Brett v Barr Smith [1919] HCA 4

Brett v Barr Smith [1919] HCA 4

The mortgage does not contain a covenant or stipulation imposing on the mortgagors a legal obligation to pay the mortgagee's income tax on the interest within the meaning of section 54, but instead merely stipulates a variable interest reducible by a formula that references income tax liability. Therefore, the mortgagors are only liable to pay interest at the rate of 5.75% per annum, reducible as prescribed by clause 7, and section 54 does not operate to void or modify the relevant provision.

Parties
Appellant: Frank Pilkington Brett; Appellant: Arthur Frederick Hooper; Respondent: Tom Elder Barr Smith; Respondent: Henry Percival Moore
Jurisdiction
Australia
Judgment Date
17 March 1919
Procedural Posture
Appeal / Final Judgment on Special Case Stated
Outcome
Appeal dismissed.
Legal Topics
Mortgage Covenants, Statutory Interpretation, Obligation to Pay Income Tax Under Mortgage, Section 54 Income Tax Assessment Act
Income Tax Mortgage Law Contract Law Mortgage Covenants Statutory Interpretation Obligation to Pay Income Tax Under Mortgage Section 54 Income Tax Assessment Act

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Parties

Frank Pilkington Brett

Appellant

Arthur Frederick Hooper

Appellant

Tom Elder Barr Smith

Respondent

Henry Percival Moore

Respondent

Procedural Posture

Appeal / Final Judgment on Special Case Stated

Legal Issues

  1. 1 Whether clause 7 of the mortgage is a covenant or stipulation imposing on the mortgagor the obligation to pay income tax on interest within the meaning of section 54 of the Income Tax Assessment Act 1915-1916

Ratio Decidendi

The mortgage does not contain a covenant or stipulation imposing on the mortgagors a legal obligation to pay the mortgagee's income tax on the interest within the meaning of section 54, but instead merely stipulates a variable interest reducible by a formula that references income tax liability. Therefore, the mortgagors are only liable to pay interest at the rate of 5.75% per annum, reducible as prescribed by clause 7, and section 54 does not operate to void or modify the relevant provision.

Court Disposition

Appeal dismissed.

Orders

  • First and second questions answered in the negative.
  • Third question answered: At the rate prescribed by clause 1 of the mortgage, reducible as prescribed by clause 7.