In spite of its unsatisfactory nature, the plea upon demurrer is enough to take the covenant sued upon out of the qualification of sec. 25 (7) of the Act of 1930-1931 introduced by sec. 35 (1) of the Act of 1932. It was argued, however, that nevertheless the covenant did not fall within sec. 25 (7), because it was not given by the defendant in his character of mortgagor. This argument is somewhat elusive, because it substitutes the indefinite expression "character of a mortgagor" for the exact words of the invalidating provision. The transaction clearly falls within the fair meaning of those words.

The judgment of the Supreme Court should be discharged and in lieu thereof the demurrer should be overruled.

The plaintiff, Motor Discounts Ltd. - the respondent here - sought in this action to recover from the defendant - the appellant here - certain moneys upon a covenant contained in an indenture dated 10th July 1931. The indenture was set out verbatim in the declaration, and according to its terms as so set out the appellant was called surety and the respondent mortgagee, and the consideration recited was the sum of £2,100, paid at the request of the surety to the Picton Lakes Village T.B. Settlement by the mortgagee, and the provisions of the Moratorium Act were excluded.

The substance of the first plea to the declaration was that the respondent agreed to lend the appellant and others certain moneys to be secured by a mortgage of real property containing a personal covenant, on the part of the appellant alone, and the covenant set forth in the indenture, and that the mortgage dated 7th July 1931 set out in the plea, and the indenture set out in the declaration, were executed pursuant to this agreement and not otherwise, and that there was no person or persons, or no entity juristic or otherwise, known as Picton Lakes Village T.B. Settlement. The plaintiff demurred to this plea, and the Supreme Court of New South Wales gave judgment in its favour. Hence this appeal.

The questions involved depend upon the construction of some confused legislation in New South Wales known as the Moratorium Acts 1930-1931 and 1932. The Moratorium and Interest Reduction (Amendment) Act, 1931, No. 66, sec. 4, enacted - without any provision for compensation whatever - that all covenants, agreements and stipulations by a mortgagor for the payment or repayment of any moneys secured by a mortgage of real property should, except for the purpose of enabling a mortgagee to exercise all or any of his rights against the mortgaged property, be void and of no effect for any purpose whatsoever. The section applies to all mortgages of real property, whether executed before or after the commencement of the Moratorium Act and notwithstanding any stipulation to the contrary (Act, 1931, No. 43, sec. 25 (3)). The definitions of mortgage and mortgagor are very wide (see Act, 1930, No. 48, sec. 2) and make it plain that the covenant or stipulation to pay, in the indenture declared upon, is a covenant or stipulation by a mortgagor for the payment of moneys secured by a mortgage of real property. It was urged that the covenant was not given by the mortgagor in his character of, or as, a mortgagor, but it is enough to say that the Act avoids covenants and stipulations by a person who is a mortgagor; therefore the covenant in the indenture is prima facie avoided by the Act. But several arguments have been advanced in opposition to this conclusion.

Firstly, that the provisions of sec. 13 of the Moratorium Act, 1930, No. 48, exclude from the operation of the Act a mortgage executed after 19th December 1930, if it contains a covenant expressly excluding the provisions of the Act. But the provisions of the Acts of 1931, Nos. 43 and 66, sec. 25 (3) and (7), are later than the Act of 1930, and explicitly provide for the avoidance of covenants and stipulations notwithstanding anything in any other Act contained.

Secondly, that the Moratorium Act 1930-1931, and sec. 4 of the Act, 1931, No. 66, avoiding covenants and stipulations for payment of money secured by a mortgage of real property, have been repealed by the Moratorium Act, 1932, No. 57, sec. 3. But the Interpretation Act, No. 4 of 1897, of New South Wales, sec. 8 (a), provides that where an Act repeals, in the whole or in part, a former Act, then, unless the contrary intention appears, the repeal shall not affect the previous operation of an enactment so repealed. The repeal of the Act of 1930-1931 cannot, therefore, revive the covenant or stipulation in the indenture sued upon.

Thirdly, that the Moratorium Act, No. 57 of 1932, sec. 35, provides that the word "mortgagor" in the provision (sec. 25 (7), No. 66 of 1931) avoiding covenants and stipulations for the payment of moneys secured by mortgages of real property shall not include a person who has guaranteed the payment of any money, notwithstanding that the payment of such money is secured by a mortgage as defined by the Act. But, despite the form of the indenture declared upon, the plea sufficiently alleges that the covenant or promise of the appellant is not by way of guarantee. A guarantee is a collateral contract postulating the principal liability of another (Rowlatt on Principal and Surety, 2nd ed. (1926), p. 1). The plea in this case excludes the liability of any other person, and alleges that the appellant's obligation is not founded upon the liability of another but upon his own debt or liability.

Lastly, it was contended that though the mere repeal of an Act does not affect the previous operation of the Act so repealed, yet it is otherwise where a contrary intention is expressed in the repealing Act, and that this is done in the Moratorium Act, No. 57 of 1932. Doubtless, in some of the provisions of that Act such an intention is expressed. Thus covenants and agreements falling within the earlier provisions of sec. 34, confirmed and evidenced in the manner required by that section, are as valid and effectual as if the provisions in the Act of 1931 avoiding covenants and stipulations for the payment of moneys secured by a mortgage of real property had not been enacted. But these provisions of sec. 34 do not cover the present case, for it is not alleged that the mortgage or indenture declared upon has been confirmed and evidenced in the manner required. However, it was argued that the provisions of sub-sec. 5 (b) of sec. 34 recognize and restore by implication the obligation created by such documents as the indenture declared upon in this case: "Nothing in this section contained shall in any way affect ... any of the rights, powers, or remedies of a mortgagee upon any security for the payment of money other than a mortgage of land and whether collateral thereto or not, and whether such security gives a charge over property or not." But the sub-section does not create or revive any right; it only preserves rights, powers or remedies that exist under such securities free from the restriction on the rights of mortgagees imposed under the earlier provisions of sec. 34. An obligation that has been avoided under sec. 25 (7) of the Moratorium Act 1931 does not exist, and gains nothing in effect from the provision contained in sub-sec. 5. Again, secs. 8 and 9 of the Moratorium Act, No. 57 of 1932, were relied upon. But sec. 9 only limits the exercise of rights, powers or remedies on the part of the mortgagee. It creates no rights, and revives no rights; it operates upon rights that exist and are recognized in law. An obligation that is avoided is no right. Sec. 8 withdraws certain transactions from the operation of Part II. of the Act. But it does not create any right or revive any right that has been destroyed; indeed, the final words of par. a of the section give no little support to this view. Finally it was urged that the repeal of the Act of 1930-1931 and the substitution of a new set of provisions - a complete code, it was called - regulating the rights of mortgagors and mortgagees operated as the expression of a general intent to restore rights that had been destroyed by the repealed legislation. But legislative intent can only be gathered from what the Legislature has chosen to enact, either in express words or by reasonable and necessary implication. The Act No. 57 of 1932 explicitly states the legislative intent, as in sec. 34, and beyond the intent so expressed the Courts cannot go.

In my opinion the result is that the appeal should be allowed.