Commercial Banking Co of Sydney Ltd v Love

On 28th June 1971 the second respondent sold the land to the first respondent for a sum payable in cash. At the date of this sale there was due to the bank by the second respondent a total sum of the order of nine hundred thousand dollars (including the indebtedness on both accounts). The bank when requested by the first respondent so to do, refused to discharge the mortgage except upon payment of the sum of $91,000, that happening to be the total amount for which stamp duty had been paid in respect of the mortgage prior to the date of the commencement of the action, namely 21st October 1971. The amount for which stamp duty had been paid on the mortgage at the date of the sale of the land was $70,000.

The first respondent, as purchaser under the contract of sale, sued the bank and the second respondent claiming:

(i) a declaration that the sum secured by mortgage A410038 was $64,000;

(ii) an order that against payment by the first respondent to the bank of the sum of $64,000 the bank execute a registrable discharge of the mortgage and deliver to the first respondent duplicate certificate of title vol. 1053 fol. 730; alternatively,

(iii) a declaration that the sum secured by mortgage A410038 was $70,000;

(iv) an order that against payment by the first respondent to the bank of the sum of $70,000 the bank execute a registrable discharge of the mortgage and deliver to the first respondent duplicate certificate of title vol. 1053 fol. 730;

(v) a declaration that any sum paid by the first respondent to the bank to obtain a discharge of mortgage A410038 would be accepted by the second respondent as moneys paid by the first respondent under the contract of sale between the first respondent and second respondent;

(vi) an order that upon payment of the balance of $64,000 due under the contract of sale the second respondent execute a registrable transfer of the land the subject of certificate of title vol. 1053 fol. 730 to the first respondent and do all things necessary to effect registration of the transfer;

(c) against both the second respondent and the bank, costs.

The Supreme Court of Western Australia (Wickham J.) held that, subject to the effect of the penultimate clause of the mortgage, the amount covenanted to be paid and secured by the charge contained in the mortgage included amounts due to the bank otherwise than through the account at the Nedlands branch of the bank: consequently, there was then due under the mortgage, apart from the effect of the penultimate clause, a sum considerably greater than the sum of $91,000 [6a] .

However, his Honour held that the penultimate clause of the mortgage plus the payment of stamp duty in the first instance was effective to limit the amounts of money secured by the charge in the mortgage to the amount of $70,000. That clause is in the following terms:

That this mortgage is collateral with the instruments of security set forth in the schedule hereto to the extent only to which such instruments are respectively stamped and is primary for the amount to which the same is primarily stamped. There were no instruments of security set out in the relevant schedule. His Honour said of this clause in these circumstances: This provision is qualified by the words at the beginning of the mortgage "and for the consideration aforesaid the mortgagor doth hereby covenant with the bank and it is hereby agreed and declared as follows:". The clause therefore is an agreement that the mortgage is primary security for the amount to which it is primarily stamped. It is not a collateral security at all and is therefore a security for the amount to which the same is primarily stamped. I suspect that this clause is designed to marry with s. 83 of the Stamp Act but I can see no reason for giving it anything other than its face value, any more than I could for giving the extent of the covenant any other than the value connoted by the words there used. It follows that on 28th June when the plaintiff acquired his equity in the mortgaged property the mortgage was then only a security to the amount of $70,000 and as at that date that was the proper amount and the only amount which the mortgagee could demand in redemption.

Where such total amount is unlimited the security is to be available for such an amount only as the ad valorem duty denoted thereon extends to cover; but where any advance is made in excess of the amount covered by that duty, the security shall, for the purpose of stamp duty, be deemed a new and separate instrument bearing date on the day on which the additional advance was made or the additional stamp duty paid, whichever is the earlier date, but so as not to otherwise affect the instrument as a security; and if such security is registered under any Act relating to the registration of securities such registration shall be effective for the additional advances, but subject in the case of a bill of sale to paragraph (4) of section six of the Bills of Sale Act 1899. Such additional duty may be paid and denoted from time to time as further advances are made, by stamps impressed on or affixed to the security and duly cancelled; and where the original security is deposited in the office of Land Titles or any other public office in which registration is required, any duplicate or counterpart of the original instrument may be stamped with such additional duty, and such stamping shall have the same effect as if the stamps had been impressed or affixed upon the original instrument.

