ACN 075 911 410 Pty Ltd v Almaty Pty Ltd

Solicitors: O'Neill Partners (plaintiff) Russells (first - fourth defendants) Kent Attorneys (fifth - sixth defendants) File Number(s): 2014/229138 Publication restriction: None

Judgment

1. These proceedings were commenced by originating process filed by the plaintiffs on 4 August 2014.
2. There were originally five plaintiffs, but on the last occasion the proceedings were before the Court for directions the third and fourth plaintiffs advised the Court that they wished to discontinue the proceedings. The discontinuance of the proceedings by those plaintiffs has not yet become effective, but that does not matter for the purposes of these reasons for judgment.
3. The remaining plaintiffs claim an entitlement to orders under s 447C of the Corporations Act 2001 (Cth) (the Act), that the appointment of the first defendants as administrators of Beechworth Land Estates Pty Ltd (Beechworth), and the third defendants as administrators of Griffith Estates Pty Ltd (Griffith), was not valid. The same gentlemen, Mr Neil Robert Cussen and Mr Ezio Marco Senatore, have been joined to the proceedings in their different capacities as the first and third defendants. I will refer to them as the "administrators".
4. The remaining plaintiffs claim other relief designed to bring the administration of Beechworth and Griffith to an end, but it is not necessary to consider the alternative bases for the relief claimed by the plaintiffs. The originating process has been amended on a number of occasions, but it is also not necessary to consider the amendments that have been made.
5. I am part heard in these proceedings. After a hearing that took many days between 7 October and 19 December 2014, the proceedings were adjourned, as time was not available to continue them. There appears to be some uncertainty as to the future conduct of the proceedings. That issue will be considered at a directions hearing that is fixed to occur on 2 April 2015.

Separate questions

1. The plaintiffs have filed points of claim in the proceedings, and have subsequently amended those points of claim. In relation to both of the companies the plaintiffs have claimed, as one basis for the Court to declare that the administrators were not validly appointed, that the appointments were invalid because of a failure to pay mortgage duty on the security instruments that were the basis for the appointment of the administrators.
2. There is no order in force under Uniform Civil Procedure Rules (NSW) r 28.2 for the separate determination of whether the appointments were invalid, because of the non-payment of mortgage duty. However, early in the hearing, the parties delivered their submissions on this issue as a discrete matter. They have now requested that I give judgment on the issue. As I understand it, the parties are of the view that, depending upon the outcome, the determination of the issue may either facilitate the settlement of the proceedings, or otherwise enable the parties to limit the remaining issues. The precise manner in which the early determination of the mortgage duty issue may achieve these ends was not explained to me. However, I accept that it will be in the interests of the parties, as well as the administration of justice, for me to decide the question, if that will increase the prospects of this matter being settled, or the issues confined. I will not explain this observation in detail. The hearing did not finish in the time allotted for it. In my view there is considerable doubt about the utility of the proceedings. There is an appearance that the costs involved will be entirely out of proportion to the benefits that even the successful parties will gain. There is every appearance that both companies are insolvent. The battle royal that is being conducted does not appear to satisfy the interests of the creditors of the companies. It is possible that, if the plaintiffs succeed in obtaining an order that the administrators were not validly appointed; the result may be nugatory if some third-party with standing to do so makes an application for some form of administration of the companies in insolvency.
3. The administrators have, in response to the plaintiffs' claim that their appointment was invalid, sought an order under s 447A of the Act to the effect that Part 5.3A of the Act is to operate as if the administrators were nonetheless validly appointed. During the course of my consideration of the question of the effect of the non-payment of mortgage duty, I have come to the conclusion that, if I decide that issue separately, I should also decide the question whether the Court has power under s 447A to validate the appointment of the administrators. If I did not also decide that issue, but left it unresolved, that would diminish the likelihood that the purpose of my delivering this separate judgment would be achieved. The parties have dealt with this issue in their submissions.
4. I do not consider the parties to have finally dealt with the question whether, if the Court has power to make an order under s 447A in the present case, it should do so. Accordingly, it would not be appropriate for me to deal with that question at this stage of the proceedings.
5. It will be preferable for the course sought by the parties, whereby the Court will determine a number of issues separately from the other issues in the proceedings, to be put on a formal footing by an appropriate order made under UCPR r 28.2. It will be appropriate for this to be done retrospectively, and I will hear the parties as to the appropriate terms of the order, after I have given judgment.
6. The course that I have taken is entirely exceptional. I would expect that applications by parties to proceedings for the Court to publish a judgment on individual issues, before the conclusion of the hearing, would routinely be rejected, where the parties have not formally addressed the making of orders under UCPR 28.2 in a timely way. As I understand it, in the present case, thought was given to whether an order for separate determination should be sought, but ultimately an order of that nature was not made.

Basis of plaintiffs' claim that administrators were not validly appointed

1. The administrators were appointed by the fifth and sixth defendants, being Vangory Holdings Pty Ltd and Vangory Services Pty Ltd. The fifth defendant (Vangory Holdings) appointed the administrators as administrators of Beechworth, and the sixth defendant (Vangory Services) appointed them as administrators of Griffith. Both appointors acted on the basis of securities that Beechworth and Griffith had respectively given to them, and in exercise of the power contained in s 436C(1) of the Act, which provides: A person who is entitled to enforce a security interest in the whole, or substantially the whole, of a company's property may by writing appoint an administrator of the company if the security interest has become, and is still, enforceable.
2. The plaintiffs' claim is that, at the date of the appointment of the administrators in respect of the two companies, the security interests upon which Vangory Holdings and Vangory Services acted were not enforceable, because mortgage duty payable in respect of the securities under the Duties Act 1997 (NSW) (the Duties Act) had not been paid. Section 211 of the Duties Act provides: A mortgage on which duty is required by this Chapter to be paid is unenforceable to the extent of any amounts secured by the mortgage on which duty has not been paid.
3. The plaintiffs' claim that the appointment of the administrators, as administrators of both companies, was invalid because of the non-payment of mortgage duty, arises in different ways in respect of each of the companies. It will be appropriate to consider the two claims separately. However, it will be convenient to deal first with the question of the proper interpretation of s 436C of the Act.

