Handevel Pty Ltd v Comptroller of Stamps (Vic)

[1985] HCA 73

HIGH COURT OF AUSTRALIA

Gibbs C.J., Mason, Wilson, Deane and Dawson JJ.

HANDEVEL PTY. LTD. v. COMPTROLLER OF STAMPS (VICT.)

(1985) 157 CLR 177

26 November 1985

Stamp Duty (Vict.)

Stamp Duty (Vict.)—Mortgage—Debenture—Instrument securing contingent obligation to purchase shares and pay price—Whether mortgage or debenture—Stamps Act 1958 (Vict.), ss. 17(1), 137D, 137F, 137N, Third Sch., heading XXII—Companies Act 1961, s. 5(1)—"debenture".

Decisions

GIBBS C.J.: This appeal from the Full Court of the Supreme Court of Victoria raises for decision a short but difficult question of construction of the Stamps Act 1958 (Vict.) ("the Stamps Act"), as amended and as in force on 21 December 1981. On that date, there was executed a trust deed which the respondent, the Comptroller of Stamps, has assessed to duty as a mortgage, bond, debenture or covenant under heading XXII of the Third Schedule to the Stamps Act. The parties to the trust deed were the appellant, Handevel Pty. Ltd. ("Handevel"), Mildura Park Shopping Centre Limited ("Mildura Park") and the Perpetual Executors and Trustees Association of Australia Limited ("the trustee"). The Full Court, allowing an appeal from Murphy J., confirmed the Comptroller's assessment.

2. The trust deed was executed as part of an arrangement whereby a number of public companies subscribed for cumulative redeemable preference shares in Mildura Park. Under the articles of association of that company the preference shareholders were entitled to receive a preferential dividend calculated according to a specified formula, and the shares were to be redeemed on 31 December 1984, unless redeemed earlier by agreement; the amount payable on redemption was the capital paid up on each share, together with arrears of dividend. The objects of the transaction were, on the one hand, to enable Mildura Park to have access to funds at a cost lower than the prevailing rates of interest and, on the other hand, to enable the companies which became preference shareholders to receive a rebate under s.46 of the Income Tax Assessment Act 1936 (Cth), as amended, on the amount of dividends received. Mildura Park thus obtained finance more cheaply than if it had borrowed the money in the ordinary way and the companies which became preference shareholders were not liable to pay the tax which would have been attracted had they received interest on the moneys they subscribed. By share issue agreements made between each preference shareholder, Mildura Park and Handevel, Handevel agreed that it would purchase the preference shares from the preference shareholder on the happening of certain events, viz., upon the trustee giving notice to Handevel to do so in accordance with the provisions of the trust deed or, in effect, if the Income Tax Assessment Act were changed to remove the rebate under s.46. By cl.3(3) of the trust deed it was provided as follows:

"If Mildura Park fails -

(a) to pay a dividend on a Share; or

(b) to repay the capital paid up on a Share; or

(c) to repay the premium payable on redemption of

a Share,

within 7 days after the due date for payment or repayment thereof, (Handevel) shall within 7 days thereafter and will in any event within 7 days after being given notice in writing by the Trustee so to do purchase that Share in accordance with the provisions in that behalf of the Share Issue Agreement relating to that Share."

3. The trust deed recited, inter alia, that "to secure the performance by (Handevel) of its obligation to purchase Shares from the Preference Shareholders in terms of the Share Issue Agreements (Handevel) has agreed to give to the Trustee as trustee for the Preference Shareholders a charge over the Land hereinafter contained supported by the registered freehold mortgage hereinafter referred to." By cl.4 of the trust deed, as security for the performance of Handevel's obligation under the share issue agreements and under the deed, Handevel charged certain land in favour of the trustee as trustee for the preference shareholders with the payment of moneys thereby secured and as security collateral with that charge agreed to execute and deliver to the trustee on request by the trustee a registrable mortgage of the land. On 21 December 1981 Handevel also executed a mortgage of the land in favour of the trustee. By cl.5(2) of the mortgage it was provided that if Handevel failed to perform any of the covenants, agreements, obligations or warranties expressed or implied in the mortgage, the trust deed or any share issue agreement, the trustee might thereupon serve on Handevel a demand for the moneys thereby secured and if Handevel failed to pay the moneys within fourteen days the trustee was given power (inter alia) to enter upon the land and exercise a power of sale.

4. The Comptroller assessed the trust deed to duty in the sum of $102,371 and the mortgage (which was regarded as a collateral security) to duty in the sum of $5.

