Wilcox Mofflin Limited v. Commissioner of Stamp Duties (N.S.W.)

Judges:
Meares J

Court:
Supreme Court of New South Wales

Judgment date: Judgment handed down 16 May 1978.

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Meares J.: On or about 27th December, 1974, there was a merger between the plaintiff and Colyer N.Z.T. Pty. Limited. The plaintiff on that day borrowed some $3,000,000 from the Bank of New South Wales for the purpose of effecting the merger, which sum was paid on its behalf to another bank.

On 31st December, 1974, the plaintiff, by deed (hereinafter called the equitable mortgage) made between it and the Bank of

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New South Wales, charged all its undertaking and assets, both present and future, including its uncalled capital for the time being, with the payment to the bank of all moneys then or thereafter to become owing or payable to the bank by the plaintiff. The plaintiff undertook, by cl. 2(j), to execute in favour of the bank such legal mortgages, transfers, assignments or other assurances of all or any part of the mortgaged premises in such form and containing such powers and provisions as the bank shall require, and by cl. 2(1) that it would lodge with it all deeds and documents of title relating to any real and/or leasehold or other personal property from time to time acquired by the plaintiff. By cl. 3(i) it was agreed and declared ``that the charge hereby created shall operate as a fixed charge as regards all real and leasehold property, uncalled capital'' etcetera, and by cl. 3(iii) that at any time after the moneys secured by the deed became payable, the bank could appoint a receiver of the mortgage premises or any part thereof. By cl. 3(xvi) the plaintiff irrevocably appointed representatives of the bank as its attorneys in respect of all acts and things under the deed to be done by the plaintiff.

By deed of mortgage over common law and Crown lands tenures, dated 11th February, 1975, the plaintiff appointed and conveyed to the bank various lands particularised in the schedule for the purpose of securing to the bank such advances and accommodation which the bank had already granted or had agreed to grant from time to time to the plaintiff. The lands set forth in the schedule to this deed are situated in New South Wales, but by deeds executed on 12th February, 1975, and 4th March, 1975, the plaintiff similarly conveyed to the bank lands in the same fashion for the same purposes situated in Queensland and Tasmania respectively but no question arises as to the two deeds last mentioned.

Until the Stamp Duties Amendment Act, No. 110 of 1974, which came into force on 1st January, 1975, there was no loan security duty payable to the Commissioner of Stamp Duties under the Stamp Duties Act, 1920, but by such amending Act the second schedule of the principal Act was amended, providing for the payment of ad valorem duty on all loan securities where the maximum amount repayable exceeded $15,000 and sec. 84B(2) provided as follows:

``Any loan security which is a collateral security for the same moneys as are secured by a primary loan security shall, unless the primary loan security or any other collateral security for the same moneys as are secured by that primary loan security is duly stamped, be liable to duty, as duty on a loan security, as if it were the primary loan security and the primary loan security had been executed when the collateral security was executed.''

The defendant assessed duty on the mortgage of the New South Wales loans at $12,521 pursuant to the provisions of sec. 83 and under the heading ``Loan Security'' in the second schedule on the basis that the amount of advances and accommodation made by the bank to the plaintiff and secured by the deed of 31st December, 1974, was $3,144,000, that the deed of 31st December, 1974, had not been duly stamped and that, accordingly, the subsequent New South Wales mortgage was liable as if it were the primary loan security and that such security had been executed when the collateral security was executed. It was not disputed by the defendant that the New South Wales mortgage was a collateral and not a primary loan security within the meaning of the Act, but the question was somewhat complicated by the fact that the deed of 31st December, 1974, was, on 13th January, 1975, presented to the defendant who stamped it with a stamp denoting the payment of $6.

This is a case stated by the Commissioner at the request of the plaintiff pursuant to sec. 124(1) of the Act for the determination of the following questions:

``(a) Whether the Deed of Equitable Mortgage dated 31 December, 1974, is exempted from stamp duty.

(b) If the answer to the preceding question is in the negative whether the duty properly assessable in respect of the said Deed of Equitable Mortgage is -

• (i) $6.00;
• (ii) $12,521.00; or
• (iii) some other and if so, what amount.

(c) Whether the said Deed of Equitable Mortgage is duly stamped for the purposes of sec. 84B(2) of the said Act.

(d) If the answer to the preceding question is in the negative whether the duty properly assessable in respect of the Deed of Mortgage dated 11 February, 1975, is -

• (i) the sum of $6.00;

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• (ii) the sum of $12,521.00; or
• (iii) some other and if so, what amount.

