IN THE SUPREME COURT OF QUEENSLAND No. 3208 of 1987

FULL COURT

BEFORE:

Mr. Justice Connolly

Mr. Justice McPherson

Mr. Justice Williams

BRISBANE, 11 AUGUST 1989

(Copyright in this transcript is vested in the Crown. Copies thereof must not be made or sold without the written authority of the Chief Court Reporter, Court Reporting Bureau.)

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BETWEEN:

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED

(Plaintiff) Respondent

-and-

DOUGLAS MORRIS INVESTMENTS PTY.LTD.

(First Defendant) Appellant

-and-

BESSER (QLD.) LIMITED (Second Defendant) Respondent

-and-

PIONEER CONCRETE SERVICES LIMITED

(Third Defendant) Respondent

JUDGMENT

MR. JUSTICE CONNOLLY: In this case I shall ask my brother McPherson to deliver the first judgment.

MR. JUSTICE McPHERSON: I would allow the appeal only in respect of the declaration in paragraph 3 of the formal judgment in the Court below. I would set aside that declaration and substitute in lieu of it the declaration numbered (3) which appears at page 41 of the Reasons for Judgment which I now publish. I would otherwise dismiss the appeal.

MR. JUSTICE CONNOLLY: I agree in the order proposed by my brother McPherson and in his reasons to which I can usefully add nothing.

MR. JUSTICE WILLIAMS: I agree with the orders proposed and with the reasons of my brother McPherson.

MR. JUSTICE CONNOLLY: The order of the Court will be as proposed by my brother McPherson.

MR. SULLIVAN: Until we have seen those reasons and the nature of the declaration, there is certainly going to be an application for orders in the nature of a stay pending an appeal. That has been agreed to by both sides.

MR. JUSTICE CONNOLLY: It having been agreed to by both sides does not mean it is going to be granted.

MR. ROBIN: If as anticipated the matter is to go further the parties are agreed that there should be an order in the nature of a stay.

(Argument ensued.)

MR. JUSTICE CONNOLLY: If you want to make an application for an extension of the injunction, you may do so before a single Judge.

MR. ROBIN: There is one other matter which both sides agree was omitted from His Honour's order, the costs order,

which appeared in the record at page 175. I understand the bank will be happy that the Full Court order should incorporate an order for costs that Mr. Justice Dowsett intended to make.

MR. JUSTICE CONNOLLY: I think when you have had a chance to look at the proposed order, you might send me a note of the additions which you both propose should be made and we can tidy that up and the order of the Full Court will be endorsed to incorporate that order.

MR. ROBIN: There is one other matter which are the costs before Your Honour on 12 July which we agree should go to the costs of the appeal.

MR. JUSTICE CONNOLLY: That has nothing to do with the Full Court.

MR. JUSTICE WILLIAMS: The order that Mr. Justice McPherson has proposed is that there be no order as to costs.

MR. JUSTICE CONNOLLY: Can you not appreciate that you are not before a single Judge; you are in the Full Court. If you want to see me today and do something about the costs of the injunction, you can do that.

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IN THE SUPREME COURT OF QUEENSLAND WRIT NO. 3208 of 1987

FULL COURT

BETWEEN:

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED

(Plaintiff) Respondent

AND:

DOUGLAS MORRIS INVESTMENTS PTY. LTD.

(First Defendant) Appellant

AND:

BESSER (QLD.) LIMITED (Second Defendant) Respondent

AND:

PIONEER CONCRETE SERVICES LIMITED

(Third Defendant) Respondent

_____________________

CONNOLLY J.

McPHERSON J.

WILLIAMS J.

_____________________

Reasons for Judgment delivered by McPherson J. on the 11th August, 1989.

Connolly J. and Williams J. concurring with these reasons and orders.

_____________________

“APPEAL ALLOWED IN RESPECT OF THE DECLARATION IN PARAGRAPH 3 OF THE FORMAL JUDGMENT OF THE HONOURABLE MR JUSTICE

DOWSETT PRONOUNCED ON THE 30TH JUNE, 1989. THE DECLARATION IS SET ASIDE AND IN LIEU SUBSTITUTE THE FOLLOWING

DECLARATION:

(3) DECLARE THAT(A) SECTION 26(1) OF THE LIMITATION ACT 1974-1981 IS

EFFECTIVE TO BAR AN ACTION TO RECOVER A PRINCIPAL SUM PAYMENT OF WHICH WAS DEMANDED BY THE PLAINTIFF BY WRITTEN NOTICE DATED 21 MARCH, 1975:

(I) IN THE CASE OF A PRINCIPAL SUM THEN DUE AND OWING, AT THE EXPIRATION OF 12 YEARS AFTER THE DATE OF THAT DEMAND;

(II) IN THE CASE OF A PRINCIPAL AMOUNT THEN ONLY CONTINGENTLY DUE, AT THE EXPIRATION OF 12 YEARS FROM

THE DATES SPECIFIED IN THE PARTICULARS TO PARAGRAPH 10 OF THE STATEMENT OF CLAIM AS THE DATES ON WHICH THOSE AMOUNTS WERE PAID BY THE BANK.

