The availability of security for unlimited overdrafts is not permanently fixed by the initial stamping — additional duty may be paid at any time to increase the amount for which the security is available, subject to payment of any applicable fine for late stamping.
Later decisions that cite Commercial Banking Company of Sydney Ltd v Love
Decisions cited by Commercial Banking Company of Sydney Ltd v Love
COMMERCIAL BANKING CO. OF SYDNEY LTD. v. LOVE [1975] HCA 48; (1975) 133 CLR 459
Stamp Duty (W.A.)
High Court of Australia
Barwick C.J.(1), Stephen(2) and Jacobs(3) JJ.
CATCHWORDS
Stamp Duty (W.A.) - Mortgage - Security document - Security for loan on overdraft - No limit of amount - Sufficient stamp duty paid to cover part of overdraft - Subsequent increase in denoted amount of stamp duty - Security to be available only for such amount as ad valorem duty denoted extends to cover - Provision in mortgage instrument that mortgage collateral with securities set out in schedule and primary for amount for &which primarily stamped - No securities mentioned in schedule - Whether mortgage available only for amount covered by original stamping - Stamp Act, 1921-1967 (W.A.), s. 83 (2)*.
* Section 83 (1) of the Stamp Act, 1921-1967 (W.A.) charges a security for
the payment of money to be lent, advanced, or paid,
or which may become due
upon an account current either with or without money previously due, where the
total amount secured or to
be ultimately recoverable is in any way limited,
with the same duty as a security for the amount so limited. Sub-section (2)
provides
that "Where such total amount is unlimited the security is to be
available for such an amount only as the ad valorem duty denoted
thereon
extends to cover; but where any advance is made in excess of the amount
covered by that duty, the security shall, for the
purpose of stamp duty, be
deemed a new and separate instrument bearing date on the day on which the
additional advance was made or
the additional stamp duty paid, whichever is
the earlier date, but so as not to otherwise affect the instrument as a
security; and
if such security is registered under any Act relating to the
registration of securities such registration shall be effective for
the
additional advances, but subject in the case of a bill of sale to paragraph
(4) of section six of the Bills of Sale Act, 1899.
Such additional duty may
be paid and denoted from time to time as further advances are made, by stamps
impressed on or affixed
to
the security and duly cancelled; and where the
original security is deposited in the office of Land Titles or any other
public
office
in which registration is required, any duplicate or counterpart
of the original instrument may be stamped with such additional
duty,
and such
stamping shall have the same effect as if the stamps had been impressed or
affixed upon the original instrument."
HEARING
Perth, 1975, September 2;DECISION
October 29.
2. On 28th June 1971 the second respondent sold the land to the first
respondent for a sum payable in cash. At the date of this
sale there was due
to the bank by the second respondent a total sum of the order of nine hundred
thousand dollars (including the
indebtedness on both accounts). The bank when
requested by the first respondent so to do, refused to discharge the mortgage
except
upon payment of the sum of $91,000, that happening to be the total
amount for which stamp duty had been paid in respect of the mortgage
prior to
the date of the commencement of the action, namely 21st October 1971. The
amount for which stamp duty had been paid on
the mortgage at the date of the
sale of the land was $70,000. (at p462)
3. The first respondent, as purchaser under the contract of sale, sued the
bank and the second respondent claiming:
(a) against the bank -
(i) a declaration that the sum secured by mortgage A410038 was $64,000;the sum of $64,000 the bank execute a registrable discharge of the mortgage and deliver to the first respondent duplicate certificate of title vol. 1053 fol. 730; alternatively,
(ii) an order that against payment by the first respondent to the bank of
(iii) a declaration that the sum secured by mortgage A410038 was $70,000;the sum of $70,000 the bank execute a registrable discharge of the mortgage and deliver to the first respondent duplicate certificate of title vol. 1053 fol. 730;
(iv) an order that against payment by the first respondent to the bank of
4. The Supreme Court of Western Australia (Wickham J.) held that, subject to
the effect of the penultimate clause of the mortgage,
the amount covenanted to
be paid and secured by the charge contained in the mortgage included amounts
due to the bank otherwise than
through the account at the Nedlands branch of
the bank: consequently, there was then due under the mortgage, apart from the
effect
of the penultimate clause, a sum considerably greater than the sum of
$91,000 (1974) WAR 170 . (at p463)
5. However, his Honour held that the penultimate clause of the mortgage plus
the payment of stamp duty in the first instance was
effective to limit the
amounts of money secured by the charge in the mortgage to the amount of
$70,000. That clause is in the following
terms:
"That this mortgage is collateral with the instruments ofThere were no instruments of security set out in the relevant schedule. His Honour said of this clause in these circumstances:
security set forth in the schedule hereto to the extent only
to which such instruments are respectively stamped and is
primary for the amount to which the same is primarily
stamped."