(e) By whom should the costs of this Stated Case be paid.''

Mr. D.G. Hill of counsel, for the plaintiff, in a careful argument first submitted that the equitable charge, having been stamped, was conclusively deemed to have been properly stamped, and that accordingly sec. 84B(2) did not operate.

Section 124A(1) provides that:

``Production of any assessment or of any document under the hand of the Commissioner purporting to be a copy of an assessment shall -

• (a) be conclusive evidence of the due making of the assessment; and
• (b) be conclusive evidence that the amount and all particulars of the assessment are correct, except in proceedings on appeal against the assessment or in proceedings in a court under section 140 of this Act when it shall be prima facie evidence only.''

Mr. Hill submitted that ``assessment'' within the meaning of this subsection was merely a process of calculation; that, to give the subsection any commonsense meaning, primarily the ``production of any assessment'' is any document stamped and the assessment is the total process of arriving at the result of putting a stamp on, but I am unable to accept this submission. The subsection undoubtedly presents problems in that there is no definition in the Act of the word ``assessment''; but, as Mr. Toomey for the defendant pointed out, the subsection uses the word ``assessment'' and the word ``stamp'' cannot be substituted for it. The subsection envisages, I think, an assessment as being primarily a document rather than a process of calculation in that it speaks of ``production of any assessment or of any document under the hand of the Commissioner purporting to be a copy of an assessment''. The provision as to a copy was intended to provide for the case, inter alia, of the original document having been mislaid or destroyed. The Commissioner's practice, as I was informed, was that if an assessment is called for it is given, and that in respect of deeds left for assessment, the Commissioner writes a pro forma letter saying ``The duty is assessed at'' so much but the fact that in many cases where duty has been assessed there will be no written assessment is, it seems to me, beside the point and in the absence of the production of an assessment the subsection simply does not operate.

The plaintiff further submitted that the equitable charge was ``duly stamped'' within the meaning of sec. 84B(2) and on the ground that it was exempt from stamp duty relied on the following extract from the judgment of the House of Lords delivered by Lord Morris of Borth-y-Gest in
I.R. Commrs. v. Henry Ansbacher & Co. (1963) A.C. 191 at pp. 209-210:

``The second question for the opinion of the court, if the answer to the first was in the negative, was as to the amount of duty with which the guarantee is chargeable. My Lords, the guarantee was not only within the words of the `Mortgage, Bond', etc., heading, but was also within the words `being a collateral, or auxiliary, or additional, or substituted security (other than an equitable mortgage), or by way of further assurance for the abovementioned purpose where the principal or primary security is duly stamped'. A security may be `duly stamped' within the meaning of these words either if it has actually borne the correct amount of stamp duty that it attracts or if it is exempt from stamp duty.''

If ``duly stamped'' covered only instruments in fact liable to duty, the consequence would be, it was submitted, that a substantial proportion of documents not liable to duty and consequently not stamped would be inadmissible in evidence in civil proceedings by virtue of sec. 29, the first part of which provides:

``Except as aforesaid, no instrument executed in New South Wales or relating (wheresoever executed) to any property situate or to any matter or thing done or to be done in any part of New South Wales, shall, except in criminal proceedings, be pleaded or given in evidence, or admitted to be good, useful, or available in law or equity for any purpose whatsoever, unless it is duly stamped in accordance with the law in force at the time when it was first executed.''

But I think sec. 29 is implicitly referring only to documents liable to stamp duty and there are differences moreover between the 1891 English Act being considered by the House of Lords in Ansbacher's case (supra) and the New South Wales Stamp Duties Act.

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Turning to the New South Wales Act, sec. 35 differentiates between an instrument not liable to duty which may be so stamped (sec. 35(a)), and one liable to duty which the Commissioner is required to stamp with a particular stamp denoting the amount of duty and that it is ``duly stamped'' (sec. 35(b)), and by sec. 37(1) a distinction is drawn between a stamp denoting that an instrument is not liable to duty and one denoting that the instrument is duly stamped; sec. 38A, moreover, empowers the Commissioner to require the production of an instrument which he has reason to believe has not been ``duly stamped''; and, finally, ``duly stamped'' by definition in sec. 3 means ``stamped in accordance with this Act and the regulations''. In my opinion the expression ``duly stamped in accordance with the Act'' in sec. 29 refers not to documents not needing to be stamped but to those referred to in sec. 35(b).