(B) SECTION 26(5) OF THE ACT IS EFFECTIVE TO BAR AN ACTION TO RECOVER ARREARS OF INTEREST IN RESPECT OF THE SAID PRINCIPAL SUM OF MONEY COMMENCED AFTER THE EXPIRATION OF SIX YEARS FROM THE HALF-YEARLY DAY ON WHICH THAT INTEREST BECAME PAYABLE ON PRINCIPAL IN TERMS OF Cl. 2 OF THE SCRIP LIEN.

AND ALSO VARY THE JUDGMENT BY ADDING THE FOLLOWING PARAGRAPH:

(8A) THE PLAINTIFFS DO PAY THE FIRST DEFENDANT'S COSTS OF AND INCIDENTAL TO THE FIRST DEFENDANT'S MOTION FILED 24TH NOVEMBER, 1987 TO BE TAXED.

OTHERWISE APPEAL IS DISMISSED.”

_____________________

IN THE SUPREME COURT OF QUEENSLAND No. 3208 of 1987

FULL COURT

Before the Full Court

Mr. Justice Connolly

Mr. Justice McPherson

Mr. Justice Williams

BETWEEN:

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED

Plaintiff (Respondent)

AND:

DOUGLAS MORRIS INVESTMENTS PTY. LTD.

First Defendant (Appellant)

AND:

BESSER (QLD.) LIMITED Second Defendant (Respondent)

AND:

PIONEER CONCRETE SERVICES LIMITED

Third Defendant (Respondent)

JUDGMENT - McPHERSON J.

Delivered the 11th day of August, 1989.

CATCHWORDS

Limitation of actions - Mortgage of personalty - Scrip lien charging shares in company to secure bank overdraft - Barring of action to recover principal moneys and interest - Whether right to possession of shares and scrip statute-barred - Limitation of Actions Act 1974-1981, ss.26(1), 26(2) and 26(5).

Counsel: Robin Q.C. and Clarke appearing for the Appellant Lienor.Muir Q.C. and Sullivan for the Respondent Bank.

Solicitors: G.R. Ryan for the AppellantMorris Fletcher & Cross for the Respondent

Hearing Date:

25 July, 1989.

IN THE SUPREME COURT OF QUEENSLAND No. 3208 of 1987

FULL COURT

BETWEEN:

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED

Plaintiff (Respondent)

AND:

DOUGLAS MORRIS INVESTMENTS PTY. LTD.

First Defendant (Appellant)

AND:

BESSER (QLD.) LIMITED Second Defendant (Respondent)

AND:

PIONEER CONCRETE SERVICES LIMITED

Third Defendant (Respondent)

JUDGMENT - McPHERSON J.

Delivered the 11th day of August, 1989.

On 21 August, 1974 the first defendant executed in favour of the plaintiff Bank four instruments described as scrip liens. Although there are four such instruments it is convenient to speak of them as only one. Each instrument is expressed to be given in consideration of loans made or to be made in favour of K.D. Morris & Sons Pty. Ltd., which was a company engaged in building construction. It is referred to in the scrip lien instrument as the Customer, while the first defendant is referred to as the Lienor. The Customer fell on hard times and was ordered to be wound up on 24 February, 1975. The amount including accrued interest due to the Bank from the Lienor and secured by the scrip lien is said now to exceed $22 million.

The scrip lien is in the form of a charge. It provides that the first defendant as Lienor:—

“doth hereby charge the scrip certificates...described in the Schedule hereto (which the Lienor deposits with the Bank) and the several...shares represented thereby...And also all...shares...substituted therefor or otherwise taking the place thereof and whether issued by way of bonus or otherwise. And all other scrip certificates...and all rights and property which shall under the provisions hereinafter contained from time to time be comprised in and subject to this security (all of which are hereinafter referred to as the ‘mortgaged securities’)...”

