McCallum v National Australia Bank Ltd

[2000] NSWCA 218

CITATION:	McCallum (aka Hain) v National Australia Bank Ltd [2000] NSWCA 218
FILE NUMBER(S):	CA 40236/00
HEARING DATE(S):	14/08/00
JUDGMENT DATE:	17 August 2000
PARTIES :	Wendy McCallum (aka Wendy Hain) (Appellant) National Australia Bank Ltd (Respondent)
JUDGMENT OF:	Sheller JA at 1; Fitzgerald JA at 2; Heydon JA at 3

LOWER COURT JURISDICTION :	Supreme Court
LOWER COURT FILE NUMBER(S) :	10265/99
LOWER COURT JUDICIAL OFFICER :	Master Harrison

COUNSEL:	S Kaur-Bains (Appellant) J Stoljar (Respondent)
SOLICITORS:	Jackson Smith (Appellant) Mallesons Stephen Jaques (Respondent)
CATCHWORDS:	Stamp duties - loan security - up stamping - statutory construction - Stamp Duties Act 1920 (NSW) s 84(4) - ND
LEGISLATION CITED:	Stamp Duties Act 1920 (NSW) Interpretation Act 1987 (NSW)
CASES CITED:	In re Dehy Fodders (Australia) Pty Ltd; Winter v The Bank of Adelaide (1973) 4 SASR 538 Shepherd v Felt and Textiles of Australia Ltd (1931) 45 CLR 359 Wagga Finance Co v Lever (1929) 30 SR (NSW) 76
DECISION:	Appeal dismissed with costs

THE SUPREME COURT

OF NEW SOUTH WALES

COURT OF APPEAL

CA 40236/00
CL 10265/99

SHELLER JA
FITZGERALD JA
HEYDON JA

17 August 2000

McCALLUM (aka Hain) v NATIONAL AUSTRALIA BANK LTD
JUDGMENT

1    SHELLER JA: I agree with Heydon JA.

2    FITZGERALD JA: I agree with Heydon JA.

3    HEYDON JA:

Background

By a mortgage dated 23 February 1982 (“the Mortgage”) the appellant mortgaged rural land to a predecessor in title of the respondent as security for a loan. By 1996 the respondent had provided overdraft and other facilities to the appellant and she had fallen into default under those facilities. On 28 April 1997 the respondent lent $684,670.85 to the appellant on the security of the Mortgage. By 7 October 1998, when the monies owing had risen to $685,589.64, the respondent served a document on the appellant pursuant to clause 1 of the Schedule to the Mortgage, which provided that the appellant would “upon demand … pay” to the respondent any part of the Principal Sum which had not been paid. The money demanded was not paid. On 27 October 1998 the respondent served a letter dated 23 October 1998 on the appellant requiring her to deliver possession of the mortgaged land to the respondent. This letter was served with a view to attracting clause 21 of a Memorandum deemed to be incorporated in the Mortgage, which provided as follows:
“That immediately upon or at any time after any default as aforesaid it shall be lawful for the Bank at any time and from time to time immediately upon notice to do all or any of the following:
(a) To enter upon and take possession of all or any of the mortgaged premises ….”.

4    At the time that that notice was given, the Mortgage had only been stamped to the value of $670,000. On 9 August 1999, “up stamping” took place: that is, stamp duty was paid on an additional $14,671 at a cost of $60.

5    On or about 28 January 1999, before the up stamping, the respondent had brought proceedings seeking (inter alia) possession of the mortgaged property. On 5 June 2000 it obtained an order for possession from Master Harrison.

6    The Master rejected a defence advanced by the appellant which was expressed thus in paragraph 13 of the Further Amended Defence:

“the Mortgage had not been up stamped in accordance with the Stamp Duties Act 1920 (NSW) and therefore at the relevant time the terms of the Mortgage could not be exercised as the terms were unenforceable by reason of section 84(4) of the Stamp Duties Act.”