"This provision is qualified by the words at the beginning
of the mortgage 'and for the consideration aforesaid the mortgagor
doth hereby covenant with the bank and it is hereby
agreed and declared as follows:'. The clause therefore is an
agreement that the mortgage is primary security for the
amount to which it is primarily stamped. It is not a collateral
security at all and is therefore a security for the amount to
which the same is primarily stamped. I suspect that this
clause is designed to marry with s. 83 of the Stamp Act but
I can see no reason for giving it anything other than its face
value, any more than I could for giving the extent of the
covenant any other than the value connoted by the words
there used. It follows that on 28th June when the plaintiff
acquired his equity in the mortgaged property the mortgage
was then only a security to the amount of $70,000 and as at
that date that was the proper amount and the only amount
which the mortgagee could demand in redemption." (at p464)
6. Section 83(2) of the Stamp Act is as follows:
"Where such total amount is unlimited the security is to be
available for such an amount only as the ad valorem duty
denoted thereon extends to cover; but where any advance is
made in excess of the amount covered by that duty, the
security shall, for the purpose of stamp duty, be deemed a
new and separate instrument bearing date on the day on
which the additional advance was made or the additional
stamp duty paid, whichever is the earlier date, but so as not
to otherwise affect the instrument as a security; and if such
security is registered under any Act relating to the registration
of securities such registration shall be effective for the
additional advances, but subject in the case of a bill of sale
to paragraph (4) of section six of the Bills of Sale Act 1899.
Such additional duty may be paid and denoted from time to
time as further advances are made, by stamps impressed on
or affixed to the security and duly cancelled; and where the
original security is deposited in the office of Land Titles or
any other public office in which registration is required, any
duplicate or counterpart of the original instrument may be
stamped with such additional duty, and such stamping shall
have the same effect as if the stamps had been impressed or
affixed upon the original instrument." (at p465)
7. The relevant portion of the schedule to the Act is as follows:
STAMP DUTYMORTGAGE (legal or equitable), BOND, DEBENTURE,
NATURE OF INSTRUMENT PAYABLE
any fractional part of $200 .. .. .. 0.252) Being a collateral, or auxiliary, or additional
8. No consideration seems to have been given at the hearing of the suit to
the question whether the first respondent as plaintiff
had any right to redeem
the mortgage given by the second respondent to the bank. The first respondent
was a purchaser for cash of
the freehold. In a suit for specific performance
against the second respondent he might prove that the second respondent was
unable
to make title to the land because of its inability to redeem the
mortgage. In fact, as I view the facts of the case, that was the
situation of
the second respondent. In that event, the first respondent could not have
obtained specific performance and would have
been relegated to damages for
loss of his bargain. The case seems to have been considered, however, on the
basis that the first
respondent as purchaser was equitably entitled to the
land, subject to payment of the agreed price and as such equitable owner
entitled
to redeem. But the first respondent's equitable estate was
commensurate with and dependent upon his right to obtain specific performance.
It may thus be doubtful on the facts of this case whether, if the second
respondent could not redeem and make title, the first respondent
had any
equity to redeem the mortgage. (at p465)
9. But no point was taken at the trial or on appeal as to the non-existence
of any right of redemption in the first respondent.
Consequently, I need
express no considered opinion on that matter. I may say, however, that on one
reading of the reasons for judgment
of the learned trial judge, it might be
thought that his Honour had held that the first respondent had a right of
redemption on payment
of a lesser sum than that for which the second
respondent might have redeemed. It needs no elaboration to conclude that such
a position
was not possible in law or in equity. Even if the first respondent
had purchased the second respondent's equity of redemption in
the land, which
in fact he did not, or if he had a right to redeem as equitable owner under
the contract of sale, his right to redeem
would have been exactly the same as
the right of redemption which the second respondent had. (at p466)
10. The claim of the first respondent according to his statement of claim was
that the bank was bound to transfer the land to him
upon payment of either the
sum of $64,000, being the balance of purchase money payable to the second
respondent under the contract
of sale, or the sum of $70,000, which was the
amount for which the bank had firstly paid stamp duty upon the memorandum of
mortgage
and being the amount which the stamp duty, indorsed on the mortgage
at the date of the contract of sale, covered. The statement
of claim asserted
that the bank had wrongly claimed to be entitled to be paid the sum of $91,000
to discharge the mortgage. (at p466)
11. The argument before the learned trial judge in support of the statement
of claim proceeded on two separate bases: first, that
the mortgage secured
only the amount due to the bank at the Nedlands branch of the bank and did not
secure sums due to the bank otherwise
than upon that account; secondly, that
because of the penultimate clause to which I have referred, the amount for
which the mortgage
was security was limited to the amount for which the
document had been stamped in the first place, namely, $70,000. (at p466)
12. As to the first ground, his Honour found against the first respondent.
Against that finding there is no cross-appeal. The second
ground which his
Honour seems to have accepted is in the passage which I have quoted from his
reasons for judgment. But it seems
to me that the penultimate clause does not
in any way bear upon the promise to pay contained in the earlier covenant or
upon the
charge over the land which the mortgage contains. The clause is quite
evidently what his Honour suspected it was, namely, a provision
to enable the
proper rate of duty to be determined whenever it was appropriate to stamp the
memorandum of mortgage. Quite evidently
it was included in the memorandum in
purported compliance with s. 26 of the Stamp Act, and had no other function.
The fact in this
case was that the clause had no operation even in relation to
stamp duty. The security,
so far as appears, was the only security
for the
amount covenanted to be paid: it was neither primary nor collateral. The
rate
of duty paid both in the initial stamping
and in the additional stamping
was at the top rate set out in the schedule of the Stamp Act. (at p467)
13. It would seem that his Honour, as I think erroneously, used the word
"primary" in the sentence in his reasons which I have quoted
which begins,
"The clause therefore ...", in two different senses: first, as in contrast to
collateral and, secondly, in the temporal
sense of first. This, in my
opinion, was erroneous. Neither in the clause of the mortgage nor in the
schedule to the Stamp Act
does the word "primary" bear a temporal
significance. (at p467)
14. As will appear when I discuss the meaning and operation of the Stamp Act,
there is, in my opinion, no direct obligation, enforceable
by penalty, to
stamp a memorandum of mortgage to secure an overdraft
of unspecified amount.