Among the shares described in the Schedule were specified shares in a company named Besser Vibrapac Masonry (Queensland) Limited, later Besser (Qld.) Limited. On 23

February, 1987 the third defendant Pioneer Concrete Services Limited made a takeover offer for the issued shares in the Besser company, which included those specified in the Schedule. The offer was successful and the third defendant Pioneer became entitled to acquire the scheduled shares in Besser compulsorily pursuant to s. 42 of the Companies (Acquisition of Shares) (Queensland) Code as shares of a dissenting offeree. The takeover offer provided for the issue of shares in Pioneer as the principal consideration for the shares in Besser compulsorily acquired from the Lienor. To effectuate the acquisition under s. 42 a transfer of the shares in Pioneer has been executed and certificates in respect of those shares have been issued in favour of the Lienor. No doubt those Pioneer shares would in the ordinary course have been delivered to the Lienor; but the Bank gave Pioneer notice of its scrip lien and claimed delivery to it of those shares, or a proportion of them numbering 132,782 in all, together with a small sum in cash representing the consideration for the Besser shares subject to the scrip lien that, were acquired by Pioneer.

The Bank thereupon instituted this action against the Lienor, Besser and Pioneer claiming declarations that the scrip liens are valid; that the Bank is entitled to possession of the 132,782 Pioneer share certificates and cash sum, to be held by it subject to the scrip liens; and that it has an equitable charge over those shares and the share certificates and cash on the terms of the scrip lien instrument. Orders were also sought restraining the Lienor from dealing with the Pioneer shares, and requiring Besser and Pioneer to deliver those certificates and cash to the Bank. The action was heard and determined by Dowsett J., who declared that the scrip liens were effective to charge the 132,782 Pioneer shares and that the plaintiff was entitled to possession of the share certificates in respect of them. He also declared that provisions of the Limitation of Actions Act 1974-1981 (“the Act”), of which the detail will be referred to later, were effective to bar actions under the scrip liens commenced after the expiration of 12

years from the date of demand for any particular balance for the time being owed by the Lienor to the Bank.

This appeal is now brought by the Lienor against that decision. There was also a cross-appeal by the Bank. However, on the representation that the determination of the matter was urgent this Court agreed to hear the appeal ahead of others on the list, leaving the cross-appeal (which is apparently concerned with a question of estoppel) to be resolved by another Court on a later occasion. The appeal accordingly proceeded before us on that basis, Mr Robin Q.C. and Mr Clarke appearing for the appellant Lienor, and Mr Muir Q.C. and Mr Sullivan for the Bank. The second and third defendants took no part in the proceedings at trial or on appeal.

The first point submitted by Mr Robin was that the scrip lien does not extend to the shares, or more particularly the certificates in respect of the shares, in Pioneer issued in favour of the Lienor as the consideration for the Besser shares acquired under the takeover that were subject to the scrip lien. In the court below his Honour rejected that submission. I consider that we should also do so.

I have set out above the relevant terms of the charging clause in the scrip lien instrument. It will be seen that the charge includes both the scrip and the shares themselves described in the Schedule, which are the original shares deposited with the Bank. It also includes all shares “substituted therefor” or “otherwise taking the place thereof”. It is true that the words “and whether issued by way of bonus shares or otherwise” then follow; but those words do not operate to exclude the Pioneer shares in question. Under the takeover acquisition they took the place of the Besser shares, and, although not issued by way of bonus, they were indisputably issued “otherwise”.

It was nevertheless said that, although the Pioneer shares themselves might thus be the subject of the charge,

the scrip or share certificates were not. The charging clause does not expressly refer to them; but it does extend the charge to “all other scrip certificates...which shall under the provisions hereinafter contained from time to time be comprised in this security (‘...the mortgaged securities’)”. The relevant provision “hereinafter contained” is cl.13, which authorises the Bank, whether or not demand for payment has been made, to:—

“take up apply for or otherwise acquire and add to the mortgaged securities all accretions benefits and advantages whatsoever which may...accrue or attach to the mortgaged securities...including...any shares or other property issued in respect of or added to or substituted for or otherwise taking the place of any of the mortgaged securities and whether issued by way of bonus or otherwise.”

Again it was said that while the new shares themselves, considered as choses of action or bundles of rights, might be within cl.13, the scrip or certificates were not. I do not regard this submission as tenable. The clause is concerned with property taking the place of any of the “mortgaged securities”, an expression that is used in the charging clause to include the original Besser scrip. If the scrip for the shares issued in Pioneer is conceived of as distinct from the shares which it represents, that scrip is nevertheless “other property issued” taking the place of the original Besser scrip. The charge created by the scrip lien therefore attaches equally to the scrip or share certificates issued by Pioneer as it does to the shares themselves.

From this I pass to the second point, which is that the Bank's right to the share scrip is statute-barred. This is said to arise from the fact that on 21 March, 1975 the Bank gave written notice to the Lienor demanding payment of amounts due by it to the Bank. In terms of cl.1 of the scrip lien the Lienor undertook to pay on written demand by the Bank the amount or balance owing or unpaid by the Lienor or the Customer to the Bank. By the final sentence of cl.3, it is declared that the Lienor is to be considered

principal debtor to the Bank for the moneys secured by the scrip lien.

