Associated Broadcasting Services Ltd. v. Comptroller of Stamps (Vic.).
Members:G Gibson P
Tribunal:
Administrative Appeals Tribunal of Victoria
G. Gibson (Presiding Member)
Associated Broadcasting Services Ltd. (``A.B.S.'') borrowed some money from Chase-N.B.A. Group Limited (``Chase''). It did so in the first place by an agreement providing for an amortising term loan facility secured by a debenture which the parties by a supplemental agreement subsequently converted to a revolving credit facility secured by the same debenture. A.B.S. paid stamp duty for the full amount secured by the original loan documents. When the supplemental agreement was executed, it was again assessed for duty in the full amount then secured. This application for review comes from that second assessment.
2. A.B.S. executed the first loan agreement on 30 August 1982. Two companies apparently associated with A.B.S., Ballarat and Western Victoria Television Limited and Goulburn-Murray Television Limited, executed the agreement as guarantors. The agreement was executed by each party, including Chase, under seal. It commences with the words ``THIS AGREEMENT''; its recitals commence ``WHEREAS''; the operative part commences ``NOW THIS AGREEMENT WITNESS-
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ETH''; its testimonium reads ``IN WITNESS whereof the parties hereto have duly executed these presents...''; the attestation clauses are in the standard corporate form.3. The recitals to the loan agreement record that Chase had agreed to make available to A.B.S. an amortising term loan facility in an amount of $8 million to assist A.B.S. with the financing of the purchase of some shares. The ``principal sum'' was defined as the sum of $8 million or the amount thereof which has not been repaid. By cl. 2, Chase agreed - one at this stage hesitates to say covenanted - to advance to A.B.S. $8 million on or immediately after execution of the agreement. By cl. 3, the sum of $8 million was to be repaid by instalments as follows:
$
1982 3,000,000
(being the day 6 months after
the date of execution hereof or
such earlier date as Chase may
agree)
30 June 1983 1,000,000
30 June 1984 1,000,000
30 June 1985 1,000,000
30 June 1986 1,000,000
30 June 1987 1,000,000
----------
$8,000,000
----------
Clause 4 provided for interest at stipulated margins over the term prime rate of Chase. Clause 6 gave to A.B.S. rights of prepayment of principal before the fixed dates on the payment of a fee of a percentage of the amount repaid. One of the conditions precedent in cl. 8 was that A.B.S. was to give a debenture to secure the loan and another was that A.B.S. was to give evidence of a resolution of its Board authorising A.B.S. to enter into the agreement. Clause 9 provided that the principal sum would immediately become due and payable on the happening of any one of a number of defaults commonly specified in such agreements. Under cl. 12, the guarantors gave their guarantee as a principal obligation and not merely as an ancillary or collateral obligation. Clause 19 provided that the agreement was to be paramount over the provisions of any loan security.
4. The debenture given to secure the loan agreement was also executed on 30 August 1982. In form it was substantially the same as the loan agreement except that it began ``THIS DEBENTURE''; its operative part commenced ``NOW THIS DEED WITNESSES''; and the phrase ``this deed'' appears in place of ``these presents'' in the testimonium. It is a debenture in common form and secures any money that A.B.S. may become liable to pay to Chase.
5. The correspondence between A.B.S. and Chase reveals that the amortising term loan facility became unsuitable to the requirements of A.B.S. A.B.S. preferred a revolving credit loan facility. It was like changing a home loan to an overdraft. A.B.S. wanted to be able to repay principal without penalty but to be able to drawdown again to the extent of the current facility. It approached Chase and Chase agreed. A.B.S. also sought and obtained a reduction in the interest rate. The correspondence shows that agreement was reached in substance on about 12 April 1984, although the variation was later made to operate from 8 May 1984. The principal outstanding at each date was $4 million. Chase again insisted on sighting evidence of authority from the Board for A.B.S. to enter into the supplemental agreement. When executed, the supplemental agreement was sealed by A.B.S. and the guarantors. According to their sealing books, the seals were affixed on 30 November 1984. The affixing of the seals was confirmed by the various Boards on 11 December 1984. On 7 December 1984 the solicitors for A.B.S. had forwarded the supplemental agreement duly executed by A.B.S. and the guarantors to the solicitors for Chase for execution and return; they agreed that the document could be submitted to the Comptroller for stamping as collateral to the security documents on the understanding that the original agreement had been stamped with ad valorem duty to cover the original facility of $8 million; no conditions were attached to the delivery of the instrument to Chase; neither there, nor anywhere else, was there any indication that execution and delivery was not to take effect as in the case of a deed. The date of execution of the supplemental agreement was expressed on the face of the agreement to be 14 December 1984.