The relevant portion of the schedule to the Act is as follows:

Nature of Instrument Stamp Duty Payable Mortgage (legal or equitable), Bond, Debenture, Covenant, Warrant of Attorney to confess and enter up judgment and Foreign Security of any kind - 1) Being the only or principal or primary security for the payment or repayment of money - Not less than $20 nor exceeding $40 $0.05 Exceeding $40 but not exceeding $80 0.10 Exceeding $80 but not exceeding $120 0.15 Exceeding $120 but not exceeding $160 0.20 Exceeding $160 but not exceeding $200 0.25 Exceeding $200 for every $200 and also for any any fractional part of $200 0.25 2) Being a collateral, or auxiliary, or additional or substituted security or by way of further assurance for the above-mentioned purpose, where the principal or primary security is duly stamped - for every $200 and also for any fractional part of $200 of the amount secured 0.05

No consideration seems to have been given at the hearing of the suit to the question whether the first respondent as plaintiff had any right to redeem the mortgage given by the second respondent to the bank. The first respondent was a purchaser for cash of the freehold. In a suit for specific performance against the second respondent he might prove that the second respondent was unable to make title to the land because of its inability to redeem the mortgage. In fact, as I view the facts of the case, that was the situation of the second respondent. In that event, the first respondent could not have obtained specific performance and would have been relegated to damages for loss of his bargain. The case seems to have been considered, however, on the basis that the first respondent as purchaser was equitably entitled to the land, subject to payment of the agreed price and as such equitable owner entitled to redeem. But the first respondent's equitable estate was commensurate with and dependent upon his right to obtain specific performance. It may thus be doubtful on the facts of this case whether, if the second respondent could not redeem and make title, the first respondent had any equity to redeem the mortgage.

But no point was taken at the trial or on appeal as to the non-existence of any right of redemption in the first respondent. Consequently, I need express no considered opinion on that matter. I may say, however, that on one reading of the reasons for judgment of the learned trial judge, it might be thought that his Honour had held that the first respondent had a right of redemption on payment of a lesser sum than that for which the second respondent might have redeemed. It needs no elaboration to conclude that such a position was not possible in law or in equity. Even if the first respondent had purchased the second respondent's equity of redemption in the land, which in fact he did not, or if he had a right to redeem as equitable owner under the contract of sale, his right to redeem would have been exactly the same as the right of redemption which the second respondent had.

The claim of the first respondent according to his statement of claim was that the bank was bound to transfer the land to him upon payment of either the sum of $64,000, being the balance of purchase money payable to the second respondent under the contract of sale, or the sum of $70,000, which was the amount for which the bank had firstly paid stamp duty upon the memorandum of mortgage and being the amount which the stamp duty, indorsed on the mortgage at the date of the contract of sale, covered. The statement of claim asserted that the bank had wrongly claimed to be entitled to be paid the sum of $91,000 to discharge the mortgage.

The argument before the learned trial judge in support of the statement of claim proceeded on two separate bases: first, that the mortgage secured only the amount due to the bank at the Nedlands branch of the bank and did not secure sums due to the bank otherwise than upon that account; secondly, that because of the penultimate clause to which I have referred, the amount for which the mortgage was security was limited to the amount for which the document had been stamped in the first place, namely, $70,000.

As to the first ground, his Honour found against the first respondent. Against that finding there is no cross-appeal. The second ground which his Honour seems to have accepted is in the passage which I have quoted from his reasons for judgment. But it seems to me that the penultimate clause does not in any way bear upon the promise to pay contained in the earlier covenant or upon the charge over the land which the mortgage contains. The clause is quite evidently what his Honour suspected it was, namely, a provision to enable the proper rate of duty to be determined whenever it was appropriate to stamp the memorandum of mortgage. Quite evidently it was included in the memorandum in purported compliance with s. 26 of the Stamp Act, and had no other function. The fact in this case was that the clause had no operation even in relation to stamp duty. The security, so far as appears, was the only security for the amount covenanted to be paid: it was neither primary nor collateral. The rate of duty paid both in the initial stamping and in the additional stamping was at the top rate set out in the schedule of the Stamp Act.

It would seem that his Honour, as I think erroneously, used the word "primary" in the sentence in his reasons which I have quoted which begins, "The clause therefore ", in two different senses: first, as in contrast to collateral and, secondly, in the temporal sense of first. This, in my opinion, was erroneous. Neither in the clause of the mortgage nor in the schedule to the Stamp Act does the word "primary" bear a temporal significance.

As will appear when I discuss the meaning and operation of the Stamp Act, there is, in my opinion, no direct obligation, enforceable by penalty, to stamp a memorandum of mortgage to secure an overdraft of unspecified amount. But s. 83(2) of the Act does purport to make the security of the mortgage unavailable except to the extent of an amount commensurate with the duty paid upon it. Assuming that the concept of availability in the sub-section extends to cover redemption, the Act allows the appellant to cure any understamping by payment of additional duty (see s. 25). There is no prohibition of such a course. As I have said, the ad valorem duty recorded on the memorandum of mortgage at the date of the commencement of the suit was for $91,000.

In my opinion, the penultimate clause was irrelevant either to the question of meaning or extent of the covenant to pay or to the question of what amount of money was necessary to redeem the mortgage as at the date of the commencement of the action. In my opinion, the conclusion that the covenant for payment in the mortgage was "an agreement that the mortgage is primary security for the amount to which it is primarily stamped" was erroneous.