It will be necessary later in these reasons to return to these and other provisions of the instrument and to the details of the demand. Before doing so I must refer to the legislation specifying times within which actions like this may be brought. The current statute, which as I have said is the Limitation of Actions Act 1974-1981, contains a number of provisions that appear to have been considered relevant in these proceedings. Section 10(1) provides that actions shall not be brought after the expiration of six years from the date on which the cause of action arose. It applies to various cases, of which that in para. (a) is “an action founded on simple contract...”. Section 10(3) adds that an action on a specialty shall not be brought after the expiration of 12 years from the date on which the cause of action accrued. Finally, s. 26 provides in subs-s.(1) as follows:—

“(1) An action shall not be brought to recover a principal sum of money secured by a mortgage or other charge on property whether real or personal...after the expiration of twelve years from the date on which the right to receive the money accrued”.

According to the reasons for judgment of Dowsett J. the matter proceeded before him on the basis that any limitation period “was that prescribed by s. 10(3) rather than found in s. 26”. I do not know why the parties should have adopted that approach at trial, but we are not bound by it. It is for us to apply the relevant law. In any event, on appeal the appellant relied on s. 26. I am in no doubt that, in an action on the scrip lien to recover the amount due to the Bank, s. 26(1) is the applicable limitation provision to the exclusion of those specified in s. 10(1) and s. 10(3). Both s. 10(3) and s. 26(1) do, in any event, prescribe a 12 year period, but the latter is the specific and therefore governing provision. Cf. Barnes

v. Glenton [1898] 2 Q.B. 223. It has its source in s. 40 of the Real Property Limitation Act 1833; 3 & 4 Will IV, c.27, later re-enacted in England in the Real Property Limitation of 1874. As such it was, in Sutton v. Sutton (1882) 22 Ch.D. 511, held to apply to an action on the personal covenant in a mortgage of land. Section 26(1) of the Queensland Act of 1974 is in substantially the same terms as the provision considered in Sutton v. Sutton except that it and s. 40 of the original Act of 1833 were confined to charges on land. Section 26(1) of the Act of 1974 now extends to a charge on any property “whether real or personal”. It therefore includes within its terms an action brought to recover the principal sum of money secured on shares by a charge like that created by the scrip lien in the present case.

The limitation period for such an action is 12 years “from the date on which the right to receive the money accrued”. The first question to be decided therefore in this case is the date on which that right accrued. Clause 1 of the scrip lien provides, so far as material, as follows:

“1. That the Lienor will on demand in writing pay to the Bank...the amount or balance which shall for the time being be owing or unpaid by the Lienor and for the Customer to the Bank...for or in respect of all loans advances credits or banking accommodation heretofore made created or given by the Bank...or now or which may hereafter be made created or given by the Bank to or for or on account or at the request of the Lienor and/or the Customer or in respect of any indebtedness...including all sums in which the Lienor and/or Customer is or may hereafter become liable immediately or contingently to the Bank...And for interest...and other lawful and accustomed charges...”

It will be seen that what is comprehended by cl.1 is “the amount or balance for the time being owing or unpaid” by the Lienor or Customer to the Bank, and that it is to be

paid by the Lienor “on demand” in writing. According to an affidavit (which appears at p.194 of the record) of a Mr A.D. Pickering, State Manager of the Bank, the Customer maintained two accounts with the Bank. One, which came to be styled the “old” account, was opened in 1952 and was conducted as a current account until 24 February, 1975. The other or “new” account was opened on 14 September, 1974. It became the Customer's trading account. At 24 February, 1975, which was the date on which the Customer company was ordered to be wound up, the total amount owing according to para. 22 of the same affidavit, consisted of a principal sum of $2,864,862.98 and interest of $137,303.94, together with a contingent liability for $512,702.26, which has since crystallised. It is treated in para. 22 as part of the principal, giving a total on that account of $3,377,565.14. A little under a month later the Bank gave to the Lienor the written notice dated 21 March, 1975 demanding immediate payment of all principal and interest moneys specified in the schedule to the notice, being moneys in respect of which the Customer was immediately or contingently liable to the Bank under the scrip liens. The schedule is in two parts that distinguish between the balance and accrued interest as at 19 March, 1975, and moneys contingently owing at that date. Totals are not provided, but according to my calculations the former amounted to some $3,594,120.00 (exclusive of interest) and the latter to $1,565,239.21 (p.407). The latter amount later crystallised at $512,706.26.