6. In form the supplemental agreement is substantially like the original loan agreement;
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unlike the debenture, it uses the word ``agreement'' rather than ``deed''. The recitals refer to the original agreement and to the subsequent agreement to make a revolving credit facility in an amount not exceeding the principal sum defined in the loan agreement. ``Current advance'' was defined as ``the lesser of the principal sum or the amount thereof which remains outstanding from time to time under the terms of the loan agreement as varied by this supplemental agreement''. ``Principal sum'' was defined as:``(i) for the period from 8th May 1984 to 30th June 1984, the sum of $4,000,000;
(ii) for the twelve months ending 30th June 1985, the sum of $3,000,000;
(iii) for the twelve months ending 30th June 1986, the sum of $2,000,000;
(iv) for the twelve months ending 30th June 1987, the sum of $1,000,000;
which the borrower is required to pay pursuant to clause 3 of the loan agreement and the definition of `principal sum' in Clause 1 of the loan agreement is varied accordingly...''
It is apparent that although executed on 14 December 1984 the supplemental agreement was to affect legal relations from 8 May 1984. Clause 2 provides that on giving specified notice of the amount and dates of drawdown ``and subject to the principal sum not being thereby exceeded'', Chase is to advance to A.B.S. such sums in stipulated units as A.B.S. requires from time to time. There are limits on the number of transactions ``and for this purpose each drawdown and each repayment shall constitute separate transactions regardless of whether the drawdown and repayment relate to the same advance''. Clause 2 then gives to A.B.S. the right to make repayment of principal at any time without penalty. Clause 3 provides that subject to the terms of the loan agreement, the revolving credit facility should terminate on 30 June 1987, when the current advance was to be repaid immediately; cl. 3 acknowledges that the principal might otherwise become repayable under the terms of the original loan agreement, presumably a reference to the default clause. Clause 4 varies the interest to the term prime rate of Chase without any margin. Clause 5 provides for an unused fee at a stipulated rate. Clause 8 preserves the original agreement and rights derived under it. By cl. 9, the guarantors gave their guarantees as principals.
7. Stamp duty of $31,971 was paid on the original agreement. Stamp duty of $10 was paid on the debenture which was stamped as collateral to the original loan agreement. On 13 March 1985 a notice of assessment pursuant to sec. 32 of the Stamps Act 1958 was issued by the Comptroller assessing duty on the supplemental agreement at $15,971. That assessment was made on the basis that the amount secured by the supplemental agreement was $4 million. That sum was paid and A.B.S. gave notice of objection on 14 May 1985. The notice of objection contained the bald assertions that the supplemental agreement is not a bond or covenant within the meaning of sec. 137D or a debenture within the meaning of sec. 137N. The respondent Comptroller disallowed the objection by notice dated 19 July 1985. At the request of A.B.S., the Comptroller referred her decision to this Tribunal pursuant to sec. 33B. Under sec. 33E this Tribunal must review her decision and may confirm, reduce, increase or vary the assessment.
8. Duty was charged pursuant to sec. 17 and Pt II, Div. 3, Subdiv. (17) and Heading XXII of the Third Schedule which relates to ``Mortgage Bond Debenture or Covenant''. Before this Tribunal there were three areas of controversy, namely, whether the supplemental agreement is:
- (1) a bond or covenant;
- (2) a debenture;
- (3) if yes to either (1) or (2), a collateral security.
Correspondence relating to the circumstances surrounding the negotiation, preparation and execution of the supplemental agreement was tendered by A.B.S. and, after some reflection, the Crown did not resist that tender. No other evidence was led, although A.B.S. had said, in its reg. 8 statement filed with this Tribunal, that it would lead oral evidence relating to the intention of the parties to the supplemental loan agreement when it was executed. I will endeavour to deal with each of the three issues in turn.
