Barcelo v Electro-Lytic Zinc Company of Australia Ltd

48 CLR 391

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(Judgment by: McTiernan J)

Barcelo
vElectro-Lytic Zinc Company of Australia Ltd

Court:

Judges: Rich J
Starke J
Dixon J
Evatt J

McTiernan J

Case References:
Ashbury v Ellis - (1893) AC 339
Attorney-General v Cain and Gilhula - (1906) AC 542
Croft v Dunphy - 48 TLR 652
Robtelmes v Brenan - 4 CLR 395
Semple v O'Donovan - (1917) (NZ) LR 273
Ellis v McHenry - LR 6 CP 228
Spiller v Turner - (1897) 1 Ch 911
Pass v British Tobacco Co (Aust ) Ltd - 42 TLR 771
Metropolitan Gas Company v McIlwraith & c Ltd - (1932) ALR 16; (1932) VLR 88
British South Africa Company v De Beers Ltd - (1910) 2 Ch 502
Hamlyn v Talisker Distillery - (1894) AC 202
Hutton v West Cork Company - 23 Ch D 654
Cyclists' Touring Club v Hopkinson - (1910) 1 Ch 179
Evans v Rival Granite Quarries Ltd - (1910) 2 KB 979
Re Florence Land and Public Works Company - 10 Ch D 530
Simultaneous Colour Printing Syndicate v Foweraker - (1901) 1 KB 771
Governments Stock Investment Company v Manila Railway Company - (1897) AC 81
Illingworth v Houldsworth - (1904) AC 355
Bloxam v Favre - (1883) LR 8 P D 101
Niboyet v Niboyet - (1878) LR 4 P D 1
Forster v Forster - (1907) 13 ALR 33
Cope v Doherty - (1858) 4 K & J 367
Delaney v Great Western Milling Co Ltd - (1916) 22 CLR 150; 22 ALR 357
Gibbs v La Societe Industrielle et Commercielle des Metaux - 25 QBD 399
Krzus v Crow's Nest Pass Co Ltd - (1912) AC 590
Maclcod v The Attorney-General for New South Wales - (1891) AC 455
Tomalin v S Pearson and Son Ltd - (1909) 2 KB 61
Bartley v Hodges - 1 B & S 375
Harding v Commissioners of Stamps for Queensland - (1898) AC 769
Cooke v Charles H Vogeler Company - (1901) AC 102
Colquhoun v Heddon - 24 QBD 491
Thomson v Advocate General - (1845) 12 Cl & Fin 1
Wallace v Attorney-General - LR 1 Ch 1
Winans v The Attorney-General - (1910) AC 27
Commissioner of Inland Revenue v Maple and Co (Paris) Ltd - (1908) AC 22
R v Jameson - (1896) 2 QB 425
Huber v Steiner - 2 Bing (NC) 203
Phillips v Eyre - LR 6 QB 1
Potter v Brown - 5 East 124
Gardiner v Houghton - 2 B & S 743

Hearing date: 27-29 September 1932
Judgment date: 21 November 1932

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Judgment by:
McTiernan J

The respondent, Electrolytic Zinc Company of Australasia, is incorporated under the "Companies Act 1915" of Victoria. Its head office, where the directors meet, is in Melbourne, and it carries on business in Victoria and elsewhere in the Commonwealth. The Company is registered under the English "Companies Act" as a Company incorporated outside Great Britain, but having a place of business there. It has an office in London and directors also, who are appointed in Melbourne. There are branch registers of members and debenture-holders respectively in the London office. This office attends to the transfer and registration of the shares and debentures of the Company on its London registers, and the payment of dividends and interest due in respect of such shares and debentures. It also receives the proceeds of the sales of the Company's products which are sold abroad, and deals with these moneys according to the instructions of the directors in Melbourne. Pursuant to its powers the directors of the Company in Melbourne determined to provide for the creation and for the issue from time to time of a series of first mortgage debentures securing in the aggregate the sum of £1,000,000, and decided to issue a portion thereof, namely, £400,000, at the rate of £8 per centum per annum, leaving the remaining £600,000 for subsequent issue if and when required, at such rate not exceeding £8 per centum per annum as the Company should deem fit.