5. By s.17(1) of the Stamps Act, the duties specified in the Third Schedule to that Act are chargeable upon the instruments specified in that schedule. Under the heading "XXII. MORTGAGE, BOND, DEBENTURE, OR COVENANT", the Third Schedule provides:

"Upon every mortgage, bond, debenture or covenant and upon every foreign security -

...

where the amount secured thereby exceeds

$10,000 - $11 for the first $10,000 secured thereby and for every additional $200 and also for any fractional part of $200 in excess of $10,000 ... ... ... ... ... 0.80".

6. Subdivision 17 of Div.3 of Pt.II of the Stamps Act, which was inserted in 1964, contains, in s.137D(1) the following definition of "mortgage":

"'Mortgage' means a security by way of mortgage or charge for the payment of any definite and certain sum of money advanced or lent at the time or previously due or owing, or foreborne to be paid, being payable, or 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) and includes -";

then follow a number of paragraphs, of which it is necessary only to refer to the following:

"(d) any instrument of mortgage or trust for the

purpose of securing holders of debentures."
It also contained s.137N which provided as follows:

"Unless the context otherwise requires words and expressions in this subdivision and under the heading 'XXII. Mortgage, Bond, Debenture or Covenant' shall have the same meaning as is assigned to them in the Companies Act 1961."

The Companies Act 1961 (Vict.) ("the Companies Act") did not define the expressions "mortgage", "bond" and "covenant" but by s.5(1) it provided that in that Act unless the contrary intention appears -

"'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."

In 1965, s.137D was amended by adding a new sub-s.(3) which, since a slight amendment in 1967, has read as follows:

"This subdivision in relation to bonds or

covenants shall apply and shall be deemed to have always applied only to bonds or covenants which secure the payment of a definite and certain sum of money advanced or lent at the time or previously due or owing, or foreborne to be paid, being payable, or 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)."

Later, in 1981, by an amendment that took effect a few days after the execution of the trust deed, a new section was substituted for the existing s.137N; the new section inserted the following definition of "debenture":

"'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 ... ".

7. It has been said again and again that the word "debenture" has no precise meaning: see the cases cited in Knightsbridge Estates Trust, Ld. v. Byrne (1940) AC 613, at pp 621-622. It may nevertheless be assumed that a single mortgage, or an agreement to give such a mortgage, would not be a debenture within the ordinary meaning of that term: see Knightsbridge Estates Trust, Ld. v. Byrne, at p 620. On the other hand, a mortgage is clearly a security and it was not (and could not be) disputed that the trust deed in the present case, which charged Handevel's property as security for the performance of its obligations, was a "security" in both the popular and the legal senses of the term. Unless the words of the definition of "debenture" in s.5(1) of the Companies Act must in some way be read down, the trust deed will be a "security" within that definition and will therefore be a "debenture" for the purposes of heading XXII of the Third Schedule to the Stamps Act unless the context of that Act otherwise requires.

8. The definition of "debenture" in s.5(1) of the Companies Act clearly derived from a provision first introduced by the Companies Act 1928 (U.K.) and which appeared in s.380 of the Companies Act 1929 (U.K.) as follows:

"In this Act, unless the context otherwise

requires, the following expressions have the meanings hereby assigned to them (that is to say):-

...

'Debenture' includes debenture stock, bonds

and any other securities of a company whether constituting a charge on the assets of the company or not".

The meaning of that section was considered by the House of Lords in Knightsbridge Estates Trust, Ld. v. Byrne, where it was held that a mortgage given by a company to secure a loan made to it on terms that it should be repaid with interest by eighty half-yearly instalments was a debenture within the meaning of s.74 of the Companies Act 1929 (U.K.) which provided that a condition contained in any debentures should not be invalid by reason only that the debentures were thereby made irredeemable or redeemable only on the happening of a contingency, however remote, or on the expiration of a period, however long. With all respect to those who think differently, I can see no conflict between the reasoning of Viscount Maugham and that of Lord Romer in that case. Each of their Lordships simply gave to the word "securities" in the definition its ordinary meaning; each rejected various arguments put in favour of the submission that a restricted meaning should be given to that word. It is true that Viscount Maugham concluded his judgment by saying (at pp.623-624) that he considered that s.74 applied "in relation to any securities granted on loan by a company registered under the Companies Acts", whereas Lord Romer spoke more generally when he said, at p.630:

"In my opinion the words 'any other securities' mean what they say, and include all other securities of any kind whatsoever."

