Ansett Transport Industries (Operations) Pty. Ltd. v. Comptroller of Stamps (Vic.)

Judges:
Tadgell J

Court:
Supreme Court of Victoria

Judgment date: Judgment handed down 16 May 1980.

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Tadgell J.

By deed of mortgage dated 25 July 1978, the appellant gave security to the Commonwealth of Australia over specifically described personal property afterwards to be acquired by the appellant. According to a recital in the deed the security is for all moneys that the Commonwealth should for the time being be liable to pay, and might at any time be required to pay, under or by virtue of certain guarantees which the Commonwealth had agreed to give but which it had not then given. The recitals and the facts upon which each party to this appeal agreed, disclose the following circumstances in which the deed was executed. Before 25 July 1978 the appellant contracted to purchase a Boeing 727-200 aircraft and related spare parts and equipment. In order to assist it to make the purchase the appellant arranged to borrow $US4.5 million from each of two lenders in the United States of America. The loans were agreed on condition that the Commonwealth should guarantee their repayment and payment of interest. The Commonwealth agreed to give appropriate guarantees, as it is empowered to do by the Airline Equipment (Loan Guarantee) Act 1977 of the Commonwealth. In accordance with the provisions of that Act the mortgage in question was sought by the Commonwealth and provided by the appellant as a security of the kind I have indicated. At the time of its execution neither the loan agreements nor the guarantees had been executed and the loans had not been made.

The appellant contended that the only duty chargeable under the Stamps Act 1958 upon the deed of mortgage is $5 pursuant to sec. 137P and Heading XXIV in the Third Schedule, alternatively $4 if it is a deed of mortgage as defined by sec. 137D. Those contentions were rejected by the respondent, who assessed duty ad valorem in the sum of $31,281.40. His assessment was confirmed by a decision of the Victorian Taxation Board of Review from which decision this appeal is brought pursuant to sec. 33E(7) of the Stamps Act.

The learned member of the Board regarded the deed of mortgage as being brought to duty pursuant to sec. 25 and Heading XXII in the Third Schedule of the Stamps Act because it is, ``... a security by way of mortgage... for the repayment of money to be thereafter lent, advanced or paid...'' in terms of the definition of the expression ``mortgage'' in sec. 137D(1) of that Act, which is contained in Subdiv. 17 of Division 3 of Part II.

In my opinion the conclusion of the Board that the instrument is dutiable as a mortgage under Heading XXII is plainly right. The argument against its correctness advanced on appeal was twofold: First, the deed is not a security for the ``repayment'' of any money and secondly, even if it is, it is not a security for the repayment of money to be thereafter ``lent, advanced or paid''. The appellant's submission was that the instrument merely gives the Commonwealth a remedy to recoup itself by dealing with the mortgaged property. It was argued that, because the deed contains no covenant by the appellant to indemnify the Commonwealth and does not contemplate that money might be paid by the Commonwealth under the guarantees in circumstances which would entitle the Commonwealth to recover it from the appellant as a debt, it is inappropriate to speak of it as conferring security for the repayment of anything to the Commonwealth. It was further contended that any money paid as guarantor by the Commonwealth to the United States lenders would not be ``lent, advanced or paid'' in terms of the definition of ``mortage'' in sec. 137D(1) because it would not be a payment in the nature of an advance or loan, a payment in the nature of an advance or loan being required in order that money may be said to have been ``lent, advanced or paid'' in terms of the definition.

An initial understanding of the context in which these submissions were put requires no detailed rehearsal of any of the terms of the deed of mortgage: an understanding of its effect is sufficient because (save for one aspect of it to which I shall refer) its purport was not in contest.

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ATC 4325

The salient effects of the deed are these. The appellant assigns to the Commonwealth its title to the aircraft and associated equipment, which for convenience I shall call simply ``the mortgaged property''. The appellant undertakes to the Commonwealth to make due payment of principal and interest in respect of the loans to be guaranteed. The appellant is to make legal assignments and to make such further assignments as the Commonwealth reasonably requires in order to give effect to the purposes of the deed. The appellant is entitled to possession and use of the mortgaged property, subject to certain limitations and to obligations on the part of the appellant to preserve and maintain it, and subject also to the right of the Commonwealth to deal with it by way of enforcing the security. Any engines or other parts of the aircraft replaced from time to time are to cease to be part of, and replacements are to become part of, the mortgaged property. Any further encumbrance of the appellant's interest in, or any lease or parting with possession by the appellant of, the mortgaged property is permitted only subject to compliance with prescribed conditions, of which the prior consent of the Commonwealth is one. In the event of the Commonwealth's being obliged to make payment under the guarantees, or of the appellant's making default under the deed or in certain other prescribed events, the Commonwealth is entitled under cl. 10(1) ``without prejudice to any of its other rights and remedies'' to exercise any of a series of rights, powers and remedies provided for by cl. 10(2). In summary, those rights, powers and remedies are:

• (a) to enter upon any land where the mortgaged property might be without liability for trespass;
• (b) to make good or to attempt to make good any default on the part of the appellant under the deed;
• (c) to let the mortgaged property on lease or charter;
• (d) to sell or dispose of the mortgaged property or any part of it; and
• (e) to maintain, repair, register and insure the mortgaged property.