The terms and conditions upon which the debentures constituting the above-mentioned portion of such series were issued and secured, are contained in the indenture described as the debenture trust deed made between the Company of the one part and the respondent, Melbourne Trust Ltd, of the other part, which became a trustee for the holders of these debentures. This latter Company is incorporated in London, and has a registered office in Melbourne. The debenture trust deed was executed by both parties at Melbourne, and is kept there. The whole of these debentures were issued under the seal of the Electrolytic Zinc Company of Australasia Ltd at its head office to persons in Victoria, and were entered upon the Company's register of debentures in Melbourne in the name of these persons. Transfers of some of these debentures were subsequently made to other persons whose names were entered on the Melbourne register of debentures, and certain debentures have since been transferred to or entered upon the register in London. In the latter case a new debenture was issued under the seal of the Company in its London office in lieu of the debenture registered in Melbourne, and the old debenture was cancelled. Debentures registered in London may be transferred to the register in Melbourne in a similar manner.

The deed created a specific charge over the Company's freehold and leasehold land situated in Tasmania, and a "floating charge" over all the other property and assets of the Company to secure payment to the trustee for the debenture-holders of the principal moneys and interest due under the terms of the debentures. The Company has property and assets in Victoria and other States of the Commonwealth and elsewhere. A condition of each debenture is that it is issued subject to and with the benefit , inter alia, of the conditions contained in the debenture trust deed, all of which are to be deemed part of it, and the undertaking and property of the Company are by each debenture charged with the payments thereby agreed to be made. It is an express condition of the debenture trust deed that it is to be construed according to the law of Victoria. Section 19 of the "Financial Emergency Act 1931" of Victoria came into operation on 1st October, 1931. After s 19 came into operation some of the debentures were on the Melbourne register of the Company, others on its London register. Certain debentures which were on the Melbourne register after 1st October, 1931, had been transferred from the London register since that date. It was a condition of each debenture that all moneys payable to the registered holder would be paid at the Company's office in Melbourne or London, according as the holder should be registered in Melbourne or London, but the Company or the trustee or a receiver of the Company could make any payment on account of principal or of interest by cheque or warrant upon bankers forwarded through the ordinary post to the registered holder of the debenture in respect of which such payment was made to such debenture-holder on the register of debentures.

Upon these facts the question arises whether the "Financial Emergency Act 1931" operates to reduce the amount of interest payable according to the tenor of each of these debentures. But, assuming that the Act does not fail to reach that obligation, on account of the situation of the property upon which payment of the moneys due under the debentures is secured, or the place where payment was agreed to be made or for any other consideration of this kind, a question lies at the threshold, whether a debenture in the issued portion of the above-mentioned series answers the description "mortgage" in s 14 of the Act.

The Supreme Court decided this preliminary question in the affirmative. It also decided that ss 19 and 22 of the "Financial Emergency Act" operated to discharge the Company from its liability to pay to the debenture-holders on the Melbourne register the whole amount of interest due to them under the terms of their debentures, but did not operate to reduce the amount of interest which the Company was liable to pay to the debenture-holders on the London register according to the terms of their debentures. It made a further finding that the Company has power to pay all debenture-holders, including those whose debentures are on the Melbourne register, the whole of the interest agreed to be paid to them; but it is for the Company to determine whether such powers should be exercised.

The appeal and cross-appeals put into contention the correctness of all these findings.

On the preliminary question it was contended by Mr Fullagar, who appeared for the Melbourne debenture-holders, and by Mr Cohen, who represented the London debenture-holders, that none of the debentures answered the description of a "mortgage" contained in the Act. It was sought to support this contention on the following grounds : -- (a) The language of s 14 showed that the Legislature intended to provide only for things ordinarily called "mortgages." The addition of the words "and also includes," and the following four cll (a), (b), (c) and (d), it was said, expanded the definition only for the purpose of including four instruments which would not ordinarily be described as "mortgages." I think that this contention is rebutted by the insertion of the words "without affecting the generality of this definition." This phrase does not admit of the inference which, it is suggested, should be drawn from the strict enumeration following the words "and also includes." That phrase relates, I think to the words "and also includes" as well as "includes." But whether this view be correct or not, I think that the words "any deed, memorandum of mortgage, instrument or agreement, whereby security for payment of money is granted over real or personal property, or any interest therein," are descriptive of an instrument creating "a floating security," as well as an instrument creating a specific security. It should be noted that each debenture declares on its face that it belongs to a series of "first mortgage debentures."