7 The appellant argued that if judgment for possession was to be obtained, the documents of 7 and 23 October 1998 had to be served; that serving them was part of the process of enforcing the mortgage; that they could not be validly served by reason of s 84(4) until the Mortgage had been stamped; and that the up stamping on 9 August 1999 did not retrospectively validate them. After referring to s 84(4) and to certain authorities, the Master said the appellant’s argument was “hopeless”.

8    The appellant’s argument on appeal raises two issues. The first is whether the up stamping of the Mortgage after the issuing of the documents of 7 and 23 October 1998 operated to validate them retrospectively. The second is whether issuing the documents of 7 and 23 October 1998 was “enforcement”.

Did the payment of duty after the serving of the 7 and 23 October 1998 documents prevent s 84(4) from operating to invalidating them?

9    The Master rejected the appellant’s argument because she considered that the principles stated in Shepherd v Felt and Textiles of Australia Ltd (1931) 45 CLR 359 were applicable. In that case Dixon J (with whom Starke J and McTiernan J agreed) held that Wagga Finance Co v Lever (1929) 30 SR (NSW) 76 was wrong: it decided that an action in detinue could not be maintained by a plaintiff who depended for his title to the goods he claimed on an assignment from the former owner on the ground that it was not stamped until after the commencement of the action. Rich J also denied the correctness of Wagga Finance Co v Lever. So did Evatt J, essentially because of the reasons given by Dixon J and because of the inconveniences that flowed from Wagga Finance Co v Lever.

10    Shepherd v Felt and Textiles of Australia Ltd was a case in which the plaintiff sued for wrongful termination of agreement. Tender by the plaintiff of the agreement was objected to on the ground that it was not stamped. The agreement was received into evidence, however, on payment to the trial judge’s associate of a sum representing the unpaid duty and fine. The High Court rejected arguments criticising the reception of the agreement. Dixon J said at 382-385:

“There remains the contention that … the document was not efficacious at the time of the alleged breach, which therefore could be not be wrongful. This argument depends upon sec. 29 of the Stamp Duties Act , the material words of which are: ‘Except as aforesaid, no instrument … shall … be pleaded or given in evidence, or admitted to be good, useful, or available in law or in equity for any purpose whatsoever, unless it is duly stamped in accordance with the law in force at the time when it was first executed.’ The words ‘except as aforesaid’ qualify the whole section, and it is evident that whatever is comprised within them is not vitiated by its provisions. The words refer to the preceding sections, including sec. 25, which allows instruments to be stamped after execution and upon payment of a fine if more than a month has elapsed, and sec. 27, which authorizes the reception in evidence of an instrument although there is some omission or insufficiency of the stamp thereon, if the amount of the unpaid duty and the fine payable by law is paid to the officer of the Court. Further, the condition expressed in the section upon which the usefulness of the instrument is made to depend is not introduced by the word ‘until’ but by the word ‘unless’. It is not to be pleaded or given in evidence or admitted to be good, useful or available unless it is duly stamped. The expressions ‘pleaded’, ‘given in evidence’ and ‘admitted’ refer to the use or the recognition of the document or of its operation in judicial proceedings or otherwise, and, I think, would naturally be understood as intending that when by due stamping it had become pleadable, receivable in evidence and admissible as good, useful and available, then its validity and operation as from the beginning were to be construed as unaffected by the enactment. It is to be noticed too that the words ‘duly stamped’ include late stamping under sec. 25. There is, perhaps, a little difficulty in applying them literally to the payment in Court of duty together with fine under sec. 27 because the officer does not stamp the instrument. But it is his duty at once to transmit the instrument to the Commissioner to be stamped. These considerations without more, in my opinion, combine to require an interpretation of the provisions of the Stamp Duties Act 1920-1924 which allows an instrument to receive its full force and effect ab initio , if it is stamped under sec. 25 or if duty and fine are paid under sec. 27. But when to these considerations is added the history of the provisions now standing as secs. 25, 27 and 29 and of their interpretation, it is impossible to doubt that instruments which may legally be stamped after execution, upon due stamping or payment under sec. 27 of duty and fine become in contemplation of law as efficacious from their execution as if they had never fallen within the operation of sec. 29. Sec. 29 takes its origin in sec. 11 of 5 Will. & M. c 21, and in sec. 59 of 9 & 10 Will. III. c. 25; and upon those statutes, in 1725, the Court of Kings Bench said: ‘It is every day’s practice, that upon payment of the duty and penalty, the writing is made good’ ( R v Bishop of Chester [(1725) 8 Mod. Rep. 364; 88 E.R. 260]. For the course of legislation since that time, it is enough to refer to sec. 19 of 31 Geo. III. c. 25; secs. 10 and 11 of 35 Geo. III. c. 55; sec. 6 of 43 Geo. III. c. 126; sec. 8 of 55 Geo. III. c. 184; secs. 12 and 14 of 13 & 14 Vict. c. 97; secs. 28 and 29 of 17 & 18 Vict. c 125 ( Common Law Procedure Act 1854); secs. 15, 16 and 17 of 33 and 34 Vict. c. 97 ( Stamp Duties Act 1870), and the New South Wales Stamp Duties Act of 1880, sec. 14. Throughout this course of legislation the Courts have uniformly acted upon the view that instruments which may upon payment of a fine be stamped at any time are to be received in evidence and enforced although duly stamped after the commencement of the proceedings. In 1805 Lord Eldon said that it ‘is the judgment of the law; that, where a paper can be stamped, paying the penalty, it is no objection, that it has not been stamped before the commencement of the suit … If the agreement is one, upon which no action is to be brought unless it is stamped, it must be stamped before action brought: but if it is an agreement, which you may get stamped, paying the penalty, there pending the action it may be stamped; and a cause has been allowed to stand over here upon that distinction. The consequence is, that, if the Court is not to act, where there has not been an observance of the revenue laws, neither is it to turn the party round, if, before the suit is over, those laws are complied with’ ( Huddleston v. Briscoe [(1805) 11 Ves. 583, at p. 595; 32 E.R. 1215, at p. 1219]. In Rogers. v James [(1816) 2 Marsh. 425 (reported also 7 Taunt. 147); 129 E.R. 59] Gibbs C.J. said that numberless instances have occurred in which a party has been nonsuited because the deed under which he claimed a right of action has had an insufficient stamp; but it has never been contended that after a valid stamp has been put upon it he has not by retrospection a good right of action. In Chervet v. Jones [(1822) 6 Madd. 267; 56 E.R. 1903] Sir John Leach V.C. directed that a suit upon an unstamped instrument should go on, but that before the decree was delivered the instrument should be produced to the Registrar stamped. The principle was applied in Burton v. Kirkby [(1816) 2 Marsh. 480; 7 Taunt. 174; 129 E.R. 70], in Rose v. Tomblinson [(1834) 3 Dowl. 49] and in Clarke v. Jones [(1834) 3 Dowl. 277]. It was recognized by Coleridge J. in Rankin v. Hamilton [(1850) 15 Q.B. 187, at p. 196; 117 E.R. 429, at p. 433], by Lord Campbell C.J in Alcock v Delay [(1855) 4 El. & Bl. 660, at p. 664; 119 E.R. 243, at p. 245] and by Martin B. in Whitehouse v. Hemmant [(1858) 27 L.J. Ex. 295]. In Wagga Finance Co. v. Lever [(1929) 30 S.R. (N.S.W) 76] the Supreme Court decided that an action of detinue could not be maintained by a plaintiff who depended for his title to the goods he claimed upon an assignment from the former owner which was not stamped until after the commencement of the action. In Electricity Meter Manufacturing Co. v. Manufacturers’ Products Pty. Ltd. [(1930) 30 S.R. (N.S.W.) 422] Street C.J., in whose judgment Ferguson and James JJ. concurred, distinguished this decision and confined its application within narrow limits. Whether the distinction was well taken it is unnecessary for me to consider because I do not think the decision in Wagga Finance Co. v Lever can be supported, but otherwise I agree with the judgment of Street C.J.”.
The arguments of the appellant on appeal

11 The appellant accepted that the Mortgage was valid from the date of its execution, but contended that s 84(4) prevented it from being enforceable and prevented the respondent from using any remedy available to enforce it.