Provision is made for the application of proceeds from any lease, charter, hiring, sale or resale by the Commonwealth by way of recouping costs and expenses and moneys paid out by the Commonwealth as guarantor, providing for payment to those entitled under the guarantees and returning any excess to the appellant. Clause 11(3) requires that if there should be any insufficiency of proceeds from leases, charters, hirings, sales or resales effected by the Commonwealth, or if there should be no proceeds, the appellant should upon demand make payment to the Commonwealth sufficient to provide for the payments which would otherwise have been made out of any proceeds.

There are two clauses in the deed (cl. 3 and 10) to which I shall have ultimately to return for a more detailed consideration. What I have said by way of summary is, however, sufficient for my present purpose, namely to demonstrate that, apart from the provision in cl. 11(3) dealing with the prospect of a short-fall upon any realisation or attempted realisation of the security -

• (1) the deed contains no requirement that the appellant make any payment to the Commonwealth, either by way of indemnity or otherwise; and
• (2) the rights given to the Commonwealth by way of enforcing its security, if the occasion should arise, consist only of recoupment by way of dealing with the mortgaged property.

These features of the deed were, as I have indicated, made central to the appellant's twofold argument that the security by way of mortgage which the deed provides is not one of a kind defined by sec. 137D(1) of the Stamps Act.

In submitting that the deed does not provide a security for the ``repayment'' of any money, counsel for the appellant relied on the apparent distinction drawn by the draftsman in the definition of ``mortgage'' in sec. 137D(1) between a security for the payment of a present advance, loan or due debt and a security for the repayment of money to be lent, advanced or paid in the future. The significance of the distinction, if any, is elusive, and the more so because, although the distinction is maintained in sec. 137D(3) it seems to have been overlooked in sec. 137F(1). In any event counsel argued that there could be no ``repayment'' to a

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ATC 4326

mortgagee without a prior payment out by the mortgagee by way of a loan or advance to or at the direction of the mortgagor in circumstances which would found an action for debt by the mortgagee against the mortgagor. A security which envisages a contingent or prospective payment by a mortgagee to a third party, without providing for a right of the mortgagee to recoup it as a debt from the mortgagor cannot, he said, satisfy the requirement of the definition. There is inherent in that argument a contention that a security for ``repayment'' of money is confined to a security which itself entitles the mortgagee to recoup himself by requiring the mortgagor to make a repayment as opposed to entitling the mortgagee to obtain recoupment by resort to realisation of the mortgaged property.

In my opinion there is no warrant for limiting by reference merely to the word ``repayment'' the class of securities to which the definition refers. The expression ``a security... for the repayment of money...'' has the advantage of being couched in non-technical language. It is, I should judge, as fully comprehensible now as an English phrase as it was at the time of the Napoleonic Wars when it was originally enacted in England as part of stamp duty legislation in relief of the peculiar financial exigencies of the year 1815: compare Part 1 of the Schedule to the Stamp Act 1815 and see Dowell, A History and Explanation of the Stamp Duties and the Stamp Laws (1873), p. 49. The expression naturally comprehends a right given with a view to securing to the grantee repayment of money outlaid by him in circumstances giving rise to a right of repayment against the payee. Such a security might be granted by the payee in whose favour the grantee made the outlay, in which case the grantee would have the choice of enforcing the security or of simply suing the payee for the debt. Equally, such a security might be granted by a party other than the payee of the outlay, and it would be irrelevant whether the outlay were made in circumstances in which the grantor could be sued for debt or not; so long as proper consideration had been given for it, the security would be enforceable against the grantor as a security for the repayment to the grantee of his outlay, to whomsoever the outlay had been made.

I was not referred to any authority for the conclusion that a security for the repayment of money must itself confer a right upon the grantee to sue the grantor for debt, and I have discovered none for myself. I am of opinion, for the reasons I have given, that the appellant's argument that the deed does not provide for the ``repayment'' of money cannot be sustained.

