The Secretary to the Treasury has forwarded to me for advice the following letter from the Secretary of the Commonwealth Bank, Sydney:

Under the New South Wales Stamp Duties Act of 1920 all securities for advances must be stamped.

In making advances in connection with the 'Diggers' Loan', the practice of the banks has been to take a lien over the actual bonds, and this lien is held by the New South Wales authorities to be subject to stamp duty. They point out that it is not the bonds which are being subjected to stamp duty, but the lien, which is quite a separate document.

Section 20A of the Commonwealth Inscribed Stock Act as inserted by No. 7 of 1918 section 3 provides for the making of advances by banks for taking up stock or bonds. The section provides that a certificate of lien signed by or on behalf of the person etc. to the effect that the bank has advanced for the purposes of the subscription the whole of the moneys or portion of same, shall be entered in the Stock Register and that no dealing shall thereafter take place without the consent of the bank. Any notice to the Registrar is sufficient for this purpose. Our practice is to write the words 'Advanced against' on the application.

It would appear therefore that the Commonwealth Act, having made special provision for advances for the purposes of taking up stock, the State cannot interfere in the exercise of these provisions by the imposition of a tax which would further operate as a great hardship on persons taking up small bonds.

The Stamp Commissioner states that amending legislation is shortly to be introduced which would overcome the difficulty in such cases in future.

We shall be glad, however, if you will ascertain from the Commonwealth Solicitor-General whether, in view of the fact that Commonwealth legislation is in existence, the State have any power to levy stamp duty in these cases.

As it is urgent to obtain a decision whilst the Loan is still open, I shall be obliged if you will let me have the Solicitor-General's reply as promptly as possible.

The section of the Commonwealth Inscribed Stock Act referred to in the above letter provides certain machinery incidental to the raising of loans by the Common-wealth. The section authorises the Registrar of Stock to accept 'certificates of lien' from banks making advances to investors in Commonwealth loans.

On the contention of the Commissioner of Stamps (New South Wales) any bank taking such a certificate of lien is liable to be sued if stamp duty in accordance with the Stamp Duties Act 1920 (New South Wales) is not paid on the certificate (section 38) and the Registrar of Stock is liable to a fine not exceeding £5 if he registers any such unstamped certificate of lien (section 24).

In my opinion the rule in D'Emden v. Pedder as construed in the Amalgamated Society of Engineers v. Adelaide Steamship Co. Ltd 28 C.L.R. 129 applies here.

The certificates are a necessary incident to the raising of Commonwealth loans; and a State Act, which makes it an offence to accept or register the certificates unless they are taxed in accordance with that Act, is inconsistent with section 20A of the Commonwealth Inscribed Stock Act 1911-1918 and, by virtue of section 109 of the Constitution, invalid to the extent of the inconsistency.

I am accordingly of opinion that State stamp duty is not chargeable on the certificates in question.

[Vol. 18, p.25]