But s. 83(2) of the Act does purport
to make the security of the mortgage
unavailable except to the extent
of an amount commensurate with the duty paid
upon it. Assuming
that the concept of availability in the sub-section extends
to cover
redemption, the Act allows the appellant to cure any understamping
by
payment of additional duty (see s. 25). There is no prohibition of such a
course. As I have said, the ad valorem duty recorded
on the memorandum of
mortgage at the date
of the commencement of the suit was for $91,000. (at
p467)
15. In my opinion, the penultimate clause was irrelevant either to the
question of meaning or extent of the covenant to pay or to
the question of
what amount of money was necessary to redeem the mortgage as at the date of
the commencement of the action. In my
opinion, the conclusion that the
covenant for payment in the mortgage was "an agreement that the mortgage is
primary security for
the amount to which it is primarily stamped" was
erroneous. (at p467)
16. It seems to have been thought that, having contracted to buy the land,
and thus acquiring an equitable interest therein, the
first respondent could
by notice to the mortgagee fix the amount on payment of which the bank was
bound to permit redemption of the
mortgage. But the bank was the registered
mortgagee. The charge created by the mortgage was effective according to the
terms of
the mortgage, subject to the effect of the Stamp Act to which I shall
later refer. That charge was not affected by the fact of the
sale or by notice
of it to the mortgagee. No question
of competing equities arose in the case.
(at p468)
17. The second respondent, however, made an alternative submission based upon
the provisions of the Stamp Act, particularly s. 83(2),
irrespective of the
terms of the mortgage. The argument was that that sub-section confined the
bank, when
redemption was sought,
to demanding only the payment of a sum not
greater than the amount for which stamp duty had first been paid
upon the
memorandum of
mortgage, in this case $70,000. The argument was founded on the
proposition that the expression "is to be
available for such an amount
only as
the ad valorem duty denoted thereon" extended to include within its ambit the
insistence on
the security at the time of redemption.
It then proceeded upon
the footing that once an amount of duty was paid in respect of a
mortgage of
unlimited amount, any further
payment of duty must be in respect of an advance
made subsequent to such first stamping.
Any sums already advanced at that
time
in excess of the amount of duty firstly paid became unsecured and could
not become secured
by any further payment of duty. Thus,
the second payment
of duty in this case could only be referable to some further advance and
not
to any sum lent before or at the
time of the payment of the amount of the
stamp duty appropriate to the sum of $70,000. (at p468)
18. It thus becomes necessary to examine further the provisions of the Stamp
Act. (at p468)
19. Section 16 imposes the duties by reference to the descriptions of the
Second Schedule to the Act. I have already set out the
relevant part
of the
Second Schedule. Section 39(1) makes the person appropriately nominated in
the schedule liable to payment of
the duty. Where
the instrument is not duly
stamped within the specified time, that person is liable to a penalty not
exceeding twenty
dollars in
addition to an additional amount of duty for late
payment. In the case of a mortgage falling within the schedule, the
mortgagor
is the person on whom the responsibility of stamping the mortgage is laid. (at
p468)
20. I find no provision in the Act which places an obligation on any person
to stamp a memorandum of mortgage securing an unlimited
and thus an
unspecified amount of money. The Act only brings such a memorandum of
mortgage to duty through the operation of s. 83(2).
It is thus apparent from
the terms of the schedule that a mortgage for an unlimited amount is not
dutiable upon its execution or
within a specified time thereafter. The
schedule is only applicable if there is a specific sum secured. If there is
such a sum,
the rate of duty is on a sliding scale with a differential as
between a collateral security and the principal or primary security.
(at
p469)
21. The Act imposes a duty on instruments, not on transactions. It does not
purport to avoid any transaction for want of the payment
of stamp duty on an
instrument. But it seeks principally to withhold the assistance of the courts
in enforcing the instrument or
in aiding the transaction where use of the
instrument is necessary in proceedings in court or in an arbitration. Section
27 provides
that a dutiable instrument may not be pleaded, given in evidence
or admitted to be good, useful or available in law or in equity
unless duly
stamped. The Act further seeks to deny the benefits of registration to a
dutiable instrument which is unstamped: s.