It seems to have been thought that, having contracted to buy the land, and thus acquiring an equitable interest therein, the first respondent could by notice to the mortgagee fix the amount on payment of which the bank was bound to permit redemption of the mortgage. But the bank was the registered mortgagee. The charge created by the mortgage was effective according to the terms of the mortgage, subject to the effect of the Stamp Act to which I shall later refer. That charge was not affected by the fact of the sale or by notice of it to the mortgagee. No question of competing equities arose in the case.

The second respondent, however, made an alternative submission based upon the provisions of the Stamp Act, particularly s. 83(2), irrespective of the terms of the mortgage. The argument was that that sub-section confined the bank, when redemption was sought, to demanding only the payment of a sum not greater than the amount for which stamp duty had first been paid upon the memorandum of mortgage, in this case $70,000. The argument was founded on the proposition that the expression "is to be available for such an amount only as the ad valorem duty denoted thereon" extended to include within its ambit the insistence on the security at the time of redemption. It then proceeded upon the footing that once an amount of duty was paid in respect of a mortgage of unlimited amount, any further payment of duty must be in respect of an advance made subsequent to such first stamping. Any sums already advanced at that time in excess of the amount of duty firstly paid became unsecured and could not become secured by any further payment of duty. Thus, the second payment of duty in this case could only be referable to some further advance and not to any sum lent before or at the time of the payment of the amount of the stamp duty appropriate to the sum of $70,000.

It thus becomes necessary to examine further the provisions of the Stamp Act.

Section 16 imposes the duties by reference to the descriptions of the Second Schedule to the Act. I have already set out the relevant part of the Second Schedule. Section 39(1) makes the person appropriately nominated in the schedule liable to payment of the duty. Where the instrument is not duly stamped within the specified time, that person is liable to a penalty not exceeding twenty dollars in addition to an additional amount of duty for late payment. In the case of a mortgage falling within the schedule, the mortgagor is the person on whom the responsibility of stamping the mortgage is laid.

I find no provision in the Act which places an obligation on any person to stamp a memorandum of mortgage securing an unlimited and thus an unspecified amount of money. The Act only brings such a memorandum of mortgage to duty through the operation of s. 83(2). It is thus apparent from the terms of the schedule that a mortgage for an unlimited amount is not dutiable upon its execution or within a specified time thereafter. The schedule is only applicable if there is a specific sum secured. If there is such a sum, the rate of duty is on a sliding scale with a differential as between a collateral security and the principal or primary security.

The Act imposes a duty on instruments, not on transactions. It does not purport to avoid any transaction for want of the payment of stamp duty on an instrument. But it seeks principally to withhold the assistance of the courts in enforcing the instrument or in aiding the transaction where use of the instrument is necessary in proceedings in court or in an arbitration. Section 27 provides that a dutiable instrument may not be pleaded, given in evidence or admitted to be good, useful or available in law or in equity unless duly stamped. The Act further seeks to deny the benefits of registration to a dutiable instrument which is unstamped: s. 28. But the court or arbitrator may receive the unstamped instrument in evidence, if being capable of then being stamped the appropriate duty is then paid upon it: s. 29(2) (see also s. 30). Thus, as there is no time fixed for the payment of duty upon a memorandum of mortgage for an unlimited amount, duty may be paid upon it in court for that amount which is at that time an appropriate amount of duty, i.e. an amount of duty commensurate with the amount sought to be recovered or asserted as being secured by the memorandum of mortgage.

Section 83(2), in using the expression "is to be available", is, in my opinion, referring to proceedings taken by the mortgagee, either as plaintiff or as defendant, to recover, or set off an amount claimed to be secured by the mortgage. The word "available" is used, in my opinion, in the same sense as it is used in s. 27. Thus, the expression would extend to embrace a defence by a mortgagee in a redemption suit in which the mortgagee asserted the obligation of the mortgagor to pay a sum in redemption. But, in such a case, the court would have power to allow the payment of an amount of duty commensurate with the mortgagee's demand. This would be so whether the memorandum was wholly unstamped or had already been stamped for a sum relevantly too small. The mortgage claim in redemption would not, in my opinion, be limited to an amount commensurate only with the amount of stamp duty which may already have been paid on the mortgage.

Section 83(2) thus provides for the payment of duty by limiting the recovery of the mortgagee to the amount of duty ultimately paid. It does not limit the mortgagee's security to the amount of duty firstly paid.

In the present case, the amount which the stamp duty denoted on the mortgage at the date of suit and at the date of hearing, extended to cover, was $91,000 and the appellant did not claim any greater sum in redemption. On the plain application of s. 83(2) to the circumstances of this case, the mortgagee was entitled to recover in redemption that sum.