The second point made on behalf of the appellant was closely associated with the first. It was that, even if the deed of mortgage was a security for the repayment of money, it was not a security for the repayment of money to be ``lent, advanced or paid''; money is not ``lent, advanced or paid'' within the contemplation of the definition of ``mortgage'' unless it is money paid by way of, or is in the nature of, a loan or advance. It was argued that the definition does not cover the case of a mortgage given to a surety to secure repayment to him of a payment which he might make to the mortgagor's creditor, for such a payment would not be made by way of or be in the nature of a loan or advance.

An instrument of mortgage providing security ``for the repayment of money to be thereafter... paid'' in terms of sec. 137D of the Stamps Act also presupposes, of course, that the money to be paid will be paid in circumstances giving rise to a right of repayment against the payee. If it were not so, a security for repayment would be pointless. A right of repayment of the kind which would justify resort to the security might arise pursuant to a contract, express or implied, between the grantee of the security and the payee, or it might arise by operation of law. Such a right would not ordinarily arise if the grantee's outlay were made officiously in favour of the payee or in invitum. As a prerequisite to enforcing a security of that kind the grantee must be able to point to a payment which constitutes a debt which the mortgage is intended to secure: see, e.g., Tilsley on Stamp Laws (3rd ed.) at pp. 387-388. The decision in
Wroughton v. Turtle (1843) 11 M. & W. 561; 152 E.R. 929 is consistent with that general expression of principle and illustrative of it. In that case a lessor mortgaged his lease by way of assignment. The lease obliged the lessor to renew upon payment of certain sums. The mortgage deed also required the

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ATC 4327

mortgagor to make the renewals and there was a covenant that upon default of the mortgagor's doing so the mortgagee might renew, the fines, costs and expenses of his doing so then becoming a charge on the mortgaged premises. There was, however, no covenant by the mortagor to repay to the mortgagee those outgoings, either with or without interest. When sued on the mortgage deed the mortgagor contended that the covenant made the mortgage a security for money to be thereafter paid, the amount of which was uncertain and without limit. It was argued that, because sufficient duty upon it had not been paid pursuant to the Stamp Act 1815, the mortgage deed was not admissible in evidence. Lord Denman C.J. admitted the deed at the trial. In delivering the judgment of the Court of Exchequer of Pleas upon the return of a rule for a non-suit, Parke B. referred to the two classes of mortgages referred to in the schedule to the Stamp Act 1815, on which the definition of ``mortgage'' in sec. 137D of the Stamps Act 1958 of this State is unquestionably modelled. His Lordship said:

``First, where the mortgage shall be made as a security for the payment of any definite and certain sum of money advanced or lent at the time, or previously due and owing or foreborne to be paid, being payable.

Secondly, where the same shall be made as security 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, or without, as the case may be;...

These two classes appear to embrace mortgages for all descriptions of debts; the first, present; the second, future. The first class, in express terms, embraces present loans and debts only. The second ought to be construed in the same way - to apply to future loans and debts only; for there is no reason why a mortgage for the same description of payment should be subject to duty in one case and not in another; why it should be subject to duty if made after the execution of the instrument, and not if made before. By holding that the word `paid' means so paid as to constitute a debt, and the repayment of which the mortgage is to secure, the whole enactment is rendered reasonable and consistent.''

The Court held that the fines, costs and expenses of renewal of the lease did not constitute a debt and would be a charge on the mortgaged property without the covenant in question. The deed of mortgage was accordingly held to have been sufficiently stamped.

The case of
Lord Suffield v. I.R. Commrs. (1908) 1 K.B. 865 involved, among other things, a consideration of the question whether a deed was a security without limit within the meaning of sec. 12(6)(b) of the Stamp Act 1891 by reason of a provision contained in it requiring the mortgagor, if default should be made in maintaining and insuring the mortgaged premises, to repay with interest the expenses incurred by the mortgagee in doing so, which expenses should until such repayment be a charge on the mortgaged premises. Bray J. had accordingly to consider whether expenditure of that kind would be money ``lent, advanced or paid'' thereby making the deed in respect of it ``a security for the payment or repayment of money to be lent, advanced or paid'' within the meaning of sec. 88(1) of the Stamp Act 1891, a provision which was in terms identical to sec. 137F(1) of the Stamps Act 1958. Having held that such expenditure could not properly be said to be ``lent'' or ``advanced'', Bray J. went on to consider whether it would be ``paid'' in the relevant sense. He said, at p. 886:

``In my opinion the word `paid' carries the matter very little further than the words `lent' or `advanced', and the payment, in order to fall within section 88 of the Stamp Act 1891, must be a payment which is intended to be, and to work out as, an advance or loan. I do not know that there is any real difference between the words `lent' and `advanced', or that the addition of the word `advanced' adds anything to the word `lent'; and I think the word `paid' adds very little. There may be some few cases which may be covered by these additional words which would not otherwise be included. In my opinion the payments which the trustees might have to make under clause 33 of the deed of May 20th, 1897, would not be money `lent, advanced or paid'.''