28. But the court or arbitrator
may receive the unstamped instrument in evidence, if being capable of then
being stamped the appropriate
duty is then paid upon it: s. 29(2) (see also
s. 30). Thus, as there is no time fixed for the payment of duty upon a
memorandum
of mortgage for an unlimited amount, duty may be paid upon it in
court for that amount which is at that time an appropriate amount
of duty,
i.e. an amount of duty commensurate with the amount sought to be recovered or
asserted as being secured by the memorandum
of mortgage. (at p469)
22. Section 83(2), in using the expression "is to be available", is, in my
opinion, referring to proceedings taken by the mortgagee,
either as plaintiff
or as defendant, to recover, or set off an amount claimed to be secured by the
mortgage. The word "available"
is used, in my opinion, in the same sense as
it is used in s. 27. Thus, the expression would extend to embrace a defence
by a mortgagee
in a redemption suit in which the mortgagee asserted the
obligation of the mortgagor to pay a sum in redemption. But, in such a
case,
the court would have power to allow the payment of an amount of duty
commensurate with the mortgagee's demand. This would be
so whether the
memorandum was wholly unstamped or had already been stamped for a sum
relevantly too small. The mortgage claim in
redemption would not, in my
opinion, be limited to an amount commensurate only with the amount of stamp
duty which may already have
been paid on the mortgage. (at p469)
23. Section 83(2) thus provides for the payment of duty by limiting the
recovery of the mortgagee to the amount of duty ultimately
paid. It does not
limit the mortgagee's security to the amount of duty firstly paid. (at p469)
24. In the present case, the amount which the stamp duty denoted on the
mortgage at the date of suit and at the date of hearing,
extended to cover,
was $91,000 and the appellant did not claim any greater sum in redemption. On
the plain application of s. 83(2)
to the circumstances of this case, the
mortgagee was entitled to recover in redemption that sum. (at p470)
25. The view I have expressed as to the meaning and operation of the Stamp
Act involves the conclusion that a memorandum of mortgage
to secure a bank
overdraft of unlimited amount is not dutiable when executed,
or within any
specified time thereafter: nor is it
necessarily dutiable when tendered for
registration, i.e. so long as the amount
secured is then unlimited. It would
be otherwise
if at the time of registration the account had been closed and
for that reason
or any other a specific sum had become payable. (at
p470)
26. The meaning and operation of so much of s. 83(2) as follows the words
"but where any advance is made ..." is far from clear:
particularly when
considered in the light of the other provisions of the Stamp Act to which I
have referred. It seems to contemplate
a situation in which the mortgage has
been put in suit for a sum covered by an
amount of stamp duty then paid but on
which advances
are subsequently made so that further duty is necessary if
these further advances
are to be recovered. Meantime, the mortgage and
its
registration are regarded as on foot securing the additional advances. Oddly
enough, the sub-section in the Stamp Act, unlike
its English prototype, speaks
of the mortgage being regarded as a separate instrument "bearing date on the
day on which the
additional
advance was made or the additional stamp duty
paid, whichever is the earlier date". I have great difficulty in
contemplating
the
payment of the additional duty before the making of the
additional advance in the case of a mortgage securing an unlimited amount.
But, obscure as the provision is, it has, in my opinion, no bearing directly
or indirectly upon the instant case. (at p470)
27. The Court was pressed with the decision of Farwell J. in In re
Waterhouse's Policy (1937) Ch 415 as authority for the proposition
that once
the bank had stamped the mortgage the amount of money then due to it, beyond
the sum for which the amount of stamp duty
was appropriate, became and
remained unsecured. The submission fastens on what his Lordship said (1937)
Ch, at p 420 : "... if a
Bank chooses to take security for an overdraft and
stamps that security with a stamp which is only sufficient to cover a limited
sum, then, as the result of sub-s. 2, 'i.e. the counterpart of s. 83(2)', the
Bank is precluded from claiming either in a Court of
law or elsewhere that the
security which it has is a security for any greater sum than that which the
stamp on it covers." (at p471)
28. But his Lordship in that case did not have to consider the problem which
is posed in this case. In the case before him the
bank had taken an
assignment of an endowment policy on the life of the customer for the sum of
$1,000. The assignment was to cover
an overdraft of an unlimited amount.
When the policy money became due, bonuses totalling $926 had become payable.
The bank had stamped
the assignment appropriately for the sum of $1,000 and
claimed only that sum out of the proceeds of the policy. It was agreeable
to
the payment of the excess to the policy holder. But the insurance company
took the stand that the policy was insufficiently stamped
because more than
$1,000 had been and was then due to the bank by the policy holder.
Accordingly, it refused to pay either the bank
or the policy holder because of
a section in the Stamp Act 1891 (U.K.) which rendered invalid an assignment
which was not duly stamped.
The insurance company paid into court the
proceeds of the policy. (at p471)
29. His Lordship decided, in effect, that the assignment was duly stamped in
relation to the bank's claim upon it. He did not have
to consider the
provisions of the Stamp Act 1891, which allowed for payment of duty on
insufficiently stamped instruments. He certainly
did not decide that the
first stamping of a security for an unlimited sum precluded for all time the
use of the security for any
sum beyond the sum appropriate to the duty firstly
paid. But if the bank in the case before him had sought to restamp the
assignment
to cover a claim under it for the full amount of the proceeds of
the policy, his Lordship, in my opinion, would have been bound to
allow that
restamping and the bank's claim for that amount under the assignment. (at
p471)
30. The purpose of the Stamp Act is to collect in the long run the full
amount of duty which could be payable under the Act upon
the instrument. The
consequence of invalidity was to ensure that full payment of duty.
Consequently, the ability to restamp insufficiently
stamped instruments must
be conceded. The sufficiency or insufficiency of the stamp duty paid must
relate to, and be determined
by, the amount for which the security is asserted
at the time the claim under it or to enforce it is made. I am unable to
regard
the decision of the reasoning in In re Waterhouse's Policy (1937) Ch
415 as authority for the respondent's submission. (at p471)
31. The appellant referred to In re Dehy Fodders (Australia) Pty. Ltd.;
Winter v. Bank of Adelaide (1973) 4 SASR 538 . I agree
with the conclusion of
all those judges of the Supreme Court of South Australia who held that the
restamping of the bank's security
was effective so that the bank could assert
the security, as between the parties to the security, for the full amount
which the restamping
covered, notwithstanding the fact that a lesser amount of
duty had been paid in the first instance. Zelling J., though otherwise
in
dissent, agreed (1973) 4 SASR, at p 565 with that proposition. He differed
from the majority as to the effect of the first payment
of duty in relation to
the competition of the bank's security with the crystallized charge of a
debenture not otherwise having priority
over the bank's charge. I have no
need in this case to decide which view, that of the majority or that of
Zelling J., is correct
in relation to the question of priorities decided in
that case, though I have no present reason to doubt the validity of the
Court's
conclusion. There is in this case no question of any competition
between the appellant's registered mortgage and the first respondent's
equitable ownership of the land, if indeed, he had any such ownership. But, I
may say, I am unable to accept the distinction which
Zelling J. draws between
an instrument and security, or between admissibility and availability as those
words are used in the Stamp
Act. I prefer the view which I have already
expressed and which the majority avoided, namely, that the word "available" is
used
in the same sense in s. 27 or s. 83(2). I rather think that the
expression "the security is to be available" in s. 83(2) is elliptically
used
to mean "the instrument shall be available to secure"; this ultimately relates
back to s. 27 with its denial of enforceability.