Although Viscount Maugham directed his words to the precise question which had to be decided, the reasoning which he accepted led logically to the conclusion expressed by Lord Romer. The reason why the expression "any other securities" was held to refer to a mortgage given by a company to secure a loan made to the company by a single mortgagee was simply that the word "securities" in the definition means what it says and includes securities of any kind. Indeed it seems impossible to suggest a meaning for the word "securities" that would include a mortgage given to secure a loan made by one lender but would not include a document such as the trust deed in the present case.

9. The decision in Knightsbridge Estates Trust, Ld. v. Byrne has been accepted without question by the textwriters (Palmer's Company Law, 23rd ed. (1982) vol.1, par.43-03; Buckley on the Companies Acts, 14th ed. (1981) vol.1, p.250; Gower, Modern Company Law, 4th ed. (1979), p.468; Wallace and Young, Australian Company Law and Practice (1965), p.31) and by decisions in Australia: Re Tarjan Construction Co. Pty. Ltd. (1964) NSWR 1054, at pp 1058-1059; Broad v. Commissioner of Stamp Duties (1980) 2 NSWLR 40, at p 50; Burns Philp Trustee Co. Ltd. v. Commissioner of Stamp Duties (N.S.W.) (1983) 83 ATC 4477, at p 4478; 14 ATR 482, at pp 483-484. I do not doubt its correctness. There is no justification for limiting the words of the definition to restrict them to debentures as ordinarily understood, when the obvious purpose of the definition was to give to "debenture" an extended meaning. The word "securities" cannot be understood as referring only to things ejusdem generis with debenture stock, bonds and notes, since those things cannot be said to form a genus.

10. For these reasons I conclude that the trust deed in the present case is a "debenture" within the meaning assigned to it by the Companies Act. It is of course not material to consider whether any of the provisions of the Companies Act reveal a contrary intention, so as to render the definition inapplicable to them. The question is whether the context of subdiv.17 of Div.3 of Pt.II of the Stamps Act, or heading XXII of the Third Schedule to that Act, requires the word "debenture" in those provisions to have a different meaning.

11. The fact that the relevant provisions of the Stamps Act have been given a restricted application to mortgages, bonds and covenants by s.137D does not provide any indication that the meaning of "debenture" should be similarly restricted. On the contrary, the history of the legislation reveals that in 1964 "mortgage" alone was restrictively defined, that in 1965 the Stamps Act was given a similarly limited application to "bonds and covenants" by an amendment which was made retrospective in effect and that eventually in 1981 (too late for Handevel) "debenture" was newly defined, in terms different from those applying to mortgages, bonds and covenants. This suggests that it was certainly not intended before 1981, and may not be intended now, that the application of the Stamps Act to debentures should be subject to the same restrictions as those applicable to mortgages, bonds and covenants. The fifth category mentioned under heading XXII, "foreign securities", has since 1964 been defined in a manner which does not conform to the definition of "mortgage" and the provisions of s.137D(3). No completely harmonious scheme can be discerned in relation to the five classes of instruments mentioned under heading XXII. It may be true to say that no good reason exists for rendering securities issued by a company chargeable with duty in circumstances in which mortgages, bonds and covenants would not be liable, but it must be remembered that the Stamps Act, like similar legislation elsewhere, is "a mere conglomeration of unco-ordinated provisions": Inland Revenue Commissioners v. Henry Ansbacher &Co. (1963) AC 191, at p 204. The lack of harmony does not require the meaning assigned to "debenture" by the Companies Act to be excluded from applying to heading XXII.

12. On behalf of Handevel, particular reliance was placed on s.137F of the Act which provides, inter alia, as follows:

"(1) A security for the payment or repayment of 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)(a) 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 be chargeable with additional duty in respect of so much of the advance as is in excess of the amount covered by the duty previously paid as follows:

... ".

It was submitted that these provisions, particularly those of s.137F(2)(a), indicate that duty is not payable unless there has been an advance. The answer to this submission is that s.137F applies only if there is a security for future advances; if the security is of a different kind, s.137F has no relevance. In the present case the amount secured was limited, and the words under heading XXII themselves show what duty is chargeable. It is difficult to envisage a security for a promise to buy shares in future under which the total amount secured would be unlimited, but if there is a deficiency in the provisions of the Stamps Act in that regard it is of no great significance and does not mean that the context of s.137F requires the word "debenture" in heading XXII to be given a meaning different from that assigned to it by the Companies Act.