BOND OR COVENANT: DEED
9. The issue of whether the supplemental agreement is a bond or covenant was fought on
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one ground only: it was common ground that to be a bond or covenant, the supplemental agreement had to be a deed. The Crown says that it is; A.B.S. says that it is not. It follows that the Tribunal does not have to consider whether the supplemental agreement, if it is a deed, may satisfy the other requirements of a bond or covenant.10. There is no doubt on the evidence that A.B.S. (and the guarantors) intended to become bound by the supplemental agreement upon execution and that upon sealing by A.B.S. and the guarantors the document was forwarded unconditionally to Chase. The instrument is therefore a written instrument that has been sealed and delivered. It falls squarely within the standard definition of a deed: Norton on Deeds (2nd ed.) 3; 12 Halsbury (4th ed.) para. 1301. From the face of the document, the only reason for doubting that it is a deed arises from the fact that it is not so described - the word ``agreement'' is used; no point was taken that the word ``covenant'' is not used. At least in relation to instruments affecting land, the absence of the word ``deed'' would not be determinative since sec. 57 of the Property Law Act 1958 provides as follows:
``Any deed, whether or not being an indenture, may be described (at the commencement thereof or otherwise) as a deed simply, or as a conveyance, deed of exchange, settlement, mortgage, charge, transfer of mortgage, appointment, lease or otherwise according to the nature of the transaction intended to be effected.''
11. The authorities do however indicate that the mere affixing of a corporate seal to a document does not render it the deed of the corporation: whether or not such instrument is a deed depends upon the intention of the corporation creating it, which is to be discerned from the terms of the document and the circumstances of its execution:
Xenos v. Wickham (1866) L.R. 2 H.L. 296;
Mayor of Wellington v. Commr of Taxes (1931) G.L.R. 333;
Electricity Meter Manufacturing Co. Ltd. v. Manufacturers' Products Pty. Ltd. (1930) S.R. (N.S.W.) 422;
Rose & Anor v. Commr of Stamps (S.A.) 79 ATC 4499; (1979) 22 S.A.S.R. 84, and the paper, and subsequent discussion, Needham J. ``Deeds - Formalities'' (1985) 1 Aust. Bar. Rev. 3, 12. In Electricity Meter Manufacturing Co. Ltd. (above at pp. 425-426), Street C.J. for the Full Court said:
``It has been urged upon us that the instrument in question should be held to be a deed, but that is a proposition which in my opinion cannot be supported. It is true that, in addition to the signatures of those who signed on behalf of the contracting companies, something in the nature of a seal was impressed upon the paper, but that standing alone is not sufficient. The document is described as an agreement, and it does not purport to have been either sealed or delivered by the parties. In Xenos v. Wickham... Blackburn J. (as he then was) said...: `the mere affixing the seal does not render it a deed; but as soon as there are acts or words sufficient to show that it is intended by the party to be executed as his deed presently binding on him, it is sufficient.' Here there is no evidence of any acts or words of any kind to show that the document was intended to be executed as a deed. I think, therefore, that it must be held to be an agreement.''
On the other hand, authority may be found to support the following two propositions:
- (1) if a document on its face purports to have been signed sealed and delivered, the fair inference in the absence of other evidence is that it is in fact a deed: Xenos v. Wickham, above, at p. 322 (Lord Cranworth); Rose & Anor, above, at ATC p. 4502; S.A.S.R. p. 87 (Zelling J.);
- (2) the sealing of a deed by a corporation prima facie imports delivery by it:
Mayor etc. of Staple of England v. Bank of England (1887) 21 Q.B.D. 160 at p. 165 (Wills J.); Norton On Deeds, above, at p. 13; Needham J. above, at p. 7;
Hooker Industrial Developments Pty. Ltd. v. Trustees of the Christian Bros. (1977) 2 N.S.W.L.R. 109 at p. 119; compare
Mowatt v. Castle Steel and Iron Works Co. (1886) 34 Ch. D. 58 at p. 62 (Cotton L.J.).
