Broad v. Commissioner of Stamp Duties (N.S.W.)
Members:Lee J
Tribunal:
Supreme Court of New South Wales
Lee J.
This is an appeal by the plaintiff by way of a case stated under sec. 124 of the Stamp Duties Act, 1920, as amended. The subject matter of the appeal is the assessment by the Commissioner of duty upon an instrument executed by the plaintiff dated 2 December 1977, and in the following form (so far as is material).
``BANK OF NEW SOUTH WALES
Security over Deposits with `own' or `other' Bank or with any Corporation
(First Party)
IN CONSIDERATION of advances and accommodation already granted and hereafter to be continued at its discretion and during its pleasure or presently granted and hereafter to be continued as aforesaid or to be granted from time to time hereafter but only at its discretion and during its pleasure by BANK OF NEW SOUTH WALES (hereinafter called the Bank) to (a) JAMES ANTHONY BROAD
....................................
of (b) 7/6 UPPER GILBERT STREET MANLY
In the State of NEW SOUTH WALES (c) SENIOR OVERSEER
(Hereinafter called the Mortgagor)
THE MORTGAGOR
(1) hereby directs the Bank to hold the Deposit particulars of which are set out in the First Schedule hereto and any deposit which may be made with the Bank in renewal thereof or in substitution therefor and the sums (both principal and interest) now owing or at any time hereafter become owing or payable thereunder or in respect thereof against the moneys hereby secured; and authorises the Bank at any time and from time to time to deduct from and retain out of the said deposit and sums or any of them such amounts as it may think fit and to apply or to set off such amounts in or towards or against satisfaction of the moneys hereby secured or any of them;
(2) hereby assigns to the Bank of the sums (both principal and interest) now owing or at any time hereafter to become owing or payable under or in respect of the Deposit particulars of which are set out in the Second Schedule hereto and any deposit which may be made in renewal of or in substitution for such deposit and all the right, title and interest of the Mortgagor in and to all such deposits and the said sums and all claims and demands which the Mortgagor now has or may hereafter have against the Corporation mentioned in the Second Schedule for or in respect of or in relation to all or any of such deposit and the said sums, to hold unto the Bank for the purpose of securing the payment to the Bank of the moneys hereby secured.
AND THE MORTGAGOR COVENANTS with the Bank and it is AGREED AND DECLARED:
1. That the Mortgagor shall pay to the Bank of demand: -
- (a) all moneys now or hereafter to become owing or payable to the Bank by the Mortgagor either alone or on joint or partnership account or on any other account whatsoever; and
- (b) all moneys which the Bank shall pay or become liable to pay to, for or on account of the Mortgagor either alone or jointly with any other person and either by direct advances or by reason of the Bank accepting or paying or discounting any order, draft, cheque, promissory note, bill of exchange or other engagement or entering into any bond, indemnity or guarantee or otherwise incurring liabilities for or on behalf of the Mortgagor whether such drafts,
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cheques, promissory notes, bills of exchange or other engagements shall have matured or not; and- (c) to (g)...
2. That the Mortgagor is the only person beneficially entitled to the deposit hereinbefore mentioned and the sums payable or to become payable thereunder or in respect thereof.
...
5. That a certificate signed by, for or on behalf of any Manager, Assistant Manager, Sub-Manager, Accountant or Sub-Accountant for the time being of the Bank or any branch thereof or of any person for the time being acting in any of the said offices stating the amount of the moneys hereby secured at the date mentioned in any such certificate shall be conclusive evidence against the Mortgagor that the amount so stated is the amount of the moneys due by the Mortgagor under these presents at the date mentioned in the said certificate and is the amount of the moneys hereby secured as at such date.
6. That the Bank shall be at liberty from time to time without further authority than these presents to debit and charge the account of the Mortgagor with all costs, charges and expenses (calculated in the case of legal costs, charges and expenses as between solicitor and own client), which the Bank shall pay, incur, sustain or be put to in connection with the account of the Mortgagor or the deposit hereinbefore mentioned or the sums payable or to become payable thereunder or in respect thereof or this security or the preparation or completion thereof or the exercise or attempted exercise of any right, power, authority or remedy conferred on the Bank or on the Attorney of the Mortgagor under or by virtue of this security or by statute together with the interest on all such moneys at the rate aforesaid and the same shall be covered by this security and be portion of the moneys hereby secured.