13. Reliance was also placed on the fact that par.(d) in the definition of "mortgage" distinguishes between a mortgage and a debenture, a distinction also drawn by s.137M, which refers to "any instrument of mortgage or trust which is made for the purpose of securing holders of debentures". It was said that this distinction indicates that it was not intended that a mortgage should fall within the meaning of the expression "debenture". However, in this context although every mortgage is a debenture, not every debenture is a mortgage and there is ample scope for the operation of these provisions even when "debenture" is given the wide meaning which the Companies Act assigns to it. But even if it could be said that the extended definition of "debenture" is inapplicable to par.(d) of the definition of "mortgage", and to s.137M, it would not follow that the context of heading XXII requires that the definition of "debenture" should not apply to the provisions of and under that heading, which are of course of critical importance.

14. In my opinion the context of the Stamps Act does not require the word "debenture" in and under heading XXII of the Third Schedule to have any meaning different from that assigned to it by the Companies Act. When given that meaning it clearly covers the trust deed in the present case which, as I have said, is without doubt a security of a company.

15. For these reasons I consider that the trust deed was rightly assessed to duty and I would dismiss the appeal.

MASON, WILSON, DEANE, DAWSON JJ.: The issue in this appeal relates to the interpretation of the words "mortgage" in s.137D(1) of the Stamps Act 1958 (Vict.) ("the Act") and "debenture" in s.137N of the Act and in s.5(1) of the Companies Act 1961 (Vict.). The respondent Comptroller of Stamps claims that the appellant is liable to pay stamp duty in the sum of $102,377.50 on a trust deed and an instrument of mortgage to which it is a party on the footing that the instruments fall within the words "mortgage, bond, debenture or covenant" in Pt XXII of the Third Schedule to the Act. Upon the disallowance of the appellant's objection to the respondent's assessment, the appellant requested that its objection be treated as an appeal to the Supreme Court of Victoria in accordance with s.33B of the Act. The primary judge (Murphy J.) allowed the appeal, holding that the instruments were not dutiable. On appeal the Full Court (Anderson, Murray and McGarvie JJ.) took a different view, concluding that the instruments were dutiable as debentures. It is from that decision that this appeal is brought.

2. The two instruments came into existence in connexion with the investment by a number of public companies of moneys in Mildura Park Shopping Centre Ltd. ("Mildura Park"). The investors subscribed for 2,560 cumulative redeemable preference shares of $1 each in Mildura Park which were issued at a premium of $9,999, the total amount subscribed being $25,600,000. The articles of Mildura Park provided for the payment of dividends on each share at a rate determined by a formula and that each share would be redeemed on 31 December 1984 for $10,000 and any unpaid amounts of dividend. As McGarvie J. noted in his judgment in the Full Court, the rate of dividend was less than the rate of interest that could be earned on a current loan of $10,000 and the advantage to the investors was that, while interest earned by a public company is taxable, the dividends received by public companies are wholly rebatable. The object of the arrangements was to enable Mildura Park to obtain development finance at a lower rate than would be payable by way of interest on borrowed money.

3. On 21 December 1981 each shareholder entered into a separate share issue agreement with Mildura Park and the appellant, and the shares were issued. On the same day the trust deed and mortgage were executed.

4. By the standard share issue agreement, read in conjunction with the trust deed, the appellant agreed with the shareholder that if Mildura Park failed to pay dividends or to redeem the shares and notice was given by The Perpetual Executors and Trustees Association of Australia Ltd. ("the trustee") or if by a change in the law the rebate allowable on dividends was removed and in relation to certain shares notice was given by the shareholder, the appellant would purchase the shares for a price equal to the amount payable upon redemption.

5. By the trust deed, which was made between the appellant, Mildura Park and the trustee, acting as trustee for the preference shareholders, the appellant undertook to the trustee to purchase the preference shares from the shareholders in the events already mentioned. By way of security for its obligations under the share issue agreements and the trust deed, the appellant charged in favour of the trustee specific registered land, which it owned, with the payment of the aggregate amount of moneys payable by it to the preference shareholders on account of the purchase price of the shares. By the instrument of mortgage the appellant mortgaged the land to the trustee to secure payment of those moneys in the event of the appellant's failure to perform its obligations under the trust deed and share issue agreement.

6. The primary judge concluded that the two instruments were given by the appellant as security for its due performance of a contingent purchase of preference shares and were not "mortgages" or "debentures" within the meaning of the relevant provisions of the Act. Because the Full Court considered that the instruments fell within the meaning of the word "debenture" it was unnecessary for the judges of that Court to examine the alternative argument based on the statutory definition of "mortgage".