The plaintiff thirdly submitted that the equitable mortgage was duly stamped under the second schedule with the rate prescribed under that schedule as a ``deed of any kind whatever not otherwise charged in this schedule'' and that it was not, as the defendant maintained, exempt from stamp duty and, accordingly, stamped in error.

The defendant's argument depended upon whether or not the equitable charge was a mortgage as defined by sec. 83 of the Stamp Duties Act prior to Act No. 110 of 1974 as a security by way of mortgage:

``(a) for the payment of any definite and certain sum of money advanced or lent at the time or previously due or owing or forborne to be paid, being payable; or

(b) for the repayment of money to be thereafter lent, advanced or paid, or which may become due upon an account current together with any sum already advanced or due, or without, as the case may be.''

Since the last-mentioned amendment, the former definition of ``mortgage'' in sec. 83 is contained in the definition section with the addition of the words ``or charge'' after the words ``means of security by way of mortgage'' and the further definition in sec. 83(1). By the amended sec. 83 ``mortgage'' includes, without limiting the meaning of that expression in sec. 3(1) of the Act:

``(a) a security by way of mortgage or charge given in consideration of the conveyance or transfer of any estate or interest in any real or personal property;

...

(d) any agreement, contract or covenant (being an agreement, contract or covenant relating to documents of title or accompanied with the deposit of any documents of title or instruments creating a charge on any property) for making a mortgage or any such other security, transfer or conveyance of any estate or interest in real or personal property whatsoever comprised in such documents, or for pledging or charging any such property as a security.''

It was basically submitted on the plaintiff's part that prior to the amendment ``mortgage'' in sec. 83 referred to the classic legal mortgage known to English law involving a total divesting by the mortgagor of what property rights he has and a transfer of such rights to the mortgagee. It was submitted on the other hand, on behalf of the defendant, that a mortgage under the Act prior to its amendment encompassed not only legal mortgages stricto sensu but all legal and equitable mortgages if the definition of mortgage in sec. 3 of the Real Property Act, 1900 is ``any charge on land created merely for securing a debt''.

In
London County and Westminster Bank Limited v. Tompkins (1918) 1 K.B. 515, the question for determination was as to whether a document was a mortgage within the meaning of sec. 1(4) of the Increase of Rent and Mortgage Interest (War Restrictions) Act, 1915 which by sec. 2(4) provided that the Act shall not apply ``(b) to an equitable charge by deposit of title deeds or otherwise''. I respectfully agree with the statement of Pickford L.J., in his judgment at p. 522 that:

``Mortgage is used in different meanings in different places, e.g., the wide definition in the Conveyancing Act, 1881, and the narrower meaning sometimes attributed to it of a legal mortgage conveying the legal estate; and equitable charge is not always used in the same sense.''

and of Scrutton L.J. (who at p. 528 said):

``It is not easy to find any judicial distinction of mortgages legal and equitable and equitable charges''

and who after looking at the classification of mortgages in Fisher on Mortgages observed:

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``But though this is the text-book classification, in which legal mortgages are distinguished from equitable mortgages and charges by the fact that in the latter case the aid of the Court is required to get the property or its possession, equity judges appear to use the terms with no such precise distinction.''

In considering the proper approach to the interpretation of this word used in the Stamp Duties Act, which of course is a taxing Act, I adopt the oft-quoted words of Lord Russell of Killowen in
I.R. Commrs. v. Westminster (Duke) (1936) A.C. 1 at pp. 24-25:

``I confess that I view with disfavour the doctrine that in taxation cases the subject is to be taxed if, in accordance with a Court's views of what it considers the substance of the transaction, the Court thinks that the case falls within the contemplation or spirit of the statute. The subject is not taxable by inference or by analogy, but only by the plain words of a statute applicable to the facts and circumstances of his case. As Lord Cairns said many years ago in
Partington v. Attorney-General (1869) L.R. 4 H.L. 100 at 122. `As I understand the principle of all fiscal legislation it is this: If the person sought to be taxed comes within the letter of the law he must be taxed, however great the hardship may appear to the judicial mind to be. On the other hand, if the Crown, seeking to recover the tax, cannot bring the subject within the letter of the law, the subject is free, however apparently within the spirit of the law the case might otherwise appear to be'.''