On behalf of the Lienor it was submitted that the debt accrued due on 21 March, 1975, when the Bank made its written demand for payment, and that the limitation period commenced to run on that date. The question for decision is whether that was the date on which the right to receive the principal money secured by the scrip lien accrued within the meaning of s. 26(1) of the Act. That depends upon whether the demand was a prerequisite to the right to receive and sue for the money. In an oft-cited passage in Bradford Old Bank v. Sutcliffe [1918] 2 K.B. 833, 848-849, Scrutton L.J. said:

“Generally, a request for the payment of a debt is quite immaterial unless the parties to the contract have stipulated that, it should be, made...Even if the word ‘demand’ is used in the case of a present debt, it is meaningless, and express demand is not necessary, as in the case of a promissory note payable on demand...”

The proposition stated is, as the learned Lord Justice recognized, subject to exceptions. One is where the debt is “not present but to accrue”; as an illustration he mentions the case of a note payable three months after demand (ibid., at 849). A recent example is Esso Petroleum Co. Ltd. v. Alstenbridge Properties Ltd. [1975] 1 W.L.R. 1474, 1483, which concerned accelerated future instalments of principal as to which prior demand was held to be necessary. A second exception, said Scrutton L.J., is where the debt is not a present debt, but a “collateral promise”, such as the promise of a surety to pay on demand if his principal does not : see Re Brown's Estate [1893] 2 Ch. 300. Bradford Old Bank v. Sutcliffe is itself an instance of that kind, in which the promise of a surety to pay “on demand” was said to involve the creditor in proving a real demand before bringing action, “and therefore that the Statute of Limitations did not run till the demand was made” (See [1918] 2 K.B. 833, 849).

A third exception, not mentioned by Scrutton L.J. but established by authority, is the case of a debt due on a running account between banker and customer. Demand by the customer is a necessary ingredient in his cause of action against the banker to recover as money lent the amount standing to his credit on current account : see Joachimson v. Swiss Bank Corporation [1921] 3 K.B. 110. Conversely, as was said by Upjohn L.J. in Lloyds Bank Ltd. v. Margolis [1954] 1 All E.R. 734, 738:

“Where there is the relationship of banker and customer and the banker permits the customer to overdraw on the terms of entering into a legal charge which provides that the money which is then due or is thereafter to become due is to be paid ‘on demand’, that means what it says.”

Acceptance of that view seems to be implicit in what was said by Berwick C.J. with whom Windeyer and Gibbs JJ. agreed, in Bank of Adelaide v. Lorden (1970) 127 C.L.R. 185, 193-195. There the guarantors undertook to pay the Bank on demand “all ‘such advances including all debts now owing or hereinafter to accrue due from’ the customer...and interest on the same respectively until payment” at rates to be fixed and computed in the manner usual in the Bank making half-yearly rests. The expression “advances” was defined in the guarantee to include “all general balances and the ultimate balance arising from time to time of the customer's entire account with the Bank...and all the customer's future indebtedness...and all other liabilities”. Their Honours were unanimous in that case in holding that before written demand was made in April, 1968, there had been no demand for payment of the amount secured by the instrument of guarantee, and accordingly that “no question of the debt having been barred by limitation of time arises” (127 C.L.R. 185, 193).

It seems to me that it is possible to find reasons for saying that one or more of the exceptions, as I have termed them, apply in the present instance. As regards the first, it is true that under the scrip lien the Lienor assumed a primary liability as debtor, and not merely as secondary liability as guarantor. By cl. 1 of the instrument the Lienor undertook to pay the amount owing by the Customer. It did not simply undertake to pay upon default by the Customer. In addition, the last sentence of cl. 3 specifically required the Lienor to be considered principal debtor to the Bank for the moneys intended to be secured. But although in form the obligation to pay is primary, in substance it is a “collateral” liability in the sense in which that term was used by Scrutton L.J. in the passage referred to. See also Lloyds Bank Ltd. v. Margolis [1954] 1 All E.R. 734, 738, and Australasian Conference Association Ltd. v. Mainline Constructions Pty. Ltd. (1978) 144 C.L.R. 335, 347-348. Furthermore, although before 24 February, 1975 the account was a current or a “running” account between banker and customer, thus bringing it within the

third of the exceptions referred to, it ceased to be such when the order to wind up was made on that date. By force of the winding up, the Customer was forced to cease trading; its business was brought to an end; and, as the winding up order records, the liquidators were obliged to open the usual trust account for the purpose of winding up. Thereafter operations on the new account appear to have been confined to recording payments by the Bank under indemnity guarantees given by it; debiting accruing interest, fees and charges; and crediting receipts from various sources, such as the proceeds of insurance policies and the sale of securities. The new account, in short, was transformed from a current account into a realisation account. Even so, I do not consider that these matters dispensed with the need for written demand under cl.1 in order to render the debt, which under that clause the Lienor had agreed to pay on demand, due and payable, or to confer on the Bank the right to receive the principal money, so as to set time running for the purpose of the limitation statute. Where the words “on demand” are used they ought to be given their full effect : see Commercial Union Assurance Co. Ltd. v. Revell [1969] N.Z.L.R. 106, 109. The Bank itself evidently considered it necessary to give formal notice of demand in this case.