7. The Act provides that the duties specified in the Third Schedule shall be chargeable upon the instruments specified in that Schedule (s.17(1)). Part XXII of the Schedule provides:

"XXII. MORTGAGE, BOND, DEBENTURE, OR COVENANT -

Upon every mortgage, bond, debenture or covenant and upon every foreign security -

...

where the amount secured thereby exceeds $10,000 - $11 for the first $10,000 secured thereby and for every additional $200 and also for any fractional part of $200 in excess of $10,000 ... ... ... ... ... ... ... ($) 0.80"

Subdivision (17) of Div.3 of Pt II of the Act is headed "Mortgage, Bond, Debenture or Covenant". The word "mortgage" is defined for the purposes of sub-div.(17) and Pt XXII of the Third Schedule by s.137D(1) to mean:

"... a security by way of mortgage or charge for the payment of any definite and certain sum of money advanced or lent at the time or previously due or owing, or foreborne to be paid, being payable, or 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) ... ".

The section then proceeds, in the form of lettered paragraphs, to include specific transactions within this definition. We set out par.(d) because it is relevant to the argument presented to the Court:

"(d) any instrument of mortgage or trust for the

purpose of securing holders of debentures."

8. Section 137D(3) limits the application of sub-div.(17) in relation to bonds or covenants to:

" ... bonds or covenants which secure the payment of a definite and certain sum of money advanced or lent at the time or previously due or owing, or foreborne to be paid, being payable, or 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)."

9. Section 137F provides:

"(1) A security for the payment or repayment of 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)(a) 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 be chargeable with additional duty in respect of so much of the advance as is in excess of the amount covered by the duty previously paid as follows ... ".

The subsection then sets out a scale according to which duty is levied on the instrument.

10. Section 137N, in the form in which it existed at the time of the execution of the instruments, provides:
"Unless the context otherwise requires words and
expressions in this subdivision and under the heading 'XXII. Mortgage, Bond, Debenture or Covenant' shall have the same meaning as is assigned to them in the Companies Act 1961."
Section 5(1) of the Companies Act provides that unless the contrary intention appears:

"'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."

11. By s.18 of the Stamps (Further Amendment) Act 1981 (Vict.), which came into operation on 1 January 1982, eleven days after the instruments were executed, a new section was substituted for s.137N. Paragraph (c) of the new section provides that, subject to certain enumerated exceptions, for the purpose of sub-div.(17) and Pt XXII of the Third Schedule:

"'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 ...".

It is evident that instruments of the kind in question are not now caught by the new definition of "debenture". But the issue which arises in this case must be determined with reference to the definition in s.5(1) of the Companies Act.

12. The classic definition of a mortgage is that given by Lindley M.R. in Santley v. Wilde (1899) 2 Ch 474, at p 474:

" ... 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."

The conveyance may be either a conveyance in equity or at law. However, the important point is that, although a mortgage usually secures a money debt, it does not always do so. For example, in Santley v. Wilde the mortgage secured, as well as repayment of moneys lent, the payment of a share of the net profit rents derived by the mortgagor. The definition of "mortgage" in s.137D(1) does not take up the traditional and accepted meaning of the term. The definition is exclusive, not inclusive. It sets out the statutory meaning exhaustively, in a manner which is more limited than the traditional meaning.

13. The application of the statutory definition to the two instruments in this case depends on the legal effect, not only of these instruments, but of the transactions between the preference shareholders and Mildura Park. The respondent submits that the security given by the appellant is for the right of the preference shareholders to divest themselves of their shares and to get their money back. But it is not a security for the right of the preference shareholders to get their money back from Mildura Park. There is no suggestion that the instruments are colourable or intended to operate otherwise than according to their terms. The shareholder's right under the articles to have his shares redeemed and to receive payment of the moneys payable on redemption is a right exercisable against Mildura Park. It is to be distinguished from the right of the shareholder to give notice to the appellant on a change in the law relating to the rebatability of dividends and the right of the trustee to give notice to the appellant on the failure of Mildura Park to redeem on the appointed date or on its failure to pay dividends because they are rights to require the appellant to purchase the shares. In the first case the shares are redeemed and the moneys paid on the shares are repaid by Mildura Park to the shareholder. In the second case the shares are not redeemed; they remain in existence and are purchased by the appellant from the shareholder, the purchase price being equal to the amount payable on the redemption of the shares. The security given by the appellant is for the performance of its undertaking to purchase, not for the performance of Mildura Park's obligation to redeem the shares under the articles.