A further question, however, is as to whether one, in considering the former sec. 83 definition, can look to the amendments of that definition in Act No. 110 of 1974 above set forth. In
D.F.C. of T. (S.A.) v. Elder's Trustee and Executor Co. Limited (1937) 57 C.L.R. 610, the following passage appears from the joint judgment of Dixon, Evatt and McTiernan JJ. at pp. 625-626:

``An Act of Parliament does not alter the law by merely betraying an erroneous opinion of it' (Maxwell, Interpretation of Statutes, 6th ed. (1920) p. 544, and, per Lord
Atkinson, Ormond Investment Co. v. Betts (1928) A.C. 143 at p. 164). `Where the interpretation of a statute is obscure or ambiguous, or readily capable of more than one interpretation, light may be thrown on the true view to be taken of it by the aim and provisions of a subsequent statute' (per Lord Atkinson (supra)). In
Cape Brandy Syndicate v. I.R. Commrs. (1921) 2 K.B. 403 at p. 414. Lord Sterndale said: `I quite agree that subsequent legislation, if it proceed upon an erroneous construction of previous legislation, cannot alter that previous legislation; but if there be any ambiguity in the earlier legislation, then the subsequent legislation may fix the proper interpretation which is to be put upon the earlier'. In reference to this statement, Lord Buckmaster said in Ormond Investment Co. v. Betts (supra): `That is, in my opinion, an accurate expression of the law, if by `any ambiguity' is meant a phrase fairly and equally open to divers meanings'. But it is not permissible to construe an unambiguous phrase in an earlier Act by an erroneous assumption of its effect contained in a later Act which did not purport to alter or amend the earlier Act (per Lawrence L.J.,
Port of London Authority v. Canvey Island Commissioners (1932) 1 Ch. 446 at p. 493).''

See also
Leveridge v. McCann (1951) N.Z.L.R. 855.

Mr. Hill referred me to the dictum of Sir Nathaniel Lindley, as he then was, in
Santley v. Wilde (1899) 2 Ch. 474 that:

``A mortgage is a conveyance of land or an assignment of chattels as a security for the payment of a debt or the discharge of some other obligation for which it is given. This is the idea of a mortgage: and the security is redeemable on the payment or discharge of such debt or obligation, any provision to the contrary notwithstanding. That, in my opinion, is the law.''

This dictum was followed by the Earl of Halsbury in
Noakes and Company Limited v. Rice (1902) A.C. 24 in the undermentioned passage in his judgment at pp. 27-28:

``It is to my mind a very remarkable corroboration of the criticism which I am now making that in that case, upon which doubt appears to have been thrown, namely that of Santley v. Wilde (supra), my noble and learned friend Lord Lindley's judgment is in these terms - and I do not know that there has been a more authoritative exposition of the rule which arises now than what my noble and learned friend there laid down''

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and he then sets forth the abovementioned passage.

In
Cavendish v. Cavendish 30 Ch. 227, Cotton L.J., in considering what a testator meant by a specific bequest of all moneys etc. except mortgages on real and leasehold security, said at p. 229:

``We must consider what the testator meant by these words. In my opinion he referred to the same description of property as is mentioned in the latter part of his will, namely, mortgages ordinarily so-called, that is, conveyances of freehold and leasehold property to secure sums of money and subject to an equity of redemption.''

In addition to Santley v. Wilde (supra), Mr. Hill referred me on this question to two older cases, namely In
Re Attenborough v. The Commrs. of I.R. (1855) 11 Ex. 461; 156 E.R. 912 in which Parke B. held that an instrument that ``I have this day deposited with A'' certain goods ``to be held by him as a security for the payment of £160 this day lent to me together with interest and should such sum of £160 not be paid by me to A by 25th March next I hereby authorise and empower him to sell and dispose of the said articles, and out of the proceeds thereof to pay the expenses of the sale, and retain the said sum of £160 and interest thereon'', did not require a mortgage stamp. He relied on Harris v. Birch ((1842) 9 M. & W. 591), which decided that a deposit of goods or any document relating to it was not a mortgage within the meaning of 55 Geo. 3, c. 185 and that although the subject case went farther since the instrument contained a power of sale, this did not render it ``a conveyance by way of mortgage''; and to
Kennard v. Futvoye (1860) L.J. (N.S.) 29 Eq. 553 in which Stuart V.C. held that the statute against clandestine mortgages (4 & 5 W. & M. c. 16) applies only to an actual mortgage and that a deed simply charging money on land containing a covenant to execute a mortgage when required to do so, although a mortgage in equity, was not a mortgage within the meaning of that statute, nor is a deed of further charge without a proviso for redemption. That statute provided, ``If any person shall mortgage any lands or tenements to any person or persons for security of money lent or otherwise accrued or become due for any other value considerations'', etc.

