YZ Finance Co Pty Ltd v. Cummings

109 CLR 395

(Judgment by: McTiernan J)

YZ Finance Co Pty Ltd v. Cummings

Court:
HIGH COURT OF AUSTRALIA

Judges:
McTiernan J
Kitto J
Taylor J
Menzies J
Windeyer J

Subject References:
Banking and finance
Money lenders
Security
Promissory note
Inconsistency between State and Federal legislation

Legislative References: - Constitution (Cth), s 109; Bills of Exchange Act 1909 (Cth); Money-lenders and Infants Loans Act 1941 (NSW), s 24

Hearing date: 21 November 1963
Judgment date: 25 February 1964

MELBOURNE


Judgment by:
McTiernan J

The appellant brought an action in the Metropolitan District Court, Sydney, on a promissory note given by the respondent to the appellant for money lent and interest payable thereon. The appellant was a money-lender within the meaning of the Money-lenders and Infants Loans Act, 1941-1961 (N.S.W.) and the loan was subject to the provisions of Pt III of that Act. The respondent's defence to the action was that the appellant could not sue on the promissory note because of the provisions of s. 24 of the Act. The defence failed. On appeal the Full Court of the Supreme Court decided that the section provided a defence to the action [F1] .

According to the express terms of the contract the respondent agreed to give the promissory note as "security" for the money lent and the interest thereon. He also gave to the appellant a bill of sale and a second mortgage pursuant to the same terms of the contract. Sub-section (2) of s. 24 includes a bill of sale and a mortgage in the list of securities which it enumerates but not a promissory note. It is clear therefore that the appellant was forbidden by sub-s. (1) of s. 24 to sue the respondent on his promise in the contract of loan to repay the principal or his promise to pay interest thereon.

The right of the appellant to bring an action on the promissory note depends upon whether it is a proceeding for the enforcement of a security made or taken to secure the payment of the money lent and interest thereon. The argument for the appellant depends upon the form of sub-s. (2) of s. 24. The words of the sub-section are: "In this section `security' includes bill of sale, mortgage, lien, and charge of any real or personal property, and any assignment, conveyance, transfer or dealing with any real or personal property to secure the repayment of any loan". Lord Watson said in Dilworth v Commissioner of Stamps [F2] : "The word `include' is very generally used in interpretation clauses in order to enlarge the meaning of words or phrases occurring in the body of the statute; and when it is so used these words or phrases must be construed as comprehending, not only such things as they signify according to their natural import, but also those things which the interpretation clause declares that they shall include. But the word `include' is susceptible of another construction, which may become imperative, if the context of the Act is sufficient to show that it was not merely employed for the purpose of adding to the natural significance of the words or expressions defined. It may be equivalent to `mean and include', and in that case it may afford an exhaustive explanation of the meaning which, for the purposes of the Act, must invariably be attached to these words or expressions" [F3] . I agree entirely with the way Sugerman J. applied this passage in the course of his reasoning in Batchelor & Co Pty Ltd v Websdale [F4] . His Honour said, "The enumeration in sub-s. (2) adds nothing to the natural import of the word `security'. Indeed all the matters enumerated are within the strictest meaning of that term and, within that meaning, the second limb of the definition is of the widest import. All the matters enumerated share the common characteristic that they relate to securities by which rights in relation to specific property of the debtor are conferred. These considerations lead to the conclusion that `include' in sub-s. (2) is equivalent to `mean and include' and that the definition therein given is intended to be exhaustive, or at least that the securities intended to be embraced all share the common characteristic of conferring rights against specific property" [F5] . The word "security" in the context of sub-s. (1) could, in the absence of sub-s. (2), include a promissory note. All the transactions mentioned in sub-s. (2) are securities in themselves. None of them needs any expression of legislative intent to be a security for the purpose of sub-s. (1). The manifest object of sub-s. (2) to be gathered from its contents is to afford guidance as to what the term "security" in sub-s. (1) is intended to be confined. I think it would be contrary to the legislative intention revealed by adding sub-s. (2) to sub-s. (1) to enlarge by construction the scope of the word "security" in sub-s. (1) to bring within the operation of the latter provision a promissory note, as no such instrument falls within the enumeration of securities in sub-s. (2). In my opinion this sub-section provides "an exhaustive explanation" of the meaning of "security" for the purpose of sub-s. (1). The meaning of "security" elsewhere in the Act is not, of course, governed by sub-s. (2).

It is argued for the appellant that in any case the present action being one on a promissory note, which is collateral to the contract of loan, it is not a proceeding to which sub-s. (1) applies because, so the argument runs, the action is not a proceeding to recover any amount either of principal or interest under the contract of loan. In my view this argument is disposed of by reasoning in Stock Motor Ploughs Ltd v Forsyth [F6] . The relevant passages are at [F7] .

It is also argued for the appellant that if sub-s. (1) ought to be construed as omitting a promissory note from the list of securities which a money-lender is entitled by the sub-section to enforce it collides with the federal Bills of Exchange Act and is made invalid wholly or partly by s. 109 of the Constitution of the Commonwealth. An argument raising a similar question is examined in the above-mentioned decision: see [F8] . I think that the reasoning found in Stock Motor Ploughs v Forsyth [F9] disposes of the attack on s. 24 founded on s. 109 of the Constitution.

In my opinion the appeal should be dismissed.