14. Once this is seen to be the effect of the security given by the appellant, the question remains whether the instruments fall within the statutory definition of "mortgage". The answer to the question must be ascertained by seeking to apply the two main limbs of the general words of the definition in turn to the two instruments. The word "advanced" bears a wide meaning (Armco (Australia) Pty. Ltd. v. Federal Commissioner of Taxation (1948) 76 CLR 584, at p 621) and may extend to transactions which are not comprehended by the word "lent". However, there is no basis for saying that the instrument of mortgage given by the appellant was "for the payment of ... money advanced or lent at the time or previously due or owing, or foreborne to be paid, being payable". The mortgage was given as security for the performance of the appellant's undertaking to purchase, that is, for the discharge of its contingent obligation to pay the purchase price of the shares. And, even if, contrary to the view that we have expressed, it were possible to regard the mortgage as security for the payment of moneys payable by Mildura Park in performance of its obligation to redeem the shares, the mortgage would not answer that part of the definition which we have quoted. By no stretch of legal imagination can money subscribed for the issue of redeemable preference shares be described accurately as money lent or money advanced, even in a case in which there is an obligation, rather than an option, to redeem the shares on or before the date stipulated for redemption. The moneys are paid by the shareholder for the issue of the shares and on the issue of the shares he becomes a member of the company entitled to the rights which attach to the shares.

15. Nor was the security "for the repayment of money to be thereafter lent, advanced, or paid". No amount was to be lent or advanced at all for the reasons already given. And the only amount to be paid, the purchase price of the shares, was to be paid by the appellant and then only if one of the contingencies should occur. The appellant is correct when it submits that security was given for the payment of an original amount, not for the repayment of an amount previously paid.

16. The authorities lend no support to this branch of the respondent's case. They give emphasis to the notion that the statutory concept of mortgage, which is based on that found in s.86 of the Stamp Act 1891 (U.K.), contemplates the giving of security for (1) the payment of past or present loans and debts; (2) the repayment of future loans and debts; and (3) the repayment of money which may later become due upon an account current. The word "paid" which is introduced into the second category, tends to suggest that the category is wider than the first, but it has been held that it is restricted to a payment which results in a debt - see Wroughton v. Turtle (1843) 11 M &W 561, at pp 568-569 (152 ER 929, at pp 931-932) per Parke B.; cf. Suffield (Lord) v. Commissioners of Inland Revenue (1908) 1 KB 865, at p 889.

17. That the transaction in the present case is not caught by the definition of "mortgage" is demonstrated by the decision in Chow Yoong Hong v. Choong Fah Rubber Manufactory (1962) AC 209. The issue there was whether a transaction involving the discounting of bills of exchange and cheques gave rise to a breach of the Moneylenders Ordinance 1951 (Malaya) and this turned on the question whether the agreement for discounting was an agreement "for the repayment of money lent". The Judicial Committee held that the business of buying bills at a discount was quite distinct from money lending. Lord Devlin, delivering the opinion of the Judicial Committee, said (at p.215):

"The business of buying bills at a discount, that is, for their value at the date of purchase, is well known and is quite distinct from moneylending. Nowadays the buyer is usually a bank or a discount house, but the fact that he cannot be put into either of those categories does not alter the nature of the transaction, neither does the designation of the discount as interest. There is here no loan of money and no promise of repayment. Their Lordships' conclusion on this point is in accordance with the decision of Branson J. in Olds Discount Co. Ltd. v. John Playfair Ltd. ((1938) 3 All ER 275) that a purchase of book-debts for a specific sum was not a moneylending transaction."

Later his Lordship said (at pp.216-217):

"There are many ways of raising cash besides borrowing. One is by selling book-debts and another by selling unmatured bills, in each case for less than their face value. Another might be to buy goods on credit or against a post-dated cheque and immediately sell them in the market for cash. Their Lordships are, of course, aware, as was Branson J., that transactions of this sort can easily be used as a cloak for moneylending. The task of the court in such cases is clear. It must first look at the nature of the transaction which the parties have agreed. If in form it is not a loan, it is not to the point to say that its object was to raise money for one of them or that the parties could have produced the same result more conveniently by borrowing and lending money."

18. The recent decision of Tadgell J. in Ansett Transport Industries (Operations) Pty. Ltd. v. Comptroller of Stamps (1981) VR 35 does not support the respondent's argument. There the deed of mortgage which was held to fall within s.137D(1) gave security to the surety for the obligation of the principal debtor to repay to the surety moneys which it was called upon to pay to the principal creditor. The security was therefore given for the repayment of an amount which would be paid by the surety to the principal creditor before repayment to the surety by the principal debtor. Here it is otherwise, for the security is given for the payment of an original amount, the amount which the appellant will be liable to pay by way of purchase price for the shares in the future, if and when the preference shareholder gives notice requiring purchase by the appellant in the event of one of the three contingencies occurring.