Whether written demand on the Lienor was necessary under cl.1 before the indebtedness became payable is, in any event, relevant to deciding whether the limitation period commenced to run only if the Bank can demonstrate that its right to receive the principal money accrued at some later date than 21 March, 1975 when that demand was made. In that regard the Bank relies on the fact that by cl.1 of the scrip lien the Lienor is required to pay “the amount or balance which shall for the time being be owing or unpaid”; and that by cl.7, the Lien is to remain a “continuing” security for due the payment of all the principal interest and other moneys thereby secured and for the time being remaining unpaid. On the authority principally of the decision of the Privy Council in Wright v. New Zealand Farmers Co-Operative Association of

Canterbury Ltd. [1939] A.C. 439, it was said that fresh balances of principal arose as items of interest and fees or charges were debited to the account and capitalised from time to time. A fresh demand made at any time in respect of each succeeding new balance would therefore set time running again and so defeat the Statute of Limitations, notwithstanding that a component of that balance of indebtedness might comprise an amount already statute-barred under an earlier demand. In the court below his Honour appears to have accepted this submission. The question now is whether, as the appellant contends here, that part of his decision is correct.

It is convenient to begin by referring to the terms of cl. 7 of the scrip lien. It was said that it was similar in substance or effect to the instrument considered in Wright's case. However, cl.2 of the document there in question, the terms of which are set out in the report of the case in [1939] A.C. 439, at 447, provided that “That this guarantee shall be a continuing guarantee and shall apply to the balance that is now or may at any time hereafter be owing to you by” the principal debtors, who were two farmers named Nosworthy. Clause 7 of the scrip lien here speaks not of a continuing “guarantee” but of the lien remaining as a continuing “security” for due payment of the indebtedness. Perhaps that is a difference in language rather than effect, for the promise to pay in cl.1 is a security for the debt; but the difference does serve to emphasise the true function of provisions like these. Their purpose is to ensure that the availability of the guarantee or security is not exhausted by or limited to a single transaction or liability but continue to operate even after the initial item of indebtedness has been discharged. See O'Donovan & Phillips : Modern Contract of Guarantee, at 154. Speaking of the word “continuing” in the guarantee in Parr's Banking Company Ltd. v. Yates [1898] 2 Q.B. 460, 466, Rigby L.J. said that its effect was to “extend the guarantee beyond the first sum advanced to sums subsequently advanced, so long as the guarantee continued”.

In the present case, therefore, the contention is that expression “continuing security” in cl.7 makes the lien available to secure not only the first debit balance owing and demanded after execution of the scrip lien but later balances as well. The question remains, however, whether if a further demand is made it will operate to set time running again in respect even of a portion of the debt demanded that is already statute-barred in consequence of the earlier demand. In delivering the advice of the Board in Wright's case Lord Russell of Killowen said that cl. 2 of the guarantee specified how it would operate:—

“namely, that it will apply to (i.e. the guarantor guarantees repayment of) the balance which at any time thereafter is owing by the Nosworthys to the Association. It is difficult to see how effect can be given to this provision except by holding that the repayment of every debit balance is guaranteed as it is constituted from time to time, during the continuance of the guarantee, by the excess of the total debits over the total credits. If that be the true construction of the document, as their Lordships think it is, the number of years which have expired since any individual debit was incurred is immaterial. The question of limitation could only arise in regard to the time which had elapsed since the balance guaranteed and sued for had been constituted”.

On the face of it, that passage might be thought to afford authority for the proposition contended for by respondent in this case; but it is necessary to look rather more closely at the facts on which the decision was based, which is best done in conjunction with the report of Wright v. New Zealand Farmers' Co-Operative Association [1936] N.Z.L.R. 157, in the New Zealand Court of Appeal.

From that report the foiling appears. Wright gave the Association a guarantee in 1909. It was a guarantee by him of payment by the Nosworthys “of all advances already made or hereafter made by you to them together with interest thereon”. By cl.2 the guarantee was, as I have said, expressed to be a continuing guarantee applying to the balance now or hereafter owing by the Nosworthys on their current account for goods supplied and advances made, with

interest and other charges. The guarantee was revocable by notice, and on 25 April, 1931, at a time when £11,816.10.4 was owed, Wright gave notice cancelling his guarantee, whereupon the account was ruled off in the Association books at that date. Thereafter interest was debited half-yearly. The instrument (which was a bill of sale) recording the primary obligation between the Association and the Nosworthys contained provision making the balance of current account payable on demand, and on 31 August, 1934 notice demanding payment of the sum of £11,816.10.4 with interest was served on the Nosworthys. The guarantee did not require demand to be made on the guarantor Wright, and no such demand was made before the Association counterclaimed against him the sum of £11,816.10.4 with interest in an action brought by Wright against the Association. Judgment on the counterclaim was entered for the Association in the sum of £13,384.13.9, which represented the sum demanded together with interest to judgment less a credit on another account allowed by the Association.