(b)

Another ground taken in support of a negative answer to the preliminary question was that the security is given by the trust deed to the trustee, but the money is payable to the debenture-holders. The answer to this contention is that each debenture contains a condition that the Company charges with the payment of the principal and interest due thereunder its property and undertaking in terms of the debenture trust deed. Detailed reference was also made to other provisions of the deed which it was argued gave the transaction characteristics rendering it substantially different from those which the Legislature contemplated would be within the purview of the Act when it defined "mortgage," "mortgagee" and "mortgagor." But prescinding from the elaborate analysis of certain parts of s 14 and the debentures and trust deed, which was made by Mr Fullagar, I think that, upon a consideration of the Act as a whole with special reference to ss 14 (1) (a), 14 (2) and 37, each one of these debentures is a mortgage in the sense in which that word is used in the Act.

Mr Fullagar further contended that none of these debentures was a mortgage within the scope of the Act, because the property upon which each debenture is secured is not wholly or substantially situate in Victoria. He contended that, for this reason, s 28 (6) would not work in this case, and Parliament did not intend that the Act should apply to it. I agree with other members of the court in the view that such a conclusion should not be drawn from the presence of this provision In the Act -- see Krzus v Crow's Nest Pass Co Ltd ., ( 1912) AC 590 at p 595. Mr Eager, on behalf of the appellant Barcelo, who represented the ordinary and preference shareholders, contended that the obligation to pay interest whether a debenture is registered in Melbourne or London, is modified by ss 19 and 22, while Mr Fullagar and Mr Cohen, who appeared for the debenture-holders on the Melbourne and London registers respectively, contended that those sections did not operate on the obligation expressed in any of the debentures.

These rival contentions raise the contention whether the general expressions in ss 14, 19 and 22 respectively, that is "any deed memorandum of mortgage instrument or agreement ... ," "every mortgage," and "every payment of interest," should, as a matter of necessary intendment, be read subject to a limitation the effect of which would be to leave these debentures unaffected by the Act. The Supreme Court decided that the generality of these expressions should be limited by implying the words "in Victoria" after "payment" and after "real and personal property" in s 14. The result of this construction is that the terms of an instrument otherwise answering the description of a mortgage is not affected by ss 19 and 22 unless it provides that payment of the money thereby secured should be made in Victoria, and the security for such payment is granted over property in Victoria. It is a matter of surmise whether the Legislature adverted to the difficulties which would arise in determining what, if any, application the Act should have in the case of a mortgage which had one or more extra-territorial aspects. Section 37 is the only expressed reference which it seems to have made to this problem. Mortgages with an interstate aspect would have been suitable subjects for legislation by the Parliament of the Commonwealth if its power extended to such cases. In the absence of any Federal legislation with respect to such case the application of the Act to such mortgages, as well as to mortgages which were made or concerned property or provide for the discharge of obligations outside Australia, must be determined by the rules that are applied in construing a Statute containing general expressions, the literal force of which affects persons or things, rights or obligations outside the territorial jurisdiction of the Legislature or arising under the law of some other country. The literal force of the words "every mortgage" in s 19 is capable of extending to the obligation in every mortgage in the world. The construction of the Act must, therefore, in the first place, be governed by the presumption that the Legislature did not intend to exceed the limits of its authority -- Maclcod v The Attorney-General for New South Wales, ( 1891) AC 455; Maxwell , Interpretation of Statutes ( 3rd ed ), p 195 ; Tomalin v S . Pearson and Son Ltd, ( 1909) 2 KB 61. The authority of the Legislature is to legislate in and for Victoria -- Bartley v Hodges, 1 B. & S 375. If the Legislature had provided expressly that ss 19 and 22 should apply to debentures made in Victoria according to Victorian law, and similar in all respects to those now in question, I think that the Courts in Victoria would be bound to enforce such a provision -- Ashbury v Ellis, ( 1893) AC 339. But the conclusion does not necessarily follow that the Act does, upon its true construction, operate upon the obligations to pay interest expressed in each debenture in the present series.