...
9. That these presents shall be a continuing security notwithstanding any settlement of account intervening payment or other matter or thing whatsoever until a final discharge hereof has been given to the Mortgagor.
10. That this security shall be enforceable notwithstanding that any negotiable or other instrument security or contract shall be still in circulation or outstanding.
...
16. That the Bank shall be entitled to the possession of the receipts certificates or other evidences of title existing in relation to the Deposits for the time being comprised in this security.
...
THE FIRST SCHEDULE HEREINBEFORE REFERRED TO Date Name of Issuing Branch Amount Date 2/12/77 and Deposit No. Deposited 2/12/81 No. 101215 MANLY N.S.W. $4,000.00 THE SECOND SCHEDULE HEREINBEFORE REFERRED TO Particulars of Deposits with other Bank or Corporation Name of other Bank Date and No. Amount or Corporation, of Receipt Deposited Due and Branch or Division ................................................................ ................................................................''
The defendant Commissioner assessed duty on the instrument at $5 on the basis that it was a ``Loan security'' within sec. 83 of the Act. The plaintiff contends that the document is not dutiable as a ``Loan security'', but should be assessed for duty as ``An agreement under hand not otherwise chargeable with duty''. If it is so the duty payable under the Second Schedule in the Act is 50 cents. The plaintiff has paid the duty on the instrument.
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At the outset, it is to be noted that the document deals with two classes of deposits, namely, moneys deposited with the Bank itself and moneys deposited with other banks or corporations. Clause (2) expressly assigns the latter to the Bank but the document elsewhere, however, makes no distinction between the two classes of deposit and refers to them indifferently as ``the deposit''. The present case concerns only a deposit made with the Bank itself.
Under sec. 83(1) ```Loan security' means mortgage, bond, debenture or covenant'', and ```Mortgage' includes, without limiting the meaning of that expression in section 3(1) of this Act'' the various instruments set out in para. (a) to (e). It is unnecessary to set out these paragraphs as they do not add to the basic meaning of ``mortgage'' in sec. 3(1) and this is accepted on both sides.
The Commissioner does not contend here that the instrument is a ``bond'' or ``covenant'' and accordingly the question is whether it is a ``mortgage'' or ``debenture''.
I shall deal with ``mortgage'' first. In sec. 3(1) mortgage is defined to mean ``a security by way of mortgage or charge'' for the payment or repayment of money as thereinafter expressed. The word ``security'' has a wide meaning. Jowitt's Dictionary of English Law defines ``security'' as ``something which makes the enjoyment or enforcement of a right more secure or certain''. It is defined in Stroud's Judicial Dictionary as ``speaking generally... anything that makes the money more assured in its payment or more readily recoverable''. Of course the Stamp Duties Act is concerned with instruments only. In a proper context an instrument may constitute a security even though it is not collateral or ancillary to any other document but itself creates the obligation. Cf. sec. 84B of the Act.
Independent Television Authority v. I.R. Commrs. (1960) 2 All E.R. 481 per Lord Radcliffe at p. 483, approving
Jones v. I.R. Commrs. (1895) 1 Q.B. 484 and
National Telephone Company Limited v. I.R. Commrs. (1899) 1 Q.B. 250. In
Maddaford v. Devantee (1951) S.A.S.R. 259 at p. 267 Mayo J. referred to the ``narrower'' meaning of security:
``... that is to say the right to resort to some person or some property or fund to satisfy a debt or claim for which another person is primarily liable (
Singer v. Williams (1921) 1 A.C. 41 and 49; in
Re Smithers (1939) Ch. 1015; in
Re United Law Clerks Society (1947) Ch. 150, 152, 153).It connotes an additional right which tends to render more certain or probable the discharge of a debt or claim than if satisfaction were dependent only on the person primarily liable.''