12. There does appear to me to be an aura of unreality in an enquiry whether a company nowadays when it seals a contractual document intends that document to take effect as a deed. Lord Wilberforce apparently referred to ``this medieval doctrine'' of the requirements of a seal as ``Mumbo jumbo'' (Needham J., above, at p. 6); and sec. 80 of the Companies
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13. In reaching that conclusion, I have been heavily influenced by the fact that the first time the question of intention was raised was in the reg. 8 statement filed with this Tribunal, when A.B.S. said that it would call oral evidence of ``the intention of the parties'' to the supplemental agreement when it was executed. A.B.S. has declined to call any such evidence. Although as a matter of practicality I would not have been in the slightest surprised that no such evidence was available, A.B.S. has raised the issue and since the relevant evidence must be predominantly within its power, it must face all of the normal consequences that flow from a failure to adduce such evidence. On the other hand, I have not taken into account the onus provisions of sec. 33C(1)(b) since, whatever else may be the proper effect of that provision on the authorities, there is great difficulty in applying it in the present circumstances where the documents leading to this reference do not, until the last moment, disclose anything other than the baldest assertions of mixed fact and law and do not contain any explicit reference to the matter of intention: as to the relationships between the evidential burden and statutory onus, see the remarks of Hunt J. in
Apollo Shower Screens Pty. Ltd. v. Building & Construction Industry Long Service Payments Corporation (1985) 1 N.S.W.L.R. 561 at pp. 564-566. Nor have I accepted the arguments of the Crown deriving from the provisions of sec. 74 of the Property Law Act and the decision of Tadgell J. in
Ansett Transport Industries (Operations) Pty. Ltd. v. Comptroller of Stamps (Vic.) 84 ATC 4103, since in my view that statutory provision and that authority relate to different questions. Finally, two matters may be noted about the Electricity Meter Manufacturing case and Rose & Anor. First, although the reporting of those cases is a little unsatisfactory, it does appear that in the former case the document did not purport to have been either sealed or delivered by the parties and that in the latter case there was in fact no sealing or delivery at all. Secondly, in neither case does reference appear to have been made to
Southampton C.C. v. I.R. Commrs (1905) 92 L.T. 364 at p. 369 where Phillimore J., in the context of a corporation having to execute a contract under seal, said, after some apparent hesitation, ``that every contract under seal by a corporate body is thereby a deed''.
14. Accordingly, since on the material before the Tribunal I find that A.B.S. intended the supplemental agreement to take effect as a deed, and since this was the only issue raised on this point, I find that the supplemental agreement took effect as a bond or covenant.
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DEBENTURE
15. Debentures are not at all like elephants. Although most people cannot define an elephant, they know one when they see one. But with debentures, not only can no one define one, but there is frequently uncertainty about identifying a document as a debenture when it turns up. The problem is, I think, evidenced from the history of the litigation which culminated in the decision of the High Court in
Handevel Pty. Ltd. v. Comptroller of Stamps (Vic.) 85 ATC 4706; (1986) 60 A.L.J.R. 40. In
Knightsbridge Estates Trust Ltd. v. Byrne (1940) A.C. 613 at p. 630 Lord Romer 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.''
It was this last proposition of Lord Romer that the majority of the High Court in substance declined to follow in Handevel, although they recognised (at ATC pp. 4715-4716; A.L.J.R. p. 47) that English judges of great authority have confessed that the term ``debenture'' defies accurate definition.
16. The definition of debenture considered by the High Court in Handevel was that contained in the Companies Act 1961 as follows:
```Debenture' includes debenture stock, bonds, notes and any other securities of a corporation whether constituting a charge on the assets of the corporation or not.''
The definition has been changed by the Stamps (Further Amendment) Act 1981 so that the definition in para. (c) of sec. 137N is now as follows:
```debenture' includes debenture stock, bonds, notes and any other document evidencing or acknowledging indebtedness of a corporation in respect of money that is or may be deposited with or lent to the corporation, whether constituting a charge on property of the corporation or not, but does not include...''
Of the six enumerated exceptions, the only one presently relevant is subpara. (v) by which the term debenture does not include:
``(v) a document, not being an acknowledgement of indebtedness of a corporation in respect of money that is deposited with or lent to the corporation, that does not create indebtedness...''
It will be apparent that the new definition, for relevant purposes, is based on that of the old companies legislation with at least three substantial differences. First, it omits the previously troublesome phrase ``any other securities of a corporation'' (as appears to be the case with the present definition of ``debenture'' in the Companies (Victoria) Code). Secondly, the definition raises to primacy part at least of the established common law criterion of a debenture, namely, that it is a document which acknowledges a debt (see Handevel at ATC pp. 4715-4716; A.L.J.R. p. 47). Thirdly, the definition is qualified, if that is the word, by subpara. (v), the effect of which may have to be considered.