The view I have expressed as to the meaning and operation of the Stamp Act involves the conclusion that a memorandum of mortgage to secure a bank overdraft of unlimited amount is not dutiable when executed, or within any specified time thereafter: nor is it necessarily dutiable when tendered for registration, i.e. so long as the amount secured is then unlimited. It would be otherwise if at the time of registration the account had been closed and for that reason or any other a specific sum had become payable.

The meaning and operation of so much of s. 83(2) as follows the words "but where any advance is made " is far from clear: particularly when considered in the light of the other provisions of the Stamp Act to which I have referred. It seems to contemplate a situation in which the mortgage has been put in suit for a sum covered by an amount of stamp duty then paid but on which advances are subsequently made so that further duty is necessary if these further advances are to be recovered. Meantime, the mortgage and its registration are regarded as on foot securing the additional advances. Oddly enough, the sub-section in the Stamp Act, unlike its English prototype, speaks of the mortgage being regarded as a separate instrument "bearing date on the day on which the additional advance was made or the additional stamp duty paid, whichever is the earlier date". I have great difficulty in contemplating the payment of the additional duty before the making of the additional advance in the case of a mortgage securing an unlimited amount. But, obscure as the provision is, it has, in my opinion, no bearing directly or indirectly upon the instant case.

The Court was pressed with the decision of Farwell J. in In re Waterhouse's Policy [7] as authority for the proposition that once the bank had stamped the mortgage the amount of money then due to it, beyond the sum for which the amount of stamp duty was appropriate, became and remained unsecured. The submission fastens on what his Lordship said [8] : " if a Bank chooses to take security for an overdraft and stamps that security with a stamp which is only sufficient to cover a limited sum, then, as the result of sub-s. 2, "i.e. the counterpart of s. 83(2)", the Bank is precluded from claiming either in a Court of law or elsewhere that the security which it has is a security for any greater sum than that which the stamp on it covers."

But his Lordship in that case did not have to consider the problem which is posed in this case. In the case before him the bank had taken an assignment of an endowment policy on the life of the customer for the sum of £500. The assignment was to cover an overdraft of an unlimited amount. When the policy money became due, bonuses totalling £463 had become payable. The bank had stamped the assignment appropriately for the sum of £500 and claimed only that sum out of the proceeds of the policy. It was agreeable to the payment of the excess to the policy holder. But the insurance company took the stand that the policy was insufficiently stamped because more than £500 had been and was then due to the bank by the policy holder. Accordingly, it refused to pay either the bank or the policy holder because of a section in the Stamp Act 1891 U.K. which rendered invalid an assignment which was not duly stamped. The insurance company paid into court the proceeds of the policy.

His Lordship decided, in effect, that the assignment was duly stamped in relation to the bank's claim upon it. He did not have to consider the provisions of the Stamp Act 1891, which allowed for payment of duty on insufficiently stamped instruments. He certainly did not decide that the first stamping of a security for an unlimited sum precluded for all time the use of the security for any sum beyond the sum appropriate to the duty firstly paid. But if the bank in the case before him had sought to restamp the assignment to cover a claim under it for the full amount of the proceeds of the policy, his Lordship, in my opinion, would have been bound to allow that restamping and the bank's claim for that amount under the assignment.

The purpose of the Stamp Act is to collect in the long run the full amount of duty which could be payable under the Act upon the instrument. The consequence of invalidity was to ensure that full payment of duty. Consequently, the ability to restamp insufficiently stamped instruments must be conceded. The sufficiency or insufficiency of the stamp duty paid must relate to, and be determined by, the amount for which the security is asserted at the time the claim under it or to enforce it is made. I am unable to regard the decision of the reasoning in In re Waterhouse's Policy [1] as authority for the respondent's submission.

The appellant referred to In re Dehy Fodders (Australia) Pty. Ltd.; Winter v. Bank of Adelaide [2] . I agree with the conclusion of all those judges of the Supreme Court of South Australia who held that the restamping of the bank's security was effective so that the bank could assert the security, as between the parties to the security, for the full amount which the restamping covered, notwithstanding the fact that a lesser amount of duty had been paid in the first instance. Zelling J., though otherwise in dissent, agreed [3] with that proposition. He differed from the majority as to the effect of the first payment of duty in relation to the competition of the bank's security with the crystallized charge of a debenture not otherwise having priority over the bank's charge. I have no need in this case to decide which view, that of the majority or that of Zelling J., is correct in relation to the question of priorities decided in that case, though I have no present reason to doubt the validity of the Court's conclusion. There is in this case no question of any competition between the appellant's registered mortgage and the first respondent's equitable ownership of the land, if indeed, he had any such ownership. But, I may say, I am unable to accept the distinction which Zelling J. draws between an instrument and security, or between admissibility and availability as those words are used in the Stamp Act. I prefer the view which I have already expressed and which the majority avoided, namely, that the word "available" is used in the same sense in s. 27 or s. 83(2). I rather think that the expression "the security is to be available" in s. 83(2) is elliptically used to mean "the instrument shall be available to secure"; this ultimately relates back to s. 27 with its denial of enforceability.