19. For these reasons the instruments are not a "mortgage" within the statutory definition. The question then is whether they are a "debenture" within the meaning of sub-div.(17) and Pt XXII of the Third Schedule.

20. Any discussion of the nature of a debenture must begin with the statement that English judges of great authority have confessed that the term defies accurate definition (British India Steam Navigation Company v. Commissioners of Inland Revenue (1881) 7 QBD 165, at pp 172-173; Lemon v. Austin Friars Investment Trust (1926) Ch 1, at p 17; Knightsbridge Estates Trust, Ld. v. Byrne (1940) AC 613, at pp 621-622). However, it has been generally agreed that two characteristics of a debenture are, first, that it is issued by a company and, secondly, that it acknowledges or creates a debt - see British India Steam Navigation Company; Edmonds v. Blaina Furnaces Company (1887) 36 ChD 215; Levy v. Abercorris Slate and Slab Company (1888) 37 ChD 260, at p 264; Topham v. Greenside Glazed Fire-Brick Company (1888) 37 ChD 281, at p 292; Broad v. Commissioner of Stamp Duties (1980) 2 NSWLR 40, at pp 48-52. The debt may be secured on the assets of the company but security in this sense is not an essential characteristic of a debenture (Blaina Furnaces, at p.219). In Burns Philp Trustee Company Ltd. v. Commissioner of Stamp Duties (N.S.W.) (1983) 83 ATC 4,477 Hunt J. stated (at p 4,479) that, in order to constitute a debenture the debt which is acknowledged or created must be an existing, not a future debt. His Honour's view is supported by authority (Lemon v. Austin Friars Investment Trust; R. v. Findlater (1939) 1 KB 594, at p 599). However, the statement needs to be qualified to allow for a document which makes provision for the repayment of a loan to be made thereafter. On the other hand, not every document creating or acknowledging a debt of a company is a debenture. It has been said that commercial men and lawyers would not use the term when referring to negotiable instruments, deeds of covenant and many other documents in which a company agrees to pay a sum of money (Palmer's Company Law (1982) vol.1, p.531). And it has never been suggested that a promise in writing by a company to purchase shares at a future date amounts to a debenture in the ordinary sense of that term (cf. Inland Revenue Commissioners v. Henry Ansbacher &Co. (1963) AC 191, at p 205). Nor has it ever been suggested that a specific mortgage of land to secure a future obligation to purchase property amounts to a debenture according to its ordinary meaning (Knightsbridge Estates Trust, at pp.620, 629).

21. The question then is whether s.5(1) of the Companies Act so enlarges the meaning of "debenture" as to comprehend either the trust deed or the instrument of mortgage. When s.137N speaks of the meaning assigned to words and expressions in the Companies Act it must be taken to refer to the defined meaning assigned by that Act, rather than to the meaning that words and expressions bear in the various contexts in which they are found in that Act. So, in relation to the word "debenture", s.137N operates to import the definition contained in s.5(1), shorn of the qualification that the defined meaning is subject to any contrary intention in the Companies Act, and makes that defined meaning subject to any contrary intention that may appear in the Act (that is, the Stamps Act).

22. The critical element in the definition is "any other securities of a corporation whether constituting a charge on the assets of the corporation or not". 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 AC 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. Inland Revenue Commissioners (1961) AC 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 (1964) 109 CLR 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. That Act did not attempt to define "debenture" in terms of "security". For this reason, apart from any other reason, neither case is of much assistance here where the problem is to ascertain what is meant by the critical words which we have quoted in the context of an inclusive definition of the term "debenture".

23. The Full Court of the Supreme Court thought that assistance was to be derived from the earlier decision of the House of Lords in Knightsbridge Estates Trust. There Lord Romer asserted (at p.628) that "the word 'debenture' as ordinarily employed in legal and commercial circles did not in the year 1908 include an ordinary mortgage of land." None the less in that case, in common with the other members of the House of Lords, he held that an ordinary mortgage of land to secure the repayment of money lent and interest was a "debenture" within s.74 of the Companies Act 1929 (U.K.) (the successor to s.103 of the Companies (Consolidation) Act 1908 (U.K.)) because it fell within the expression "any other securities of a company" contained in s.380 of the 1929 Act. That section contained a definition of "debenture" which was the same as that contained in s.5(1) of the Companies Act 1961 (Vict.), except that it did not include the word "notes" and referred to a "company" instead of a "corporation". Although suspecting that the result may not have been intended by Parliament (pp.620-621, 629), their Lordships could see no basis for saying that the context required that "debenture" be given a more limited meaning.