A mortgage or charge falls within this latter concept of security and requires property (it can be property of any kind) to be subject to the mortgage or charge - it cannot be a mere obligation in isolation. This is the commonly accepted meaning of the word mortgage.
One looks therefore to see what it is that is mortgaged or charged by the instrument under consideration. Counsel for the Commissioner claims that it is ``the deposit'' referred to in the First Schedule which is mortgaged or charged, and points to cl. 1 which states that the bank is to hold the deposit ``against the moneys hereby secured'' and the second covenant in which the mortgagor is described as being ``beneficially entitled to the deposit''... He refers to the words ``secured'' and ``security'' appearing in covenants 5, 6, 9, 10, 11 and 16. But, of course, the use of expressions ``secured'' or ``this security'' cannot itself characterise the instrument as a security or a mortgage or charge if in its nature it is not so. Merely because, commercially, it may be regarded as a security is in no way decisive of its true legal import.
The first question is to determine the nature of ``the deposit'' to which the First Schedule refers. All that the document shows is that the Bank is holding at its Manly branch money, namely $4,000, ``deposited'' on 2 December 1977 by the plaintiff and repayable on 2 December 1981 and in the absence of any evidence that the ``deposit'' could be regarded as a deposit of specific currency to be retained as such, or that the moneys were held by the Bank as trustee or agent for the plaintiff, it seems to me that the only conclusion open is that the transaction to which the Schedule refers is a loan by the plaintiff to the Bank. A loan is not the same as a bank deposit - ``a loan is primarily for the benefit of the Bank, a deposit is primarily for the benefit of the depositor''. Nussbaum
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Money in Law p. 105 - but both crate a debt and a debt is a chose in action. I have not overlooked the second covenant by the mortgagor which refers to the mortgagor being ``the only person beneficially entitled to the deposit'', but it is difficult to give this a meaning in regard to a deposit of moneys with the Bank unless it is intended only to refer to the ownership at the time of the deposit, of a deposit made in cash or by cheque or other valuable security. In the case of a deposit of moneys to which cl. 2 and the Second Schedule of the document apply, namely, a deposit with some ``other Bank or Corporation'', the covenant might be taken to mean that the mortgagor covenants that he has not assigned or encumbered the chose in action constituted by the deposit. Be that as it may, the deposit to which the First Schedule refers is, as I have said, to be regarded as a loan.The Commissioner sought to base a contention upon the fact that ``the deposit'' constituted a chose in action, and claimed that the document could be regarded as a conditional equitable assignment of a chose in action and that this would constitute a security in the nature of a mortgage. No doubt such an assignment of a chose in action could be regarded as ``loan security'' within sec. 83(1) of the Stamp Duties Act.
``The law as to equitable assignment, as stated by Lord Truro in
Rodick v. Gandell ((1852) 1 De G.M. & G. 763, at pp. 777-778) is this: `The extent of the principle to be deduced... is, that an agreement between a debtor and a creditor that the debt owing shall be paid out of a specific fund coming to the debtor, or an order given by a debtor to his creditor upon a person owing money or holding funds belonging to the giver of the order, directing such a person to pay such funds to the creditor, will constitute a valid equitable charge upon such fund, in other words, will operate as an equitable assignment of the debts or fund to which the order refers.'''(Palmer v. Carey (1925-26) 37 C.L.R. 545 at p.548.)
Mr. Handley Q.C., counsel for the plaintiff, conceded that this would be the result if the deposit had been one to which the Second Schedule of the instrument applied. But no question of an assignment to the Bank of the chose in action constituted by the loan, or of the ``fund'' made up by the $4,000, can arise in the present case - the chose in action constituted by the loan is the plaintiff's right, as creditor, to enforce the loan in accordance with its terms and that cannot be assigned to the Bank the debtor. Any document purporting to achieve such an assignment could only operate as a release of the debt or a covenant not to sue.