17. A.B.S. says that the supplemental agreement is not dutiable as a debenture because it does not acknowledge or create any indebtedness. A.B.S. submits that the debt acknowledged must be a present debt of a fixed amount or maximum possible amount. Some support for those propositions may be found in
Broad v. Commr of Stamp Duties (N.S.W) 80 ATC 4578 at pp. 4586-4587; (1980) 2 N.S.W.L.R. 40 at pp. 51-52 (referred to by the majority without comment in Handevel at ATC pp. 4715-4716; A.L.J.R. p. 47) and
Burns Philp Trustee Co. Ltd. v. Commr of Stamp Duties (N.S.W.) 83 ATC 4477 at p. 4479 (referred to with comments by the majority in Handevel at ATC pp. 4715-4716; A.L.J.R. p. 47); and compare
Slavenburg's Bank v. Intercontinental Ltd. (1980) 1 W.L.R. 1076 at pp. 1099-1100. These propositions were associated with an argument about dutiability premised on the decision of the High Court in
Commercial Banking Co. of Sydney Ltd. v. Love (1975) 133 C.L.R. 459. There are serious problems facing these propositions in the
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Victorian context, given the reference in the present definition of ``debenture'' to ``money that is or may be deposited with or lent to the corporation'' and to the provisions of sec. 137F (considered by Anderson J. inHome v. Walsh (1978) V.R. 688 at pp. 692-694); see also the reference to ``any definite and certain sum of money'' in the definition of ``Mortgage'' in sec. 137D(1). A.B.S. submitted that the statutory definition of ``debenture'' is now exhaustive. Counsel for the Comptroller was not prepared to commit himself on this point, in the absence of specific instructions, but he pointed to some problems in arriving at the result that the definition is exhaustive. It is sufficient to note that the definition before the Court in Broad v. Commr of Stamp Duties (N.S.W.), above, which was similar to the companies legislation definition, was held not to be exhaustive and that the High Court observed in Handevel (at ATC pp. 4715-4716; A.L.J.R. p. 47) that under that kind of definition, not every document creating or acknowledging a debt is a debenture. There may, I think, be significant problems at either end, depending on the resolution of this question.
18. A.B.S. placed great reliance on subpara. (v). That provision, if I may say so, has some of the appearance of and a number of the problems associated with an afterthought, although I should say that neither side sought to refer the Tribunal to the Parliamentary history of this provision. In form a treble negative, it is doubly evocative of the remark about the revocability of dispensations from above. It will be seen that subpara. (v) reinforces an apparent distinction between evidencing indebtedness and acknowledging indebtedness: see Broad v. Commr of Stamp Duties (N.S.W.), above, at ATC pp. 4585-4586; N.S.W.L.R. p. 50; and as to the possible width of ``acknowledgement of debt'' compare
Corporate Affairs Commission v. David Jones Finance Ltd. (1975) 2 N.S.W.L.R. 710 at pp. 714-715 and
Stage Club Ltd. v. Millers Hotels Pty. Ltd. (1981) 150 C.L.R. 535, in which the High Court held that a corporate balance sheet may constitute sufficient acknowledgement of a debt for the purposes of the Statute of Limitations. Subparagraph (v) does not in its own terms have the same capacity to refer to possible future indebtedness as the primary part of the definition. Subparagraph (v) also introduces, for the first time in as many words in this definition, the notion of the creation of indebtedness: compare Handevel at ATC pp. 4715-4718; A.L.J.R. pp. 47 and 48-49. Subparagraph (v) introduces problems for future debts, since there is an inherent difficulty in evidencing or acknowledging something that does not exist, and since not every instrument that most businessmen would call a debenture creates indebtedness, in the sense that a debt must arise by virtue of the execution of the obligations imposed on the person giving the instrument to borrow money from the person taking the instrument.
19. In the result, I do not think that I have to try to resolve any of these problems, which appear to me to involve no little difficulty. Whatever else may be said of the present definition, it is clear that on its own terms there is an unconfined residuum of a document that constitutes an acknowledgement of indebtedness of a corporation in respect of money lent to that corporation (as there has long been at common law), and in my view on the plain meaning of the supplemental agreement, it does just that. The terms of the supplemental agreement (para. 6 above) define the principal sum as $4 million for the period 8 May 1984 to 30 June 1984 and $3 million for the next 12 months. It follows that upon execution of the supplemental agreement on 14 December 1984, A.B.S. acknowledged that as at that date the principal owing to Chase was $3 million and as at 8 May 1984 was $4 million. The supplemental agreement has to be read with the original agreement, as A.B.S. freely conceded. In the end, A.B.S. said that the possibility of prepayments having been made under the original loan agreement prevented the supplemental agreement from being construed as a certain acknowledgement of a fixed debt. It would not matter how unlikely I may think would be the possibility of such carefully prepared documents not recording prior movements. The fact is that the supplemental agreement does state and acknowledge, rightly or wrongly, indebtedness in fixed sums before and at the date of its execution. If that is right, the document comes within even the narrowest view of the definition of debenture. There may, I think, be difficulty in characterising the document as creating obligations, since the primary obligations as to principal derive from the original agreement and obligations in
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respect of drawdowns or payment of the unused fee would be contingent on the course of subsequent events; compareKnights Deep Ltd. v. I.R. Commrs (1900) 1 Q.B. 217. It may, I think, be said that under the supplemental agreement, A.B.S. was obliged to pay the unused fee except to the extent that it availed itself of the drawdown facility, but I do not know that this could be described as the creation of an obligation and it is a matter which I do not think I have to determine.