Interpretation of s 436C of the Act

1. Although the circumstances in which mortgage duty had not been paid on the security interests were different in the case of each of Beechworth and Griffith, the plaintiffs say that, at the date of the appointments, s 211 of the Duties Act had the effect that the security instruments were unenforceable, so that they were not enforceable for the purposes of s 436C of the Act. The administrators' response to this argument differed as between Beechworth and Griffith. In the case of Beechworth the administrators argued that, although it was true that mortgage duty had not been paid on the security interest under the Duties Act, no mortgage duty was payable, as the property the subject of the security interest was at all relevant times situated outside New South Wales; and there was no requirement for mortgage duty to be paid under the law of Victoria, which is the place where the property was located. In the case of Griffith, the administrators accepted that the property the subject of the security interest was located in New South Wales, so that the security interest became liable to payment of mortgage duty. The required mortgage duty had not been paid at the date of the appointment of the administrators. The administrators accepted that the security interest was, accordingly, unenforceable as at that date. The full amount of the duty was paid after the administrators were appointed. They argued that, on the proper interpretation of the Duties Act, the effect of the subsequent payment of the required mortgage duty was that, as a matter of law, the security interest must be considered as being as enforceable from its inception as if the mortgage duty had been paid by the due date.
2. The concept of enforceability arises in two statutory contexts - s 436C of the Act, and s 211 of the Duties Act. It will therefore not be sufficient to consider the meaning of unenforceability for the purposes of the Duties Act. The primary question is whether the relevant Vangory company was entitled to a security interest in the whole, or substantially the whole, of the property of Beechworth and Griffith, and the security interest had become, and was still, enforceable at the date of the appointment of the administrators.
3. In the present case the question is whether the word "enforceable" has the meaning that the security interest must actually be enforceable as a matter of law at the date of appointment, or whether it is sufficient if the security interest is not enforceable as at that date, but by reason of some subsequent event, it is deemed as a matter of law aways to have been enforceable from the date of the default.
4. A number of considerations may be relevant to this issue of statutory interpretation, and to the subsequent issue of whether, if s 436C of the Act requires that the security interest actually be enforceable at the date of the appointment, the Court has power under s 447A to make an order having the effect of validating the appointment, if the enforceability of the security interest is only established retrospectively.
5. It is necessary to note a number of features of the Duties Act that concern the timing of the payment of duty charged by the Act. Section 208(1) has the effect that a mortgage may become liable to mortgage duty on the date of its first execution, and s 208(2) imposes a liability to additional duty on the making of each subsequent advance that is secured by the mortgage. Under s 207, the mortgagor is the person liable to pay the mortgage duty. That is so even though the mortgagee will be the party concerned to ensure that the mortgage is enforceable at all times. Section 209, which is concerned with when the duty must be paid, provides: "A tax default does not occur for the purposes of the Taxation Administration Act 1996 (NSW) if duty is paid within 3 months after the liability to pay duty arises". Under s 3 of that Act (the TAA), "tax default means a failure by a taxpayer to pay, in accordance with a taxation law, the whole or part of the tax that the taxpayer is liable to pay". Section 4 of the TAA includes the Duties Act within the meaning of "a taxation law". Section 26(1) of the TAA imposes a liability on the taxpayer to pay penalty tax in addition to the amount of tax unpaid if a tax default occurs. Section 8 of the TAA vests in the Chief Commissioner a general power to make an assessment of the tax liability of a taxpayer. The provisions of the TAA dealing with assessments show that, in particular cases, the completion of the assessment may take some time before the Chief Commissioner is able to determine the amount of duty that is payable. Section 297 of the Duties Act has the effect that, for the purposes of the TAA, the stamping of an instrument by the Chief Commissioner is taken to constitute an assessment of the duty payable under that Act. Under s 289 of the Duties Act, an instrument is duly stamped if it is stamped in accordance with that Act. Finally, s 296 of the Duties Act creates a criminal offence in the following terms: "… a person liable with respect to any instrument chargeable with duty… must cause the instrument…to be duly stamped…within 6 months after it was first executed".
6. The relevance of these provisions is that they demonstrate the fact that it is neither required by law, nor is it the practice, that stamp duty imposed upon instruments must be paid at or before the time of execution. Stamp duty is ordinarily paid after execution, within time periods stipulated by the legislation. The legislation contemplates that the duty may be paid late, in which event penalties may be imposed. In some cases it may be necessary for the Chief Commissioner to engage in a process of assessment, which may entail some delay in the determination of the amount of duty payable. An instrument is not duly stamped until it is stamped in accordance with the Duties Act.
7. An analysis of the provisions of the Duties Act, as well as the TAA, therefore seems to suggest that it is inherent in the arrangements imposed for the payment of duty that there will be delays between the time when the duty is imposed and when it is paid. As time elapses, penalty and criminal sanctions may be imposed if the duty is not paid.
8. It follows from these considerations that, if "enforceable" in s 436C of the Act invariably means presently enforceable as a matter of law, the holder of the security interest will not be able validly to appoint an administrator during the period after the execution of the security interest when mortgage duty, in the ordinary course of business, has not yet been paid, but no default has arisen.
9. Part 5.3A was first inserted into the Corporations Law when Part 4 of the Corporate Law Reform Act 1992 (Cth) commenced on 23 June 1993. The interpretation of its provisions must be undertaken from the perspective that stamp duty on securities was charged under the legislation of the several States and Territories that preceded the Duties Act, and its contemporary equivalents. For the reasons that will appear below from my examination of the relevant authorities, it is established that, at least as between the parties to a security instrument, inadequate payment of duty under the precursor statutes to the Duties Act led to a form of 'suspensory' unenforceability, in the sense that late payment of duty plus any penalty would have the effect that the security was considered to be enforceable in the same way as if the duty had been paid by the due time. It is therefore clear that, at the time Part 5.3A was first enacted, it was necessary to interpret s 436C from the perspective that it was well established that the security interest may be unenforceable at the date of the appointment of the administrator, but the subsequent payment of the requisite duty would have the effect, as between the parties to the security interest, that it had been valid and enforceable from its inception.
10. Notwithstanding these considerations I have come to the conclusion that the better view is, for the reasons that follow, that the word "enforceable" in s 436C of the Act requires that the security interest be presently enforceable as a matter of law at the date of the appointment of the administrator.
11. The plaintiffs relied strongly on the decision of the Court of Appeal in Correa v Whittingham [2013] NSWCA 263; (2013) 278 FLR 310, albeit prim-arily in the context of the proper interpretation of s 211 of the Duties Act. The plaintiffs relied upon the decision in support of their argument that s 211 has the effect that, if mortgage duty is not duly paid, the security is unenforceable notwithstanding late payment of the full amount of the mortgage duty.
12. The Court of Appeal in that case was concerned with the validity of an appointment of an administrator by the directors of a company under s 436A of the Act. The company was registered under the Registered Clubs Act 1976 (NSW). Section 41 of the Registered Clubs Act relevantly provided: "A person is not capable of being appointed to act in the capacity of the administrator…of a registered club that is a company within the meaning of the Corporations Act…or of acting in any such capacity unless the person has been… (b) approved to act in that capacity by the Authority" . The question was whether the administrator had validly been appointed in circumstances where the Authority did not give its approval before the date of appointment, but did so some 11 days later. The Court of Appeal held that a person who did not have the approval of the Authority under s 41, at the time of the appointment, lacked capacity to be appointed as an administrator, and that incapacity could not be cured by the granting of any subsequent approval. The Court of Appeal was primarily concerned with the proper interpretation of s 41, as the effect of s 5E(2)(e)(ii) of the Act was that s 41 of the Registered Clubs Act and s 436A of the Act operated concurrently, and the effect of s 5E(4) of the Act was that s 41 was effective in accordance with its terms, as it was not directly inconsistent with s 436A.
13. In essence, the Court of Appeal held that, for various reasons, s 41 should be interpreted to have the effect that it required the approval of the Authority to be given before the appointment of the administrator under s 436A, and that the appointee's capacity had to be established once and for all before the time of appointment.
14. It should be noticed that the Court of Appeal was not primarily concerned with the proper interpretation of s 436A. Relevantly, for the purposes of that case, there was no issue as to whether the conditions for an appointment under s 436A by the directors of the company were satisfied. In the present case the primary question, which is the question now under consideration, is whether the condition for a valid appointment contained in s 436C was satisfied .
15. Gleeson JA (with whom Barrett JA and Tobias AJA agreed) at [93] and [94] set out important considerations, which, though directed towards the proper interpretation of s 41 of the Registered Clubs Act, are highly germane to the proper interpretation of s 436C of the Act in the present case. His Honour said: [93] There are a number of other relevant considerations which highlight the difficulties with the approach of the primary judge in construing the statutory requirement in s 41 as only having "suspensory effect". First, this approach disregards the significance of the time periods imposed by Pt 5.3A for the taking of various steps in relation to an administration including the convening of creditors meetings to make decisions as to the fate of the company's affairs and the giving of relevant notices by the administrator. These include the following: (a) the first meeting of creditors must be held eight days after the administration begins (s 436E(2)); (b) the second meeting of creditors must be held within five business days before, or after, the end of the convening period (s 439A(2)), which is generally 20 business days beginning on the day after the administration begins (s 439A(5)); (c) in each case, notice of such meetings must be given at least five business days before the meeting (s 436E(3) and s 439A(3)); (d) the rights of secured creditors, owners and lessors under Div 7 of Pt 5.3A; and (e) the power of administrators to give notice to an owner or lessor of property used or occupied by the company within five days after the beginning of the administration, stating that the company does not propose to exercise rights in relation to the property (s 443B(3)). [94] On the primary judge's preferred construction, because s 41 does not specify the time in which an approval by the Authority must be given after an appointment, the administrator, creditors and members, as well as owners and lessors would be left in a state of not knowing whether the administrator's appointment might be subsequently rendered invalid because either an approval had not been sought, or if sought, had not been granted. A construction productive of such great uncertainty is to be avoided.
16. This reasoning justifies a conclusion in the present case that the word "enforceable" in s 436C of the Act means actually enforceable as a matter of law at the time of the appointment of the administrator. The provisions of Part 5.3A of the Act will have considerable significance for the affairs of the company, its officers, its creditors and others. The significance of the provision is increased by the strict regime, including as to the timing of the steps in the administration, imposed by Part 5.3A. The validity of the appointment of the administrator should not be capable of remaining in suspense pending the payment of outstanding mortgage duty by some interested party. It should not be possible for any party to be in a position where it can control the validity of the administration by means of a subsequent decision as to whether or not to pay unpaid mortgage duty. It should not be possible for an administration to remain perpetually in suspense, because no interested party pays outstanding mortgage duty. It is not desirable that any party, who is not a party to the mortgage, should be put in the position where that party may have to pay the mortgage duty in order to secure the retrospective validity of the appointment of the administrator, where that party wishes to establish the validity of the administration, or some step carried out under it.
17. That interpretation of s 436C will have the undesirable effect that it may hinder the appointment of an administrator during the period in which mortgage duty has not been paid, but is before the date when a default in payment arises. However, it is at least open to the holder of the security interest to accelerate the payment of the mortgage duty before the holder acts under s 436C to appoint the administrator. As Ward J (as her Honour then was) noted in C & L Cameron Pty Ltd - GB Gazzana v Nadalan Enterprises Pty Ltd [2012] NSWSC 676 at [57], a mortgage on which duty was not paid at the time required by the Duties Act would become prospectively enforceable if the duty was paid late, but before the time at which the enforceability of the mortgage was relevant.
18. Any inconvenience that may arise from this interpretation of the section will be ameliorated by the consideration, to which I will now turn, that s 436C only requires that the security interest be enforceable, and not that the whole of the mortgage duty has been paid. The difficulty will further be reduced, if, as I conclude below, the Court has power under s 447A of the Act to order that Par 5.3A is to operate as if the administrator has validly been appointed, in appropriate cases, if the administrator is appointed by the holder of a security interest at a time when the interest is not enforceable by reason of the fact that no mortgage duty has been paid as required by the Duties Act.
19. The conclusion that I have thus far reached is that s 436C of the Act does not permit the valid appointment of an administrator if the security interest is, at the time of appointment, entirely unenforceable because no mortgage duty imposed by the Duties Act has been paid.
20. A relevant feature of mortgage duty is that the arrangements for its payment must accommodate the fact that mortgages may be limited or unlimited, and the amount secured by the mortgage may change over time. The fact that the amount secured may change has led to legislative arrangements that provide for what is commonly called "up stamping". That is probably the reason for the introduction into the Duties Act, and its precursors, of provisions such as s 211. Before the introduction of mortgage duty into the legislation, the duty imposed upon instruments or transactions would either be paid, or not paid, and the instrument or transaction would be valid, and evidence thereof admissible, or not. Consequently, the enforceability provisions took the standard form of s 29 of the Stamp Duties Act 1920 (NSW), to which I will come in due course. In the case of mortgage duty, however, the enforceability provision must deal with the possibility that mortgage duty has been paid in respect of some, but not all, of the amount secured by the mortgage. The provision therefore must accommodate partial enforceability.
21. Section 211 of the Duties Act provides that the mortgage "is unenforceable to the extent of any amount secured by the mortgage on which duty has not been paid". Thus, if only part of the mortgage duty required to be paid has been paid, the mortgage will be enforceable, but only to the extent necessary to recover the amount for which mortgage duty has been paid. The wording of s 211 may be compared with that of its precursor, s 84(4) of the Stamp Duties Act. The terms of that provision were: A loan security referred to in this section is unenforceable unless it has been stamped as provided by this section, whether or not the amount in relation to which the loan security is sought to be enforced is less than the amount in relation to which it is required to be stamped.
22. The effect of this provision was that a loan security was not enforceable at all unless all of the duty required to be paid had been paid. There was thus a material change in wording between the former and present provisions that deal with the enforceability of security interests upon which mortgage duty has not been paid. This change in wording is clear, and straightforward, and there is no justification for the Court to do other than to apply the wording of s 211 in accordance with its ordinary meaning.
23. The consequence is that, for the purposes of s 436C of the Act, a security interest will be enforceable at the time of the appointment by the security holder of an administrator, if at that time at least some of the mortgage duty charged on the security interest has been paid.
24. I cannot discern in Part 5.3A of the Act any statutory intention to secure the revenue interests of the several States and Territories, in relation to the recovery of mortgage duty. The Part is merely concerned with the need for the security interest to be enforceable at the time the security holder acts to appoint the administrator. There is therefore no reason to add a gloss to the wording of s 436C, which has the effect of adding the word "entirely" before the word "enforceable".
25. A further relevant consideration arises from the fact that Part 5.3A was first inserted into the Corporations Law when Part 4 of the Corporate Law Reform Act 1992 (Cth) commenced on 23 June 1993. At that time the different stamp duty regimes of the various State and Territorial jurisdictions could, and frequently did, apply to single security instruments in overlapping and inconsistent ways, which could lead to the outcome that the security might be enforceable in one jurisdiction, but not in others.
26. Even now, there is a material difference between the legislation of New South Wales, which for the time being continues to impose mortgage duty on security instruments, and that of the only other competing jurisdiction, Victoria, which has repealed the legislation that formerly imposed mortgage duty. As s 436C is a provision in a Commonwealth statute that is required to be applied in the same terms throughout the Commonwealth, problems may arise in relation to its implementation where a single security interest is treated differently as to its enforceability by the legislation of different States or Territories. It is necessary for the Court to be alive to that problem, but it is best dealt with in the context of particular fact situations, if and when it arises. I will return to this issue when I consider the validity of the appointment of the administrators to Beechworth.

Availability of s 447A of the Corporations Act

1. Section 447A(1) of the Act provides: "The Court may make such order as it thinks appropriate about how this Part is to operate in relation to a particular company".
2. The plaintiffs argued that the Court of Appeal in Correa v Whittingham held that the Court has no power under s 447A to validate an invalid appointment made in breach of State law (in that case, s 41 of the Registered Clubs Act). They submitted that there is no reason why an appointment made invalid by reason of s 211 of the Duties Act would fall outside that principle.
3. In my view the reasoning of the Court of Appeal in that case is clearly distinguishable from the present.
4. The plaintiffs' argument may have been valid, if the appointment of the administrators had been an act undertaken in the enforcement of the security interests. However, the appointment, by the holder of a security interest issued by a company, of administrators of the company under s 436C, is not an act of enforcement of the security, or an act in aid of the realisation of that security. The appointment of an administrator by a secured creditor is a step which may often result in the creditor's right under the security never being enforced at all: see Australian Innovation Ltd v Dean-Willcocks [2001] NSWSC 1204; (2001) 40 ACSR 531 [25] - [33].
5. The requirement that the security interest be enforceable is, for the purposes of s 436C, a trigger for the entitlement to appoint the administrator under s 436C, and not part of the process of enforcing the security. If the appointment of an administrator under s 436C is invalid, it is not so by force of s 211 of the Duties Act; it is because for the purposes of s 436C of the Act, the security interest was unenforceable.
6. In Correa v Whittingham Gleeson JA said at [103] and [104]: [103] First, whilst the powers under s 447A are wide, they are not entirely without limit. In particular, s 447A is not a general power standing apart from the scheme found in Pt 5.3A of the Corporations Act: see Australasian Memory Pty Ltd v Brien at 280 [20] and 281 [24]. [104] Secondly, s 447A(1) speaks of orders about how "this Part" is to operate in relation to a particular company. The reference "this Part" is to be understood as a reference to each of the provisions in it: see Australasian Memory Pty Ltd v Brien at 279 [18]. Clearly, s 41 of the Registered Clubs Act is not a provision contained in Pt 5.3 A. Thus, there is no power under s 447A of the Corporations Act to validate the invalidity of an administrator's appointment arising under s 41 since the former section is directed to how Pt 5.3A of the Corporations Act operates in relation to a company, not the operation of separate State or Territory legislation.
7. In the present case, the making of an order as sought by the administrators under s 447A would not involve the Court attempting to change the operation of s 211 of the Duties Act; rather it would involve the Court ignoring the unenforceability of the security interest under that Act. The order would constitute an order about how "this Part" is to operate in relation to a particular company. The effect of the order would be that the appointment under s 436C would be effective, notwithstanding the unenforceability of the security interest at the time, because the mortgage duty payable on the security interest has subsequently been paid.
8. The making of an order under s 447A would not necessarily be dependent on a resolution of the issue as to whether the late payment of mortgage duty has had the result that, as between the parties to the security interest, it has been valid and enforceable from its inception, or whether it only has the result that the security interest is prospectively enforceable. There is nothing in the wording of s 447A that mandates the outcome that it will only ever be appropriate to make a validating order if the effect of the late payment of mortgage duty has been to retrospectively establish the enforceability of the security interest.
9. The plaintiffs also submitted that an appointment of an administrator under s 436C of the Act cannot properly be validated by an order made under s 447A, if the underlying security was not enforceable at all. I do not accept this argument, at least in so far as it applies to the circumstances of the present case. It is not necessary for the Court to address the issues that may arise in cases where the security interest has not become enforceable in accordance with its terms, because, for example, there has been no default. It is clearly the intention of s 436C that the power of the secured creditor to appoint an administrator is dependent upon the appointor having the benefit of a valid security, and a valid basis for enforcing the security. I would not generalise, but it is understandable that the Court would hesitate to exercise the power contained in s 447A in cases where it was established that the supposed security interest did not exist, or that there was no default or other event making the security enforceable. I would not like to say, however, that the Court would never exercise the power in s 447A in those circumstances.
10. However, the present case is concerned with possible unenforceability because of the late payment of mortgage duty. The Court is not concerned with a total failure to pay the mortgage duty. For the reasons that I have explained above, the issue of enforceability may arise at a time before the fact of non-payment of mortgage duty has led to any default under the Duties Act. It is not the purpose of the Act to ensure that mortgage duty is paid to any revenue authorities of the States and Territories. Section 436C may be satisfied if the security interest is only partially enforceable; and notwithstanding that a substantial part of the mortgage duty payable has not been paid.
11. In National Australia Bank Limited v Horne [2011] VSCA 280; (211) 253 FLR 205 the Victorian Court of Appeal held at [31] that s 477A was not limited to being available "to cure defects or to remedy the consequences of some departure from the scheme as set out in the other provisions of Part 5.3A. Its operation should not be confined to such cases". I respectfully agree.
12. I accordingly find that s 447A of the Act is, in the present case, a valid basis for the Court to make the order sought by the administrators, in so far as it may be necessary to cause their appointments to be valid, notwithstanding that, at the date of the appointment, the relevant security interest was not enforceable because, at that time, none of the mortgage duty required to be paid by the Duties Act had been paid. It will be a matter for further evidence and submissions as to whether, in the present case, the Court should make an order under s 447A.
13. As will be seen, the conclusion that I have reached that a security interest is enforceable for the purposes of s 436C if it is enforceable, but only in part, because not all of the mortgage duty payable has been paid, will be decisive to the outcome of the dispute concerning the validity of the appointment of the administrators for Beechworth. My conclusion that s 436C is not satisfied if, at the time of the appointment of the administrators, the security interest is entirely unenforceable because no mortgage duty has been paid, notwithstanding that all of the duty payable may have been paid after the time of the appointment, will be decisive to the outcome of that issue in relation to the validity of the appointment of the administrators for Griffith. In this case the availability to the Court of the power to make a validating order under s 447A may remedy the outcome in relation to Griffith, but the determination of that issue must abide the completion of the hearing.
14. In these circumstances, the conclusions that I have reached do not depend upon the resolution of the issue as to whether late payment of mortgage duty has the effect of rendering the security interest valid and enforceable from its inception. As this issue was, however, the subject of detailed submissions, I will return to it below, after I deal with the plaintiffs' claims concerning the validity of the appointment of the administrators to Beechworth and Griffith.