The very fact that ``the deposit'' means no more than an indebtedness of the Bank to the plaintiff in the sum of $4,000 to be discharged on 2 December 1981 makes it impossible, in my view, for it to be held that the instrument is a mortgage or charge on the simple footing that there can be no mortgage or charge in favour of oneself of one's own indebtedness to another.
The point has been expressly dealt with in
Halesowen Presswork v. Westminster Bank (1971) 1 Q.B. 1. In that case the plaintiff company went into voluntary liquidation on a resolution passed in the afternoon of 12 June 1968. It had two accounts with the defendant bank, a No. 1 account which was in debit and a No. 2 account which was slightly in credit. On the morning of 12 June, a cheque for £8,611/5/10 drawn by Girlings Limited in favour of the plaintiff was paid into the defendant bank for credit to the plaintiff's No. 2 account. The proceeds of the cheque were not, however, credited to the plaintiff's No. 2 account until 13 June and the cheque was not cleared until 14 June. The central issue in the case was whether the bank was entitled to set off the credit balance in the No. 2 account against the debit balance in the No. 1 account. The circumstances differ from the present case in that the ordinary banker/customer relationship existed between the parties in respect of both accounts, whilst here the ``deposit'' by the customer with the bank of a fixed sum payable at a particular time is not in the nature of an account held by the plaintiff with the bank but is a loan by the plaintiff to the bank. However, the observations of their Lordships, in my view, apply equally to the present situation.
Buckley L.J. (1971) 1 Q.B. 1, at p. 46 said:
``Mr Yorke, as I understand his argument, does not now rely upon a lien which the bank may at any time have had
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upon the cheque for £8,611.5s.10d. which was paid by the company into the No. 2 account on June 12, 1968, earlier than the passing of the winding-up resolution. In this I think he was right. When that cheque was cleared, as it was on June 14, 1968, it ceased to be a negotiable instrument and also ceased to be in the possession of the bank. Any lien of the bank on the cheque must thereupon have come to an end. The amount of the cheque was credited to the No. 2 account on June 13, 1968. The money or credit which the bank obtained as the result of clearing the cheque became the property of the bank, not the property of the company. No man can have a lien on his own property and consequently no lien can have arisen affecting the money or that credit. The amount of the credit of the company upon the No. 2 account was, of course, increased, but this credit represented indebtedness by the bank to the company as its customer, and I cannot myself understand how it could be said with any kind of accuracy that the bank had a lien upon its own indebtedness to the company. It has, of course, long been recognised that a banker has a general lien on all securities deposited with him as banker by a customer unless there be an express contract or circumstances that show an implied contract inconsistent with lien: see
Brandao v. Barnett (1846) 3 C.B. 519, per Lord Campbell at 531. The term 'securities' is no-doubt used here in a wide sense, but does not, in my judgment, extend to the banker's own indebtedness to the customer.''
When the matter went to the House of Lords (1972) A.C. 785 the view of Buckley L.J. was upheld. Lord Cross of Chelsea (his dissent does not relate to this matter) at p. 810 expressed himself as follows:
``No doubt the bank acquired a 'lien' on the cheque drawn by Messrs. Girling on their bankers, but that cheque was duly honoured and any lien which the bank had on the piece of paper and the obligation of Messrs. Girling created by their drawing the cheque, was soon replaced by an increase in the bank's indebtedness to the company. I agree with Lord Denning M.R. and Buckley L.J. (1971) 1 Q.B. 1 at pp. 33, 34, 46, that a debtor cannot sensibly be said to have a lien on his own indebtedness to his creditor. It may be that as a matter of history the recognition by the courts of the right of a banker to treat several accounts as one was influenced by their earlier recognition that in the absence of agreement to the contrary a banker had a lien on all securities in his hands for the general balance owing to him on all accounts. But to describe the right to consolidate several accounts as an example of the banker's lien is I think a misuse of language.''
Viscount Dilhorne had expressed the same view (p. 802). Nothing in the judgments of Lord Simon or Lord Kilbrandon suggests any dissent from the proposition.
