STARR-BOWKETT LOANS

Otago Daily Times, Issue 18493, 2 March 1922, Page 9

STARR-BOWKETT LOANS

QUESTION OF STAMP DUTY. His Honor Mr Justice Sim gave judgment yesterday in’ the action between the Dunedin Starr-Bowkett Building Society and the Minister of Stamp Duties. The judgment reads, inter alia:—'phe question to be determined on this appeal is whether the principal money secured by the mortgage from Boyd to the society is to be treated as £IOO or £125. The sum lent to Boyd was £IOO, and he covenanted" to pay to the society the sum of £IOO and the sum of £25 by way of premium ■ thereon, making together the sum of £125 by 323 fortnightly payments of 7s 9d each,” to be made as therein specified. The Commissioner of Stamps treated £125 as the principal money secured by the mortgage, and assessed the duty accordingly at 10s under the seventh schedule to ‘‘The Finance Act, 1915.” The society claims that this assessment is erroneous, and contends that £IOO should be treated as the principal money secured by the mortgage. The appropriation of the loan was obtained by Boyd at a sale\under rule 47 of the society’s rules, which provides that when the appropriation is by sale the chairman shall offer for competition the sum of £IOO, and the member who within five minutes offers the highest, amount of premium for such loan shall be the purchaser. Bui© 49 provides that the amount of premium agreed to be given is to be added to the advance and paid for along with the principal sum. The society does not charge any interest on loans to members, and it was admitted by counsel that the premium here was not a payment in the nature of interest. It was contended, however, that any remuneration agreed! to be paid to the society for the use of the money lent to a member could not be treated as part of the principal money. secured by the mortgage given by such member. But there is nothing to prevent the parties from agreeing that such a premium shall be part of the principal money secured by the mortgage. The question whether or not that has been done in any particular case must depend on the contract between the parties. In the present case the parties have agreed, I, think, to make the premium part of the principal money secured by the mortgage. That is what rule 49 appears to contemplate, and the covenant in the mortgage is to pay the sum of £125 by the specified instalments. The premium is thus made a debitum in presenti although it is solvendum in future. If Boyd made default so as to bring into operation the power to call up the principal moneys secured by the mortgage, the society, it is clear, would be entitled under the provisions of the mortgage to recover the premium ns part of these moneys by an action at law. . . In the present case the payment of the premium xs not garded as a payment in the nature of interest, and the only alternative seems to be to treat it as a payment in the nature of principal. It was properly treated in this way, I think, by the Commissioner, and the assessment is accordingly confirmed, and the appeal dismissed with costs (£5 Ss) to the respondent.