The Secretary to the Treasury has forwarded me the following minute for advice:

Section 3 of the Loans Securities Act 1919 reads as follows:

When under any Act the Treasurer has authority to borrow moneys in accordance with the provisions of the Commonwealth Inscribed Stock Act 1911–1918, or in accordance with the provisions of any Act authorising the issue of Treasury Bills, the Governor-General may, notwithstanding the provisions of those Acts, authorise the Treasurer to borrow the moneys in such amounts and manner and at such prices and on such terms and conditions and issue such securities in such form as the Governor-General approves.

The Loan Acts authorising the raising of loans by the Commonwealth–whether passed before or after the passing of the Loans Securities Act 1919–contain the following provision:

The Treasurer may from time to time, under the provisions of the Commonwealth Inscribed Stock Act 1911/191, or under the provisions of any Act authorising the issue of Treasury Bills, borrow moneys not exceeding in the whole the amount of … pounds.

In the Crown Solicitor’s opinion No. 46 of 1931, dated 3rd March, 1931, regarding the question of taxation by the Commonwealth of interest on Commonwealth Loans raised outside Australia, the Crown Solicitor states:

Section 3 of the Loans Securities Act, 1919, has, I understand, been acted upon as if it applied not only to loans previously authorised, but also to loans subsequently authorised. Section 3 is, however, open to the interpretation that it applies only to Acts in force at the time it was enacted, and that subsequent Acts which expressly authorise the Treasurer to borrow moneys under the provisions of the Commonwealth Inscribed Stock Act without any reference to the Loans Securities Act show by their terms that section 3 is not intended to apply to such subsequent Acts. In view of what has apparently been done by the Treasury, I do not propose to further consider whether or not section 3, when correctly interpreted, applies to subsequent Acts, and assume that it applies to all Acts whether enacted previously or subsequently.

Will you be good enough to favour the Treasury with an advising on the point raised by the Crown Solicitor. The question is important as Loans raised overseas after the passing of the Loans Securities Act 1919 have been regarded as having been borrowed in accordance with the provisions of that Act and not the Commonwealth Inscribed Stock Act. If it be held that the Treasurer had no authority to borrow the moneys under the Loans Securities Act, but only the Commonwealth Inscribed Stock Act, then under the latter Act, by virtue of section 52B, the interest would be free of Commonwealth Income Tax, the prospectus not having declared the interest to be liable to such tax.

It may be mentioned that the Prospectuses of the London loans merely quoted the Loan Acts which authorised the borrowing of the moneys.

As a pure matter of construction of section 3 of the Loans Securities Act, I do not think that the opening words ‘when under any Act’ are restricted to Acts passed before the passing of the Loans Securities Act.

It is a rule, in the drafting of modern statutes, that an Act ‘should be deemed to be always speaking’ (Lord Thring, Practical Legislation, p. 83). This means that the present tense is used in conditional and relative clauses of a sentence, and has reference to the time at which the Act is applied.

Section 3 is a good illustration of this rule; and in this respect is, I think, clear and unambiguous. It provides that ‘the Governor-General may’, under certain circumstances, ‘authorise the Treasurer to borrow’ etc.

What are the circumstances under which the Governor-General may exercise this power? He may exercise it ‘when by any Act the Treasurer has power to borrow moneys’ etc. The section requires that the statutory authority for the Treasurer to borrow should exist at the time when the Governor-General exercises his power. That is the point of time to which the word ‘when’ relates; and the section affords no ground for a reference back to the time of commencement of the Act.

Comparison may be made with section 4 of the Commonwealth Inscribed Stock Act 1911, which provides that ‘The Governor-General may by order create stock for raising by way of loan any money authority to borrow which is granted by any Act.’ It has never been suggested, and could not, in my opinion be maintained, that this provision is limited to Loan Acts passed before the commencement of the Commonwealth Inscribed Stock Act.

I am therefore of opinion that the Loans Securities Act can be applied in relation to Loan Acts subsequently passed.