20. It follows that since I regard the supplemental agreement as an acknowledgement of indebtedness by A.B.S., it is in my view a debenture within the terms of the present definition, whatever else may be held to be the proper construction of that definition.
COLLATERAL SECURITY
21. A.B.S. says that the supplemental agreement is a collateral security for the same moneys as are secured by the original loan agreement within the terms of sec. 137I(1) and the definition of ``collateral security'' in sec. 137D(1). Section 137I(1) is as follows:
``Where there are one or more instruments of collateral security for the same moneys as are secured by a primary mortgage bond debenture or covenant such instruments shall not be liable for stamp duty under this subdivision if the primary mortgage, bond, debenture or covenant is duly stamped.''
The relevant provisions of sec. 137D(1) are as follows:
```Collateral security' includes any debenture issued under or pursuant to an instrument of mortgage or trust which has been duly stamped and any auxiliary additional or substituted security.''
22. The requirements of sec. 137I(1) can be broken down as follows. There must be:
- (1) one or more instruments;
- (2) that are collateral;
- (3) that are securities;
- (4) for the same moneys secured;
- (5) by a primary mortgage bond debenture or covenant;
- (6) which primary instrument is duly stamped.
23. On the assumption that the supplemental agreement is otherwise dutiable and that the original loan agreement was duly stamped under Subdiv. (17), condition (1) is plainly met. Conditions (5) and (6) are also met, although the provisions of sec. 137D(4) preclude A.B.S. from asserting that the debenture should be regarded as the primary instrument. What is entailed by the notion of ``primary security'' was considered by the High Court in
C.B.C. v. Love (1975) 133 C.L.R. 459 and by Tadgell J. in Stardawn Investments Pty. Ltd. v. Comptroller of Stamps (Vic.) 84 ATC 4097.
24. Another question is whether the supplemental agreement is a ``security'' within the meaning of the section (condition (3)). In Handevel at ATC p. 4716; A.L.J.R. pp. 47-48 the majority said:
``The word `security' is susceptible of more than one meaning. It may mean a debt or claim, the payment of which is in some way secured, either by a right to resort to some fund or property for payment or by a guarantee (
Singer v. Williams (1921) 1 A.C. 41 at p. 49); or it may mean an instrument which creates or acknowledges an obligation to pay a sum of money, even though it is the original source of the obligation and the obligation is executory (
Independent Television Authority and Associated Rediffusion Ltd. v. I.R. Commrs (1961) A.C. 427; Ansbacher, at pp. 207-208). Kitto J. described the first of these meanings as the primary meaning (
Y.Z. Finance Co. Pty. Ltd. v. Cummings (1963-1964) 109 C.L.R. 395 at p. 403). In Independent Television Authority and Ansbacher it was held that `security' bore the second of these two meanings in the First Schedule to the Stamp Act 1891 (U.K.), although in Ansbacher (at p. 205) it was considered that an agreement for the sale and purchase of shares in a company did not fall within the words `Mortgage, Bond, Debenture, Covenant' in the First Schedule to the 1891 Act.''
The English cases there referred to and
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Jones v. I.R. Commrs (1895) 1 Q.B. 484 have been considered in
Neon Signs (Aust.) Ltd. v. Comptroller of Stamps (1963) W.A.R. 167;
Electronic Industries Ltd. v. Comptroller of Stamps (1971) V.R. 195 at p. 198; Rose & Anor
25. That leaves two questions, whether the instrument is collateral (condition (3)) and whether it is for the same moneys secured (condition (4)). The notion of what might be collateral was considered by Tadgell J. in Stardawn Investments, above. His Honour remarked (at ATC p. 4100) that the definition of ``collateral security'' in sec. 137D(1) afforded little assistance. His Honour went on to say:
``The purpose appears to be to exempt from ad valorem duty under Subdiv. (17) any instrument which would otherwise be dutiable thereunder if its effect is to provide collateral security for the same moneys as are secured by a primary instrument which is duly stamped.
... A thing is collateral to another if it exists side by side with the other. No necessary notion of the primacy of one over the other is involved in collaterality by itself. But the subsection by its terms does cast some light on the meaning of a `collateral security' by using the expression, as it appears to me, in contradistinction to a `primary mortgage, bond, debenture or covenant'. In that context it has, in my judgment, a meaning of an auxiliary security or, perhaps, one which is accessory to another. Sometimes, no doubt, it is very easy to see that one security collateral to another is merely auxiliary to the other for the purpose of providing security for the same debt. Sometimes it may be much more difficult to draw that conclusion and sometimes, I should think, it would not be possible to do it. If it were not possible to do it then sec. 137I(1) would not apply.''