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ATC 4328

At pp. 889-890, his Lordship, referring to Wroughton v. Turtle, observed that:

``The distinction between that case and the present is that there there was no covenant by the mortgagor to repay these expenses either with or without interest. No doubt that was relied upon by Parke B. in his judgment. In construing the word `paid' he said that the payment must be restricted to one which would result in a debt, and that there was no debt in that case because there was no obligation by the mortgagor to pay or repay. It may be that that was a perfectly good distinction, and that it was all that was necessary for the purposes of the decision in that case, but I think it would be a very narrow view upon which to construe sec. 88 of the Stamp Act 1891. In my opinion the word `payment' ought to be restricted still further and construed as meaning a payment which would in effect work out as an advance.''

Counsel for the appellant founded himself upon the remarks of Bray J., which I have cited, when submitting that money is not ``paid'' in terms of the definition in sec. 137D(1) unless it is paid by way of a loan or advance.

But whatever weight I give to the rather tentative dicta of Bray J. upon the meaning of the words ``or paid'' in this context, I am clear that they are not sufficient to sustain the submission of counsel for the appellant. There is nothing in Lord Suffield v. I.R. Commrs. which leads to, or even suggests, the conclusion that a payment made by a surety pursuant to an instrument of guarantee is to be regarded as a payment which is not made in circumstances giving rise to a right of repayment. His Lordship in that case was in my view doing no more than to hold that the expenditure there in question could not be said to give rise to a right of repayment, whether as a debt or otherwise. In particular, I think he was not purporting to specify categories of transactions which would give rise to a right of payment of a kind to which a security by way of mortgage could attach.

Is, then, a contingent or prospective payment by a surety capable of being described as money to be lent, advanced or paid after a security by way of mortgage has been given for its repayment? If so, is an instrument of mortgage given to secure repayment of such a payment a dutiable instrument under Heading XXII?

In my opinion an affirmative answer to each of these questions is indicated by the decision of
Lord Canning v. Raper (1852) 1 E. & B. 164; 118 E.R. 400, a case which was relied on by the learned member of the Board in reaching his decision in this case, and, of course, by counsel for the respondent on appeal. The ratio decidendi of the case was much debated before me and I have examined it with care. The plaintiff sued for arrears of rent, claiming that the defendant was an assignee of the unexpired period of the term. One of the pleas was that the defendant was a sub-lessee and a deed was tendered to prove it. The plaintiff objected to the tender on the ground that the deed was a mortgage and was not appropriately stamped. Coleridge J. admitted the deed at the trial. The Court of Queen's Bench allowed a rule for a new trial, holding that the deed was a mortgage and that, because it had not been duly stamped as such, it had been improperly admitted. The deed recited a previous assignment of the leased premises by the lessee to persons who by the deed granted a sub-lease to the defendant to secure him an indemnity in respect of obligations to third parties which he had undertaken jointly with the grantors but, as between himself and them, as surety. The argument that the deed attracted stamp duty ad valorem as a mortgage depended on the schedule to the Stamp Act 1815, the categories of mortgage referred to in which were described by Parke B. in the passage from his judgment in Wroughton v. Turtle which I have already cited. Lord Campbell C.J., delivering the judgment of the Court (which consisted also of Coleridge, Erle and Crompton JJ.), said this:

``In this case the question is whether an assignment of chattels to secure the assignee an indemnity in case he should be called on to pay the amount secured by a bond which he had entered into as surety for the assignor, is a mortgage liable to an ad valorem stamp. Is it an assignment to secure `the repayment of money, to be lent, advanced or paid' at a future time?

If the debt of the principal is paid by the surety, the amount of that debt is so much

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ATC 4329

money paid for that principal. If the defendant had bound himself absolutely to pay the debt of the principal at a future time, and the assignment had been made to repay what he should so pay, the instrument would be clearly within the words of the statute. And, although he bound himself to pay only in case the principal made default, still the assignment was to secure repayment of money to be paid at a future time, in case of that contingency happening. A security for contingent future payments is as much within the words and meaning of the statute as a security for certain future payments.''

Counsel for the appellant submitted that Lord Canning v. Raper is authority for no more than the proposition that an instrument may be a security for the repayment of money to be thereafter lent, advanced or paid even if the obligation to repay is a contingent obligation. Whilst Lord Canning v. Raper is authority for that proposition its authority is not, I think, confined to it. The case also affords an example of liability to duty ad valorem, pursuant to legislation not materially different from Subdiv. 17 of Division 3 of Part II of the Stamps Act 1958, of an instrument of mortgage given to secure the repayment to the grantee of money to be thereafter paid by him to other than the grantor in circumstances giving rise to a right of repayment.