(at p472)
32. I would allow the appeal and, in lieu of the order of the Supreme Court
dismiss the first respondent's suit. (at p472)
STEPHEN J. This appeal raises two quite distinct questions; the first turns
upon the construction of a mortgage, the second upon
the meaning of s. 83(2)
of the Stamp Act (W.A.). (at p472)
2. The facts sufficiently appear in other judgments. The relevant mortgage,
over Western Australian land, is expressed to secure
repayment to the
appellant bank of all moneys owing to it by the respondent, D.H. Investments
Pty. Ltd. (D.H.), or by an associated
company, Davies Investments Pty. Ltd.
The latter company had accounts with the bank in two States, heavily overdrawn
in South Australia
and less so in Western Australia. Whatever may have been
the initial understanding of the bank's Western Australian branch when
the
mortgage was first executed, it is quite clear that the charge upon the
mortgaged land cannot be limited to the amount overdrawn
on the Western
Australian account only but must apply equally to any of the companies'
indebtedness to the bank. The learned trial
judge so held and there is no
cross appeal on this issue. (at p473)
3. However, his Honour concluded that one clause of the mortgage had the
effect of limiting the amount of the charge to the maximum
amount for which
the mortgage was, after its execution, first stamped for duty pursuant to the
Stamp Act, namely $70,000. The clause
in question reads:
"That this mortgage is collateral with the instruments of
security set forth in the schedule hereto to the extent only to
which such instruments are respectively stamped and is
primary for the amount to which the same is primarily
stamped." (at p473)
4. No instruments were in fact "set forth in the schedule" and in my view the
clause had, in these circumstances, no function to
perform; its function is to
ensure compliance with s. 26 of the Stamp Act in those instances, of which the
present transaction was
not one, in which more than one security instrument
exists. Section 26 requires that all facts and circumstances affecting
liability
of an instrument to duty be fully and truly set forth; the scheme of
the Act in relation to mortgages is to impose one rate of duty
on "the only or
principal or primary security" and a much lower rate upon a collateral
security where the principal or primary security
is itself duly stamped. Had
there been some scheduled instrument of security the clause would have had an
appropriate operation
consistent with the provisions of the Act; in its
absence it has none. (at p473)
5. His Honour of course recognized that the clause was intended to have
significance for duty purposes but concluded that it also
imposed an upward
limit on the charge created, a limit governed by "the amount to which the same
is primarily stamped", treating
"primarily" as having the temporal meaning of
"first" or "initially". In my view "primarily" bears no temporal meaning in
this clause;
it is used in contradistinction to "collaterally", just as
"primary" is contrasted with "collateral" in the Stamp Act. This, I think,
sufficiently appears both from the apparent purpose of the clause, concerned
as it is with matters of the incidence of stamp duty,
and from its express
terms, which contrast the mortgage's collateral operation with its primary
operation and measure the extent
of the latter by reference to "the amount to
which the same is primarily stamped". (at p474)
6. Where, as here, there are no scheduled instruments of security referred to
in the mortgage's schedule the distinction drawn between
collateral and
primary is inoperative; the mortgage is the only security and will, unless its
express terms are affected by statute,
be security for those amounts which the
parties have expressly agreed that it should secure, namely all amounts owed
to the bank
by the mortgagor or by Davies Investments Pty. Ltd. (at p474)
7. My reference to the terms of the mortgage being affected by statute leads
me to the second question raised in this appeal, the
effect of s. 83 of the
Stamp Act. In the case of a security expressed to be of unlimited amount, as
is the present mortgage, s.
83(2) provides by its opening words that "the
security is to be available for such an amount only as the ad valorem duty
denoted
thereon extends to cover". The present mortgage, originally stamped
in an amount appropriate to a security for no more than $70,000,
is sought to
be relied upon by the bank to the extent of $91,000, an appropriate further
amount of stamp duty having been paid ad
valorem to the extent of $21,000 once
it was appreciated by the bank's Western Australian branch both that the
indebtedness of Davies
Investments Pty. Ltd. included its large South
Australian overdraft and that the mortgaged property had realized $91,000 on
the open
market. The question is whether, in terms of the provisions of s.