Validity of appointment of administrators to Beechworth

1. I will first consider the plaintiffs' claim that the appointment in respect of Beechworth was invalid. The claim is to be found in pars 10 to 12 of the plaintiffs' amended points of claim. The plaintiffs plead that, as at 14 July 2014, when the administrators were appointed to Beechworth, the securities granted by Beechworth to Vangory Holdings had not been stamped for duty in New South Wales, as required by s 208(2) or s 208(3A) of the Duties Act.
2. The plaintiffs claim that, at the time of the appointment of the administrators, Beechworth had property situated wholly or partly within New South Wales, for the purposes of s 205(1)(a) of the Duties Act. The particulars given in the points of claim for that claim are: (a) the only asset of Beechworth was the debt of Redhill Developments Pty Ltd (Redhill) assigned to it by Suncorp Metway Ltd in about November/December 2012; (b) on or about 29 April 2014, Redhill moved its principal place of business and registered office of Redhill to New South Wales, and on and from that date its directors and shareholders were located in New South Wales; and (c) after 29 April 2014, Vangory Holdings made advances to, or paid third-party creditors of, Beechworth pursuant to the Beechworth Loan.
3. There is a complex and unresolved issue in the proceedings concerning whether or not Beechworth was indebted to Vangory Holdings at the date it appointed the administrators. I have not attempted to reconcile the various amended schedules prepared by the parties during the course of the proceedings, which were designed to facilitate the determination of the state of indebtedness as between Beechworth and Vangory Holdings at the material date. I will treat it as an open issue. The particulars given by the plaintiffs, which I have set out above, have been prepared upon the assumption (which the plaintiffs themselves may still wish to contest) that any indebtedness of Beechworth to Vangory Holdings, which may be found to exist, arose partly before, and partly after, Redhill changed its residence from Victoria to New South Wales on about 29 April 2014. I regard it as being implicit in the plaintiffs' request that I give judgment on the separate issues now under consideration, that I do so upon the assumption, for the purposes of these reasons, that any indebtedness of Beechworth to Vangory Holdings arose partly before and partly after Redhill's change of residence.
4. It is necessary to provide a brief explanation concerning the assets of Beechworth, which were the subject of the security granted to Vangory Holdings. Originally, the company described in the plaintiffs' particulars as Redhill was a company with its principal place of business and registered office in Victoria. Relevantly, its business was to develop land at Beechworth in Victoria, for the purpose of creating residential allotments. For that purpose, it borrowed money from Suncorp Metway Ltd (Suncorp). Redhill secured that borrowing by granting to the lender a mortgage over the Beechworth land. Redhill defaulted, and Suncorp elected to realise the value of its security by assigning the debt and the supporting security to Beechworth. The assignment took place under an assignment deed between Suncorp and Beechworth dated 8 November 2012. The property assigned is contained in a definition of "Securities" in clause 1.1 of the deed. It is sufficient to note that par (a) described a mortgage dated 27 June 2012 granted by Redhill bearing registered dealing no. AF168070Y. Paragraph (f) described an indemnity agreement dated 15 July 2008 granted by Redhill in favour of Suncorp in relation to monies owed by Redhill to Suncorp. Other interests were also assigned, but they are not relevant to the present issue. Evidently, the price that Beechworth paid was less than the nominal value of the land at Beechworth, so that the company Beechworth looked to make a profit by selling the individual residential allotments for prices which in aggregate were hoped to exceed the price paid to Suncorp.
5. On 10 October 2013, Beechworth entered into a general security deed, as it was called, with Vangory Holdings. By clause 2.1 Beechworth granted to Vangory Holdings a fixed charge over all of the present and after-acquired property of Beechworth that was not a security interest under the Personal Property Securities Act 2009 (Cth) (the PPSA), as well as a security interest over all personal property encompassed by the PPSA. The general security deed was registered in the Personal Property Securities Register on 13 May 2013. It secured Beechworth's obligations to Vangory Holdings under a loan agreement dated 10 October 2013. The proper law of the general security deed was the law of New South Wales.
6. The effect of the general security deed was to grant to Vangory Holdings a charge over the debt owed by Redhill to Beechworth that had been assigned by Suncorp to Beechworth, as well as a charge over Beechworth's interest as mortgagee over the land at Beechworth.
7. It will be convenient at this point to deal with one of the submissions made by the plaintiffs. They claim, as is reflected in the particulars of their amended points of claim, which are set out above, that the only asset of Beechworth was a debt owed by Redhill that was assigned to Beechworth by Suncorp. Clearly, that claim is not correct. Beechworth was also entitled to a mortgage over the land at Beechworth in Victoria. That mortgage was also charged to Vangory Holdings. The plaintiffs supported this claim by the argument that, at all relevant times, Beechworth was not registered as the proprietor of any land in Victoria; Redhill was. That is true, but Beechworth, as assignee, had a mortgage over the land of which Redhill was the registered proprietor. That mortgage was an interest in the land, and was situated in Victoria.
8. It will also be convenient to deal with one of the arguments put by the administrators. The plaintiffs' claim turns on the fact that, at a time before the appointment of the administrators, Redhill changed its residence from Victoria to New South Wales. If Redhill was indebted to Beechworth under a simple contract, then the situs of the debt changed from Victoria to New South Wales. The administrators sought to counter this argument with the submission that, at the relevant time, s 40(2) of the Transfer of Land Act 1958 (Vic) had the effect that, upon registration, dealings lodged under the Torrens system were deemed to be deeds. As the mortgage over the Beechworth land would have been registered in Victoria, the administrators submitted that the mortgage became deemed to be a deed, and the deed was situated in Victoria. As the relevant principle of the conflict of laws is that a specialty debt is deemed to be located where the deed is, the administrators submitted that the liability of Redhill to Beechworth to pay the debt was situated in Victoria. The situs of the debt would not move with the change of residence of Redhill, as it would if the debt arose under a simple contract.
9. The principles upon which the administrators rely are correct in so far as they go. However, in my view, the submission fails on the facts. The transaction documents that created the various rights that Suncorp assigned to Beechworth are identified in the deed of assignment, but they are not separately in evidence in these proceedings. I have referred above to the fact that the deed of assignment identified a mortgage and an indemnity by Redhill, as well as other obligations to which persons other than Redhill were parties. I do not know the terms of the various transaction documents. It is possible, and perhaps probable, that the mortgage that Redhill granted to Suncorp contained a personal promise by Redhill to pay the debt. Even if that is so, I have assumed that the indemnity also obliged Redhill to pay the debt to Suncorp. Even if the mortgage on registration was deemed to be a deed, I am not satisfied that it has been established that Redhill was not also liable to repay the debt under a simple contract. The evidence is not sufficient to enable me to determine the issue definitively. On the balance of probabilities, Redhill was liable to repay Suncorp, and thus Beechworth after the assignment, under a simple contract.
10. The general security deed has not been stamped with duty under the law of any State. No duty has at any relevant time been payable in respect of the general security deed under the law of Victoria.
11. The plaintiffs' submission is that the general security deed became chargeable with the payment of mortgage duty under the Duties Act, when the debtor, Redhill, ceased to be a resident of Victoria, and became a resident of New South Wales. The plaintiffs say that Beechworth's interest in the secured debt owed by Redhill is movable property, so that its situs changed from Victoria to New South Wales, when Redhill changed its place of residency.
12. Section 204 of the Duties Act provides that Chapter 7 charges duty on instruments that fall within the definition of a mortgage (the duty being called mortgage duty). Relevantly, under s 205(1)(a), an instrument is a mortgage if it is a security by way of charge over property wholly or partly in New South Wales at the liability date. At the date the general security deed was executed, none of the property charged by it was situated in New South Wales. Accordingly, the general security deed did not become liable to duty on the date of its first execution (s 208(1)), or on the making of any further advances, before Redhill changed its residence (s 208(2)). Section 208(3) is also not applicable, because the general security deed has at no time affected land in New South Wales.
13. The question is whether s 208(3A) of the Duties Act had effect. By that section: An instrument of security that does not affect property in New South Wales at the date of first execution but that, at any time after execution, affects relevant property in New South Wales identified in the instrument or identified under an arrangement in place when the instrument was first executed, becomes liable to duty on the date it first affects that property, unless it is exempt from duty.
14. The plaintiffs say that the section charges duty in relation to property that is outside New South Wales at the time of the execution of the instrument, but, being movable, is brought into New South Wales after the instrument was executed.
15. The parties did not provide detailed submissions on the issue of how Chapter 7 of the Duties Act may impose mortgage duty on property that is situated outside New South Wales at the date the mortgage is executed, but is brought within the State afterwards.
16. In Hill Duties Legislation (Thomson 2007) at [14.0210] the learned authors say: As originally enacted, para (a) [of the definition of mortgage] required the question whether the security was wholly or partly over property in the State to be tested as at the date of the first execution of the security. If the location of the property secured by the mortgage or charge changed and particularly when duty came to be recalculated at the time of the making of new advances this did not impact upon whether the instrument was a mortgage, except where the case was one which fell within para (b). That paragraph as originally enacted (it was deleted by the 2002 amendments) provided that an instrument would be a mortgage as defined and thus liable to New South Wales duty if, not being a floating charge, it did not affect property in New South Wales at the date of first execution but did aspect of land in the Stay within a period of 12 months from the date of first execution. The amendments made in 2003 by the State Revenue Legislation Amendment Act 1997 replaced the date of first execution in para (a) with the expression the "liability date". "Liability date" is defined in the Dictionary to mean the date the mortgage becomes liable duty under s 208. Ordinarily, that will be the time of first execution. However, there can also be a liability arising on the making of an advance or further advances. Hence, the question whether the mortgage secures property wholly or partly within the State and the question is whether any duty at all is payable in New South Wales and the quantum of duty payable in the State, will be determined both at the time of first execution and also at the time any advance is made.
17. I will, in the circumstances, accept this extract as providing a correct statement of the law. Given the absence of detailed submissions from the parties, it is not necessary for me to attempt to make a definitive decision as to how the Duties Act applies in this context. If this statement of the law is correct, it would only have the result that the general security deed executed by Beechworth became liable for the payment of mortgage duty under the Duties Act in relation to advances made by Vangory Holdings after 29 April 2014. The change of residence by Redhill at that date did not have the effect that mortgage duty became payable in relation to the advances made before that date.
18. Consequently, at the date Vangory Holdings appointed the administrators, the general security deed was at least enforceable in relation to the advances that were made before 29 April 2014.
19. For the reasons that I have set out above, the general security deed was therefore enforceable for the purposes of s 436C of the Act, and the administrators were validly appointed to Beechworth, even if Redhill's change of residence had the effect that some mortgage duty became payable under the Duties Act in relation to advances made by Vangory Holdings after 29 April 2014, and that duty has not been paid.
20. There is a further reason why the appointment of the administrators to Beechworth was valid, irrespective of the enforceability issues that may have arisen under the Duties Act, as a result of Redhill's change of residence.
21. It is necessary to consider the validity of the plaintiffs' argument that, when Redhill changed its place of residence to New South Wales, the situs of the whole of Beechworth's interest in the debt owed by Redhill and the mortgage to secure that debt over the land at Beechworth in Victoria changed to New South Wales. The source of the plaintiffs' argument is the long established principle that, where a debt is owed by a single debtor, it is situated where the debtor resides: see Assetinsure Pty Ltd v New Cap Reinsurance Corporation Ltd (in liq) (2006) 225 CLR 331 at 352. The plaintiffs then rely upon the decision of the High Court in Haque v Haque (No 2) (1964-1965) 114 CLR 98 in support of the principle that the interest of a lender in a debt secured by a mortgage or charge over land is movable property. Accordingly, say the plaintiffs, when Redhill changed its place of residence to New South Wales, the situs of the property that was the subject of the general security deed also changed to New South Wales. That was so notwithstanding that the mortgage component of that property remained over land at Beechworth in Victoria.
22. In my view the decision of the High Court in Haque v Haque (No 2) does not have the effect contended for by the plaintiffs. The Court in that case was concerned with the question of what law should be applied to the succession to a deceased person's interest in land that was the subject of an uncompleted contract for sale. The Court considered the comparable situation where the deceased was entitled to a debt that was secured by a mortgage over land. In both cases the deceased had an interest in land, and at the same time an interest in the debt that was owed by the purchaser, or the debtor, as the case may be. In both cases the interest in the land could not exist separately from the entitlement to payment. Under the principles of the conflicts of law that were applicable in the case to the succession of property on the death of the owner, the law of the situs would ordinarily govern succession to land (being immovable property), but the law of the domicile of the deceased would govern the succession to the debt (being movable property). The decision of the High Court hinged on the consideration that, because the debt and the property interest could not exist independently, or be severed, there was no escape from the need to choose whether succession to the immovable property should follow succession to the movable property, or vice versa. That choice was necessary because, if the law of the situs and the law of the domicile contained different rules as to who was entitled to succeed to the deceased's property, the application of the separate laws to the immovable and the movable components of the indivisible interest owned by the deceased might lead to the severance of those components in a way that the law would not contemplate. Put simply, party A might become entitled to enforce the debt, but party B might succeed to the mortgage interest in the land. The law will not contemplate that the mortgage can exist separately from the debt.
23. The majority of the High Court; being Kiito, Menzies and Owen JJ, held that the mortgage should follow the debt. Kitto J said at 129 (citations omitted): The analogy of a contract of sale with a mortgage is not a complete analogy, but the points of similarity are the very points which are important for our present purpose. The problem, as in the case of a mortgage, is to decide whether the land or the debt should be considered the principal thing. It seems to me that a system of law which views the rights and interests of a vendor of land as they were viewed in Lysaght v Edwards must, of logical necessity, accept the answer that the debt is the principal thing. The residual interest which the deceased had in the land at his death, which is commensurate with the amount of the purchase money then remaining unpaid, possesses according to the law of its situs the legal quality which Sir George Jessel referred to by using the words "lien" and "charge". It devolves upon the executor as an asset to be employed in getting in the purchase money…but the answer, it seems to me, is that the legal relationship at the death of the deceased between the purchase money and the land was such that the right of succession to the money must carry with it the right of succession to the land. I am therefore of opinion, agreeing with Wolff CJ, that the succession to the lands so far referred to is governed by the right of succession to movables.
24. The High Court did not decide that the interest of the deceased vendor in land the subject of an uncompleted contract of sale, or, equally, an interest in a mortgage over land, was movable property. Rather, the Court decided that, the choice being necessary, the principal aspect of the interest was the debt, and the interest in the land, though remaining in fact an immovable, should be governed by the right of succession to the movable debt. Kitto J said at 128 and 129: … I must confess that I see no reason for holding that a mortgagee's interest in the mortgage land is a movable; but while its character as an immovable may well be of crucial importance for some purposes, such as a determination of the legal validity of the disposition, inter vivos or by will…it seems to me that English law could not, consistently with its traditional attitude as to the relation of debt and security, apply to such a special class of immovable the same rule of private international law for the choice of the law to govern succession as it applies to immovables generally. See also Nygh's Conflicts of Laws in Australia (9 th edition) at [32.26].
25. The present case plainly does not involve the law of succession. The question is whether, for the purposes of the Duties Act, the property charged by the general securities deed moved from Victoria to New South Wales. It may be accepted that the debt that Redhill owed to Beechworth moved from Victoria to New South Wales. Beechworth's security interest under its mortgage over the land in Victoria did not move. There is no reason at all in the present case to apply the artificial requirement that is necessary in a succession case, that the immovable interest must be treated in the same way as the associated movable interest. As a matter of fact and law, Beechworth's mortgage interest in the land at Beechworth has always been situated in Victoria.
26. It is necessary to recognise that the starting point of the Court's consideration of the validity of the appointment of the administrators is s 436C of the Act, and not any provision of the Duties Act. The question is whether, at the time of appointment, Vangory Holdings was entitled to enforce a security interest in the whole, or substantially the whole, of Beechworth's property, and the security had become, and remained, enforceable.
27. In Re Australian Property Custodian Holdings Ltd (admins apptd) (rcs and mgs apptd) [2010] VSC 492; (2010) 80 ACSR 114 Sifris J said the following concerning the issue of whether the charge in respect of which the administrators had been appointed was over the whole, or substantially the whole, of the company's property: [7] Mr Coles QC, who appeared with Mr Cheetham for the NAB and Capital Finance Australia Ltd (by leave of the court), submitted that the appointment was invalid because the charge was not over "the whole or substantially the whole, of [the company's] property". The balance sheet of the company as at June 2010 discloses total assets of $15,751,942.63. Total liabilities are disclosed as $10,709,020.58. Accordingly, the net asset position as at 30 June 2010 was $5,042,922.05. If the $5,000,000 term deposit with the NAB is excluded from the asset position of the company, as it must, the charge as at 30 June 2010 would be over $10,751,942.63 of the assets of the company, out of total assets of $15,751,942.63. Put another way, the company encumbered (as at 30 June 2010) about 68% of its assets in favour of Daytree. Of course, the property of a company may change from time to time and the position referred to above is only at a particular point in time. However, the exclusion of the $5,000,000 term deposit is, in my opinion, definitive as it represents a substantial asset of the company. [8] In my opinion, the charge is not over the whole or substantially the whole of the company's property. It is over a significant part of the company's assets, but certainly not the whole and in my opinion, certainly not substantially the whole. In this context, substantially refers to almost all of the assets but certainly not 68% of the assets. The exclusion of a substantial asset must, inevitably, lead to the conclusion that a charge is not over the whole, or substantially the whole, of a company's property.
28. His Honour determined the question by reference to the proportion by value that the assets of the mortgagor secured by the mortgage bore to the value of the whole of the mortgagor's assets. In National Australia Bank Ltd v Horne [2011] VSCA 280; (2011) 85 ACSR 639 the Victorian Court of Appeal noted the manner in which Sifris J had determined that the charge was not over the whole, or substantially the whole, of the company's property without adverse comment. The appellant did not appeal from that finding by Sifris J.
29. The significance of the judgment in Re Australian Property Custodian Holdings is that the Court measured the property over which the security interest was held in proportion to the whole of the company's property in terms of relative value. I agree with that approach.
30. If that approach is adopted in the present case, then the proper course is to compare the value of Beechworth's interest in the land at Beechworth in Victoria to the total of that value plus the value of the debt owed by Redhill to Beechworth, which became situated in New South Wales.
31. As Redhill had defaulted on its obligations to Suncorp, before that company assigned the debt and the mortgage that secured it to Beechworth, it is unlikely that the debt had a high recovery value at the date Redhill acquired its New South Wales residency. The only evidence that goes to this issue is contained in the report prepared by the administrators pursuant to s 439A of the Act, which was admitted into evidence as exhibit U. The report includes in par 5.1 a RATA prepared by the directors of Beechworth, who were on the company's register of directors. The value given by the directors to Beechworth's interest in land was $2.2 million. Sundry debtors were $475,000 (with an unknown recovery value). Paragraph 5.1.2 explains that the sundry debtors were six companies that owed unpaid balances to Beechworth in respect of the sale of allotments. There is nothing in the report that suggests that the debt owed by Redhill had any value to Beechworth. (There is a statement in par 3.2.4 that Redhill was, at the date of the report, wholly owned by the second plaintiff. The plaintiffs have tendered no evidence to dispel the appearance that the debt owed by Redhill had no value to Beechworth).
32. The plaintiffs did not make any claim in their amended points of claim based upon the situs of the debts that were included in the sundry debtors referred to in the administrators' report. The report suggests that the debtors were controlled by Mr Spencer, who is the third plaintiff in the proceedings. If Beechworth was entitled to recover debts in the total sum of $475,000 from those debtors, and if the debtors were resident in New South Wales, then that may have had an effect on the determination of whether Vangory Holdings had an enforceable security over the whole, or substantially the whole, of Beechworth's property. That issue does not arise in this case.
33. Accordingly, even if at relevant times the general security deed was unenforceable in so far as it purported to create a security over the debt owed by Redhill to Beechworth, because of the operation of s 211 of the Duties Act, the deed was effective to create an enforceable security over Beechworth's mortgage of the land at Beechworth in Victoria.
34. It must be remembered that s 436C is a provision of a Commonwealth statute, and in entertaining an application by the plaintiffs for the making of a declaration under s 447C of the Act, as well as other provisions of that Act, the Court is exercising the judicial power of the Commonwealth: see Felton v Mulligan (1971) 124 CLR 367. When the Court is asked to determine whether administrators have validly been appointed under s 436C of the Act, difficult questions may arise where, notwithstanding that the relevant security interest is valid and enforceable in accordance with its terms, the provisions of some State or Territorial laws have the effect that the security is not enforceable, but the laws of other States or Territories do not. It may be that the security is entirely enforceable under the laws of all States and Territories, save for one, under which it is entirely unenforceable. That issue was not addressed by the parties in submissions in this case. It is not necessary to deal with it, because, on the view that I have taken, even if s 211 of the Duties Act has the effect that Vangory Holdings' charge over the debt owed by Redhill is not enforceable, the Duties Act does not purport to make the charge over Beechworth's mortgage over the land at Beechworth in Victoria unenforceable. Consequently, Vangory Holdings was entitled to appoint the administrators by exercising the power in s 436C of the Act, because its charge over the mortgage of the land in Victoria has not been made unenforceable by any relevant law, and that mortgage covers substantially the whole of Beechworth's property.