In the present case the instrument in my view does not operate as a mortgage or charge of ``the deposit'' - what it does is to give to the Bank the right ``at any time and from time to time to deduct from and retain out of the said deposit and sums or any of them such amounts as it may think fit and to apply or to set off such amounts in or towards or against satisfaction of the moneys hereby secured or any of them'', and in my view that is no more than giving to the Bank a right to set off against its own indebtedness the indebtedness of the plaintiff at any given time. Such a contractual right to set off even if considered to be a ``security'' in the wide sense of that word cannot be regarded as a mortgage or charge.
Is the instrument then a debenture? Under sec. 83(1):
``'Debenture' includes debenture stock, bonds, notes and any other securities, whether constituting a charge on the assets of a body corporate or not, of a body corporate, whether incorporated in New South Wales or not.''
The first question which arises is whether a debenture under the Act can only be given by a body corporate or whether it can also be given by an individual. In Halsbury's 4th ed., vol. 7, dealing with Companies, para. 813, the following appears:
``Meaning of debenture: No precise definition of 'debenture' can be found but various forms of instruments are called debentures. A debenture is a document which either creates or acknowledges a
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debt. A document may be a debenture even though, under its terms, the debt is only to be repaid out of a part of the profits. The term `debenture' is usually associated with a company of some kind, and most debentures are securities given by companies, but they are often granted by clubs and occasionally by individuals.''
The Oxford Dictionary defines ``debenture'' inter alia to mean ``an acknowledgement of indebtedness by a corporation, private person, etc.''.
In
C.A.C. v. David Jones Finance Ltd. (1975) 2 N.S.W.L.R. 710; (1976) CLC ¶40-242 Needham J. dealt with the meaning of debenture, although not in relation to the question whether a document given by an individual could properly be described as a debenture. He said at N.S.W.L.R. p. 714-715; CLC p. 28,462:
``In
Knightsbridge Estates Trust Ltd. v. Byrne ((1940) A.C. 613, at p. 621) Viscount Maugham said: `If we begin by asking what the word `debenture' means, apart from any definition, the reply must be that it has no precise meaning, Chitty J. observed in the case of
Levy v. Abercorris Slate and Slab Co. ((1887) 37 Ch. D. 260, at p. 264) that the word `means a document which either creates a debt or acknowledges it, and any document which fulfils either of these conditions is a debenture'. An interesting extract from Skeat's Etymological Dictionary (1882) will be found in a footnote to the case (1887) 37 Ch. D. 260, at p. 264. Sir Nathaniel Lindley had previously stated simply, `What the correct meaning of `debenture' is I do not know',
British India Steam Navigation Co. v. Inland Revenue Commissioners ((1881) 7 Q.B.D. 165, at p. 172). In
Lemon v. Austin Friars Investment Trust Ltd. ((1926) Ch. 1) the same ignorance was professed in the Court of Appeal.'The definition in s. 380 of the Companies Act, 1929 (Imp.) was in similar terms to that of the Companies Act, 1961 (N.S.W.). The House of Lords held ((1940) A.C. 613) that a mortgage of real estate by a company was a debenture within that definition. As Lindley J. had said ((1881) 7 Q.B.D. 165, at pp. 172 173), in the passage referred to by Viscount Maugham ((1940) A.C. 613, at p. 621), various types of things are debentures, including something `which is nothing more than an acknowledgement of indebtedness'. That `definition' was applied by the Court of Criminal Appeal in
R. v. Findlater ((1939) 1 K.B. 594, at p. 599). It was described as `the widest definition of a debenture'.''
There can be no doubt that the word ``debenture'' has been associated with corporations over a long period of time. ``Debenture Stock'' is referred to in the Companies Clauses Act 1863 26 and 27 Vict. c. 118 sec. 22. Companies Acts in this State have defined ``debenture'' in substantially the terms in which it is found in the Stamp Duties Act. Companies Act 1936: sec. 6. ``Debenture includes debenture stock, bonds and any other securities of a company whether constituting a charge on the assets of the company or not.'' This definition is identical with that in the United Kingdom Companies Act 1929 sec. 380. In the Companies Act 1961, the definition is the same except for the use of the word ``corporation'' instead of the word ``company''.