1. [1973] 4 S.A.S.R. 538. 2. [1973] 4 S.A.S.R., at p. 565.

I would allow the appeal and, in lieu of the order of the Supreme Court dismiss the first respondent's suit.

This appeal raises two quite distinct questions; the first turns upon the construction of a mortgage, the second upon the meaning of s. 83(2) of the Stamp Act W.A..

The facts sufficiently appear in other judgments. The relevant mortgage, over Western Australian land, is expressed to secure repayment to the appellant bank of all moneys owing to it by the respondent, D.H. Investments Pty. Ltd. (D.H.), or by an associated company, Davies Investments Pty. Ltd. The latter company had accounts with the bank in two States, heavily overdrawn in South Australia and less so in Western Australia. Whatever may have been the initial understanding of the bank's Western Australian branch when the mortgage was first executed, it is quite clear that the charge upon the mortgaged land cannot be limited to the amount overdrawn on the Western Australian account only but must apply equally to any of the companies' indebtedness to the bank. The learned trial judge so held and there is no cross appeal on this issue.

However, his Honour concluded that one clause of the mortgage had the effect of limiting the amount of the charge to the maximum amount for which the mortgage was, after its execution, first stamped for duty pursuant to the Stamp Act, namely $70,000. The clause in question reads:

That this mortgage is collateral with the instruments of security set forth in the schedule hereto to the extent only to which such instruments are respectively stamped and is primary for the amount to which the same is primarily stamped.

No instruments were in fact "set forth in the schedule" and in my view the clause had, in these circumstances, no function to perform; its function is to ensure compliance with s. 26 of the Stamp Act in those instances, of which the present transaction was not one, in which more than one security instrument exists. Section 26 requires that all facts and circumstances affecting liability of an instrument to duty be fully and truly set forth; the scheme of the Act in relation to mortgages is to impose one rate of duty on "the only or principal or primary security" and a much lower rate upon a collateral security where the principal or primary security is itself duly stamped. Had there been some scheduled instrument of security the clause would have had an appropriate operation consistent with the provisions of the Act; in its absence it has none.

His Honour of course recognized that the clause was intended to have significance for duty purposes but concluded that it also imposed an upward limit on the charge created, a limit governed by "the amount to which the same is primarily stamped", treating "primarily" as having the temporal meaning of "first" or "initially". In my view "primarily" bears no temporal meaning in this clause; it is used in contradistinction to "collaterally", just as "primary" is contrasted with "collateral" in the Stamp Act. This, I think, sufficiently appears both from the apparent purpose of the clause, concerned as it is with matters of the incidence of stamp duty, and from its express terms, which contrast the mortgage's collateral operation with its primary operation and measure the extent of the latter by reference to "the amount to which the same is primarily stamped".

Where, as here, there are no scheduled instruments of security referred to in the mortgage's schedule the distinction drawn between collateral and primary is inoperative; the mortgage is the only security and will, unless its express terms are affected by statute, be security for those amounts which the parties have expressly agreed that it should secure, namely all amounts owed to the bank by the mortgagor or by Davies Investments Pty. Ltd.

My reference to the terms of the mortgage being affected by statute leads me to the second question raised in this appeal, the effect of s. 83 of the Stamp Act. In the case of a security expressed to be of unlimited amount, as is the present mortgage, s. 83(2) provides by its opening words that "the security is to be available for such an amount only as the ad valorem duty denoted thereon extends to cover". The present mortgage, originally stamped in an amount appropriate to a security for no more than $70,000, is sought to be relied upon by the bank to the extent of $91,000, an appropriate further amount of stamp duty having been paid ad valorem to the extent of $21,000 once it was appreciated by the bank's Western Australian branch both that the indebtedness of Davies Investments Pty. Ltd. included its large South Australian overdraft and that the mortgaged property had realized $91,000 on the open market. The question is whether, in terms of the provisions of s. 83(2), the bank may now treat the security as available up to $91,000 or whether the additional stamping was ineffective, the limit of availability of the security being fixed once and for all by the initial stamping of the mortgage appropriate to a security for only $70,000.

Section 83(2), the full terms of which appear in other judgments, goes on to provide for the situation in which further advances may be made in excess of the amount covered by the duty originally denoted on the instrument. Its effect is to deem the mortgage to be a new and separate instrument for duty purposes as from the making of an additional advance so that the security will be available in respect of that additional advance to the extent appropriate to whatever further duty is then paid; the instrument may thus, in the jargon of revenue law, be effectively "upstamped".