24. There is an element of divergence in their Lordships' reasoning. Viscount Maugham considered that the effect of the wide terms of the definition was to comprehend "any securities granted on loan by a company" (pp.623-624). He did not say that the effect of the definition was to embrace any document issued by a company which in some way secured the payment of money. Consequently, when he concluded that there was nothing in the context of s.74 which required that "debenture" bear a meaning different from that assigned by s.380, he proceeded only on the footing that "any other securities of a company" included securities granted on loan by a company. On the other hand, Lord Romer thought that the words "any other securities" "mean what they say, and include all other securities of any kind whatsoever" (p.630). However, he did not disclose what he meant by the term "securities", though it may be said that, in view of the concluding words of the definition, he was not using the term "securities" in the sense of security over the assets of a company. The problem is compounded by the circumstance that Lord Atkin and Lord Wright agreed with the speeches of Viscount Maugham and Lord Romer, while Lord Porter contented himself with "My Lords, I concur" (p.630).

25. In the light of the difficulties already mentioned, which cannot be resolved by reference to the speeches, we consider that the authority of Knightsbridge Estates Trust is restricted to what it actually decided, namely that the definition of "debenture" in s.380 comprehended a specific mortgage of land by a company to secure a loan. So confined, the decision has no persuasive influence in determining whether s.5(1) of the Companies Act catches the two instruments in the present case.

26. The concluding words of the definition in s.5(1), "whether constituting a charge on the assets of the corporation or not", conformably with the express reference to "notes", which in Australia are unsecured, recognize what was pointed out in Blaina Furnaces, namely that the giving of security over an interest in property is not an essential characteristic of a debenture. For this reason alone it is difficult to accept that "any other securities of a corporation" refers only to securities in what has been called the primary sense of that term. However, it does not follow that the definition refers to securities in its widest and secondary sense. This is because the reference to "any other securities of a corporation" is used to supplement the categories of "debenture stock, bonds, notes" in the context of what is a debenture. In this context and regardless of its content in other respects, the word "securities" should not be seen as enlarging the scope of the definition of "debenture" in s.5(1) of the Companies Act to include documents by which a company agrees to purchase property at a future date. Such documents are of a quite different character to the issued debenture stock, bonds and notes of a corporation. They are not documents which acknowledge or create or secure an existing debt. They do not make provision for the repayment of a loan to be made in the future. According to judicial decision and traditional understanding, they have always stood outside the denotation of "debenture".

27. Moreover, an examination of the provisions of the Act demonstrates that the term "debenture", when used in sub-div.(17) and Pt XXII, was not intended to comprehend documents of this kind. Apart from s.137N it would be tolerably clear that the provisions of sub-div.(17) were not intended to apply to a promise to buy something in the future. So much at least appears from s.137F when that provision is examined closely. It is a critical provision because its purpose is to prescribe comprehensively how duty is to be charged in cases where moneys are to be paid in the future pursuant to a security (a) where the total amount secured or ultimately recoverable is limited (s.137F(1)) and (b) where the amount secured is unlimited (s.137F(2)). In speaking of "(a) security for the payment or repayment of money to be lent, advanced, or paid", the opening words of s.137F(1) produce some difficulty, but, consistently with the definition of "mortgage", they must be read as "(a) security for the payment of money advanced or lent or the repayment of money to be lent, advanced or paid". They refer, first, to a security for an existing debt or a debt created contemporaneously with the security and, secondly, to a debt which will arise after the creation of a security by reason of the subsequent loan, advance or payment of money. So understood, the section makes no prescription at all for the manner in which duty is to be paid in the case of a promise to buy something in the future, the price payable not being limited. Accordingly, the section proceeds on the footing that a security, which within the context of sub-div.(17) includes a debenture, does not include an instrument which creates or acknowledges a contingent future debt arising from a contingent obligation to purchase.

28. The contrast between the restricted definition of "mortgage" and the limited application of sub-div.(17) to bonds and covenants on the one hand and the wide meaning of "debenture" for which the respondent contends becomes a matter of some significance. It is not apparent why a document which would not be liable to duty as a mortgage, bond or covenant when given by an individual should be dutiable as a debenture when issued by a company. The absence of any such reason is an additional ground for thinking that in sub-div.(17) the word bears a more restricted meaning.

29. For the foregoing reasons we would allow the appeal, set aside the orders made by the Full Court and restore the judgment of the primary judge.

Orders

Appeal allowed with costs.

Order that the judgment and order of the Full Court of the Supreme Court of Victoria be set aside. In lieu thereof order that the appeal to that Court be dismissed with costs.