 1966 the legislature intended to, and did, extend the classes of agreement and arrangement which would attract duty of this kind. It is clear too that the vendor under a sale to which a credit arrangement relates is not necessarily a vendor in the ordinary sense. However, to determine what transactions are "credit arrangements" it remains necessary to find the meaning of the words contained in the definition itself.

If for convenience one puts aside the case of an offer to enter into an arrangement, and the case where subsequent to the purchase of goods an option to pay by instalments is exercised, it is apparent from the words of the definition that a "credit arrangement" must be an arrangement under which when goods are purchased the amount payable or paid is not less than an amount calculated in accordance with the definition. The Solicitor-General submitted, rightly in my opinion, that although the amount payable or paid is described by reference to a purchase price, the definition does not itself state that the amount should be or include the purchase price itself. In other words, the definition appears capable of referring to a case where an amount which could not itself be described as the purchase price is quantified by reference to the purchase price. The Solicitor-General went on to contend that the words "when goods are purchased" refer to the occasion of the payment and do not require that the purchase should be made under the arrangement. The provisions of s. 75B (1) (a) (ii), which require an instrument, which is to be stamped as an instalment purchase arrangement, to be made out within seven days of the sale to which a credit arrangement relates, suggest that what is contemplated is a credit arrangement that precedes, or is at latest contemporaneous with, the sale. That this is so is supported by the use of the words "when goods are purchased" in the definition of "credit arrangement". Those words cannot in my opinion be read as meaning "when goods have been purchased". In one of the judgments of the Court of Appeal reference was made to the words "subsequent to the purchase of goods". Those words do not in any way affect the conclusion that an arrangement to be within the definition cannot be one made after the purchase in a case (such as the present) where there was no exercise of an option to pay by instalments. In the case of an option the arrangement may be subsequent to the purchase but must precede or be contemporaneous with the exercise of the option. In its application to an arrangement which does not relate to the exercise of an option the definition refers to an arrangement under which an amount is payable or paid when goods are purchased on or after the making of the arrangement. This would be enough to justify a conclusion that the instrument in the first of the three cases before us was not rightly assessed to duty as an instalment purchase arrangement, because in that case the purchase of the goods preceded the making of the arrangement recorded in the instrument. The other two cases, however, could not be disposed of on this ground, for in those cases the effect of the condition in the contract may well have been that the goods were not purchased before the arrangement was made.

It does not seem to me to be necessary finally to decide whether upon its proper construction the definition of "credit arrangement" requires that the purchase which is the occasion of the payment should be effected pursuant to the provisions of the arrangement. Indications that this is the effect of the definition are provided by the definition of "vendor", which suggests that the payment is to be made to a person who, although not the seller, is in some way connected with the sale itself, e.g., as a person mentioned in the contract of sale as the person to whom payment is to be made, and by the definition of "purchaser" which, with the provisions of s. 75B, shows that the amount is to be paid or payable by a person who is a purchaser in the ordinary sense. However, whether or not it is necessary that the purchase should be made under the arrangement, it is in my opinion made clear by the words of the definition that an arrangement can only be a "credit arrangement" if it provides for an amount to be paid or to become payable on a purchase of goods, which purchase, as I have already said, must take place immediately or in the future. In other words, the arrangement must itself stipulate that the purchase is the occasion on which the amount is to be paid or to become payable. This conclusion, that an arrangement, to come within the definition, must itself require the amount to be paid or to become payable when goods are purchased, is enough to dispose of the present appeal. In each case the accepted application related the payments simply to the date of acceptance of the application. It was immaterial to the arrangement recorded in the instrument whether the purchase to which it related had already been completed or would be completed immediately on acceptance or would not be completed until some later time in the future. The arrangement embodied in the instrument was not one under which any amount was paid or payable when goods were purchased.

For these reasons I am unable to agree with the construction given by the learned members of the Court of Appeal to this obscure and difficult provision. I hold that the instrument was not stampable as an instalment purchase arrangement and it is common ground that in that event it attracted duty only at the rate provided for "an agreement or a memorandum of agreement, and not otherwise specifically charged with any duty - under hand only".

I would allow the appeal and answer the questions in the stated cases accordingly.

I have had the advantage of reading the reasons for judgment of Menzies J. and am in agreement with them.

I have had the advantage of reading the reasons for judgment prepared by the Chief Justice in these three matters. I agree with those reasons and that the appeals should be upheld.