Validity of appointment of administrators Griffith

1. I will now turn to a consideration of the plaintiffs' claim that the appointment by Vangory Services of the administrators as administrators of Griffith under s 436C of the Act was invalid.
2. Vangory Services purported to act on the basis of a general security deed granted by Griffith to Vangory Services, which contained equivalent terms in respect of Griffith to those described above in relation to the general security deed granted by Beechworth to Vangory Holdings. The land the subject of the mortgage in this case was situated at Griffith in New South Wales. It is clear that, at all relevant times, the principal asset of Griffith was situated in New South Wales. Mortgage duty was required by s 204 and s 208(1) and (2) of the Duties Act to be paid in respect of the general security deed. That duty had not been paid by the date upon which Vangory Services purported to appoint the administrators to Griffith. As at that date, s 211 of the Duties Act had the effect that the general security deed was entirely unenforceable.
3. Since the date when the purported appointment of the administrators to Griffith took place, the whole of the requisite mortgage duty has been paid. The question is whether the payment of that mortgage duty has had the retrospective effect of validating the appointment of the administrators.
4. It is necessary to return to the wording of s 436C of the Act. Had the security interest constituted by the general security deed become enforceable, and was it still enforceable, at the time of appointment of the administrators? The administrators accepted that their appointment will have been invalid, unless the late payment of the outstanding mortgage duty had the effect, for the purposes of s 436C, that the enforceability of the general security deed was retrospectively established as at the date of appointment.
5. It follows from my conclusion that s 436C requires that the security instrument actually be legally enforceable at the time of the appointment of the administrators, that the administrators were not validly appointed to Griffith. The validity of their appointment will therefore depend upon whether or not an order validating their appointment is made by the Court under s 447A of the Act.

