Sumner v Campbell [1935] HCA 20; (1935) 53 CLR 196 (17 April 1935)

Sumner and Others Applicants, Appellants; and Campbell and Another Respondents, Respondents

The Moratorium Act 1932 N.S.W., sec. 34 (7), reads as follows:—"Nothing in this section or in section twenty-five of the Moratorium Act contained shall be construed so as to affect any right, power, or remedy of the mortgagee for the recovery of any moneys secured by a mortgage of land and interest thereon in the event of—(a) a sequestration order being made against the mortgagor; or (b) the mortgagor executing a deed of assignment or of arrangement under the provisions of any bankruptcy law for the time being in force; or (c) an order being made or resolution passed for the winding up of the mortgagor being a company; or (d) the estate of a deceased mortgagor being insolvent and being administered by or under the direction of any Court." The interpretation of this section is not free from difficulty, but I think that reason strongly supports the view that the Legislature could not have intended to distinguish between liquidations already in progress before the passing of the Act and those afterwards commenced. And this general view is not inconsistent with the language of the section, which is fairly susceptible of the construction placed upon it by the judgment of Evatt J., which I have had an opportunity of reading. In Re Anglo-French Co-operative Society Ltd.; Ex parte Pelly [No. 2][1], a retrospective operation was given to the words "being wound up," which were held to mean being wound up at or after the commencement of the Act in question.

Motor Credits Ltd. claimed to prove as an unsecured creditor in the winding up of Property Insurance Co. Ltd. for a sum of £5,217 7s. 9d., payable to it under a covenant in a second mortgage of property in Pitt Street, Sydney, from the Insurance Co. to it. The Insurance Co. was in the course of voluntary winding up pursuant to a resolution passed on 10th January 1930. The Moratorium Act 1930-1931 of New South Wales, sec. 25, had provided that all covenants, agreements or stipulations by a mortgagor for payment or repayment of any mortgage 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. (See In re Paul & Gray Ltd.[2]; City Mutual Life Assurance Society Ltd. v. Smith[3].) But the Moratorium Act 1932, sec. 34 (7), provided: "Nothing in this section or in section twenty-five of the Moratorium Act contained shall be construed so as to affect any right, power, or remedy of the mortgagee for the recovery of any moneys secured by a mortgage of land and interest thereon in the event of ... (c) an order being made or resolution passed for the winding up of the mortgagor being a company." The Supreme Court of New South Wales rejected the claim on the ground that the amending sec. 34 (7) (c), upon its proper construction, was not retrospective in operation, and had no application to orders made or resolutions passed before the commencement of the Act. And the provisions of sec. 9, sub-sec. 2 (e), (f) and (g) were referred to in support of this view. But it is plain that the construction of sec. 34 (7) adopted by the Supreme Court is not universally true; thus it cannot be applied to par. (d)—"the estate of a deceased mortgagor being insolvent and being administered by or under the direction of any Court." Prima facie, it would seem that the words used in sec. 34 (7) (c) refer to future and not past events. But the purpose of the section is clear; it was to restore in certain cases rights which had been taken away by the Moratorium Act 1930-1931. It did not annul rights vested in creditors in any true sense, though they benefited by the provisions of sec. 25. The Courts lean against interpreting an Act so as to deprive a party of an accrued right, but such a presumption has no application to such an Act as the present, which is designed to restore and not to destroy rights. The substance of sec. 34 (7) (c) is that nothing in the Act of 1930-1931 shall affect the rights or remedies of a mortgagee for the recovery of any moneys secured by a mortgage of land in case of winding up. The words "order being made or resolution passed" are not so intractable that, having regard to the character and other provisions of the Act of 1932, they must be referred to some future event rather than the existence in fact of an order or resolution.

I have had an opportunity of reading the judgment prepared by Evatt J., and I agree, for the reasons which he gives, that the better construction of the language of sec. 34 (7) of the Moratorium Act 1932 N.S.W. is that which makes the words "in the event of" describe the nature of the right, power or remedy of the mortgagee re-established by the provision instead of treating them as modifying the verb "shall be construed" and stating when temporally his general rights, powers, and remedies shall be considered to exist. This construction removes the apparent incongruity between pars. (a), (b) and (c) of the sub-section, on the one hand, and par. (d), on the other hand. Par. (d) upon its terms necessarily includes estates of deceased mortgagors which, at the commencement of the Act, are insolvent or in the course of administration by the Court, whereas, if "in the event of" be given a temporal meaning or effect, pars. (a), (b) and (c) prima facie would, as the Supreme Court held, refer only to orders, deeds and resolutions made, executed and passed in the future. The construction harmonizes the provision with the language of sec. 9 (2) (e) and (g), in which the use of the adverbial "where" makes the express allusion to past and future natural. It has the great advantage of giving a meaning to the provision which is just and reasonable in policy. Notwithstanding Mr. Flannery's attempt to justify it on the ground that the Legislature may have intended not to disturb the shares in which assets might be distributed among creditors in bankruptcies and liquidations commenced before the Act, the contrary meaning does not appear to me reasonable, first, because dividends already paid on either view would not be affected, and secondly, because such an intention clearly cannot be imputed in the case of par. (d).