The definition of ``collateral security'' in sec. 137D(1) appears to derive from the relevant provisions of the English Stamp Act 1891, which refer to any mortgage, bond, debenture or covenant being ``a collateral or auxiliary, or additional, or substituted security...'': see Sergeant and Sims on Stamp Duties (7th ed.) 165;
I.R. Commrs v. Ansbacher (1963) A.C. 191. The supplemental agreement is, if nothing else, a supplemental agreement. It supplements the original loan agreement. It operates in conjunction with the original loan agreement and exists side by side with it. In my view it is clearly collateral to the original agreement within the terms of the section. Whether or not the supplemental agreement may be characterised as an ``auxiliary additional or substituted security'' within the terms of the definition in sec. 137D(1), it is in my view collateral within the ordinary meaning of that word in sec. 137I. I do not think that the Crown strenuously challenged this result. If the result is that, at least in this context, the term ``collateral security'' in sec. 137I(1) has a meaning that would be strange to a businessman, the problem does, I think, lie with the meaning of the word ``security'', rather than the word ``collateral''. But the meaning of security in this context does I think have some bearing on the meaning of the entire collocation of ``collateral security for the same moneys''.
26. There is an inherent difficulty in regarding as ``the same moneys'', ``moneys'' which are exchanged, presumably by bill of exchange or book entry, by being borrowed, repaid and borrowed again. At a purely literal level the problem is, I think, insuperable. The Crown says that when you look at the supplemental agreement, A.B.S. is obliged to repay the principal sum due from time to time before it can drawdown on the new facility and that therefore any further borrowing will be of different moneys. The Crown says that as at 8 May 1984, $4 million was owing as the principal sum under the original agreement. Clause 2 of the supplemental agreement limits the obligation of Chase to advance moneys by saying that the principal sum is not to be exceeded. As at 8 May 1984, A.B.S. could not have called for an advance unless it had paid part of the principal. The Crown says that that process continues throughout the duration of the life of the supplemental agreement so that at
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no time could A.B.S. require an advance until the principal sum due at the relevant time under the original loan agreement had been repaid. The Crown says that it follows that any further advance by Chase must be pursuant to a new facility constituted by the supplemental agreement, or, in other words, be an advance of different moneys. As I followed the argument, A.B.S. did not so much contest this analysis of the working of the supplemental agreement as argue that if it is right, the supplemental agreement creates an obligation to pay the current advance which is and always will be nil, with the result that the document is not dutiable in itself. I must confess that at times during this part of the argument I experienced the same mixed feelings of awe and wonderment that affect some people on first being presented with Descartes' ontological argument for the existence of God and others on first hearing Kant's celebrated refutation of that argument.27. A.B.S. also said that a very narrow construction of the phrase ``the same moneys as are secured'' would cause problems with the ordinary bank overdraft. If on 1 January a customer of a bank gives a mortgage to secure an overdraft of $100, and if on 1 February the overdraft has gone to $200, and he gives a further mortgage to secure the overdraft, then if a narrow analysis of ``security for the same moneys'' is persisted in, the second mortgage has been given for different moneys, and a different ``debt'', and could not be collateral within the meaning of sec. 137I(1). It may be that some assistance may be derived from learning like that associated with running accounts (as in
Pioneer Concrete (Vic.) Pty. Ltd. v. Grollo & Co. Pty. Ltd. (1973) V.R. 473) but in my view, that reasoning would result in the introduction into the Act of a level of unreality rarely reached before.
28. The argument does, I think, show the difficulties in trying to apply too literal a meaning to the words of the section and the danger of confusing ``indebtedness'' with a narrow or technical notion of ``debt''. It also shows the danger inherent in breaking down the section into its constituent parts for the purposes of analysis, as has been done above. There is always a danger in taking a compound phrase and considering its component parts in isolation:
Lloyd v. F.C. of T. (1955) 93 C.L.R. 645 at pp. 660, 667. The Crown said that the phrase ``same moneys'' means ``the same debt''. A.B.S. says that it means ``the same amount secured''. I have some difficulty in accepting either transcription in its terms. The word ``indebtedness'' was not introduced into sec. 137I although it now recurs through the present definition of ``debenture''. On the other hand, it is impossible to ignore that in Heading XXII the phrase used is ``amount secured'' and that in sec. 137F(2)(a) the phrase used is ``the amount covered''. But in the context of this particular legislation, I do not think that the fact that there are different phrases used for what would otherwise appear to be similar concepts requires me to depart from what would otherwise appear to be a sensible construction. Speaking entirely for myself, I think that judicial warnings as to the idiosyncrasies in drafting, and the difficulty in finding any pattern, in this legislation have been too august and too frequent to ignore.