Effect of payment of overdue mortgage duty under s 211 of the Duties Act

1. As I have noted, in relation to their appointment as administrators to Griffith, the administrators' primary argument was that, upon payment in full of the default mortgage duty, the general security deed retrospectively became enforceable from the date of breach by Griffith under s 211 of the Duties Act, so that it was enforceable for the purposes of s 436C of the Act. The result, they said, was that their appointment as administrators has been valid and effective from the time that it was made.
2. On the view that I have taken of the legal issues raised by the questions that I am now considering, the validity of this submission by the administrators does not strictly arise. However, the question has been fully argued by the parties. Furthermore, for the reasons that I have explained above, the administrators are entitled to pursue their claim for a validating order under s 447A of the Act. For the purpose of the application of that provision, it may be material to the administrators' prospects of success whether or not, for the purposes of s 211 - if not for the purposes of s 436C - the late payment of the mortgage duty had the effect of retrospectively curing any defect in the validity or enforceability of the general security deed.
3. In these circumstances I have concluded that it will be appropriate for me to decide the question, for the purposes of these proceedings. That means that I will decide whether the general security deed became valid and enforceable from the date of its execution, when the mortgage duty was finally paid. In the course of dealing with this question it will be necessary for me to consider a line of cases decided by judges of this Court, sitting in the Duty List, that have considered the consequences of mortgage duty not being paid on mortgages in the context of applications by the mortgagees for an order for the continuation of a caveat lodged against the title to land that is claimed to be subject to the mortgage. While it will be necessary for me to consider the reasoning in these cases, it will not be appropriate for me to form any conclusion as to whether those cases were correctly decided.
4. I have already set out above the terms of s 211 of the Duties Act. It has the effect that a mortgage on which duty is required by Chapter 7 of the Duties Act to be paid is unenforceable to the extent of any amounts secured by the mortgage on which duty has not been paid.
5. It will be necessary to examine, both in relation to the Duties Act and its precursors, the general provisions that deal with the consequences of stamp duty not being paid on instruments or transactions, and also the special provisions concerning the failure to pay mortgage duty.
6. Section 304 of the Duties Act is the general provision that deals with the consequences of the duty imposed by the Act not being paid. It is relevantly provides: (1) An instrument that effects a dutiable transaction or is chargeable with duty under this Act is not available for use in law or equity for any purpose and may not be presented in evidence in a court or tribunal exercising civil jurisdiction unless: (a) it is duly stamped, or (b) it is stamped by the Chief Commissioner or in a manner approved by the Chief Commissioner. (2) A court or tribunal may admit in evidence an instrument that effects a dutiable transaction, or is chargeable with duty in accordance with the provisions of this Act, and that does not comply with subsection (1): (a) if the instrument is after its admission transmitted to the Chief Commissioner in accordance with arrangements approved by the court or tribunal, or (b) if (where the person who produces the instrument is not the person liable to pay the duty) the name and address of the person so liable is forwarded, together with the instrument, to the Chief Commissioner in accordance with arrangements approved by the court or tribunal…
7. The Uniform Civil Procedure Rules 2005 (NSW) provide a mechanism for the implementation of s 304(2) in r 31.13 in the following terms: (1) The "usual undertaking by person liable" if given to the court by a party in relation to an instrument referred to in section 304 (2) of the Duties Act 1997 is an undertaking that the party will, within a time specified by the court, transmit the instrument to the Chief Commissioner of State Revenue. (2) The "usual undertaking by person not liable" if given to the court by a party in relation to an instrument referred to in section 304 (2) of the Duties Act 1997 is an undertaking that the party will, within a time specified by the court, forward to the Chief Commissioner of State Revenue the name and address of the person liable to pay duty on the instrument under that Act together with the instrument.
8. Under the Stamp Duty Act, which was in force immediately before the enactment of the Duties Act, the general provisions for the consequences of a failure to stamp an instrument with the duty imposed by the Act were to be found in ss 27 to 29. It is sufficient for present purposes to note only the following parts of these sections: 27 Terms on which unstamped or insufficiently stamped instruments may be received in evidence (1) On the production of an instrument chargeable with stamp duty as evidence in any court of civil judicature, the officer whose duty it is to read the instrument shall call the attention of the Judge to any omission or insufficiency of the stamp thereon, and if the instrument is one which may legally be stamped after execution it may, on payment to such officer of the amount of the unpaid duty and the fine payable by law, be received in evidence, saving all just exceptions on other grounds. (2) Such officer shall detain and immediately transmit to the Chief Commissioner the instrument, together with the duty and fine so paid thereon, and the payment thereof shall be denoted on such instrument accordingly. 28 … 29 Inadmissibility of unstamped and other instruments (1) Except as aforesaid, no instrument executed in New South Wales or relating (wheresoever executed) to any property situate or to any matter or thing done or to be done in any part of New South Wales, shall, except in criminal proceedings, be pleaded or given in evidence, or admitted to be good, useful, or available in law or equity for any purpose whatsoever, unless it is duly stamped in accordance with the law in force at the time when it was first executed… (4) Sections 27 and 28 and this section do not apply to an instrument or a copy of an instrument tendered as evidence on behalf of a party (not being a person who is primarily liable to duty in respect of the instrument) if the court is satisfied: (a) that the party has informed, or will in accordance with arrangements approved by the court inform, the Chief Commissioner of the name of the person primarily liable to duty in respect of the instrument, and (b) that the party will, in accordance with arrangements approved by the court, lodge the instrument or a copy of the instrument with the Chief Commissioner.
9. The imposition of stamp duty was first made in New South Wales by the Stamp Duties Act 1865 (NSW), which was superseded by Acts with the same title that were enacted in 1880, 1898, and then in 1920. Each of these Stamp Duties Acts contained a number of provisions with the same general effect as ss 27 to 29 of the 1920 Act. It is not necessary to consider the differences.
10. The general provisions of the legislation dealing with non-payment of stamp duty have always had the effect that instruments or transactions upon which the necessary duty has not been paid are of no effect in law, and are not admissible into evidence, while the duty remains outstanding. The legislation has always provided a mechanism for the outstanding duty to be paid, even if the issue is first raised during the course of a hearing in legal proceedings in which it is sought to tender into evidence and rely upon an unstamped document. The mechanism has changed over the years, but the differences are not presently material.
11. Section 84 of the Stamp Duties Act 1920 imposed loan security duty on loan securities, and was effectively the precursor to Chapter 7 of the Duties Act, and was comparable in effect to the provisions contained in that Chapter, although the actual circumstances in which duty was payable were different. It is not necessary to consider the differences in detail, save to note that, by reason of s 84(5), the following sub-section (4) applied to all loan securities executed after 1 January 1975 (if subject to duty under the Act): A loan security referred to in this section is unenforceable unless it has been stamped as provided by this section, whether or not the amount in relation to which the loan security is sought to be enforced is less than the amount in relation to which it is required to be stamped.
12. Section 211 of the Duties Act, therefore, provides that a mortgage is unenforceable to the extent that duty has not been paid, while s 84(4) of the Stamp Duties Act provided that a loan security is unenforceable unless it has been stamped. I have already noted above a further difference between the two sections, in that s 84(4) has the effect that the loan security is unenforceable if any amount of the duty payable has not been paid, while s 211 permits enforcement of the security instrument, but only up to the amount for which mortgage duty has been paid. It will be necessary in due course to consider whether the change in language between the two sections leads to any different result.
13. This is a convenient point to note that the explanatory note to the Duties Bill 1997 contained only a very general description of Chapter 7, and does not include any comment on the difference in wording between s 211 and its precursor. The Minister's second reading speech on the Duties Bill is equally uninformative, although it may be noted that the Minister said: "The primary purpose of the Bill is to replace the current Stamp Duties Act with simple, clear and equitable legislation drafted in contemporary language and modern style". May the change in language between s 84(4) of the Stamped Duties Act and s 211 of the Duties Act reflect no more than casual modernisation?
14. A series of cases have established how the general provisions of the legislation that concern the effect of non-payment of stamp duty operate, in cases where the duty is paid late, and after the occurrence of the event that is claimed to have some legal significance for the purposes of the unstamped instrument or transaction.
15. In Wagga Finance Co Limited v Lever (1930) 30 SR (NSW) 76 the issue before the Supreme Court was whether the assignee of a hire purchase agreement, under an unstamped written assignment, could sue the hirer in detinue, after the hirer refused to return the goods following the termination of the hire purchase agreement by the assignee. The applicable stamp duty was not paid until after the commission of the alleged tort, when the hirer refused to redeliver the goods. The Court held that the subsequent payment of the stamp duty did not retrospectively make the assignment valid as at the date of the tort.
16. The Full Court considered the correctness of the decision of Wagga Finance in Electricity Meter Manufacturing Coy Ltd v Manufacturers' Products Proprietary Ltd (1930) 30 SR (NSW) 422, a decision of Street CJ (Ferguson and James JJ concurring). The Chief Justice at 429 distinguished Wagga Finance on the basis that: "All that that case actually decided was that, in the circumstances, retroactive validity could not be given to the instrument of assignment as against a stranger to it".
17. On the issue of the effect of the late payment of stamp duty on the validity and enforceability of the instrument as between the parties to it, the Chief Justice said at 428: In the present case, the public requirement of taxation has been complied with, but it is submitted that as the agreement was not stamped when it was first executed, it only takes effect as from the date on which it was stamped, and has no retroactive validity. That it conferred no rights of any kind recognisable at law until stamped, is unquestionable, I think, but the Legislature has not anywhere said in terms that, when an instrument may be legally stamped after execution, it shall be deemed to be operative only from the date on which it is stamped, and shall have no retroactive operation. All that it has said is that an unstamped document shall be inefficacious for any purpose at law or in equity… And then at 430: I do not think that we are constrained by the Act or by judicial authority to hold that an agreement which has been lawfully stamped after its execution is not, on being stamped, as efficacious for all purposes, inter partes, as if it had been stamped immediately on execution. Admitting to the full that unless and until it is stamped it will not be recognised in any Court as an effective instrument and that the payment of stamp duty is indispensable to its admissibility in evidence, I am of opinion that upon being stamped, even after action brought, it is as efficacious between the parties to it as if it had been duly stamped when executed.
18. Street CJ made these statements of principle after he noted statements made by Isaacs J (as his Honour then was) in The Commissioner of Stamps (Queensland) v Weinholt 20 CLR 531 at 542 that the legislation had the effect of "invalidating the instrument until the proper duty is paid"; and Dent v Moore 26 CLR 316 at 324 where Isaacs J "spoke of the law as striking an instrument with sterility unless and until the public requirement of taxation had been complied with". The point is that the effect of a failure to pay the requisite stamp duty was not simply that the document was not admissible in legal proceedings, but it had no legal effect until the duty was paid.
19. The effect of late stamping of an instrument was authoritatively considered by the High Court in Shepherd v Felt and Textiles of Australia Ltd (1931) 45 CLR 359. In that case Dixon J (as his Honour then was), with whom Menzies and Owen JJ agreed, said at 382 to 386 (citations omitted): There remains the contention that, conceding the application of sec. 27 to an instrument bearing a sufficient but uncancelled stamp, and conceding the payment of the correct amount of "the unpaid duty and the fine payable by law," nevertheless the document was not efficacious at the time of the alleged breach, which therefore could 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… 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… 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 Wagga Finance Co. v. Lever 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. 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.
20. The reasoning given by Dixon J depended not only on the effect of the words "except as aforesaid" in s 29 of the Stamp Duties Act, but also more generally on the history of the provisions that took effect as ss 27 to 29 in that Act.
21. All of the Justices disagreed with Street CJ in the Electricity Meter Manufacturing case only in so far as the Chief Justice attempted to distinguish the decision in Wagga Finance. The High Court unanimously overruled that decision. The consequence was that, for the purposes of provisions such as ss 27 to 29 of the Stamp Duty Act, belated full payment of the stamp duty would cause the instrument to be efficacious for all purposes from its inception, even against a third party to the instrument.
22. In Commercial Banking Co of Sydney Ltd v Love (1975) 133 CLR 459 Barwick CJ at 469, Stephen J at 475 and Jacobs J at 481 made equivalent statements to those made by Dixon J concerning the retrospective effect of late payment of stamp duty.
23. It will be appropriate to give some attention to the decision of Nader J in the Supreme Court of the Northern Territory, in Westpac Banking Corporation v Mousellis (1985) 37 NTR 1. This decision has received little attention, but as it turns out, it may be of some importance to an understanding of the genesis of the line of cases that have considered the issue of non-payment of mortgage duty in the context of applications for the extension of caveats.
24. Nader J set out the equivalent of s 29 of the Stamp Duties Act, which is found in s 121 of the Taxation (Administration) Act 1978 (NT) at 5, as follows: 121. INSTRUMENTS NOT DULY STAMPED INADMISSIBLE Subject to sections 119 and 120, an instrument - (a) executed in the Territory; or (b) relating (wheresoever executed) to property situated or to a matter or thing done or to be done in a part of the Territory, and which is liable to duty or tax in the Territory shall not, except in criminal proceedings, be pleaded or given in evidence, or admitted to be good, useful, or available in law or equity for any purpose whatsoever, unless it is duly stamped.
25. His Honour then referred to ss 119 and 120 of that Act, and noted that they related to the use of instruments and documents as evidence (they were in substance of the same effect as ss 127 and 128 of the Stamp Duties Act). He then discussed a number of cases, in particular Shepherd v Felt and Textiles of Australia Limited and Commercial Banking Co of Sydney Limited v Love. He then set out the section of the Taxation (Administration) Act that was equivalent in effect to s 211 of the Duties Act, being s 69B(3), which was as follows: (3) Where the total amount secured or to be ultimately recoverable by or under a loan security is not expressed in the loan security to be limited to a definite and certain sum of money, then - (a) that loan security is enforceable as a loan security only to the extent of the amount in respect of which duty (including any duty which is deemed to have been paid by virtue of section 69a), as duty on a loan security, has been paid on the loan security;
26. It should be noticed that this provision uses language similar to that of s 211 of the Duties Act, in that it speaks of the loan security only being enforceable to the extent of the amount of duty paid. That differs from s 84(4) of the Stamp Duties Act, which used the words: "A loan security referred to in this section is unenforceable unless…". Nader J then described the effect of s 69B(3) at 6 in the following terms: The effect of this provision is that where the amount secured at the time the security is to be enforced exceeds the amount in respect of which duty has been paid, the security is enforceable only to the extent of the latter amount. It is a necessary inference from this provision that, although such a security is not duly stamped, it can be pleaded and used in evidence, despite s 121, provided the action on it is limited to enforcing it to the extent of the amount covered by the duty paid... I take "enforceable" to mean enforceable by any means, including by exercise of the power of sale or by action to enforce the personal covenant.
27. The following point will become relevant to the consideration of the caveat cases, but it should be noted that in this extract from the judgment, Nader J is saying, in effect, that the general provision in s 121 must give way to the specific provision in s 69B(3). The general provision would make the instrument entirely unenforceable, because less than all of the required stamp duty had been paid, but the specific provision has the effect that the loan security could be enforced, albeit only up to the amount in respect of which the instrument had been stamped.
28. His Honour then returned to the issue of late stamping, and said at 6 and 7 (putting aside as irrelevant for present purposes his consideration of the question of whether the stamp duty could be paid so late that it is paid after judgment): It is clear from the authorities that the late stamping of an instrument has "retro-active efficacy" to use the phrase of Street CJ in Electricity Meter Mfg Co Ltd v Manufacturers' Products Pty Ltd (1930) 30 SR (NSW) 422 at 428: see also Shepherd's case… I have been able to find no exception to the generality of the proposition that, where late stamping is possible, such late stamping validates the instrument retro-actively... It is true that s 69b(3) of the Taxation (Administration) Act, in terms, limits the enforceability of a loan security not duly stamped to the amount for which it is actually stamped. That provision would have been given its effect if the undertaking of Mr Crane had not been given. The effect of Mr Crane's undertaking is to render the loan securities, in effect, duly stamped as if from the beginning, thus regularizing the extent of the attempted enforcement. The purpose of the legislation, to protect the revenue and not to benefit a defendant, is thus satisfied… The relevant statute in Shepherd's case and the Electricity Meter case was the Stamp Duties Act 1920-1924 (NSW). Sections 25, 27 and 29 of that Act are the substantial equivalents of ss 107, 119 and 121 of the Taxation (Administration) Act, respectively. Although, as I have explained, s 69b(3) of the Taxation (Administration) Act ousts the operation of s 121 in respect of a loan security, at least where some duty has been paid on it, ss 107 and 119 apply. A loan security upon which some, but insufficient, duty has been paid is not rendered unpleadable or inadmissible by s 121, but its enforceability is limited by s 69b(3), and by implication, only its enforceability. However, by analogy with the reasoning in the cases, the limit to enforceability ought to be able to be retrospectively removed in the same way as the disabilities imposed by s 121 can be removed. A loan security is an instrument upon which additional tax and a penalty can be paid under s 107. I am satisfied that what the cases say about the disabilities imposed by s 121 are equally applicable to the limit on enforceability imposed by s 69b(3). If an insufficiently stamped loan security is later stamped in accordance with s 107, or if the procedures under s 119 are followed, the limitations on its enforceability are entirely removed. I can see no basis for giving retrospectivity to the effect of subsequent due stamping in cases under s 121 and denying such retrospectivity to cases under s 69b(3): see also Commercial Banking Co of Sydney Ltd v Love (133 CLR) at p 469.
29. When close attention is given to Nader J's reasons, it appears that his Honour decided the question that I am now considering, in favour of the conclusion that, even under s 211 of the Duties Act, once the required mortgage duty has been paid, the security interest becomes enforceable from its inception. As I have noted, his Honour first dealt with the situation that obtains before the mortgage duty has been paid. In that circumstance the specific provision in s 211 applies to the exclusion of the general provision in s 304. The security interest is only enforceable up to the amount for which mortgage duty has been paid. However, once all of the mortgage duty has been paid, even though late, "the limitations on its enforceability are entirely removed", notwithstanding that the specific provision uses words to the effect that the mortgage is unenforceable to the extent of any amount on which duty has not been paid.