12    The appellant contended that Shepherd v Felt and Textiles of Australia Ltd did not apply to the present issue for several reasons. One was that while the High Court was examining only s 29 of the Stamp Duties Act 1920, s 84(4) did not then exist, and was introduced only in 1987; it was wrong to “jump” from the reasoning used in relation to s 29 and apply it automatically to s 84(4). The second was that so far as Dixon J’s reasoning depended on the opening words of s 29, which referred back to ss 25 and 27, there was no equivalent in s 84(4). Thirdly, so far as Dixon J’s reasoning depended on the use of the word “unless” in

s 29, it was said that it had no corresponding application to s 84(4), either because the “plain and clear meaning” of s 84(4) compelled a different result or because the word “unless” was at best ambiguous. It was also submitted that the Interpretation Act 1987 (NSW) permitted recourse to the Second Reading Speech, which revealed that s 84(4) was dealing with a particular mischief and that mischief would not be dealt with effectively if “unless” were given the construction it was given in Shepherd v Felt and Textiles of Australia Ltd . Finally, it was said that the construction propounded by the appellant did not lead to injustice: persons in the position of the respondent were not kept out of their remedies, but could serve a fresh notice after ensuring that stamp duty was paid and could then proceed to enforce their rights.

13    In 1975 Part 3 Division 21 of the Stamp Duties Act was introduced to make provision for the up stamping of loan securities under which further advances were made. Considerable amendments were made in 1986. The expression “loan security” was defined in s 83(1), relevantly to the present case, as meaning “a mortgage that, at the time of its execution affected property in New South Wales”: paragraph (c). Section 84(1)-(3) provided:

“84. (1) Where:
(a) the total amount secured or to be ultimately recoverable by or under a loan security is limited to a definite and certain sum of money (whether or not it is expressed to be so limited) and pursuant to the loan security that total amount may be increased; and
(b) that total amount is increased (whether or not pursuant to the loan security),
then:
(c) if that total amount is increased pursuant to the loan security, that loan security; or
(d) if that total amount is increased pursuant to any other instrument, that other instrument,
shall be stamped as a loan security with the duty, if any, equal to the difference between:
(e) the duty, as duty on a loan security, that would be payable if a loan security were executed in respect of the sum of the amount payable or repayable under or secured by the firstmentioned loan security and the amount of that increase and any previous increases; and
(f) the duty, as duty on a loan security, paid on the firstmentioned loan security or on any such instrument relating to the firstmentioned loan security.
(2) A loan 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 (not being a mortgage otherwise chargeable with duty as a loan security) is to be stamped, where the total amount secured or to be ultimately recoverable is limited to a definite and certain sum of money (whether or not it is expressed to be so limited), with the same duty as a loan security for that total amount.
(2A) Where:
(a) the total amount secured or to be ultimately recoverable by or under a loan security is limited to a definite and certain sum of money (whether or not it is expressed to be so limited); and
(b) advances, or additional advances, are made under the loan security the total amount of which exceeds that definite and certain sum (even though the amount outstanding does not at any time exceed that definite and certain sum),
the loan security shall be stamped as a loan security, with duty equal to the difference, if any, between:
(c) the duty, as duty on a loan security, that would be payable if a loan security were executed in respect of the total amount of the advances; and
(d) the duty, as duty on a loan security, already paid on the loan security.
(3) If the total amount secured or to be ultimately recoverable by or under a loan security is not expressed (whether in the loan security or otherwise) to be limited to a definite and certain sum of money, the loan security is to be stamped with duty of $5 and, if an advance, or the total of an advance and one or more additional advances made under or secured by the loan security, exceeds $16,000, additional duty of $4 for every $1,000 or fractional remaining part of $1,000 of the total amounts advanced under or secured by the loan security in excess of $16,000 shall be payable.”