Those being the relevant facts, it is necessary to mention that it was only a portion of the counterclaim amounting to some £3,255.0.0 that was in dispute. It represented advances made by the Association to the Nosworthys before 31 July, 1928, which were said to be statute-barred at the date of the counterclaim more than six years later in 1934. It was in the course of rejecting this contention, which would have treated each separate “advance” to, or liability incurred by, the Nosworthys as a distinct item of indebtedness accrued and payable, that Lord Russell stated the propositions to which I have referred. His Lordship was not concerned with the question whether a balance of indebtedness having once accrued due and payable in consequence of demand could be demanded again, so as to set the limitation period running anew. He was concerned only with the question whether the limitation period commenced to run when the advance was made rather than when the balance was demanded. It was in that context that he said the question of limitation could “only arise

in regard to the time which had elapsed since the balance guaranteed and sued for had been constituted”.

One view of the New Zealand case is that the balance had not been “constituted” until notice of demand was served on 31 August, 1934. The whole of the unpaid balance was therefore well within the limitation period of six years from the date of that notice. So it was also if the relevant date was 25 April, 1931, when the account was ruled off in the Association's books and a new account opened. It is not possible to know which of these two dates was selected by their Lordships as the date at which the limitation period commenced to run in that case. They expressly refrained from deciding that question. See Wright's case [1939] A.C. 439, 450. Lord Russell did, however, refer to the decision of the Court of Appeal in Parr's Banking Company v. Yates [1898] 2 Q.B. 460 which had been the subject of extensive consideration by the court in New Zealand.

In Parr's case the facts were that in 1887 the defendant Yates gave to the plaintiff Bank a guarantee to secure the overdraft of its customer McLaren on a current account with the Bank. It was to be a “continuing guarantee”, of due payment of all moneys from time to time owing with interest, commission and other charges, that was not liable to be withdrawn except after six months written notice, and which was subject to an upper limit of £1,000.0.0. At the end of 1890 the debit balance in McLaren's account stood at £3,247.14.50. Thereafter no further advances were made to McLaren by the Bank but he continued to pay sums in reduction of the debt until March, 1897, while the Bank continued to debit half-yearly interest, commission and charges. By 30 June, 1897, which was shortly before the Bank's writ issued against the defendant Yates, the debit balance stood at £1,979.1.6. In the Court of Appeal, it was held that Yates was liable only for interest, commission and other banking charges that had accrued within the period of six years before the action. Vaughan Williams L.J. plainly regarded ([1893] 2 Q.B. 460,

467) the cause of action on the guarantee as having arisen with respect to each item of the account, whether principal, interest, commission or other charges, as that particular item became due and was not paid, with the consequence that the six year limitation period commenced at the date at which each such item was debited. The judgment of A.L. Smith L.J. also treated the principal as irrecoverable because the last “advance” to McLaren had been made more than six years before the writ was issued. See [1898] 2 Q.B. 460, 464-465. It is plain that he did not regard the interest, commission and other charges as “advances” because he held that such of those items as had been debited within six years before action brought were recoverable. Rigby L.J. adopted a similar view ([1898] 2 Q.B. 460, 465-466) holding that the Bank had a right of action in respect of all principal sums advanced before 31 December, 1890, with the consequence that all such sums were statute-barred. It is, as Smith J. pointed out in Wright's case in New Zealand ([1936] N.Z.L.R. 157, 173-175) possible to treat the Law Journal report of his judgment in 67 L.J.Q.B. 857 as supporting a conclusion that the accrual date for the action on the guarantee was 31 December, 1890, which was when the half-yearly balance was struck after the last advance; but that does not accord with the version of his judgment in the authorised reports. On any view of the judgments as reported in the Law Reports, the limitation period was regarded as commencing to run from the date at which each “advance” was made.

It was because of that view of the ratio of Parr's case that, in Wright v. New Zealand Farmer's Co-operative Association [1939] A.C. 439, 449-450, Lord Russell was disposed to leave open the correctness of the decision in that case. He did so because the guarantee in Parr's case was not, as it was in Wright's case, a guarantee of the “balance” from time to time owing by the primary debtors Nosworthy, which, as his Lordship said ([1939] A.C. 439, 450) represented a guarantee of “repayment of each debit balance as constituted from time to time, during the

continuance of the guarantee, by the surplus of the total debits over the total credits”.