30. In Official Trustee in Bankruptcy v D'Jamirze (1999) 48 NSWLR 416 Hodgson CJ in Eq (as his Honour then was) at [56] followed Shepherd v Felt and Textiles of Australia Pty Ltd, and held "that once an instrument is stamped, it is as efficacious as from execution as if it had never fallen within the operation of s 29 of the Stamp Duties Act". His Honour was dealing with a mortgage upon which duty was payable under the Stamp Duties Act, and which had been paid late.
31. The Court of Appeal in McCallum (aka Hain) v National In Australia Bank Ltd [2000] NSWCA 218 was required to consider the same question. Heydon JA (as his Honour then was) (Sheller and Fitzgerald JJA agreeing) said: [11] The appellant accepted that the Mortgage was valid from the date of its execution, but contended that s84(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 s29 of the Stamp Duties Act 1920, s84(4) did not then exist, and was introduced only in 1987; it was wrong to "jump" from the reasoning used in relation to s29 and apply it automatically to s84(4). The second was that so far as Dixon J's reasoning depended on the opening words of s29, which referred back to s25 and s27, there was no equivalent in s84(4). Thirdly, so far as Dixon J's reasoning depended on the use of the word "unless" in s29, it was said that it had no corresponding application to s84(4), either because the "plain and clear meaning" of s84(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 s84(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 Pt3 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 s83(1), relevantly to the present case, as meaning "a mortgage that, at the time of its execution affected property in New South Wales": para(c). S84(1)-s84(3) provided: [his Honour then set out those provisions]… 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. S84(6)- s84(6B) provided: [his Honour then set out those provisions]… The appellant accepted that loan securities regulated by s84 were subject not only to s25, but also to s27 and s28. It follows that the additional advance to which s84 applied was subject to the duty created by s25, the facility created by s27 for receiving chargeable instruments provided the duty was immediately paid, and the facility created by s28 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 s29. [14] The appellant contended that her construction of s84(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 s84(4). In particular, the Second Reading Speech does not adopt these arguments, and no other light is cast on the meaning of s84(4) by the Second Reading Speech, even assuming it is permissible to have resort to it… [His Honour set out aspects of the second Reading speech] [16] Thus the Second Reading Speech did not discuss the detailed language of any part of s84, and though s84(4) had no counterpart in the legislation as it stood before the amendments introduced by the Minister, her speech did not discuss s84(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 s84(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 s29. The officers responsible for drafting s84(4) must be presumed to have been aware of Dixon J's approach to the word "unless" in s29 - an approach which has been relied on in later authority, eg 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 s84(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 s84(4) in relation to up stamping the consequence which Dixon J attributed to s29 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 s84(4) in the light of the construction given to it by the High Court when it appeared in s29 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 s84(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.
32. Section 29(1) of the Stamp Duties Act 1920 (NSW) used the word "unless" in the expression "no instrument…shall…be pleaded or given in evidence, or admitted to be good, useful, or available in law or equity for any purpose whatsoever, unless it is duly stamped in accordance with the law…" The same word was used in s 84(4) in the expression: "A loan security referred to in this section is unenforceable unless it has been stamped as provided in this section…" The judgment of the Court of Appeal in McCallum will be determinative of the present question unless there are proper reasons for the Court to conclude that the legislature intended to achieve a different outcome by using in s 211 of the Duties Act the words "A mortgage on which duty is required by this Chapter to be paid is unenforceable to the extent of any amounts secured by the mortgage on which duty has not been paid".
33. It will now be appropriate to consider the line of cases decided by this Court in the context of applications in the Duty List for orders for the continuation of caveats to protect unregistered mortgages, where the mortgage duty imposed by the Duties Act has not been paid.
34. It must be borne in mind that, in each of these cases, when the mortgagee's application for an order extending the caveat came on for hearing, no mortgage duty had been paid, as was required by the Duties Act. A different question might arise if the requisite mortgage duty was paid after the date of the lodgement of the caveat, but before the hearing of the proceedings for its extension.
35. It should be remembered in this context that s 227 of the Duties Act provides: 227 Unregistered mortgages protected by caveats (anti-avoidance provision) (1) A caveat under the Real Property Act 1900 in which an estate or interest is claimed under an unregistered mortgage is chargeable with duty. (2) The amount of duty is: (a) if the mortgage is chargeable, but not stamped, with mortgage duty - the same amount as is chargeable on the mortgage, or (b) if the mortgage is stamped, or is not chargeable, with mortgage duty - $50. (3) The person liable to pay the duty is the mortgagor. (4) This section does not apply to a caveat lodged in respect of a mortgage that is exempt from mortgage duty under Part 4.
36. This provision is designed to protect the revenue by preventing persons, who claim an entitlement to a mortgage or charge over land registered under the Real Property Act, from avoiding paying mortgage duty, but still seeking to protect their claim by lodging a caveat against the title to the property. As will be seen, in the Duty List matters in which applications have been made to extend caveats, attention has not always been given to whether the caveat itself was stamped, and if so by the amount required by s 227.
37. In Complex Scaffolding Solutions Pty Ltd v Doueihi [2014] NSWSC 230 I had occasion to observe: [41] Frank Ticehurst et al, Baalman & Wells' Land Titles Office Practice (5th ed 1998, LBC Information Services) at [40.400] states: "Any caveat in which an estate or interest is claimed under an unregistered mortgage, loan agreement, deed of charge or similar transaction is liable to stamp duty and will not be accepted for lodgement unless it has been marked by the Office of State Revenue." [42] The effect of s 227 is that, if a caveat claims that the caveator is entitled to a mortgage interest under an unregistered mortgage, the caveat itself is chargeable with mortgage duty. The amount of duty payable depends upon whether the unregistered mortgage is chargeable. If it is, but the mortgage is not stamped with the relevant mortgage duty, the amount of duty payable on the caveat is the same amount as was required to be paid as mortgage duty in respect of the unregistered mortgage. If the unregistered mortgage is stamped, or is not chargeable, the amount of mortgage duty is a flat $50. In the present case the proposed new caveat has not been stamped with any mortgage duty, whether ad valorum or $50. There is no evidence concerning the plaintiff's intention in relation to the payment of mortgage duty on the caveat. The plaintiff has not offered any undertaking to the court that it will cause the requisite duty to be paid.
38. It appears that the first of the cases is Neoform Developments & Interiors Pty Ltd v Town & Country Marketing Pty Ltd [2002] NSWSC 344, which was decided by Young CJ in Eq (as his Honour then was). The observations that were made concerning the consequences of the document claimed to constitute the charge not being stamped were obiter, because his Honour found that there had been no default. The relevant document, a marketing agreement, had been stamped with $10 as a deed, but no mortgage duty had been paid. Nothing was said about whether the caveat itself was stamped under s 227. His Honour said: [31] No duty has been paid under the Act, therefore, the mortgage is not enforceable. I agree with the writers of the current edition of Hill on the Duties Legislation (LBC, Sydney, 2001) at [14.0390] that when one is dealing with mortgages it is s211 that one applies rather than the general provisions of s304, which gives way in the case of mortgages. [32] As the mortgage duty had not been paid at the date the caveat was lodged, it would seem to me that in any event the caveat could not be supported.
39. Hill on the Duties Legislation appears to be a looseleaf service. The current version of the service contains at [14.0390] a discussion into which the expression of principle upon which Young CJ in Eq relied has survived from the 2001 edition. The service states: Where an instrument liable to duty is not duly stamped, the normal sanction for failure to so do is the unenforceability of that instrument by virtue of it not being allowed to be given in evidence. That sanction is now to be found in s 304 of the Act. However, the general provisions of that section would give way to the specific provisions of s 211 in the event of an inconsistency. In one sense there is no inconsistency, since s 211 of this Chapter is specifically concerned with unenforceability, whereas s 304 may only be concerned with matters of evidence. The relationship between them is not clear, especially as s 304 permits undertakings to be given to permit an instrument to be given into evidence, whereas s 211, arguably, might still operate to require unenforceability. See Neoform Developments and Interiors Pty Ltd v Town and Country Marketing Pty Ltd… at [31] and Boral Recycling v Wake…
40. The proposition that the general provisions in s 304 would give way to the specific provisions of s 211 appears to have its genesis in an observation at [14.0060], which concerns the payment of mortgage duty on unlimited securities, in which the following is said: … The unenforceability provisions of s 304 of the Act could, however, in the light of the specific provisions of s 211 of this Chapter, have no application to mortgages; cf Westpac Banking Corporation v Mousellis…
41. The source of these views appears to be Hill J. His Honour, writing extra-judicially, produced a commentary on the Duties Bill 1997, called Stamp Duty Rewrite New South Wales (LBC Information Services 1997). At [7110] his Honour said: Where an instrument liable to duty is not duly stamped, the normal sanction for failing to so do is the unenforceability of that instrument by virtue of it not being allowed to be given in evidence. That sanction is now to be found in s 304 of the Act. However, the general provisions of that section would give way to the specific provisions of s 211 in the event of an inconsistency. In one sense there is no inconsistency, since s 211 of this Chapter is specifically concerned with enforceability, whereas s 304 may only be concerned with matters of evidence. The relationship between them is not clear, especially as s 304 permits undertakings to be given to permit an instrument to be given into evidence, whereas s 211, arguably, might still operate to require non-enforceability. Under the previous law provisions such as s 211 operated to the exclusion of unenforceability provisions such as s 29 of the 1920 Act. Whatever the relationship between the sections it is clear that a mortgage while duty remains to be paid upon it is enforceable only to the extent of the amount which the duty paid covers. The section thus restores the law to that prevailing at the time Love was decided. That case is discussed in the note at [7020] above.
42. [7020] includes the following observation: … However, it would seem that the unenforceability provisions of s 304 could, in the light of the inconsistent provisions of s 211 of this Chapter, have no application: compare Westpac Banking Corp v Mousellis
43. It seems to be reasonably clear that Hill J relied upon the decision in Westpac Banking Corporation v Mousellis as the source of his conclusion that s 211 was inconsistent with s 304; that the effect of the inconsistency was that s 211 prevailed to the exclusion of s 304; so that the more general latter provision would give way to the more specific former provision. That is the conclusion with which Young CJ in Eq agreed in Neoform Developments.
44. As I have observed above, in considering Westpac Banking Corporation v Mousellis, it is true that Nader J decided that the specific provision that was equivalent to s 211 prevailed over the general provision equivalent to s 304, but that only applied for the period in which the mortgage duty required to be paid remained unpaid. The need for the specific provision to prevail arose because otherwise the mortgage would be entirely unenforceable, even though part of the mortgage duty had been paid. It is obvious, however, from a consideration of Nader J's reasons for judgment that, as soon as all of the required mortgage duty has been paid, the mortgage becomes retrospectively enforceable for all purposes. As I have also observed, that conclusion was reached on the basis of a specific provision that had the same language structure as s 211.
45. It will be useful to interpolate a reference to McKensey v Hewitt [2004] NSWSC 636; (2004) 61 NSWLR 54, which is another decision of Young CJ in Eq (as his Honour then was), albeit one referring to s 29 of the Stamp Duties Act. This case was not concerned with the extension of a caveat to support an unstamped mortgage, but with an unstamped settlement agreement. His Honour said: [10] In Dent v Moore (1919) 26 CLR 316 at 324, Isaacs J, when delivering the decision of the High Court said of the section: … it strikes that instrument with sterility … unless and until the public requirement of taxation has been complied with. Until that has happened, the instrument … is not 'available' and not 'effectual' - that is, it is has no effect - for any purpose whatsoever at law or in equity: in other words, it cannot be considered as an instrument giving title, or as one which could be made the means of compelling anyone to give title. It is in the eye of the law a nullity … The Court then went on to say that no estoppel or admission can circumvent that result. That passage has been applied on many occasions perhaps one of the most significant occasions being Ash St Properties Pty Ltd v Pollnow (1987) 9 NSWLR 80 especially at 100 to 101, but it is applied every day of the week in this Division when caveats lodged by developers who have not paid stamp duty on their contracts are removed because, until the stamp duty is paid, the developer has no interest in the land despite the contract.
46. The point of my reference to this decision is to note his Honour's reference to the long-standing practice of the Equity Division of this Court to remove caveats that have been lodged to support instruments that purport to create any manner of interest in land, where the instruments have not been duly stamped. This practice apparently does not depend upon the application of s 211 of the Duties Act, and it is not limited to caveats that support unstamped mortgages.
47. McDougall J considered the effect of an unstamped mortgage in Boral Recycling Pty Ltd v Wake [2009] NSWSC 712. This matter was also dealt with in the Duty List, and was the subject of an ex tempore judgment. The guarantee and indemnity upon which the caveat was based had not been stamped with mortgage duty. There is no indication whether or not the caveat itself was stamped. His Honour said: [10] Clearly, so far as admissibility is concerned, the problem could be cured under s 304. But would that cure the problem under s 211? In my view, it would not. I shall explain why. [11] If cl 9 is to create a caveatable interest it must be (as Mr Oliveri acknowledged in the course of argument) because it operates, at least in equity, as a mortgage or charge. If, and to the extent that, it so operates, then it is a mortgage as defined by s 205 of the Duties Act. It does not fall within any of the exemptions from stamping set out in Pts 3A and 4 of Ch 7 of the Duties Act. Thus, prima facie (and Mr Oliveri did not submit to the contrary), it was required to be stamped in accordance with the provisions of Pt 2 of Ch 7. [12] Not having been stamped, the consequences prescribed by s 211 must follow. A mortgage that is required to be stamped is enforceable only to the extent of the amount secured by it on which duty has been paid. In this case, no duty having been paid, the relevant amount, for the purposes of s 211(1) is zero. [13] There appears to be some lack of authority on the point. Indeed, Mr Oliveri submitted that he had been involved in many such matters and that the point had never been raised. That may, perhaps, reflect the fact that no one has yet sought to take it. In any event, the matter was considered (although obiter) by Young CJ in Eq in Neoform Developments and Interiors Pty Ltd v Town and Country Marketing Pty Ltd [2002] NSWSC 344. There were a number of points taken in that case, including one as to s 211 of the Duties Act. His Honour noted at [29] that the point had not been fully argued before him. But, in circumstances where the mortgage with which his Honour was concerned had not been stamped with mortgage duty (which is also the case in the matter with which I am concerned today), his Honour concluded that the mortgage was not enforceable. Specifically, his Honour said at [31], not only was the mortgage unenforceable but the particular provisions of s 211 applied over the general provisions of s 304. The latter section, his Honour said, "gives way in the case of mortgages". [14] Further, as his Honour pointed out at [32], the relevant date for assessing enforceability was the date the caveat was lodged. The mortgage not having then been stamped, his Honour said that it would seem "that in any event the caveat could not be supported". [15] In my respectful opinion, that is the approach to be taken to the section. The starting point is, as I have pointed out, that if the provisions of cl 9 are to create a caveatable interest it must be because they operate as a mortgage or charge. Therefore, s 205 of the Duties Act attracts the obligation to stamp. A failure to stamp attracts the operation of s 211. There is no point in standing the matter down to enable the mortgage to be stamped because that would operate to make it enforceable from the date of stamping. Even if this were incorrect (and under the Stamp Duties Act, 1920, it appears that late stamping may have validated an instrument ab initio - see McKensey v Hewitt [2004] NSWSC 636 at [11]) the question is to be assessed today in respect of the particular caveat lodged. [16] In circumstances where the matter was brought on urgently at the plaintiff's request, I do not see the interests of justice as requiring that the proceedings be adjourned, presumably with an order extending the operation of the caveat, so that the plaintiff can attend to its obligations under the Duties Act. Plaintiffs who wish to avail themselves of the caveat provisions of the Real Property Act, 1900, through mechanisms such as cl 9 of the agreement presently under consideration, should attend to their legal obligations expeditiously, and well in advance of any hearing to vindicate their rights. [17] In the circumstances, I hold that the provisions of cl 9, insofar as they constitute a mortgage or charge, are unenforceable. Being unenforceable (and there being no other source of any caveatable interest) it follows that the caveat is bad and that there is no point in ordering its extension. It follows in turn that the proceedings must be dismissed with costs and I so order.
48. In this case McDougall J based his decision in part on the conclusion that late payment of mortgage duty would not make the mortgage enforceable from its inception, and accordingly from the date the caveat was lodged. Accordingly, there was no point in allowing an adjournment of the application to enable the mortgage duty to be paid. However, his Honour also held that it was necessary for the mortgage to be enforceable at the time the caveat was lodged, before the Court could make an order extending the caveat.
49. The question was then considered by White J in Bellissimo v JCL Investments Pty Ltd [2009] NSWSC 1260. No mortgage duty at all had been paid on the document said to create the charge. It does not appear whether mortgage duty was paid on the caveat. His Honour said: [19] Section 204 of the Duties Act 1997 (NSW) charges duty on instruments that fall within the definition of a "mortgage". For the purposes of Ch 7 an instrument is a mortgage "if it is a security by way of mortgage or charge over property, wholly or partly in New South Wales, at the liability date". If the deed of guarantee does create an implied charge, it is a mortgage within the meaning of Ch 7 of the Duties Act. Section 210 imposes duty of $5 if the mortgage secures no amount, or if the amount secured is not more than $16,000. There is provision for additional duty on an advance or further advance which increases the amount secured. Section 211 provides that a mortgage on which duty is required by Ch 7 to be paid is unenforceable to the extent of any amount secured by the mortgage on which duty has not been paid. [20] It may be that if the instrument is a charge it is liable to no more than $5 of duty. I will assume that that is the case, and that the costs agreement does not contain provisions which would amount to an advance within the meaning of s 206. Nonetheless, the effect of s 211 is that whilst any duty remains unpaid on the instrument, it is unenforceable. This goes beyond the prohibition in s 304 on the instrument being received into evidence if not duly stamped, or if an undertaking is not given. [21] It was submitted for the plaintiff that he would undertake forthwith to pay duty payable on the instrument. However, as McDougall J said in Boral Recycling v Wake [2009] NSWSC 712, a case dealing with a caveatable interest said to arise by a guarantor's having agreed to charge its interest in freehold or leasehold property: … if the provisions of clause 9 are to create a caveatable interest it must be because they operate as a mortgage or charge. Therefore, s 205 of the Duties Act attracts the obligation to stamp. A failure to stamp attracts the operation of s 211. There is no point in standing the matter down to enable the mortgage to be stamped because that would operate to make it enforceable from the date of stamping. Even if this were incorrect (and under the Stamp Duties Act, 1920, it appears that late stamping may have validated an instrument ab initio - see McKensey v Hewitt [2004] NSWSC 636 at [11]) the question is to be assessed today in respect of the particular caveat lodged. [22] I should add that there is a public policy interest in persons taking instruments which are intended to create a mortgage or charge in drawing to the attention of the mortgagor or chargor, being the party primarily liable for the duty, that, such a liability exists. At the very least that would draw to the attention of those signing such instruments that an agreement, which in terms is expressed to be an agreement to the lodgment of a caveat, will be contended by the other party to amount to a charge over the first person's land.