This view, however, does not dispose of all the matters referred to in the Treasury minute. It remains to consider what effect the Loans Securities Act has when applied, in the way in which it has actually been applied, to the Loan Acts which actually have been passed since 1919.

All these later Loan Acts contain (with immaterial variations) a provision that–

The Treasurer may from time to time, under the provisions of the Commonwealth Inscribed Stock Act 1911–1927, or under the provisions of any Act authorizing the issue of Treasury Bills, borrow moneys not exceeding in the whole the amount of      pounds.

None of these Loan Acts mentions the Loans Securities Act. But the Loans Securities Act could be brought into operation as regards any of them by an Order of the Governor-General in-Council under that Act. Where no such Order-in-Council was made, the Loans Securities Act would have no operation.

The form of order which was made under the Loans Securities Act was an order reciting the Loan Acts under which it was proposed to borrow, reciting section 3 of the Loans Securities Act, and declaring that the Treasurer is authorized to borrow the sum of £ … ‘in such amounts and manner, and at such prices and on such terms and conditions, and issue such securities in such form, as are set forth in the attached prospectus’. The Order-in-Council was never gazetted, and was not officially brought to the knowledge of the investor. All that he saw was the prospectus itself, and the prospectus usually did not mention the Loans Securities Act.

It did, however, refer to the issue as an issue of ‘Registered Stock’; the intention apparently being to notify the investors that the issue was ‘Registered Stock’ under the Loans Securities Act, not ‘Inscribed Stock’ under the Commonwealth Inscribed
Stock Act.

It is not clear, however, that the mere description of stock as Registered Stock is sufficient to identify it with the Loans Securities Act. To show what I mean I will refer to the provisions of the Commonwealth Inscribed Stock Act and the Loans Securities Act.

The Commonwealth Inscribed Stock Act (section 3) defines ‘Stock’ as meaning Commonwealth Government Inscribed Stock.

Section 3 empowers the Governor-General to ‘create capital stock called Commonwealth Government Inscribed Stock.’

Section 14 empowers the Governor-General to establish ‘Registries for the inscription of stock’ in the Commonwealth and in London.

Section 15 requires all stock issued to be inscribed in a Stock Ledger at a Registry.

The Loans Securities Act contains (section 2) the following definitions:

‘Register’ means the Register … of Stock.

‘Registry’ means a Registry for the inscription of Stock …

‘Stock’ means Stock issued under this Act, and reference to Stock includes … reference to registered stock. (The phrase ‘registered Stock’ does not occur elsewhere in the Act.)

Section 5 empowers the Governor-General:

1. to establish Registries at any places outside the Commonwealth for the inscription of Stock and for the issue and registration of securities …; and
2. to appoint such Registrars as he … thinks necessary.

It does not appear that the Governor-General has ever appointed a Registrar of Stock in London, either under the Inscribed Stock Act or under the Loans Securities Act. The prospectus, however, states that the Stock will be registered and transferable at the Commonwealth Bank of Australia, New Broad Street, London.

It seems therefore that there is no clear distinction between inscription and registration of stock. ‘Inscribed Stock’ issued under the Commonwealth Inscribed Stock Act may well be described as ‘registered’, and ‘registered stock’ under the Loans Securities Act may be described as ‘inscribed’.

If the Taxation Commissioner claimed income tax on the interest from Registered Stock, on the ground that section 52B of the Commonwealth Inscribed Stock Act was not applicable, and the stock-holder disputed the claim, I think that the Commissioner would be faced with many difficulties in the Courts. The taxpayer would contend that the prospectus referred him to the Loan Acts, which in turn referred him to the Commonwealth Inscribed Stock Act, but that he had not been referred to the Loans Securities Act. The Commissioner would produce the Order-in-Council, to establish the application of the Loans Securities Act; and the taxpayer would point out that he had been given no opportunity of knowing of the existence of the Order. The court would certainly be disinclined to give a decision against the taxpayer based on the existence of an undisclosed Order-in-Council, and would be likely to favour a construction of the contract and the law which would avoid that result.

[Vol. 25, p. 110]