The respondent contends, in my view correctly, that this specific provision for up-stamping is confined to true cases of further advances and has no application where the inadequacy of the initial stamping is not due to the making of further advances but has always existed. However, it does not follow that because this express provision for up-stamping is confined to the case of further advances there can be no effective up-stamping in other cases. The quite elaborate provisions of the later portions of s. 83(2) appear to be designed to ensure that the punitive provisions of s. 20, with its fines for late stamping, will not become applicable to a perfectly adequately stamped instrument which is at risk of becoming inadequately stamped, and hence pro tanto unavailable as a security, merely because of the making of further advances. The legislation, not unreasonably, displays no such concern in the case of an instrument which is discovered to have been inadequately stamped from the start. To it the special up-stamping provisions of s. 83(2) will not apply, instead where insufficient duty has been paid recourse will have to be had to s. 20, which permits of the late stamping of documents which have initially been insufficiently stamped, but only at the price of payment of a fine.

In my view, when a mortgage is initially insufficiently stamped and the insufficiency is made good by late stamping under s. 20 the amount to which the total duty then extends will, in the terms of the first sentence of s. 83(2), be the amount for which the security is then available. That sentence is concerned not with the amount to which the duty denoted on first stamping extends but with the amount to which the duty denoted, whether or not increased since first stamping, extends whenever the security is sought to be availed of. Thus insufficiency of stamping may be fully remedied by recourse to s. 20, albeit at the price of the fine which it prescribes.

The respondent's argument necessarily treats the first sentence of s. 83(2) as confined to the position of the mortgage, in terms of duty denoted on it, as at the time of first payment of duty; but the words used provide little support for that view, on the contrary the phrase "is to be available" suggests, rather, that the relevant time is the time when the security is to be availed of and that it is the duty then shown as denoted on the instrument which operates as a limit.

This is enough to dispose of the respondent's case. Whether or not the time has yet come when it may properly be said that the bank is seeking to avail itself of the security within the meaning of the first sentence of s. 83(2), a matter which I regard as open to serious doubt, it is at least clear that by the time of institution of these proceedings by the respondent Love the mortgage had been denoted for duty in an amount appropriate to a total of $91,000. In my view the security had by then become available to the bank to the extent of that total amount. It follows that I would regard as in error the order of the Supreme Court that the sum secured by the mortgage is only $70,000; the other orders made fall with it.

In coming to this conclusion I am not to be taken as determining that even at the date of issue of the writ this mortgage was then dutiable in any amount or that fines fixed in accordance with the Third Schedule, at least to the extent to which they depend upon a multiple of "the amount of proper stamp duty", could have been imposed if stamping were sought under s. 20. In this case the bank has in fact paid duty, treating the mortgage as securing $91,000, but there is much to be said for the view that a mortgage expressed to secure an unstated amount attracts no liability to duty, although under s. 83(2) it cannot be availed of (whatever precisely may be involved in that concept) as security beyond the amount for which it is then appropriately stamped with duty. On this view the purpose and effect of those provisions of s. 83(2) which follow its first sentence are obscure; however, they do not affect the present appeal.

I would allow the appeal and dismiss the respondent's suit.

It is first necessary to refer to some provisions of the Stamp Act, 1921-1967 W.A.. Section 83(1) and s. 83(2) are as follows:

(1) A security for the payment or repayment of money to be lent, advanced, or paid, or which may become due upon an account current either with or without money previously due is to be charged, where the total amount secured or to be ultimately recoverable is in any way limited, with the same duty as a security for the amount so limited.

(2) Where such total amount is unlimited the security is to be available for such an amount only as the ad valorem duty denoted thereon extends to cover; but where any advance is made in excess of the amount covered by that duty, the security shall, for the purpose of stamp duty, be deemed a new and separate instrument bearing date on the day on which the additional advance was made or the additional stamp duty paid, whichever is the earlier date, but so as not to otherwise affect the instrument as a security; and if such security is registered under any Act relating to the registration of securities, such registration shall be effective for the additional advances, but subject in the case of a bill of sale to paragraph (4) of section six of the Bills of Sale Act, 1899.

Such additional duty may be paid and denoted from time to time as further advances are made, by stamps impressed on or affixed to the security and duly cancelled; and where the original security is deposited in the office of Land Titles or any other public office in which registration is required, any duplicate or counterpart of the original instrument may be stamped with such additional duty, and such stamping shall have the same effect as if the stamps had been impressed or affixed upon the original instrument.

(1) Where there are several instruments of collateral security for the same moneys as are secured by a primary security duly stamped, only one of such instruments shall be liable to stamp duty as a collateral security.

(2) No instrument of collateral security shall be deemed to be duly stamped unless the principal or primary security is duly stamped.

In s. 81 the term "mortgage" is defined to mean a security by way of mortgage, inter alia, for the repayment of money to be thereafter lent, advanced or paid, or which may become due upon an account current together with any sum already advanced or due. The instruments brought to duty are, pursuant to s. 16, specified in the Second Schedule. In that schedule, under the title "Mortgage (legal or equitable), Bond, Debenture, Covenant, Warrant of Attorney to confess and enter up judgment and foreign security of any kind", the distinction is drawn between (1) the only or principal or primary security for the payment or repayment of money (and certain rates of duty are set out); and (2) collateral, or auxiliary, or additional or substituted security (and a single lower rate of duty is specified).