83(2), the bank may now treat the security as available up to
$91,000 or
whether the additional stamping was ineffective, the limit of availability of
the security being fixed once and for all
by the initial stamping of the
mortgage appropriate to a security for only $70,000. (at p474)
8. Section 83(2), the full terms of which appear in other judgments, goes on
to provide for the situation in which further advances
may be made in excess
of the amount covered by the duty originally denoted on the instrument. Its
effect is to deem the mortgage
to be a new and separate instrument for duty
purposes as from the making of an additional advance so that the security will
be available
in respect of that additional advance to the extent appropriate
to whatever further duty is then paid; the instrument may thus, in
the jargon
of revenue law, be effectively "upstamped". (at p474)
9. The respondent contends, in my view correctly, that this specific
provision for up-stamping is confined to true cases of further
advances and
has no application where the inadequacy of the initial stamping is not due to
the making of further advances but has
always existed. However, it does not
follow that because this express provision for up-stamping is confined to the
case of further
advances there can be no effective up-stamping in other cases.
The quite elaborate provisions of the later portions of s. 83(2) appear
to be
designed to ensure that the punitive provisions of s. 20, with its fines for
late stamping, will not become applicable to a
perfectly adequately stamped
instrument which is at risk of becoming inadequately stamped, and hence pro
tanto unavailable as a security,
merely because of the making of further
advances. The legislation, not unreasonably, displays no such concern in the
case of an
instrument which is discovered to have been inadequately stamped
from the start. To it the special up-stamping provisions of s.
83(2) will not
apply, instead where insufficient duty has been paid recourse will have to be
had to s. 20, which permits of the late
stamping of documents which have
initially been insufficiently stamped, but only at the price of payment of a
fine. (at p475)
10. In my view, when a mortgage is initially insufficiently stamped and the
insufficiency is made good by late stamping under s.
20 the amount to which
the total duty then extends will, in the terms of the first sentence of s.
83(2), be the amount for which
the security is then available. That sentence
is concerned not with the amount to which the duty denoted on first stamping
extends
but with the amount to which the duty denoted, whether or not
increased since first stamping, extends whenever the security is sought
to be
availed of. Thus insufficiency of stamping may be fully remedied by recourse
to s. 20, albeit at the price of the fine which
it prescribes. (at p475)
11. The respondent's argument necessarily treats the first sentence of s.
83(2) as confined to the position of the mortgage, in
terms of duty denoted on
it, as at the time of first payment of duty; but the words used provide little
support for that view, on
the contrary the phrase "is to be available"
suggests, rather, that the relevant time is the time when the security is to
be availed
of and that it is the duty then shown as denoted on the instrument
which operates as a limit. (at p475)
12. This is enough to dispose of the respondent's case. Whether or not the
time has yet come when it may properly be said that
the bank is seeking to
avail itself of the security within the meaning of the first sentence of s.
83(2), a matter which I regard
as open to serious doubt, it is at least clear
that by the time of institution of these proceedings by the respondent Love
the mortgage
had been denoted for duty in an amount appropriate to a total of
$91,000. In my view the security had by then become available to
the bank to
the extent of that total amount. It follows that I would regard as in error
the order of the Supreme Court that the
sum secured by the mortgage is only
$70,000; the other orders made fall with it. (at p476)
13. In coming to this conclusion I am not to be taken as determining that
even at the date of issue of the writ this mortgage was
then dutiable in any
amount or that fines fixed in accordance with the Third Schedule, at least to
the extent to which they depend
upon a multiple of "the amount of proper stamp
duty", could have been imposed if stamping were sought under s. 20. In this
case
the bank has in fact paid duty, treating the mortgage as securing
$91,000, but there is much to be said for the view that a mortgage
expressed
to secure an unstated amount attracts no liability to duty, although under s.
83(2) it cannot be availed of (whatever precisely
may be involved in that
concept) as security beyond the amount for which it is then appropriately
stamped with duty. On this view
the purpose and effect of those provisions of
s. 83(2) which follow its first sentence are obscure; however, they do not
affect the
present appeal. (at p476)
14. I would allow the appeal and dismiss the respondent's suit. (at p476)
JACOBS J. It is first necessary to refer to some provisions of the Stamp
Act, 1921-1967 (W.A.). Section 83(1) and s. 83(2) are
as follows:
"83. (1) A security for the payment or repayment ofSection 87 provides:
money to be lent, advanced, or paid, or which may become
due upon an account current either with or without money
previously due is to be charged, where the total amount
secured or to be ultimately recoverable is in any way limited,
with the same duty as a security for the amount so limited.
(2) Where such total amount is unlimited the security
is to be available for such an amount only as the ad
valorem duty denoted thereon extends to cover; but where
any advance is made in excess of the amount covered by that
duty, the security shall, for the purpose of stamp duty, be
deemed a new and separate instrument bearing date on the
day on which the additional advance was made or the additional
stamp duty paid, whichever is the earlier date, but so
as not to otherwise affect the instrument as a security; and
if such security is registered under any Act relating to the
registration of securities, such registration shall be effective
for the additional advances, but subject in the case of a bill
of sale to paragraph (4) of section six of the Bills of Sale
Act, 1899.
Such additional duty may be paid and denoted from time
to time as further advances are made, by stamps impressed
on or affixed to the security and duly cancelled; and where
the original security is deposited in the office of Land Titles
or any other public office in which registration is required,
any duplicate or counterpart of the original instrument may
be stamped with such additional duty, and such stamping
shall have the same effect as if the stamps had been impressed
or affixed upon the original instrument."
"87. (1) Where there are several instruments of collateral
security for the same moneys as are secured by a primary
security duly stamped, only one of such instruments shall be
liable to stamp duty as a collateral security.