Counsel for the appellant objected that Lord Canning v. Raper is distinguishable from the present case in that, first the mortgagee in that case was a joint obligor with the mortgagors and, secondly, the mortgagee was there granted an express indemnity by way of the mortgage in respect of any financial outlay he might make to the third parties. There are indeed differences between that case and this but they are not, in my opinion, sufficient to distinguish the two cases upon a material matter of law. The mortgagee in Lord Canning v. Raper did, of course, happen to be jointly liable with the mortgagors to third parties but that circumstance appears to have played no part in the decision. What was important was that, as between the mortgagee and the mortgagors, the mortgagee was entitled to regard any amount he paid out to the third parties as recoverable from the mortgagors, albeit not on any covenant to repay contained in the deed. As between the mortgagors and himself, the mortgagee bound himself as surety. In respect of any payment he might have been obliged to make to the third parties he could have sued the mortgagors in assumpsit for money paid, there being nothing in the deed inconsistent with his right to do so.

Whether or not any outlay the mortgagee in Lord Canning v. Raper might have had to make to the third parties could properly have been described as a loan or advance to the mortgagors, the outlay would have been (as Lord Campbell put it) ``so much money paid for'' the mortgagors. It would have been a payment of which the mortgagee was entitled to obtain repayment, which repayment the deed of mortgage was intended to secure.

I consider, therefore, that Lord Canning v. Raper covers this case if any monetary outlay which the Commonwealth might be obliged to make to the appellant's lenders could be described as so much money paid for the appellant in circumstances giving rise to a right of repayment.

Counsel for the appellant argued against the existence of any such right, submitting that the deed of mortgage covers the field of the Commonwealth's rights to recoup itself and that its rights are limited to those enumerated in cl. 10(2) of the deed which I have already summarised. For the respondent it was submitted that there is nothing in the deed of mortgage to inhibit the conventional right which a surety has to recover against his principal, on a common indebitatus count as money paid, all money which he expends as surety. Indeed counsel for the respondent argued that the terms of the deed are positively directed to ensuring that any such right remains unaffected. These opposing contentions raise the only point of construction of the deed in the case.

The express rights, powers and remedies of the Commonwealth set out in cl. 10(2) of the deed are nowhere said to be the only powers available to the Commonwealth in the event that it is called upon and is obliged to pay any moneys under the guarantees. On the contrary, the powers conferred by cl. 10(2) are exercisable by the Commonwealth, according to cl. 10(1), ``without prejudice to any of its other rights and remedies''. I

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understood counsel for the appellant to submit that those words must be taken to have been inserted only out of an abundance of caution and therefore not to mean what they say. He pointed to the right of the Commonwealth, conferred by cl. 3(1)(b) to require the appellant to execute further assignments and documents as it may from time to time reasonably require in order to give effect to the purposes of the deed. The words I have quoted from cl. 10(1) serve merely to make it plain, he said, that the right conferred by cl. 3(1)(b) is not to be affected by the exercise of any right conferred by cl. 10(2). I reject that submission. I should very much doubt whether the right conferred by cl. 3(1)(b) could in any sense be described as a ``remedy'' of a kind which the words I have quoted from cl. 10(1) are designed to leave unaffected by an exercise of the rights conferred by subcl. (2) of cl. 10. In any event, the expression used in cl. 10(1) is ``any of its other rights and remedies'' and I see no reason why the width of that expression should be limited by reading it to mean ``any of its other rights and remedies conferred by this deed''.

That the right of the Commonwealth to sue the appellant upon a common count for money paid by it as guarantor is unaffected by the deed is made clearer, if need be, by the terms of cl. 3(4), namely -

``Nothing contained in this deed shall merge, extinguish, discharge, postpone lessen or otherwise prejudicially affect any other security now or hereafter held by the Commonwealth or any right or remedy which the Commonwealth now has or hereafter may have against the Company or any other person, and no other security now or hereafter held by the Commonwealth shall in any way prejudicially affect the powers and provisions, contained or implied in this deed, and the specialty created by this deed shall not operate as a merger of any simple contract remedy.''

The appellant's argument was again that this provision, being part of cl. 3 which, in subcl. (1) confers a right on the Commonwealth to obtain further assignments (but is not limited to that subject matter) should be read as confining its protection to that right. So to confine it would be to rewrite it. In my opinion the terms of subcl. (4) of cl. 3 speak for themselves. The appellant's argument in respect of it fails.