29. A banker may advance money by way of loan or overdraft, although as a matter of law an overdraft is simply money lent: Paget's Law of Banking (9th ed.) 115, 399. It must be borne steadily in mind that the issue in this case relating to ``collateral securities'' arises in the context of one ``security'', the original loan agreement, being varied by a later ``security'', the supplemental agreement. It must also in my opinion be remembered that the supplemental agreement, if otherwise dutiable under Subdiv. (17), is dutiable because of its connection with and derivation from the terms of the original loan agreement; and for these purposes I do not think that this characterisation would be altered by a finding that the supplemental agreement ``created'' obligations in the relevant sense. In its simplest terms, the transaction between Chase and A.B.S. began as a loan and finished as an overdraft. When Chase gave the original loan, it extended credit to A.B.S. When the agreement was varied, the parties stayed within the limits of that credit. The stream as diverted was prevented from rising higher than its source. A.B.S. paid duty on the original instrument of loan on the basis that it secured $8 million. On the changeover, another assessment was issued for the maximum liability then outstanding. But as I follow the documents, the maximum liability of A.B.S. to Chase has descended constantly pursuant to the terms of the original loan. The source of that liability continues to derive from the original
ATC 2029
agreement, although some of its incidents have been altered by the supplemental agreement. As I read the documents, the revolving facility was like a revolving door. Although of a diminishing circumference, it operated within the same area previously occupied by the sliding door constituted by the original agreement. The two doors have a similar function, although they use different means. To my mind it is immaterial that different quantities of matter may from time to time pass between the opening provided that the ambit of that opening remains within that originally created. In my view, the constancy of the source of the liability imposed by the original loan agreement produces the result that the supplemental agreement secures the same moneys as the original agreement and is sufficient to bring the supplemental agreement within the terms ``security for the same moneys'' in sec. 137I. In my view the supplemental agreement is within the plain purpose and reasonable meaning of the section. I do not think that the words of this exempting provision should be meanly construed; the definition of ``collateral security'' in sec. 137D(1) can I think properly be described as expansive; and there is a long line of authority for the proposition that a liberal construction should be given to words of exemption from tax:Warrington v. Furbor (1807) 8 East 241; 103 E.R. 334;
Armytage v. Wilkinson (1878) 3 App. Cas. 355 at p. 370;
Burt v. C. of T. (1912) 15 C.L.R. 469 at p. 487; Lloyd v. F.C. of T., above at p. 665. In Warrington v. Furbor, the question was whether a written guarantee for the payment of goods came within an exception to the Stamp Acts as ``a contract for or relating to the sale of any goods''. Having stated the question, Lord Ellenborough said (at 103 E.R. pp. 335-336):
``And I think that where the subject is to be charged with a duty, the cases in which it is to attach ought to be fairly marked out; and we should give a liberal construction to the words of exception, confining the duty.''
Although the immediate problem derives more from a consideration of the implementation of the supplemental agreement than from a consideration of its interpretation, in the end the question becomes one of the interpretation of the legislation; and although I am wary of putting any gloss at all on the relevant parts of sec. 137I, I am clearly of the view that it should be made to work effectively and that adherence to a strict literal interpretation of the phrase ``security for the same moneys'' would produce the opposite effect in this case and may lead to trouble in other cases.
30. Accordingly, in my view the supplemental agreement is not liable for stamp duty under Subdiv. (17) because of the operation of sec. 137I. Although I have considered the question primarily on the footing that the supplemental agreement is for relevant purposes a debenture, the same result does I think follow when it is regarded as a bond or covenant; some may take the view that such a case is a fortiori. It follows that in my view the assessment should be varied. No argument was addressed against the proposition that if sec. 137I applied, no duty at all should be paid, but if there is some duty payable (as was paid on the debenture), the Comptroller may raise that matter when the subject of costs is discussed.
31. For the reasons given, the decision of the Tribunal is:
- (1) that the assessment under reference be varied by being reduced to nil;
- (2) that the application be adjourned for further hearing as to the question of the costs of the reference and for the determination of what if any stamp duty may be payable on the supplemental agreement in light of this decision of this Tribunal.
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