These provisions created the duty to “up stamp” by ensuring that duty was paid on the highest value of the money lent less what had been paid. Section 84(6)- (6B) provided:
“(6) An advance or additional advance referred to in subsection (2A) or (3) shall for the purposes of section 25 of this Act deemed to be made pursuant to a new and separate loan security first executed on the day on which the advance or additional advance was made.
(6A) Section 25 (Terms on which instruments may be stamped after execution) applies to and in respect of a mortgage referred to in paragraph (d) of the definition of ‘Loan security’ in section 83(1), being a mortgage which affects land in New South Wales, as if a reference in section 25 to the date on which an instrument is first executed were a reference to the date on which the mortgage affected land in New South Wales.
(6B) Section 25 (Terms on which instruments may be stamped after execution) applies to and in respect of an instrument which evidences the terms of a mortgage or becomes a mortgage as referred to in paragraph (e) of the definition ‘Loan security’ in section 83(1) as if a reference in section 25 to the date on which an instrument is first executed were a reference to the date on which the documents of title or instruments evidencing the terms of a mortgage were first deposited, or the instrument becomes a mortgage, as so referred to.”

The appellant accepted that loan securities regulated by s 84 were subject not only to s 25, but also to ss 27 and 28. It follows that the additional advance to which s 84 applied was subject to the duty created by s 25, the facility created by s 27 for receiving chargeable instruments provided the duty was immediately paid, and the facility created by s 28 for receiving secondary evidence of chargeable instruments. Hence the tender of the Mortgage or any other instrument pursuant to which a further advance was made could not be prevented by s 29.

14 The appellant contended that her construction of s 84(4) gave effect to an anti-avoidance goal in such a fashion as to indicate that it was to be preferred to the competing construction. The appellant submitted that it was notorious that often no step was taken to pay stamp duty until it was necessary to rely on the document in question in legal proceedings. The appellant submitted that if her construction was sound, mortgagees (who often have to move swiftly to enforce their securities, for example by appointing a receiver on becoming aware that the mortgagor was seeking to remove valuable property) would take pains to pay all stamp duty payable well before any occasion for enforcement arose. If the respondent’s construction was sound, the mortgagee would be able to hold back from paying stamp duty until it became clear that this would be necessary. The appellant submitted that in many cases when enforcement action was threatened, the mortgagor would either pay what was owed, or vacate the mortgaged property without fuss, and that in these cases there was a threat to the revenue unless the construction of the appellant was perceived by mortgagees to be sound: if mortgagors perceived the construction to be sound, they would pay stamp duty at the outset in all cases, at a time when it was unclear what would happen when enforcement action was threatened against a particular mortgagor.

15 In my opinion these arguments unduly discount the commercial morality of lenders in relation to the duty to pay stamp duty which is unquestionably payable. They also discount the fear lenders experience of having to pay fines for non-payment of duty, and the fear which professional advisers experience of being implicated in the circumstances which lead to the imposition of fines. But even if the empirical basis of these arguments were sound, they do not point sufficiently clearly to the appellant’s preferred construction of s 84(4). In particular, the Second Reading Speech does not adopt these arguments, and no other light is cast on the meaning of s 84(4) by the Second Reading Speech, even assuming it is permissible to have resort to it. The appellant relied on the following parts of the Second Reading Speech delivered on 4 December 1986 by Mrs D Grusovin, the Minister for Consumer Affairs and Assistant Minister for Health, to the Legislative Council. She said that the Stamp Duties (Further Amendment) Bill, which introduced s 84(4), included a mixture of various provisions, some of which were “reviews of avoidance practices”. These “anti- avoidance provisions” were said to include “a wide-ranging review of the loan security duty provisions”. The speech referred to a “third area of avoidance … in relation to loan securities”. A summary of “the main anti-avoidance features of the amendments” was given, namely:

“the redefinition of ‘loan security”, the clarification of duty liability on unlimited loan securities, the removal of the right to use adhesive stamps on certain loan securities, clarifying the position in relation to securities that include New South Wales property only after execution, and the bringing to duty of caveats which protect unregistered mortgages.”