The appellant bank on 24th May 1971 took security in the form of a mortgage dated 27th May 1971 pursuant to the Transfer of Land Act, 1893 W.A., as amended, over certain land which the second respondent had purchased and of which it was the registered proprietor. The mortgage was to secure the repayment on demand of "all moneys whatsoever which either previously or subsequently to the date hereof shall have been lent or paid to for or on account of or have become due payable or owing by the Mortgagor(s) and/or the Borrower(s) to the bank on balance of account or otherwise howsoever " The borrower, Davies Investments Pty. Ltd., was a company in some way associated with the mortgagor.

At the time of the giving of the security, the borrower had an account at the Nedlands branch of the appellant which was in credit to the extent of $49,469. However, the borrower had another account at the Adelaide branch of the appellant bank and, on the date last-mentioned, the amount owing to the appellant by the borrower on the Adelaide account was $331,506. A cheque for $250,000 was due to be debited to the latter account.

The mortgage was a security for the payment or repayment of money to be lent, advanced, or paid or which might become due upon an account current with money previously due: see s. 83(1) of the Act. The total amount was unlimited, and therefore s. 83(2) was applicable.

On 17th June 1971 ad valorem duty sufficient to cover an amount of $70,000 was paid to the Commissioner of Stamps and was denoted on the mortgage. At that date $62,223 was owing to the appellant by the borrower on current account at the Nedlands branch, and $889,609 was owing to the appellant by the borrower on current account at the Adelaide branch of the appellant.

On 28th June 1971 the appellant bank heard that the second respondent had agreed to sell the mortgaged land for $91,000 to the first respondent, and it was subsequently informed that settlement was due on 5th September. On 6th August 1971, the appellant paid further ad valorem duty and had it denoted on the mortgage to cover a further amount of $21,000. The two current accounts had been ruled off on 28th June 1971 and no further moneys were thereafter lent, though interest and other charges continued to accrue. At the date last-mentioned, the Nedlands account was in debit to the extent of $63,394 and the Adelaide account in debit to the extent of $889,609.

The purchaser, the first respondent, commenced proceedings claiming that he was entitled to complete the purchase on payment to the appellant bank of either the balance due on completion, namely, $64,000, or, alternatively, the sum of $70,000, the amount covered by the ad valorem duty denoted on the security when it was first stamped. The appellant claimed that the mortgage, being now stamped with duty sufficient to cover a sum of $91,000, was available to it as security for that sum.

Wickham J. found that the mortgage was security in respect of both the Nedlands account and the Adelaide account of the borrower. There is no appeal or cross-appeal from that finding. He then found that the mortgage was available as security to the bank only for the amount of $70,000. He based this conclusion on a clause in the mortgage which reads as follows:

That this mortgage is collateral with the instruments of security set forth in the schedule hereto to the extent only to which such instruments are respectively stamped and is primary for the amount to which the same is primarily stamped.

There are no instruments of security set out in the schedule to the mortgage, and therefore the only relevant part of the clause is that the mortgage "is primary for the amount to which the same is primarily stamped". Wickham J. concluded that the mortgage was "primarily stamped", within the meaning of the clause, only for the amount for which it was first stamped, namely, $70,000, and further concluded that the additional ad valorem duty covering the further $21,000 gave the bank as against the first respondent no security over the land in respect of this additional sum at 28th June when the first respondent acquired his equity in the mortgaged property. Upon this basis he concluded that the first respondent was entitled to a declaration against the appellant that the sum secured by the morgage was $70,000 and to an order that against payment to it of that sum the appellant should execute a registrable discharge of the mortgage and should deliver the certificate of title to the first respondent. He found it unnecessary to consider a further submission made to him on behalf of the first respondent that the same conclusion would follow from the application of s. 83(2) of the Stamp Act.

Before this Court, argument has been presented both on the meaning of the clause in question and the effect of s. 83(2) of the Stamp Act. The clause has obvious reference to the provisions of the Stamp Act. The words "primary security" can hardly be given a meaning independently of the provisions of the Act. Nor, in my opinion, can the words "primarily stamped" be given a meaning independently of the provisions of the Act which I have set out. These words mean "stamped as a primary security". They do not mean "stamped in the first instance". They bear no temporal sense in their context. I therefore conclude that the clause in the security does not help the first respondent.