It is not because general words are used in an Act of Parliament every case which falls within the words is to be governed by the Act. It is the duty of the Courts of Justice so to construe the words as to carry into effect the meaning and intention of the Legislature

-- Cope v Doherty, 2 De G. & J 614 at pp 623-4 , per Turner, LJ The Legislature has not given any clearly expressed indication as to what are the limits of the sphere in which it intended the Act to operate. The question of its application may arise with respect to many mortgages, all possessing various extraterritorial elements. Abnormal consequences may follow if the scope of the general words in ss 19 and 22 were confined only by the legal limits of the Legislature's authority -- see Harding v Commissioners of Stamps for Queensland, ( 1898) AC 769. As the Legislature has not indicated precisely the category of characteristics which should distinguish the mortgages which it intended the Act to affect, I do not think that the court should undertake that task.

For the purpose of answering the particular questions in this case, it is sufficient to determine whether there is any sound basis for implying any limitation on the general expressions in ss 19 and 22 of the Act, the result of which would leave the mortgage in question unaffected by its provisions. The principle which should govern the selection of any such limitation is stated in Maxwell , Interpretation of Statutes ( 3rd ed ), at p 200, in these terms --

Under the same general presumption that the Legislature does not intend to exceed its jurisdiction, every Statute is to be so interpreted and applied, so far as its language admits, as not to be inconsistent with the comity of nations or with the established rules of international law.

There are many instances of interpretation by which the scope of general expressions has been limited. Some may be cited. In Cope v Doherty (above), it was held that the words "any seagoing ship" in the "Merchant Shipping Act 1854," which Turner, LJ, said "would embrace every vessel navigating the sea which is not propelled by oars," were held not to extend to the case of a collision between foreign ships owned by foreigners. Turner, LJ, said (at p 624) --

This is a British Act of Parliament, and it is not, I think, to be presumed that the British Parliament could intend to legislate as to the rights and liabilities of foreigners. In order to warrant such a conclusion I think that either the words of the Act ought to be express or the context of it to be very clear.

See also The Amalia, 1 Moore (N.S ) 471. In Ex parte Blain, ( 1879) 12 Ch Div 522, it was held that the true interpretation of the word "debtor" in the English "Bankruptcy Act 1869," is a debtor subject to English bankruptcy law. Cotton, LJ, said (at pp 532-3) --

I say to the English bankruptcy law and not to the English law generally, for this reason, that we are dealing with a question of bankruptcy; and it may be that there are English statutes which give our Courts power to deal with foreigners who are not here as regards matters which, according to all principles, ought to be adjudicated upon by our Courts, such as, for instance, questions relating to real property situate in England ... We have to consider what is the fair interpretation of the Act, and we must not give to general words an interpretation which would, in my opinion, violate the principles of law admitted and recognised in all countries.

James, LJ (at p 527). said --

It is not consistent with ordinary principles of justice or the comity of nations that the Legislature of one country should call on the subject of another country to appear before its tribunals when he has never been within their jurisdiction. Of course, if a foreigner has come into this country and has committed an act of bankruptcy here, he is liable to the consequences of what he has done here. But, in the absence of express legislative provision, compelling me to say that the Legislature has done that which, in my opinion, would be a violation of international law, I respectfully decline to hold that it has done anything of the kind.

See also Cooke v Charles H . Vogeler Company, ( 1901) AC 102, which approved of Ex parte Crispin, LR 8 Ch App 374.

In the latter case it was held that the expression "that the debtor has in England or elsewhere made a conveyance or assignment of his property to a trustee for the benefit of his creditors generally" in the English "Bankruptcy Act 1869,"

seems clearly intended to relate to a conveyance which is to operate according to English law, which a conveyance executed by a domiciled Englishman, though out of England, may do; but a conveyance executed by a domiciled foreigner in his own country must necessarily operate according to foreign law, and we think it was never intended that such a conveyance should be an act of bankruptcy.