The speech then said:
“Unlimited loan securities are becoming increasingly popular because of the flexibility they provide to both borrowers and lenders. These securities provide for large sums of money to be loaned to the borrower, but because there is not a fixed and certain amount, the security is usually liable to duty of only $5. The Act provides for additional duty to be paid when advances are made, but the amendments clarify and strengthen these provisions to ensure that duty avoidance is minimised and that the provisions can be more effectively enforced.”

The speech then turned to the extension of the legislation to loan securities executed outside New South Wales which initially did not relate to New South Wales property but later encompassed it, and to provisions rendering caveats dutiable.

16 Thus the Second Reading Speech did not discuss the detailed language of any part of s 84, and though s 84(4) had no counterpart in the legislation as it stood before the amendments introduced by the Minister, her speech did not discuss s 84(4).

17 It is necessary to examine the language of the statute rather than the language of the Minister. It does not point clearly to the construction for which the appellant contends. Further, it must be construed against the background of what has been said authoritatively about similar legislative language. A striking feature of s 84(4) is its use of the word “unless”. An essential aspect of Dixon J’s reasoning in Shepherd v Felt and Textiles of Australia Ltd is the construction it gave to the word “unless”. Dixon J treated that word as pointing to the consequence that late payment of duty would bring about a retroactively validating effect under s 29. The officers responsible for drafting s 84(4) must be presumed to have been aware of Dixon J’s approach to the word “unless” in s 29 - an approach which has been relied on in later authority, e.g. In re Dehy Fodders (Australia) Pty Ltd; Winter v The Bank of Adelaide (1973) 4 SASR 538 at 544 per Bray CJ and 556 per Walters J. The officers responsible for drafting s 84(4) must also be presumed to have been aware of Dixon J’s analysis of former stamp duty legislation and of the authorities on it which favour the view that stamping retrospectively validates conduct undertaken before stamping. If the parliament had intended to avoid in s 84(4) in relation to up stamping the consequence which Dixon J attributed to s 29 in relation to initial stamping, one would expect it not to have used the expression “unless”, but rather to have used language excluding the possibility of retroactive operation. The use of “unless” in s 84(4) in the light of the construction given to it by the High Court when it appeared in s 29 points against the validity of the appellant’s argument.

18    The appellant’s arguments would produce curious results. Once up stamped, mortgages in the position of the Mortgage in this case would have full validity, and would be admissible in evidence, but would be wholly unenforceable to the extent that any act of enforcement preceded the date of up stamping, and would be unenforced until some fresh step was taken to enforce them. The anomalous position of up stamped loan securities might produce considerable practical inconvenience in some circumstances. These consequences would have to be endured if statutory language compelled them, but one would look for clear statutory language before lightly arriving at them.

19 In short, the appellant’s arguments must be rejected because they find no clear support either in s 84(4) or in the Second Reading Speech; because if they were correct one would expect, in the light of prior authority, different language from that which was employed; and because if they were sound they are capable of producing inconvenient results which one would expect to be produced only by clear words.

Was the service of the documents of 7 October 1998 and 23 October 1998 an act of enforcement?

20 Since the appellant’s construction of s 84(4) has been rejected, it is not necessary to consider whether in any event s 84(4) applies to the service of the documents dated 7 October 1998 and 23 October 1998.

Orders

21    I would dismiss the appeal with costs.

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