Counsel have been unable to refer to any case in which the word ``debenture'' has been applied to a document issued by an individual - all the cases relating to debentures appear to be cases where the document has been given by a company with this qualification however that (as Halsbury observed) unincorporated clubs too issue debentures, e.g.
Wylie v. Carlyon (1922) 1 Ch. 51. I am concerned with the meaning of the word in the Stamp Duties Act. Notwithstanding that it could be used to describe an acknowledgement of indebtedness by an individual, the fact is that that is a rare usage, and over a long period of time the word has, both in the commercial world and in the Courts, had a special relationship to documents given by companies. The definition in the Act could fairly be regarded as taken from the Companies Act except that it uses the term ``body corporate'' instead of ``company''. This is explicable upon the footing that the definition is operating upon debentures of corporations whether incorporated in New South Wales or not and the expression
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``body corporate'' can be regarded as somewhat more specific than the word ``company''.Mr. Handley Q.C., for the plaintiff, has submitted that, in the circumstances, I should treat the word ``includes'' in the definition of debenture as if it were ``means and includes''. He referred to
Batchelor & Co. v. Websdale (1963) State Reports 49, where this meaning was given by the Court to the definition of ``security'' in sec. 24 of the Money Lenders & Infants Loan Act 1941. In that case Sugerman J. quoted from the speech of Lord Watson in the Privy Council in
Dillworth v. Commr. of Stamps (1899) A.C. 99 at pp. 105-106:
``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 where it is so used these words or phrases must be construed as comprehending, not only such things as they signify according to their natural imports, 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 imposed 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.''
In considering whether the definition is exhaustive there are two aspects. The first is - is the definition exhaustive of the documents of a body corporate which can be regarded as debentures for the purposes of the Act? The second is - does the definition restrict the documents which can be regarded as debentures to those issued by bodies corporate? It is the latter question with which I am concerned here but the two matters are to some extent bound up with each other as each requires an understanding of the application of the word ``debenture'' and accordingly it is appropriate to look a little more closely at that matter. The word is one which can apply to a mere acknowledgement of debt. Knightsbridge Estates Trust v. Byrne (supra). It must refer to a specific indebtedness (I shall refer to this later) and it must be an actual acknowledgement of debt as distinct from being mere evidence of a debt. It usually of itself creates an enforceable obligation or obligations.
Topham v. Greenside Glazed Fire-Brick Co. (1883) 37 Ch. D. 281 at p. 292. It can apply to documents which may properly be referred to by other descriptions. In
Pearl Assurance Co. Ltd. v. West Midlands Gas Board (1950) 2 All E.R. 844, Wynn J. at p. 847 pointed out that "... it is clear from
British India Steam Navigation Co. v. I.R. Commrs. ((1881) 7 Q.B.D. 165) that a document which can be described as a debenture may also be described accurately as another type of document, viz., in that case, a promissory note". His Honour held in that case that a document properly described as a mortgage was a debenture.
In Knightsbridge Estates Trust Ltd. v. Byrne (supra), Viscount Maugham pointed out that because there was no accurate exhaustive definition of the word, it ``was desirable'' to insert into the Companies Act of 1929, a definition which he referred to as being ``very wide'' (p. 623). That definition which is very similar to the definition in the Stamp Duties Act, is as follows:
```... debenture' includes debenture stock, bonds and any other securities of a company whether constituting a charge on the assets of the company or not.''
Lord Romer at p. 630 said:
``It was, however, contended on behalf of the appellants that the words `any other securities' should be construed as referring only to securities ejusdem generis as the genus to which debentures belong. All I can say about this is that, if no one seems to know exactly what `debenture' means, no one can be expected to know what is ejusdem generis with it. Indeed, the very fact that no one seems to know exactly what `debenture' means indicates pretty plainly that `debenture' is itself the name of a genus, and not of a species. In my opinion the words `any other securities' mean what they say, and include all other securities of any kind whatsoever.''