50. His Honour thus followed the decision of McDougall J in Boral Recycling.
51. The question was again considered by Barrett J (as his Honour then was) in ACN 075 911 410 Pty Ltd v Almaty Pty Ltd [2011] NSWSC 333 Barrett J said: [15] The plaintiff's case is that land of the first defendant is effectively charged with the payment of money by operation of the 23 June 2009 and, in particular, the charging clause. On that basis, there is a "mortgage" within s 205 of the Duties Act 1997 being a mortgage which, of course, affects land in New South Wales. Neither of the documents mentioned bears any evidence of the payment of stamp duty. Neither carries an impressed stamp as referred to in s 287(1) of the Duties Act nor any endorsement of the kind mentioned in s 289 A. There is simply no marking of any relevant kind. Having regard to s 304 of the Duties Act , I therefore reserved the question whether either should be admitted into evidence. [16] A related issue arises under s 211 of the Duties Act which is in these terms: A mortgage on which duty is required by this Chapter to be paid is unenforceable to the extent of any amount secured by the mortgage on which duty has not been paid. [17] It is common ground that the charging clause in the 23 June 2009 documents applies to the land of the first defendant in respect of which the caveat was lodged. It is also common ground - or, at least, not disputed - that the charging clause cannot cause the land to be encumbered so as to cause an estate or interest in it to be enjoyed by the plaintiff if the charging clause is, to use the word found in s 211, "unenforceable". An enforceable right to resort to the land as security is crucial to the existence of the estate or interest as chargee claimed by the plaintiff in its caveat. [18] As McDougall J explained in Boral Recycling Pty Ltd v Wake [2009] NSWSC 712, any stamping that may in future occur cannot operate in a retrospective way to create, as at the date of the caveat, any interest that would have existed by virtue of the charge had it then been enforceable. [19] The desire that the documents of 23 June 2009 be in evidence is the desire of the plaintiff. It is only through those documents, coupled with other evidence, that the plaintiff could begin to make good its contention that it has the estate or interest claimed in the caveat or, at least, that its claim may have substance. The person liable to pay duty on a mortgage is the mortgagor: Duties Act , s 207. The mortgagor, being the first defendant, did not appear on the hearing of the notice of motion. Nor did the plaintiff, being the mortgagee, proffer the "usual undertaking by person not liable" in accordance with r 31.13(3) of the Uniform Civil Procedure Rules 2005. It follows that, if a liability to duty exists in respect of the two documents together, the court is precluded by s 304 of the Duties Act from having regard to those documents in sdetermining the plaintiff's interlocutory claim. And if that is in truth the position, the claim necessarily fails.
52. Not only was mortgage duty not paid, but the plaintiff did not undertake to pay the duty. Strictly, the question of whether late payment of the duty would have a retrospective effect under s 211 did not arise. Barrett J then addressed the consequences of the fact that a limited amount of stamp duty had been paid on the caveat itself pursuant to s 227 of the Duties Act, in the following terms: [20] The plaintiff relies on the fact that the caveat itself has been stamped. It bears an Office of State Revenue stamp showing that, on 18 February 2011, duty of $5 was paid by reference to an "Initial Amount" of $16,000. Given that a Real Property Act caveat as such is not otherwise liable to stamp duty, it may be inferred that the caveat was stamped pursuant to s 227 of the Duties Act : [his Honour then set out the terms of the section]… [21] The stamp on the caveat, considered in the light of s 227 and the provisions of s 210 as to rates of duty on mortgages, indicates that duty has been paid on the caveat in an amount that would have been chargeable on a mortgage securing, at its first execution, not more than $16,000. [22] I was not directed to any provision of the Duties Act which, as it were, deems a mortgage which has itself not been stamped to be stamped with the duty in fact impressed on a caveat related to the mortgage in the way relevant to the operation of s 227. Indeed, the terms of s 227 itself seem to emphasise the separateness of the caveat and the mortgage. Thus, for example, in a case where the mortgage is chargeable but not stamped, the amount for which the caveat is "chargeable with duty" is "the same amount as is chargeable on the mortgage". There is thus clear recognition of the co-existence of an amount of duty chargeable on the mortgage and an amount of duty chargeable on the caveat, with both amounts being the same and with separate charges for the two being imposed. [23] An immediate reaction is to think that provisions with respect to collateral securities may operate. Under s 217 a "collateral mortgage" is chargeable with a minimum duty of $50. The definition of "collateral mortgage" in the Act's dictionary is: "collateral mortgage" means a mortgage that secures all or part of the same money as another mortgage, instrument of security or mortgage package. [24] It is, to my mind, not possible to see how the documents of 23 June 2009 secure the same money as "another mortgage, instrument of security or mortgage package", when it is the caveat that is put forward as the "mortgage, instrument of security or mortgage package" securing the money in question. This is because the caveat, of its nature - and as recognised by s 227 - does not "secure" anything and is not a "mortgage", "instrument of security" or "mortgage package". [25] The overall conclusion with respect to stamp duty is that the Loan Term Sheet and Costs Agreement of 23 June 2009 attract a liability to ad valorem stamp duty as a "mortgage" and that that liability is not removed or reduced because the caveat has been stamped in the way that it has; but that there is a remote possibility (which I am inclined to think does not really exist at all) that, because of the stamping of the caveat, the Loan Term Sheet and Costs Agreement of 23 June 2009 are chargeable with a minimum duty of $50 under s 217. Either way, the fact that the Loan Term Sheet and Costs Agreement of 23 June 2009 have not been stamped at all and no undertaking under r 31.13(3) has been given means that, under s 304 of the Duties Act, the court cannot receive or have regard to those documents. [26] It follows that the plaintiff, by failing to get into evidence the key documents on which it relies, has failed to make out its case for the grant of interlocutory relief by way of an order for the extension of the caveat. The plaintiff cannot show that the claim in the caveat has or may have substance unless it proves the content of the documents of 23 June 2009 and this, for the reasons I have given, it has not done.
53. I should add that I applied the principle that an offer to pay late mortgage duty in order to secure the extension of a caveat in respect of which the required mortgage duty had not been paid at the time the caveat was lodged was not sufficient to justify an order extending the caveat in Complex Scaffolding Solutions Pty Limited v Abraham Doueihi [2014] NSWSC 230. The validity of the principle was not, however, challenged in those proceedings.
54. It was Katzmann J in Arnautovic & Sutherland t/as Jirsch Sutherland & Co v Civitanovic (as trustee of the bankrupt estate of Adrian Lawrence Rosee) [2011] FCA 809; (2011) 199 FCR 1 who drew attention to the apparent inconsistency between the line of authority that holds that late payment of stamp duty cures the defect in the validity and enforceability of instruments or transactions liable to duty from the inception, and the line of caveat cases decided in the Duty List of the Equity Division of this Court. Mr Rosee, before the commencement of his bankruptcy, entered into two deeds in favour of the liquidator of a company of which Mr Rosee was the sole director, to guarantee payment of his fees and expenses and indemnify him for all other costs incurred while acting as liquidator. Each deed contained a clause in which Mr Rosee agreed to charge any property to which he had legal title to secure his liabilities under the deed, as well as an acknowledgement that the liquidator had a caveatable interest in any real property the subject of the charge. Mr Rosee undertook to grant the liquidator an unregistered mortgage upon request. The deeds were not stamped with mortgage duty. Mr Rosee's bankruptcy intervened before the question arose as to whether the liquidator could enforce the charge against his property. The question before Katzmann J was, in simple terms, whether the liquidator or the trustee in bankruptcy was entitled to an asset that was subject to the charge. The liquidator did not cause the mortgage duty to be paid before the case was initially determined by a Federal Magistrate. It was only paid days before the appeal to Katzmann J was heard. The liquidator had to apply for leave to file and rely upon new evidence, to establish that the mortgage duty had finally been paid. In the result Katzmann J dismissed the liquidator's application to rely upon the evidence, so the appeal was decided upon the basis that the mortgage duty had not been paid. Accordingly, s 211 of the Duties Act had the effect that the charges created by the two deeds were not enforceable.
55. Her Honour, in the course of her reasons, considered the issue of whether, had the requisite mortgage duty been paid, albeit late, the unenforceability of the charges caused by s 211 of the Duties Act would have been cured. Katzmann J considered most of the authorities that I have reviewed above, and reached the following conclusion: [52] McCallum does not seem to have been cited to any of the NSW judges upon whose decisions Mr Bedrossian relied. Certainly, none of the judgments refer to it. Section 211 does not use the word "unless". This might point to a deliberate legislative intention to overcome the interpretation given to s 29. But the language is not clear. It certainly does not exclude the possibility of "retroactive operation". And the inconvenience of the alternative interpretation to which Heydon J referred in McCallum remains. The Explanatory Note on the Duties Bill is silent on the question. And there is nothing in the second reading speech that throws any light on it. The Minister delivering the second reading speech, the Hon RJ Debus MP, said that the main purpose of the legislation was to replace the Stamp Duties Act with "simple, clear and equitable legislation drafted in contemporary language and modern style": Hansard, Legislative Assembly, 12 November 1997, p 1612. He said nothing about the question of enforceability of unstamped mortgages. [53] Whatever the reason for the change in the statutory language concerning the unenforceability of mortgages, I very much doubt that the change from "unenforceable unless it has been stamped" to "unenforceable to the extent of any amount secured by the mortgage on which duty has not been paid" was intended to have the effect that the mortgage was only enforceable from the time of stamping and not retrospectively from the time of execution, contrary to the previous authorities. In the light of the authorities, if the effect were to prevent a mortgage from operating ab initio one might have expected either the substitution of "unless" with "until" or some express statement to the effect that the stamping only operated prospectively. I am therefore inclined to follow the approach in McCallum and to hold that s 211 operates retrospectively to make the charge enforceable from the time it was executed. If I am right, this means that the admission of the evidence of the now stamped deeds would not only not be futile, it would be decisive; the appellants would succeed on the appeal.
56. The question is whether the conclusion reached by Katzmann J is correct.
57. In my view it is. I acknowledge, however, that, if it were not necessary to interpret s 211 in its historical context, perhaps the more natural way to interpret its wording would be that a mortgage is only enforceable up to the amount covered by the mortgage duty paid at the time of enforcement, and that any late payment of mortgage duty would only have a prospective effect. That reading of the wording would imply the temporal conclusion that enforceability would only follow payment of the requisite mortgage duty.
58. I do not think that the change in wording from s 84(4) of the Stamp Duties Act, whereby a loan security was "unenforceable unless it has been stamped", to the expression used by s 211 of the Duties Act, which makes a mortgage "unenforceable to the extent of any amount… on which duty has not been paid" is sufficient, in the light of the time-honoured approach to the effect of late payment of stamp duty, to justify a conclusion that the Parliament intended to enact a significant change in the law. The line of authority that culminated in the judgment of Heydon JA in McCallum is extremely persuasive. The change in wording between s 211 and its predecessor should not be given significance, unless there is a clear basis for doing so. There is nothing in the relevant second reading speech, or in the explanatory note, that would suggest that such a change was intended. As I have noted, the second reading speech rather suggests that no such change was intended, and that the purpose of the change in wording was to introduce "simple, clear and equitable legislation drafted in contemporary language and modern style"! I cannot discern anything that arises from the text of the Duties Act, or the context in which that legislation was enacted, which provides any positive reason to conclude that the Parliament intended to achieve the result that a failure to pay mortgage duty had the exceptional result that late payment of that duty would only make the mortgage prospectively enforceable. The reason for the inclusion of s 84(4) of the former legislation, and s 211 of the present, was in my view to satisfy the need for there to be a special arrangement to deal with the possibility that only part of the mortgage duty payable may have been paid in respect of mortgages that secure different amounts over time. There does not appear to be anything special about mortgage duty that would justify a conclusion that mortgages should only be enforceable prospectively, once unpaid mortgage duty is finally paid.
59. A further, specific reason for the conclusion that I have reached arises out of a combination of the circumstances that the Duties Act permits late payment of mortgage duty, albeit on payment of a penalty, and also contemplates that mortgage duty can be paid in due time, without default, up to 3 months after the liability date. If mortgage duty is not paid immediately upon the execution of the mortgage, or at the time of some further advance, there will not be an immediate default under the Duties Act. The default will only occur at some later time. Yet s 211 has the effect that the mortgage is unenforceable if the mortgage duty has not been paid. Its effect is not limited to the mortgage being unenforceable if payment of the mortgage duty is in default. There is therefore a real possibility that a mortgage will become enforceable in accordance with its terms, say upon default by the mortgagor, at a time when the mortgage duty has not been paid, but there has been no default. If s 211 has the effect that the mortgage is only enforceable from the date of payment of the mortgage duty, then that would exclude defaults being effective even during the period when there is no default arising from the failure to pay the mortgage duty. I do not think that that result could have been intended by the Parliament. I cannot see any basis in the wording of s 211 for interpreting it as having a retrospective effect where the mortgage duty is paid after the liability date, but there is no default, but only having a prospective effect in cases where there has been a default. It is the imposition of penalties that deals with the cases in which a default in payment of the mortgage duty has occurred.
60. Given the need that has arisen for me to consider the reasoning in the caveat cases, I should make some final observations about the correctness of the outcomes in those cases. It does not follow from the conclusion that I have reached in this case that I think that those cases were wrongly decided. That is an issue, in any event, which should be left for further consideration in a case in which it arises. A number of observations should be made about this line of cases.
61. First, the source was the interlocutory decision of Young CJ in Eq in Neoform Developments, in which his Honour's observations on the issue were obiter. It does not appear that in that case, or the subsequent cases, the issue was fully argued.
62. Secondly, the line of authority that proceeds through the Electricity Meter Manufacturing, Shepherd v Felt and Textiles of Australia Ltd, The Commercial Banking Company of Sydney Ltd v Love, and McCallum v National Australia Bank Ltd cases was not considered by the Courts.
63. Thirdly, in so far as Young CJ in Eq appears, in Neoform Developments, to have relied upon Hill on the Duties Legislation, in holding that the general provision in s 304 gives way to the specific provision in s 211 of the Duties Act, his Honour, with respect, may not have appreciated that the view expressed in Hill was derived from Westpac Banking Corporation v Mousellis, which, when read carefully, stands for the contrary position to that which his Honour adopted.
64. Fourthly, it does not follow that the caveat cases were wrongly decided. There is authority in those cases for the proposition that, for a caveat to be sustainable, the mortgage interest in the land claimed by the caveator must exist at the date the caveat is lodged. If the mortgage is unenforceable at that time, then the caveat will have been lodged to support an interest in the land that did not exist. The question whether the late payment of the mortgage duty will cure this deficiency is a matter for the proper interpretation of the statutory provisions in the Real Property Act 1900 (NSW) that govern the validity of caveats, rather than the effect of s 211 of the Duties Act. While s 74F of the Real Property Act, permits a person who claims to be entitled to a legal or equitable estate or interest in land to lodge a caveat, there must, at the time of lodgement, be a basis for the conclusion that there is a serious question to be tried regarding the existence of the estate or interest claimed: see Circuit Finance Australia Ltd v Bessounian [2006] NSWSC 1190 at [7]. There can be no such serious question if the claim is unenforceable by statute. The concept of the caveat subsequently springing into life upon payment of the mortgage duty is unsatisfactory (or not if the duty is never paid). Although usually (albeit not in the Almaty case) the dispute as to whether or not the caveat should be extended is between the party claiming to be a mortgagee and the registered proprietor, it must not be forgotten that the purpose of lodging a caveat is to affect the rights of third parties who may deal with the registered proprietor. There is good reason to interpret the provisions of the Real Property Act in a way that requires the mortgage to be enforceable as a matter of law at the time the caveat is lodged, because any retrospectivity of legal effect as between the mortgagee and the registered proprietor should not put the interests of third parties at risk. This is a question that should be left for consideration when it arises in a case that concerns the extension of a caveat. (The High Court's ruling in Shepherd v Felt and Textiles of Australia Ltd that late payment of stamp duty has the general effect of making the instrument retrospectively valid, even against third parties, will not be decisive of this issue, as the question does not arise under the Duties Act, but depends upon the proper interpretation of the relevant provisions of the Real Property Act).
65. Fifthly, at least in cases where the mortgage duty has not been paid before the hearing, the caveat cases may be supported by the practice that the Court will not adjourn the hearing to enable the mortgagee to pay the unpaid mortgage duty.
66. In this respect, in Almaty Barrett J made the observations that have been set out above concerning the relationship between payment of mortgage duty imposed on caveats, and the payment of the duty on the mortgage itself. That is a subject that was not considered by the parties in this matter, and is beyond the proper scope of these reasons for judgment. However, it is clear that the purpose of s 227 of the Duties Act is to provide some protection to the revenue against the possibility that mortgagees may fail to pay the required mortgage duty in respect of the mortgages, and then seek to protect themselves by lodging a caveat to support the unregistered mortgages. The section requires that, if the mortgage itself is not duly stamped, a caveat lodged in its support must be stamped with the same amount of mortgage duty. In my view it is an available basis for the Court to refuse to extend the caveat that the mortgagee has neither paid the mortgage duty payable on the mortgage, nor the equivalent duty payable on the caveat. The Court would be entitled, in the exercise of its discretion, to decline to lend its aid to a mortgagee in these circumstances, which would have the effect of permitting the mortgagee to avoid the consequences of an explicit statutory attempt to prevent mortgagees lodging caveats to protect unstamped mortgages. On the other hand, if the caveat has been stamped to the full amount of the mortgage duty payable on the mortgage, the Court may look differently upon an application to enable any necessary mortgage duty to be paid on the mortgage itself.