(2) No instrument of collateral security shall be deemed
to be duly stamped unless the principal or primary security
is duly stamped." (at p477)
2. In s. 81 the term "mortgage" is defined to mean a security by way of
mortgage, inter alia, 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. The instruments
brought to duty are,
pursuant to s. 16, specified in the Second Schedule. In that schedule, under
the title "Mortgage (legal or
equitable), Bond, Debenture, Covenant, Warrant
of Attorney to confess and enter up judgment and foreign security of any
kind", the
distinction is drawn between (1) the only or principal or primary
security for the payment or repayment of money (and certain rates
of duty are
set out); and (2) collateral, or auxiliary, or additional or substituted
security (and a single lower rate of duty is
specified). (at p477)
3. The appellant bank on 24th May 1971 took security in the form of a
mortgage dated 27th May 1971 pursuant to the Transfer of Land Act, 1893
(W.A.), as amended, over certain land which the second respondent had
purchased and of which it was the registered proprietor. The
mortgage was to
secure the repayment on demand of "all moneys whatsoever which either
previously or subsequently to the date hereof
shall have been lent or paid to
for or on account of or have become due payable or owing by the Mortgagor(s)
and/or the Borrower(s)
to the bank on balance of account or otherwise
howsoever ..." The borrower, Davies Investments Pty. Ltd., was a company in
some
way associated with the mortgagor. (at p477)
4. At the time of the giving of the security, the borrower had an account at
the Nedlands branch of the appellant which was in credit
to the extent of
$49,469. However, the borrower had another account at the Adelaide branch of
the appellant bank and, on the date
last-mentioned, the amount owing to the
appellant by the borrower on the Adelaide account was $331,506. A cheque for
$250,000 was
due to be debited to the latter account. (at p478)
5. The mortgage was a security for the payment or repayment of money to be
lent, advanced, or paid or which might become due upon
an account current with
money previously due: see s. 83(1) of the Act. The total amount was
unlimited, and therefore s. 83(2) was
applicable. (at p478)
6. On 17th June 1971 ad valorem duty sufficient to cover an amount of $70,000
was paid to the Commissioner of Stamps and was denoted
on the mortgage. At
that date $62,223 was owing to the appellant by the borrower on current
account at the Nedlands branch, and
$889,609 was owing to the appellant by the
borrower on current account at the Adelaide branch of the appellant. (at
p478)
7. On 28th June 1971 the appellant bank heard that the second respondent had
agreed to sell the mortgaged land for $91,000 to the
first respondent, and it
was subsequently informed that settlement was due on 5th September. On 6th
August 1971, the appellant paid
further ad valorem duty and had it denoted on
the mortgage to cover a further amount of $21,000. The two current accounts
had been
ruled off on 28th June 1971 and no further moneys were thereafter
lent, though interest and other charges continued to accrue. At
the date
last-mentioned, the Nedlands account was in debit to the extent of $63,394 and
the Adelaide account in debit to the extent
of $889,609. (at p478)
8. The purchaser, the first respondent, commenced proceedings claiming that
he was entitled to complete the purchase on payment
to the appellant bank of
either the balance due on completion, namely, $64,000, or, alternatively, the
sum of $70,000, the amount
covered by the ad valorem duty denoted on the
security when it was first stamped. The appellant claimed that the mortgage,
being
now stamped with duty sufficient to cover a sum of $91,000, was
available to it as security for that sum. (at p478)
9. Wickham J. found that the mortgage was security in respect of both the
Nedlands account and the Adelaide account of the borrower.
There is no appeal
or cross-appeal from that finding. He then found that the mortgage was
available as security to the bank only
for the amount of $70,000. He based
this conclusion on a clause in the mortgage which reads as follows:
"That this mortgage is collateral with the instruments of
security set forth in the schedule hereto to the extent only
to which such instruments are respectively stamped and is
primary for the amount to which the same is primarily
stamped." (at p479)
10. There are no instruments of security set out in the schedule to the
mortgage, and therefore the only relevant part of the clause
is that the
mortgage "is primary for the amount to which the same is primarily stamped".
Wickham J. concluded that the mortgage was
"primarily stamped", within the
meaning of the clause, only for the amount for which it was first stamped,
namely, $70,000, and further
concluded that the additional ad valorem duty
covering the further $21,000 gave the bank as against the first respondent no
security
over the land in respect of this additional sum at 28th June when the
first respondent acquired his equity in the mortgaged property.
Upon this
basis he concluded that the first respondent was entitled to a declaration
against the appellant that the sum secured
by the morgage was $70,000 and to
an order that against payment to it of that sum the appellant should execute a
registrable discharge
of the mortgage and should deliver the certificate of
title to the first respondent. He found it unnecessary to consider a further
submission made to him on behalf of the first respondent that the same
conclusion would follow from the application of s. 83(2) of
the Stamp Act. (at
p479)
11. Before this Court, argument has been presented both on the meaning of the
clause in question and the effect of s. 83(2) of the
Stamp Act. The clause
has obvious reference to the provisions of the Stamp Act. The words "primary
security" can hardly be given
a meaning independently of the provisions of the
Act. Nor, in my opinion, can the words "primarily stamped" be given a meaning
independently
of the provisions of the Act which I have set out. These words
mean "stamped as a primary security". They do not mean "stamped
in the first
instance". They bear no temporal sense in their context. I therefore
conclude that the clause in the security does
not help the first respondent.