In Colquhoun v Heddon, 24 QBD. 491, Pollock, B., in deciding that a limitation should be put upon the words "any insurance company" in 16 and 17 (Vict), c. 91, s 1, said (at p 497) --

It is clear that Parliament contemplated the passing of some Act dealing with the registration of companies. But apart from that I am convinced that when in an English Act of Parliament the words 'any insurance company' are used, those words mean a company within the United Kingdom and within the cognizance of English law and legislation. In the first place, the word 'company' in itself denotes, not a mere firm of persons, which in a mercantile sense might be the same in whatever part of the world it was established, but an entity and a legal entity, the validity and effect of which must depend upon the laws of the country within which that company is established. Therefore, upon all ordinary principles, it seems to me sufficient to say that the words 'insurance company' in this English Act of Parliament mean an insurance company within the purview of the English Legislature, and therefore within England.

In affirming the judgment of the Queen's Bench Division in this case Lord Esher, M.R , in the course of his judgment in the court of Appeal, said -- 25 QBD. at pp 134-5 --

Now, supposing the words 'any insurance company' stood alone, and there were nothing else in the section to modify the view which one would take of their meaning, would it or would it not be right to say that those words in an English Act of Parliament would include all foreign insurance companies wheresoever they might be? What is the rule of construction which ought to be applied to such an enactment standing alone? It seems to me that unless Parliament expressly declares otherwise, in which case even if it should go beyond its rights as regards the comity of nations, the Courts of this country must obey the enactment, the proper construction to be put upon general words used in an English Act of Parliament is that Parliament was dealing only with such persons or things as are within the general words and also within its proper jurisdiction, and that we ought to assume that Parliament (unless it expressly declares otherwise), when it uses general words, is only dealing with persons or things over which it has properly jurisdiction ... If, therefore, those words stood alone, I should be of opinion that the insurance companies mentioned must be insurance companies over which our Parliament has jurisdiction, and that the section would be confined to such companies.

The Master of the Rolls came to the conclusion that other sections of the Act assisted the view that the only companies referred to in the section are companies amenable to the jurisdiction of the English Parliament. See also Harding v Commissioner of Stamps for Queensland (above), in which a limitation was placed on the words "every disposition of property" in s 4 of the Queensland "Succession and Probate Duties Act 1892" ; Thomson v Advocate General, ( 1845) 12 Cl & Fin. 1, where it was held that the words "every legacy given by any will of any person" in 55 Geo. III., c. 184, were subject to a necessary limitation, and did not extend to the will of any person domiciled out of Great Britain, whether the assets are locally situate or not. In Wallace v Attorney-General, LR 1 Ch 1 at p 9, Lord Cranworth, L.C, in interpreting the words "every disposition of property, by reason whereof any person shall on the death of another become entitled to any property shall be deemed to confer on the person so becoming entitled a succession" in s 2 of the Succession Duty Act," 16 and 17 (Vict), c. 51, said --

Parliament has, no doubt, the power of taxing the succession of foreigners to their personal property in this country; but I can hardly think we ought to presume such an intention, unless it is clearly stated. The ground on which my opinion rests is that to the generality of the words in the second section under which a duty is imposed upon every person who becomes entitled to property on the death of another, some limitation must be implied, and that limitation can only be a limitation confining the operation of the words to persons who become entitled by virtue of the laws of this country.

See also Winans v The Attorney-General, ( 1910) AC 27 at pp 35-6, and p 48 ; Commissioner of Inland Revenue v Maple and Co (Paris) Ltd, ( 1908) AC 22; and R v Jameson, ( 1896) 2 QB 425 at p 430.

If the general words of the Act are interpreted in the light of the principles enunciated in these cases, no limitation need be adopted which would exclude from their operation the debentures in the present case. The fact that the debentures were or might become payable abroad would in itself be no ground for taking the debentures outside the application of the general words so limited. The first material characteristic of each debenture is that it was executed in Victoria according to Victorian law. That law gave life to each instrument and regulates its construction. The obligation to pay interest created by each debenture is within the cognisance of Victorian law and legislation. That obligation is clearly within the purview of the Act unless some other feature of the debentures, such as the situation of some of the mortgaged property or the place at which interest due under some of the debentures should be paid, does, on the true interpretation of the Act, place the obligation outside its scope. Although part only of the property, upon which payment of the money due under the debentures is charged is in Victoria, yet that part of the property is charged with the payment of the whole of these moneys. The fact that some of the property subject to the mortgage is situated outside Victoria does not therefore suggest any reason for saying that the literal force of the words of the Act should be modified so as to prevent ss 19 and 22 having any application to this case.