Conclusion

1. I will invite the parties who remain in the proceedings to bring in short minutes of order to effect the conclusions that I have reached in these reasons for judgment. The short minutes of order should include appropriate orders under UCPR r 28.2.
2. In summary, I have concluded that the appointment of the administrators as administrators of Beechworth was not ineffective because mortgage duty payable under the Duties Act on the general security deed granted by Beechworth had not been paid. I have concluded that the appointment of the administrators as administrators of Griffith was ineffective because none of the mortgage duty payable on the general security deed granted by Griffith had been paid. However, the Court has power under s 447A of the Act to make an order to the effect that Part 5.3A is to operate as if the administrators had validly been appointed as administrators of Griffith. For that purpose, when the requisite mortgage duty was paid on the general security deed granted by Griffith, the deed became enforceable as at the date of appointment of the administrators.
3. As it is clearly undesirable for the administrators' status as administrators of Griffith to remain in doubt for any considerable time, pending the determination of their application under s 447A of the Act, I would ask the parties to consider whether it is practicable for them to deal with that outstanding issue on an expedited basis, perhaps by delivering written submissions on the basis of the evidence that has already been tendered in the proceedings. That is a question that may be considered at the next directions hearing.

Amendments 16 June 2015 - Change to case title on the cover sheet to conform with the corporations list case title protocol DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 16 June 2015