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The definition in the Stamp Duties Act then, may be taken to mean that debenture stock, bonds, notes and ``all other securities of any kind whatsoever'' (to use Lord Romer's words) issued by bodies corporate will be within the expression ``debenture'' when used in the Act. Although the definition is, in a sense, reasonably specific, there is no real reason shown, in my view, why it should be taken to be expressing exhaustively the classes of documents of a body corporate, which can be taken to be debentures. The case is not one, in my view, within either of the classes referred to by Lord Watson in Dillworth v. Commr. of Stamps (supra): it is not a case where the natural meaning of the word can be seen to be enlarged by the definition, for the ambit of the natural meaning is itself very uncertain, and the very uncertainty as to what documents are comprehended by the word ``debenture'' is itself good reason for not holding that the definition is exhaustive as to the kinds of documents of bodies corporate intended to be dealt with. The expression ``acknowledgement of a debt'' is itself of very general import, and it can comprehend documents not expressly covered by the definition given in the Act. It follows that ``includes'' is not to be read as meaning ``means and includes'' so far as the classes of documents of a body corporate which may be debentures are concerned. But the very lack of precision of the word in regard to the documents to which it relates gives a special significance in my view to the fact that the definition found in the Act relates only to documents of bodies corporate. If the legislature, in using the word ``debenture'' was intending that it should be taken to apply to documents given by bodies corporate unincorporated clubs and individuals, it is difficult to understand why it should single out only the documents of bodies corporate for definition. Many classes of documents given by an individual and, of course, by an unincorporated club could be regarded as debentures, qualifying at least as ``acknowledgements of a debt'' but no attempt is made to deal with them in any way: yet there must surely be as much uncertainty as to what documents of an unincorporated club or of an individual can be regarded as debentures as there is in regard to company documents. The only section besides sec. 83 which makes any provision in regards to debentures, is sec. 84D and that applies only to the debentures of a body corporate. Bearing in mind the near identity of the definition in the Stamp Duties Act with that found in the Companies Act and the fact that both commercially and in the Courts, ``debenture'' is a word most commonly associated with documents issued by bodies corporate and rarely, if ever, associated with individuals, it seems to me that the proper conclusion is that the legislature is identifying the word ``debenture'' with bodies corporate in accordance with the common meaning of the word. In my opinion the word ``debenture'' in the Act is restricted to documents issued by bodies corporate, and has no application to documents given by individuals. I would add that I am here concerned with a fiscal statute, and to the extent that it is left doubtful as to whether ``debenture'' does include a document given by an individual, that doubt should be resolved in favour of the plaintiff.
Anderson v. Commr. of Taxes (Vic.) (1937) 57 C.L.R. 233 at p. 243.
For the reasons I have given, I am therefore of the opinion the document under consideration in the present case, being given by an individual, is not a ``debenture'' within the meaning of sec. 83 of the Act.
There is, however, in my view, a further reason why it should not be held to be a debenture. It will be observed that nowhere does it state the existence of any specific indebtedness of the plaintiff to the Bank. Whether there was any indebtedness at the time the document was executed by the plaintiff is not disclosed, although the document does refer to ``advances and accommodation already granted''.
I have earlier referred to Topham v. Greenside Glazed Fire-Brick Co. (1887) 37 Ch. D. 281 where North J. considered the meaning of ``debenture''. In that case a company had deposited title deeds with its bankers together with a memorandum signed by the directors and executed under the seal of the company which stated that the deposit was made to secure to the bankers ``payment of all sums of money which we are now or at any time hereafter may be indebted to you whether on current account for principal, interest, commission and charges or any other account whatsoever, and in consideration of the advance made now to us
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and of our account being continued we undertake to execute when thereunto requested a proper mortgage...''At p. 292 his Honour said:
``Moreover, according to the view expressed by Mr. Justice Chitty in
Edmunds v. Blaina Furnaces Company 36 Ch. D. 215 the word `debenture' has no precise legal definition, but always imports an acknowledgement of a debt and generally if not always a convenant or an agreement to pay. In the present case I do not find that the memorandum contains an acknowledgement of any debt. It is quite true that the memorandum was given for the purpose of securing the then present advance of the bank to the company and any other sums which might become due from the company to the bank, but there is no reference to any specific sum. One does not know what was the exact amount due to the bank at the moment at which the document was executed and from that time forward the sum secured would no doubt vary from day to day for it is a security for the balance of the current account to a limited amount having regard to the stamp placed upon the document. Nor do I find in the document any agreement by the company to pay...''