Furthermore, the inference that the Legislature intended to confine the Act to obligations to pay interest, which were to be performed in Victoria, is not one which is required by the presumption that the Legislature intended to maintain consistency between the Act and the rules of private international law as administered in the Courts of Victoria. If the clause in the debenture trust deed, which declares that the instrument is to be construed according to the law of Victoria, had not been inserted, all the main features of the transaction should, I think, lead to the conclusion that the governing law of these debentures is the law of Victoria. In the case of all of them the obligation to pay interest is, in my opinion, a matter "within the proper jurisdiction of the Legislature" -- Colquhoun v Heddon (above) .

The distinction between that part of the law of the foreign country, where a personal contract is made, which is adopted, and that which is not adopted by our English Courts of law, is well known and established; namely, that so much of the law as affects the rights and merit of the contract, all that relates 'ad litis decisionem' is adopted from the foreign country; so much of the law as affects the remedy only, all that relates 'ad litis ordinationem' is taken from the 'lex fori' of that country where the action is brought

per Tindall, C.J, in Huber v Steiner, 2 Bing. (N.C.) 203 at p 210.

The learned Chief Justice, after referring to a restriction which was relevant in that case but not in the present case, continued (at p 211) --

It does, indeed, appear but reasonable that the part of the lex loci contractus which declares the contract to be absolutely void at a certain limited time without any intervening suit, should be equally regarded by the foreign country, as the part of the lex loci contractus which gives life to and regulates the construction of the contract; both parts go equally 'ad valorem contractus,' both 'ad decisionem litis.'

See also Ellis v McHenry, LR 6 C.P 228; and Phillips v Eyre, LR 6 QB 1. In delivering the judgment of the court in the latter case, Willes, J, said (at p 28) --

The obligation is the principal to which a right of action in whatever court is only an accessory, and such accessory, according to the maxim of law, follows the principal, and must stand or fall therewith . 'Quac accessorium locum obtinet extinguuntur cum principales res peremptac sunt.' A right of action, whether it arise from contract governed by the law of the place or wrong, is equally the creature of the law of the place and subordinate thereto. The terms of the contract or the character of the subject-matter may show that the parties intended their bargain to be governed by some other law; but primá facie it falls under the law of the place where it was made. And in like manner the civil liability arising out of a wrong derives its birth from the law of the place, and its character is determined by that law. Therefore, an act committed abroad, if valid and unquestionable by the law of the place, cannot, so far as civil liability is concerned, be drawn in question elsewhere unless by force of some distinct exceptional legislation, superadding a liability other than and besides that incident to the act itself. In this respect no sound distinction can be suggested between the civil liability in respect of a contract governed by the law of the place and a wrong.

The judgment continues (at p 29) -- "But if the foreign law extinguishes the right it is a bar in this country equally as if the extinguishment had been by a release of the party or an act of our own Legislature." See also Potter v Brown, 5 East. 124 ; Gardiner v Houghton, 2 B. & S 743.

For the purpose of answering the particular questions presented for decision in this case it is not necessary to decide whether, upon the true construction of the Act, ss 19 and 22 affect the obligation to pay interest expressed in a mortgage which in its contractual aspects is plainly governed by the law of Victoria, but was granted over immovable property entirely outside the State. I think that Questions (a), (b) and (c) should be answered in the affirmative.

As to Question (d). The "Financial Emergency Act" does not prohibit the payment of interest according to the tenor of a mortgage which is within its purview. But in the present case there is not, in my opinion, sufficient information before the court relating to the facts and circumstances which should be taken into consideration to determine whether the making of any such payment at any time would be a proper exercise of any power which the Company may have to make payments of money pursuant to its memorandum of association. I do not think that this question should be answered.

The appeal should, in my opinion, be allowed, and the questions answered in the following way: -- Questions (a), (b) and (c), Yes . (d). This question should not be answered.