It is therefore necessary to turn to the second argument, that with which Wickham J. found it unnecessary to deal, namely, the effect of s. 83(2) of the Stamp Act. It has been submitted that the words of that sub-section apply in such a way that once an initial amount of duty is paid to cover a security for an amount to which that duty extends, thereafter additional duty cannot be paid and denoted on the security except in respect of further advances made after the date of the initial payment of duty. I do not think that this can be correct. It may be that the second sentence of sub-s. (2) is apt only to cover further advances. Some support for such a view comes from the language of the last paragraph of the sub-section. However, it is the opening words of the sub-section which need now to be considered. The security is to be available for such an amount only as the ad valorem duty denoted thereon extends to cover. It is undisputed that the ad valorem duty denoted on the security extends to cover $91,000. In order to conclude that the security is not available for the whole of this amount, it would be necessary to read in some words of temporal significance, as by inserting the adverb "first" before the word "denoted". I can see no reason why this should be done. The purpose of s. 83 is to secure the revenue. Although the mortgagor is the person specified in the Second Schedule as liable for the payment of the amount of stamp duty on the mortgage, the effect of s. 83 is to give the mortgagee an interest in seeing that the security is duly stamped. Otherwise, the security will not be available to him either at all or in full, depending upon the circumstances. However, once the duty and any necessary fine have been paid, then, the duty being denoted on the security, the latter is available to the mortgagee for the amount which that duty extends to cover.

So far as the second sentence of sub-s. (2) is concerned, that whereby for the purpose of stamp duty the security is deemed a new and separate instrument, whether it be applicable only to further advances or whether it be applicable to further payments of duty on existing advances as well, its purpose is one of stamp duty only. One effect which can be observed in that connection is that the time for payment of the duty is fixed by deeming the advance not already covered by previous payment of duty to have been made by a new and separate instrument on the day on which the additional advance was made or the additional stamp duty was paid, whichever be the earlier date. Thereby a time is fixed in respect of these additional advances within which the instrument is required to be stamped in respect of the amount which becomes due in respect thereof. Thus s. 20 can be made to apply even though in fact no further instrument is executed. However, it is not possible to extract from the language of sub-s. (2) any intention that a deficiency in payment of duty in the first instance irrevocably reduces the amount for which the security is available between the mortgagee and the mortgagor and those claiming under the mortgagor.

In particular, it is not possible to extract from its language any intention to affect the equitable doctrines in relation to "tacking" and to priorities in equity. It is true that, for the purposes of s. 83, the security was only available to the appellant for an amount of $70,000 at the date when the first respondent acquired his equitable interest in the land. It does not follow that an equitable interest of a second mortgagee, and still less of a purchaser of the land, takes priority over the appellant in respect of any amount in excess of that sum simply because notice of a second mortgage or purchase was received by the appellant. The true fact was that the amounts of the prior advances were covered by the security at the date when the first respondent obtained his equitable interest, and they far exceeded the sum of $70,000. Even though at that date, because of the deficiency in payment of stamp duty, the security was not available to the appellant in excess of that sum, no rights were thereby created in the first respondent whereby he would obtain a priority to which he was not entitled under the general law. He can be in no better position than the mortgagor against whom the security would be available at the time when it was sought to enforce it for such amount as the ad valorem duty denoted thereon extended to cover. In other words, s. 83(2) is a section intended to ensure and require the payment of the duty which ought to be paid and once the appropriate duty is paid the security becomes available. The payment allows the security to be available for the further amount in accordance with the terms of the security which to the extent of the payment has full force and effect ab initio: see Shepherd v. Felt and Textiles of Australia Ltd. per Dixon J. [4] . I agree with the conclusion of the majority of the Full Court of South Australia on a statute similarly worded in In re Dehy Fodders (Australia) Pty. Ltd.; Winter v. Bank of Adelaide [5] .

1. (1931) 45 C.L.R. 359, at p. 383. 2. [1973] 4 S.A.S.R. 538.

In In re Waterhouse's Policy [6] Farwell J. applied the provisions of similar legislation. He held that a mortgagee in circumstances such as those now being considered, even though he made advances beyond the amount covered by the duty paid, was not required to stamp the security for any amount greater than the amount for which that mortgagee relied upon it as a security for the advance. He stated [7] :

If a bank, or any other person, lends money with no limit on the amount to be lent and stamps the security which it takes for a limited sum and subsequently desires that security to be increased so that it will cover a larger sum, then on every occasion when it is desired to increase the security it is necessary to stamp the security with a further duty, and for that purpose the security shall be deemed to be a new and separate instrument on the date on which the advance or loan is made. If that is not done, then the lender is precluded from holding his security, in whatever form it may be, as security for any amount over that which the stamp upon it will cover. 1. [1937] Ch. 415. 2. [1937] Ch., at p. 420.

Farwell J. does not particularly say that the security may only be increased in respect of advances made after the date of the original stamping, and I am not at all sure that he intended so to state. It seems to me probable that, in respect of advances both before and after the original stamping, he regarded the mortgagee as having the right to determine the extent of the cover given by the security. But in any case the point at issue was different from that which now falls to be determined.

I am of the opinion that the appeal should be allowed and the declaration and order of the Supreme Court set aside and the action dismissed with costs.