His Honour declined to hold that the document was a debenture within sec. 17 of the Bills of Sale Act 1882.
Counsel for the Commissioner sought to place reliance upon British India Steam Navigation Company v. I.R. Commrs. (1881) 7 Q.B.D. 165 at pp. 172-173 where Lindley J. stated that there could be a debenture ``which is nothing more than an acknowledgement of indebtedness'' and submitted that it was unnecessary for the document to acknowledge indebtedness in a specific amount. In the Law Journal report of that case (1881) 50 L.J.N.S. Common Law 517 the words of the learned judge are stated to be ``nothing more than an acknowledgement of debt''. The case concerned a debenture which did refer to an express sum of money and it is to be noted that North J. in Topham v. Greenside Glazed Fire-Brick Co. (supra) referred to the case and apparently did not regard it as stating a proposition inconsistent with that which he was asserting. In
R. v. Findlater (1939) 1 K.B. 594, Lindley J.'s definition was adoped and acted upon, and treated as meaning ``an acknowledgement of an existing debt'' (p. 599).
I have been unable to find any express qualification of the statement of North J. that a debenture is an acknowledgement of a debt, and in the absence of clear authority to the contrary, I am not prepared to hold that a general acknowledgement of indebtedness is sufficient to characterise a document as a debenture.
For the reasons given I am of the opinion that the document in the present case is not ``a debenture''.
As the instrument is neither a ``mortgage'' nor ``a debenture'' it is not dutiable as a ``loan security'' within sec. 83(1) of the Stamp Duties Act and as the Commissioner has not contended that, if that is the case, it is other than an Agreement or Memorandum of Agreement under hand not otherwise chargeable with duty, it will attract duty accordingly.
Before leaving the case, I should refer to a submission made by counsel for the Commissioner, that as the First Schedule to the document refers to a debt owing by the Bank to the plaintiff that of itself constitutes an acknowledgement of a debt by the Bank and the document is therefore ``a debenture'' of the Bank and thus a debenture of a body corporate within the definition in sec. 83(1). The document is executed only by the plaintiff and contains no acknowledgement by the Bank of any loan by the plaintiff to the Bank so for that reason alone apart from any other considerations it could not be held to be a debenture. This conclusion makes it unnecessary to consider whether it would be open to or appropriate for this Court, in the present proceedings in which the Bank is neither a party nor represented, to entertain a submission directed to showing that the Bank and not the plaintiff was the party primarily liable for the duty on the instrument.
I now set out the questions asked in the stated case together with the answers thereto:
- (1) Whether the assessment of duty made herein is correct and, in relation thereto, whether -
- (a) the instrument is a ``loan security'' within the meaning of the Act; or (NO)
ATC 4588
- (b) the instrument is an ``Agreement or Memorandum of an Agreement and not otherwise specifically charged with any duty... under hand only'' within the meaning of the Act; or (YES)
- (c) the instrument is some other and, if so, what other type of instrument.
- (a) the instrument is a ``loan security'' within the meaning of the Act; or (NO)
- (2) Whether the duty properly assessable in respect of the instrument is -
- (a) $5.00; or (NO)
- (b) $0.50; or (YES)
- (c) some other and, if so, what other amount.
- (3) By whom should the costs of these proceedings be paid?
(THE DEFENDANT)
I order that the excess duty paid in conformity with the erroneous assessment be repaid to the plaintiff. I order the defendant to pay the plaintiff's costs.
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