Counsel for the appellant finally referred on this point to cl. 11(3). He said that, by contemplating that the appellant might be required to make up any short-fall which the realisation of the mortgaged property might leave, that provision lends support to the view that there is no general right of the Commonwealth to receive repayment of money which it might be required to outlay as surety. That argument depends at best upon implication. I cannot, I think, override the express provisions of cl. 3(4) and cl. 10(1) to which I have referred.

I accordingly conclude that any monetary outlay which the Commonwealth might be obliged to make under the guarantee will give rise to a right of repayment from the appellant and that the deed of mortgage is intended to secure such repayment. It follows that the deed of mortgage is a ``mortgage'' as defined by sec. 137D(1) and is dutiable accordingly under Heading XXII of the Stamps Act.

In anticipation of that conclusion counsel for the appellant next submitted that the amount secured by the instrument is not ``in any way limited'' but is of an ``unlimited'' amount in terms of sec. 137F(1), (2) and (5) of the Act. The argument was that, because the security is for an unlimited amount, it follows that ``the amount secured thereby does not exceed $8,000'', that therefore the duty provided for thereon by Heading XXII is $4 only, and that it was wrong to assess duty in respect of a sum of $US9 million as had been done by the respondent. It was argued that the sum of $US9 million is significant only because, by sec. 4 of the Airline Equipment (Loan Guarantee) Act 1977, the Commonwealth is not empowered to give guarantees in respect of moneys borrowed exceeding (or exceeding the equivalent of) $US9 million. The amount (if any) which is actually secured is unlimited, it was said, because the amount payable to the lenders by the Commonwealth pursuant to the guarantees will not be limited to the principal sum of $US9 million but will extend to principal, interest and charges outstanding

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at any time. The argument was that because one could not at the date of the instrument determine the upper or the lower or any limit of the amount which the Commonwealth might be called on to pay, and which the appellant might be called on to repay, the amount secured by the instrument is unlimited.

In my opinion it does not follow, because the Commonwealth might be called upon to pay less or more than $US9 million, either that the provisions of sec. 137F(2) are attracted for the purpose of the initial assessment of duty or that the amount secured by the instrument is one ``where the amount secured thereby does not exceed $8,000'' in terms of Heading XXII. Let it be assumed that the amount secured or to be secured by the deed of mortgage was, at the time of its execution, capable of being varied in a manner which prevented its being then determined. Section 137F(5) would require the amount secured to have been treated as unlimited. Alternatively, let it be assumed that the amount secured was unlimited for some other reason. That does not, in my view, mean that the security is shown to have been one ``whereby the amount secured thereby does not exceed $8,000''. If the amount secured is unlimited, how can it be said that it does not exceed $8,000? Of course, it cannot.

One of the questions of law which by its notice of appeal the appellant contended was involved in the decision of the Board of Review was -

``Whether, if the Instrument is a Mortgage Bond Debenture or Covenant within the meaning of the said sub-Division 17 and the said Heading XXII, the Instrument is a security where the total amount secured or to be ultimately recoverable is limited to the sum of 9 million dollars in United States currency or some other and what sum.''

The notice of appeal went on to state as a ground of appeal -

``That the Board erred in holding that the instrument was a security where the total amount secured or to be ultimately recoverable was limited and further erred in holding that the total amount secured or to be ultimately recoverable was limited to 9 million dollars in United States currency.''

As I read the decision of the Board the learned member held that the amount secured by the deed of mortgage was the amount that the Commonwealth ``may have to meet in United States dollars (up to nine million such dollars) in discharge of its obligations under its guarantees''. The terms of the guarantees to be given by the Commonwealth were not placed before the Board of Review and they were not placed before me. Because their terms had not been worked out at the time of the execution of the deed of mortgage they were in truth irrelevant to the matter of assessment of duty on the deed at the date of its execution. For all one knows their terms may never have been worked out and the proposed transaction may never have gone ahead. But the facts agreed between the parties to this appeal include the statement that the two proposed borrowings by the appellant had been agreed to by the proposed lenders on condition that the Commonwealth would guarantee the repayment of and the payment of interest on the borrowings. It does appear, therefore, that the intention was that by its guarantees the Commonwealth should commit itself to the lenders in the United States of America for a sum potentially in excess of $US9,000,000. It follows that the maximum amount intended to be secured by the mortgage is in excess of $US9,000,000. The amount of the excess is of course unascertainable, at least for the purposes of this appeal.