Mr. Hill finally relied upon the so-called orthodox classification of a mortgage expressed in Professor Sykes' text-book The Law of Securities, 2nd ed. at pp. 12 and 13. At p. 12 that learned author states:

``In preference, however, to coining some less well-known phrase it is proposed to use the phrase `mortgage stricto sensu' to comprehend such general class''

and adds ``nowadays it represents an ideal and not an existing concept''. In chapter 4 the author deals with various types of so-called equitable mortgages and refers to a decision of Lord Thurlow in
Russel v. Russel (1783) 1 Bro. C.C. 269; 28 E.R. 1121, that from the advance of money coupled with the deposit of the deeds made with the intent to create a security, equity implied an agreement to give a mortgage and hence an equitable mortgage arises.

Mr. Toomey, on the other hand, took me to Helmore's definition at p. 133 of the 2nd ed. of the Law of Real Property viz:

``A mortgage is a security under contract over property, real or personal, for money lent or owing''

and to In
Re Beirnstein, Barnett v. Beirnstein (1925) 1 Ch. 12 in which Lawrence J., in construing a will, said at p. 18:

``Although the various definitions of the word `mortgage' to be found in the law dictionaries and older text-books may be useful in ascertaining the derivation of that word and in arriving at its strict technical meaning, yet, I am of opinion that at the present day that word, when used in a recent instrument, such as the will in the present case, cannot properly be confined to a security strictly complying with such definitions.

In my opinion, a mortgage, in the modern acceptation of the term, has a wider meaning, and covers not only legal mortgages but also equitable mortgages of all kinds, that is to say, all charges created by contract to secure debts or engagements, even although not evidenced by deed or even by writing, as, e.g., a charge created by deposit of title deeds''

and finally to a passage from the judgment of Wills J. in
The United Realization Company Limited v. The Commrs. of I.R. (1899) 1 Q.B. 361 at p. 365 when he said:

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``With respect to the difference between `mortgage' and `charge' the cases cited by the Solicitor-General, and particularly that of
Health v. Pugh (1881) 6 Q.B.D. 345; 7 A.C. 235, have satisfied me that there is no distinction to be drawn between `mortgage' and `charge' except in respect to the machinery by which each is enforced. `Mortgage' is a charge enforced with a different sort of machinery - more beneficial to the person who lends the money and is entitled to the benefit of the mortgage - than the machinery by which a charge can be enforced; but, to my mind, the instrument in question is a charge; it is a mortgage; and it constitutes an immediate charge.''

I do not, with respect to Wills J., share his feeling of satisfaction after reading the cases cited by the Solicitor-General and Health v. Pugh (supra). But Bruce J. in his judgment rested his opinion upon the single point that the instrument was a ``covenant'', being a security for the repayment of money. The question in the case was as to whether an instrument was chargeable with ad valorem stamp duty under the Stamp Act, 1891 under the heading ``Mortgage, Bond, Debenture, Covenant''. It is stated in Halsbury, 3rd ed., vol. 27 at p. 155 that, ``A mortgage is a disposition of property as security for a debt and it may be effected... by an agreement to create a charge''; and in Coote on Mortgages, 9th ed. vol. 1 at pp. 8 and 9 that a mortgage may be effected by means of a legal or an equitable assurance and in that text-book, and many others on the subject, both legal and equitable mortgages are dealt with.

So it is that I am unable to agree with Gillard J. in
Waldron v. Bird (1974) V.R. 497 at p. 501; CCH Company Law Cases ¶40-122 at p. 27,878 that Lord Lindley's definition of what constitutes a mortgage has never been dissented from, and I turn to consider, as one must in my opinion, what was the meaning, in sec. 83, of the word ``mortgage'' which has by statute and otherwise so many different meanings. Bearing in mind that one is dealing with a taxing Act and in the light of the wider definition given to the word by the amending legislation, it is limited, in my view, to the orthodox classification referred to in Sykes (supra) and defined by Lord Lindley. Such a view, I think, is supported by General Exemption 15 from stamp duty in the second schedule of the Act which refers to a release or reconveyance by way of discharge of mortgage, any discharge of mortgage and any ``transfer or conveyance by way of mortgage etc.''. (The emphasis is my own.)

Accordingly, I find that the equitable mortgage was not exempted from stamp duty on the ground that it was a mortgage within the meaning of the definition in sec. 83 and that it was properly assessed in the sum of $6. I accordingly answer the questions as follows:

• (a) No.
• (b)(i) $6.
• (c) Yes.
• (e) by the defendant and I so order.