We are concerned in this matter only with par. (c) which, by reason of sec. 2 (2), would be severable from pars. (a), (b) and (d) of sub-sec. 7, if they or any of them were invalid. The question how far they are affected by sec. 109 of the Constitution, therefore, did not arise in this case.

The question which is raised upon this appeal is whether the fact that the winding up of the mortgagor, being a company, commenced before December 21st, 1932 (the day on which the Moratorium Act 1932 was assented to) prevents the appellant mortgagee from proving in the liquidation.

The judgment of the Full Court rests mainly upon the use of the words "in the event of" in sec. 34 (7). These words, it is suggested, are indicative of futurity, and the judgment proceeds:—

My opinion is that this is not the correct method of approach to the problem which has arisen, and that no question of retrospectivity really arises. Sec. 25 of the Moratorium Act 1930 and sec. 34 (1) of the Moratorium Act 1932 placed restrictions upon the mortgagee's rights, powers and remedies for the recovery of the mortgage moneys. Thus sec. 34 (1) of the Moratorium Act 1932 requires that a confirmation shall be obtained from the mortgagor as a condition of the mortgagee's commencing proceedings for the payment of the mortgage moneys, sec. 25 (1) of the Act of 1930 places a general prohibition upon the mortgagee's bringing proceedings for the breach of any covenant of the mortgage, and sec. 25 (7) of the Moratorium Act 1930 invalidates all covenants for the payment or repayment of mortgage moneys, excepting for the purpose of enabling a mortgagee to exercise his rights against the mortgaged property.

It is in relation to these restrictions upon the rights of the mortgagee that sec. 34 (7) has to be understood. The overriding purpose of the sub-section is to remove the statutory restrictions in the four cases specified—in (a), (b), (c) and (d). In form the sub-section creates a special statutory rule as to the construction of the provisions which are restrictive of a certain "right, power, or remedy of the mortgagee." The real question which arises is: What "right, power, or remedy" is to remain unimpaired by the statutory restrictions referred to at the commencement of the sub-section? For the answer, reference has to be made to all the words from "for the recovery" to the end of the sub-section. All such words go to make up the description of the "right, power, or remedy" which the sub-section expressly protects. In the result, the protected "right, power, or remedy" is to recover the mortgage moneys in any of four specified types of proceedings.

If the sub-section is approached in this way, it is not possible to hold that any of the four types of proceedings must have commenced prior to the passing of the sub-section itself. The words "in the event of" are quite capable of describing proceedings which have already commenced, and they address themselves to the contingency that a certain state of affairs is existing. This view of the sub-section is strongly supported by sec. 7 (d) and by the use of the words "being made," "executing," and "being made" in sec. 7 (a), (b) and (c) respectively.

The fallacy in the argument for the respondent is to overlook the fact that English is a "positional" language (cf. per Rich J. in Dignan v. Australian Steamships Pty. Ltd.[5]) and to treat the words "in the event of" and the four pars. (a), (b), (c) and (d) as though they had been transposed to the commencement of the sub-section. Then the words would naturally and grammatically have been construed as relating to future events, and could not be regarded as part of the description of the "right, power, or remedy" of the mortgagee to which special protection was being accorded by the sub-section.

The argument based on the doctrine against retrospectivity mistakes the chief purpose of the sub-section. The sub-section is not concerned with the question whether the events which have created the occasion for the creditors of the mortgagor instituting a special type of proceeding have occurred before or after the commencement of the Act in which the sub-section occurs. Quoad the mortgagee, such an "occasion" is necessarily fortuitous, and it is not inaccurately referred to as an "event." And the Legislature has considered that the restrictions which otherwise impede the mortgagee should be regarded as non-existent in those instances where it is no longer possible to carry out the main purpose of the Moratorium Acts by saving the mortgagor from liquidation. The Legislature has determined that in all such cases the mortgagee should not be put in a worse condition than the other creditors of the mortgagor.

For these reasons the appeal should be allowed and the order of Street J. restored.

I am of the same opinion as Rich, Dixon and Evatt JJ., whose judgments I have read.

Appeal allowed with costs. Order of the Full Court discharged and order of Street J. restored. Respondents to pay costs of the Full Court appeal.

[1] (1884) 50 L.T. 754.

[2] (1932) 32 S.R. (N.S.W.) 184, 386; 49 W.N. (N.S.W.) 49, 164.

[3] [1932] HCA 62; (1932) 48 C.L.R. 532.

[4] (1934) 35 S.R. (N.S.W.), at p. 4; 51 W.N. (N.S.W.), at p. 200.

[5] [1931] HCA 19; (1931) 45 C.L.R. 188, at p. 197.

High Court of Australia

Sumner v Campbell [1935] HCA 20; (1935) 53 CLR 196 (17 April 1935)

HIGH COURT OF AUSTRALIA