Counsel for the appellant advanced no argument with a view to showing that if the deed of mortgage is dutiable as a mortgage under Heading XXII (as I have held it to be) and is not dutiable on the footing that the amount secured thereby does not exceed $8,000 (as I have held) the respondent was in error in assessing duty (as he did) in respect of a sum of $US9,000,000. Nor, in my opinion, was any such argument properly open for I consider that the respondent was entitled to assess the instrument in the way he did. Although it was impossible at the time of assessment to put an upper limit on the amount secured, it was possible to ascertain from the deed that the parties to it had agreed on a specified sum of $US9,000,000 as a basic amount secured. The deed was, I

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ATC 4332

think, liable to be assessed to duty by reference to that specified basic sum, disregarding as a matter of necessity any interest which might increase it. That approach is, in my view, authorised by a long line of decisions of which that of the House of Lords in
Independent Television Authority and Associated-Redifusion v. I.R. Commrs. (1961) A.C. 427 is perhaps the most recent authoritative example.

That case involved the assessment to duty under the Stamp Act 1891 of an agreement as a ``bond covenant or instrument'' being a security ``for any sum or sums of money'' payable ``for a definite and certain period, so that the total amount to be ultimately secured can be ascertained''. The taxpayer objected that the total amount payable under the agreement could not be determined at the date of execution because there was provision for increase or decrease in a certain event of the amount periodically payable and that therefore it did not fall within the head of charge on which the revenue relied. The objection was denied by Wynn Parry J., by the Court of Appeal and in the House of Lords. Lord Radcliffe, at p. 443 of the report, said:

``I take it, therefore, to be a well-settled principle that the money payable is ascertained for the purposes of charge without regard to the fact that the agreement in question may itself contain provisions which would in certain circumstances prevent it being payable at all. If that is so, there is at least no better reason for adopting a different principle when there are found clauses which merely vary the amount to be paid according to specified contingencies. Nor does it matter for this purpose whether the effect of such a clause is to make it possible for the sum to be increased or to be diminished... What is necessary is that it should be possible to ascertain from the agreement that there is some specified sum agreed upon as the subject of a payment which may perhaps fairly be called the prima facie or basic payment. Even that minimum condition may have to be restated in relation to certain kinds of securities, such for example as guarantees, in which the ad valorem charge is calculated according to the maximum sum contingently payable, or, to put it in another way the amount of the guarantee...''

The Independent Television Authority case was not, of course, concerned with the quantification for stamp duty purposes of money secured by a mortgage, but reasoning of a similar kind, in reliance on the same line of previous authority, was applied by Finlay J. in the case of
International Power and Paper Company of Newfoundland Limited v. I.R. Commrs. (1933) 12 A.T.C. 413, which is also reported in Sergeant on Stamp Duties, 4th ed. at p. 399. I think therefore that the reasoning of Lord Radcliffe in the passage I have quoted is applicable as much to the question of quantification for stamp duty purposes of an amount secured by an instrument of mortgage as it is to the quantification for those purposes of money payable under an instrument; see also the judgment of Brightman J., in
Coventry City Council v. I.R. Commrs. (1979) Ch. 142, at p. 150. Two points arise in cases such as this when the value of an instrument for duty is in issue. First, the nature and effect of the instrument must be ascertained, by reference to what it provides, as a matter of construction. Secondly, in construing the instrument regard is not to be had to contingencies or conditions which might affect the amount to be paid or secured, as the case may be.

The Independent Television Authority case appears to me to provide authority, by reference also to the decisions referred to in it, for the proposition for which it is cited in Sergeant on Stamp Duties, 7th ed. at p. 16, namely this:

``In the case of instruments liable to ad valorem duty by reference to a scale dependent upon an amount which may or may not be payable according to the happening of a contingency, the Revenue is entitled to ad valorem duty in the maximum amount payable in any contingency. However" - and this is the passage which is more relevant here - "where an instrument refers to a specified sum which is neither a maximum nor a minimum but is variable upwards or downwards in certain circumstances, duty is to be charged on the specified sum.''

As a matter of construction the deed of mortgage in this case specifies a sum of

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ATC 4333

$US9,000,000 as a ``prima facie or basic'' amount, to use the language of Lord Radcliffe. That is a sum in respect of which the respondent was required to assess duty under Heading XXII on the footing that it is the amount secured.

The learned member of the Board of Review, in addition to holding that the deed of mortgage was assessable as a mortgage under Heading XXII, considered in detail whether it was assessable as a debenture under the same heading, and held that it was. Having decided for myself that the instrument was properly assessable as a mortgage, I think I need not investigate its assessability as a debenture and I refrain from doing so.

One subsidiary question remains for consideration. It concerns the rate at which the sum of $US9,000,000 should be converted to Australian currency for the purpose of calculating the amount of duty on the deed of mortgage.