(at p479)
12. It is therefore necessary to turn to the second argument, that with which
Wickham J. found it unnecessary to deal, namely, the
effect of s. 83(2) of the
Stamp Act. It has been submitted that the words of that sub-section apply in
such a way that once an initial
amount of duty is paid to cover a security for
an amount to which that duty extends, thereafter additional duty cannot be
paid and
denoted on the security except in respect of further advances made
after the date of the initial payment of duty. I do not think
that this can
be correct. It may be that the second sentence of sub-s. (2) is apt only to
cover further advances. Some support for
such a view comes from the language
of the last paragraph of the sub-section. However, it is the opening words of
the sub-section
which need now to be considered. The security is to be
available for such an amount only as the ad valorem duty denoted thereon
extends to cover. It is undisputed that the ad valorem duty denoted on the
security extends to cover $91,000. In order to conclude
that the security is
not available for the whole of this amount, it would be necessary to read in
some words of temporal significance,
as by inserting the adverb "first" before
the word "denoted". I can see no reason why this should be done. The purpose
of s. 83
is to secure the revenue. Although the mortgagor is the person
specified in the Second Schedule as liable for the payment of the
amount of
stamp duty on the mortgage, the effect of s. 83 is to give the mortgagee an
interest in seeing that the security is duly
stamped. Otherwise, the security
will not be available to him either at all or in full, depending upon the
circumstances. However,
once the duty and any necessary fine have been paid,
then, the duty being denoted on the security, the latter is available to the
mortgagee for the amount which that duty extends to cover. (at p480)
13. So far as the second sentence of sub-s. (2) is concerned, that whereby
for the purpose of stamp duty the security is deemed
a new and separate
instrument, whether it be applicable only to further advances or whether it be
applicable to further payments
of duty on existing advances as well, its
purpose is one of stamp duty only. One effect which can be observed in that
connection
is that the time for payment of the duty is fixed by deeming the
advance not already covered by previous payment of duty to have
been made by a
new and separate instrument on the day on which the additional advance was
made or the additional stamp duty was paid,
whichever be the earlier date.
Thereby a time is fixed in respect of these additional advances within which
the instrument is required
to be stamped in respect of the amount which
becomes due in respect thereof. Thus s. 20 can be made to apply even though
in fact
no further instrument is executed. However, it is not possible to
extract from the language of sub-s. (2) any intention that a deficiency
in
payment of duty in the first instance irrevocably reduces the amount for which
the security is available between the mortgagee
and the mortgagor and those
claiming under the mortgagor. (at p480)
14. In particular, it is not possible to extract from its language any
intention to affect the equitable doctrines in relation to
"tacking" and to
priorities in equity. It is true that, for the purposes of s. 83, the
security was only available to the appellant
for an amount of $70,000 at the
date when the first respondent acquired his equitable interest in the land.
It does not follow that
an equitable interest of a second mortgagee, and still
less of a purchaser of the land, takes priority over the appellant in respect
of any amount in excess of that sum simply because notice of a second mortgage
or purchase was received by the appellant. The true
fact was that the amounts
of the prior advances were covered by the security at the date when the first
respondent obtained his equitable
interest, and they far exceeded the sum of
$70,000. Even though at that date, because of the deficiency in payment of
stamp duty,
the security was not available to the appellant in excess of that
sum, no rights were thereby created in the first respondent whereby
he would
obtain a priority to which he was not entitled under the general law. He can
be in no better position than the mortgagor
against whom the security would be
available at the time when it was sought to enforce it for such amount as the
ad valorem duty
denoted thereon extended to cover. In other words, s. 83 (2)
is a section intended to ensure and require the payment of the duty
which
ought to be paid and once the appropriate duty is paid the security becomes
available. The payment allows the security to be
available for the further
amount in accordance with the terms of the security which to the extent of the
payment has full force and
effect ab initio: see Shepherd v. Felt and
Textiles of Australia Ltd. per Dixon J. [1931] HCA 21; (1931) 45 CLR 359, at p 383 .
I agree
with the
conclusion of the majority of the Full Court of South Australia on a
statute similarly
worded in In re Dehy Fodders
(Australia) Pty.
Ltd.; Winter
v. Bank of Adelaide (1973) 4 SASR 538 . (at p481)
15. In In re Waterhouse's Policy (1937) Ch 415 Farwell J. applied the
provisions of similar legislation. He held that a mortgagee
in circumstances
such as those now being considered, even though he made advances beyond the
amount covered by the duty paid, was
not required to stamp the security for
any amount greater than the amount for which that mortgagee relied upon it as
a security for
the advance. He stated (1937) Ch, at p 420 :
"If a bank, or any other person, lends money with no limit
on the amount to be lent and stamps the security which it
takes for a limited sum and subsequently desires that security
to be increased so that it will cover a larger sum, then on
every occasion when it is desired to increase the security it is
necessary to stamp the security with a further duty, and for
that purpose the security shall be deemed to be a new and
separate instrument on the date on which the advance or loan
is made. If that is not done, then the lender is precluded
from holding his security, in whatever form it may be, as
security for any amount over that which the stamp upon it
will cover." (at p482)
16. Farwell J. does not particularly say that the security may only be
increased in respect of advances made after the date of the
original stamping,
and I am not at all sure that he intended so to state. It seems to me
probable that, in respect of advances both
before and after the original
stamping, he regarded the mortgagee as having the right to determine the
extent of the cover given
by the security. But in any case the point at issue
was different from that which now falls to be determined. (at p482)
17. I am of the opinion that the appeal should be allowed and the declaration
and order of the Supreme Court set aside and the action
dismissed with costs.
(at p482)
ORDER
Appeal allowed with costs.
Order of the Supreme Court of Western Australia set aside and in lieu thereof order that such suit be dismissed with costs.