Section 25 of the Stamps Act 1958 provides that:

``Where an instrument is chargeable with ad valorem duty in respect of any money in a currency other than that of the Commonwealth of Australia, such duty shall be calculated on the value of such money in Australian currency according to the current rate of exchange on the day of the date of the instrument.''

The deed of mortgage is, as I have held, chargeable with duty ad valorem in respect of a sum of $US9,000,000 and it follows that the duty is by reason of sec. 25 to be calculated on the value of that sum in Australian currency according to the current rate of exchange on 25 July 1978. The section provides legislative recognition of the fact that foreign currency is for stamp duty purposes not money but a commodity which must be valued: see
I.R. Commrs. v. Littlewoods Mail Order Stores Ltd. (1963) A.C. 135 at p. 152, in the speech of Lord Simonds.

It appears from the facts agreed between the appellant and the respondent that on 25 July 1978 the current rates of exchange for transactions of sale and purchase by Australian banks of currency of the United States of America in an amount of $US9,000,000 were:

      buying rate:       $Aust. 1.00 = $U.S. 1.1622
      selling rate:      $Aust. 1.00 = $U.S. 1.1498
      

The respondent applied the latter in making his calculation.

At the hearing of the reference further information was sought by the Board and furnished by the parties which (according to the Board's reasons for its decision) described to some extent the manner and circumstances in which rates of exchange are fixed and published daily by the Reserve Bank of Australia. It appears that, in addition to fixing daily limits by reference to which Australian trading banks establish so-called ``buying'' and ``selling'' rates for transactions in this country involving foreign currencies, the Reserve Bank publishes what is called a ``mid-rate'' above and below which, within specified limits, buying and selling rates must be established by the trading banks. None of the information which appears to have been furnished to the Board in addition to the facts agreed and filed pursuant to rule 9(1)(iii) of the Taxation Appeals Rules and Regulations 1978 (S.R. 169/1978) was provided by the parties to the Court on the appeal. I assume that course to have been taken because the decision of the Board did not turn upon it; and in the event no argument was directed to me which materially depended upon the additional information. Accordingly, I take no heed of it.

I therefore take the final question of law which I have to decide to be whether the respondent was correct in calculating duty upon an amount in Australian currency converted from United States currency at the relevant selling rate of 1.1498 or whether he should have made the conversion at the buying rate of 1.1622, for which the appellant contends. The value of $US9,000,000 in Australian currency converted at the selling rate of 1.1498 is $Aust.7,827,448, whereas the value converted at the buying rate of 1.1622 is $Aust.7,743,934. Ultimately, therefore, the question is whether the respondent assessed duty at 0.4 per cent on a value which was excessive by $83,514. If he did, there was an over-assessment by some $334.

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ATC 4334

Having regard to the comparatively small sum which depends upon the answer to the point neither counsel developed an elaborate argument upon it. I took it however, to be common ground (as it apparently was before the Board of Review) that the practice of the Australian trading banks in foreign currency transactions is to quote two rates. One is a ``selling rate'', used when a bank is providing and a customer is buying foreign currency for transmission abroad in exchange for Australian currency. The other is a ``buying rate'', used when a bank is taking from a customer foreign currency in exchange for Australian for use here. There were, therefore, as there conventionally are, two rates of exchange current on the relevant date in respect of a transaction involving the conversion of United States dollars to Australian dollars. Which was the ``current rate of exchange'' in terms of sec. 25 of the Stamps Act? The case was argued before me on the footing that one or the other should be applied, save that counsel for the appellant (somewhat faintly and rather un-enthusiastically, I thought) contended, as an alternative and for want of better, for the application of the mid-rate which had been referred to before the Board.

The value upon which duty ad valorem is to be assessed on an instrument under Heading XXII is determined by ``the amount secured thereby''. In this case the amount secured is the amount that the Commonwealth is liable to outlay in fulfilment of its obligations as guarantor. It is the ``value of such money'' which must be expressed in Australian currency by reason of sec. 25 of the Act for the purpose of calculating duty. For the purpose of doing that one must assume that, in order to procure United States dollars to fulfil its obligations, the Commonwealth would be required to buy United States dollars at the rate at which Australian banks would at the relevant time be prepared to sell them. In my opinion, therefore, the ``current rate of exchange'' referred to in sec. 25 of the Act is, in this case, the selling rate on 25 July 1978 of one Australian dollar to 1.1498 American dollars, and that is the rate which the respondent adopted.

I would dismiss this appeal.

The order of the court is that the appeal be dismissed with costs to be taxed.

I accede to the application that the ordinary time within which notice of appeal is to be lodged be extended to twenty-eight days.