What neither Parr nor Wright resolved is what the result would have been if the liability under the guarantee was, as it is here, payable on demand, and if demand for a particular balance had been made at a time that was beyond the limitation period at the date at which action was brought. In my opinion, the result in such a case is that, with respect to the particular indebtedness comprehended by that demand, the limitation period begins to run; and that it cannot be made to commence again by making a fresh demand that incorporates the old indebtedness as a part of the new balance. Quite plainly, time cannot repeatedly be set running again by the simple expedient of making successive demands for precisely the same amount or balance; and I do not see that there is any difference if in a case like this the old balance forms part of the new. I say in “a case like this” because it is one in which the account had ceased to be a current or running account at the time demand was made on 21 March, 1975. Thereafter the only additions to the balance of indebtedness demanded consisted of items of interest fees and charges regularly debited to the account and ultimately capitalised or incorporated in it. The only reductions consisted of the amount credited from proceeds of realisation of assets to which the Bank was entitled as part of its security. Payments made by the Bank pursuant to indemnity guarantees were debited to a separate “Manager” account also secured by the scrip liens.

The result that I have postulated seems to me to be consistent with the thrust of the only two decisions of the High Court in which anything like the same question has been considered. One is Bank of Adelaide v. Loring (1970) 127 C.L.R. 185 previously mentioned. The terms of the relevant obligations have been referred to. The guarantee there involved an undertaking to pay on demand all advances including debts owing or to accrue due from the Customer, the expression “advances” being defined to include all

general balances and the ultimate balance arising from time to time on the Customer's account. In explaining the position in that case, in which there was a monetary upper limit on the amount of the guarantee, Barwick C.J. said (127 C.L.R. 185, 194):—

“In the case of an overdrawn account with a bank secured by personal guarantee, as was the instant case, the bank may close the account in the sense that no further drawing will be met and may in addition demand payment of the account by the customer.”

That was precisely what happened here. In the event that an interval of time elapses between closure of the account and demand, interest accruing in the interval will, his Honour said, be added to the last half-yearly balance, and the surety will be liable to pay so much of that total debt as falls within the limit of the guarantee; but, as his Honour also says (127 C.L.R. 185, 195):—

“It is the amount due by the customer to the bank at the date of the demand which becomes due and payable by the surety subject to any limit of liability fixed by the instrument of guarantee”.

If that is the amount that becomes due and payable by the surety at that date, I do not consider that it will cease to be due and payable simply because at a later date a further demand is made for it together with any additional sum such as interest that has been debited thereafter.

The second decision of the High Court is Commercial Bank of Australia Ltd. v. Colonial Finance Mortgage Investment & Guarantee Corporation Ltd. (1906) 4 C.L.R. 57. In that case the guarantee was to pay all debts now or hereafter to become owing or payable by the debtor corporation to the Bank, subject to a limit of £12,500.0.0, in case the Customer should make default in payment thereof on demand, the guarantee being a continuing guarantee that was to “apply to and secure any ultimate balance that shall remain due to you the said bank”. In December, 1892 a

demand on the debtor corporation for payment of £2,000.00 and another small sum, being part of the debt, was made but not satisfied. Griffith C.J., with whom Barton J. agreed, held that the statute of limitations began to run against the guarantor only in respect of the sum of £2,000.00 and the other smaller sum demanded, and not in respect of the whole of the debt. He said (4 C.L.R. 57, 66):—

“Any other construction would defeat the object of the guarantee, which was that the guarantee should continue until the debit was paid, and would result in what was probably never intended by either party, that a peremptory demand of any part of the debt should give a right of action against the guarantors for payment, not only of that particular sum which the debtor was asked to pay and did not pay, but for the whole amount of the indebtedness, with a consequent obligation on the part of the creditor to enforce his claim within the statutory period, at the risk of losing his right of recourse to the guarantee altogether.”

To my mind that passage shows that his Honour had in mind that a creditor who made demand for payment was at once at risk of suffering his claim to become statute-barred if he failed within the limitation period to bring his action to recover from the guarantor the amount demanded. That would not have been so if it had been possible to make a further demand for the same sum as part of the “ultimate balance” remaining due that had been guaranteed. That conclusion is, I think, strengthened in the present case by the fact that under s. 26(1) the limitation period begins to run from the date on which “the right to receive the money accrued”. That is not something that can readily be considered as happening more than once.

In my opinion, therefore, which in this respect is contrary to that formed by the learned trial judge in his judgment, the effect of the demand on 21 March, 1975 was to set time running under the statute with respect to that portion of the debt of which payment was then demanded. It includes the amounts described in the notice of that date as “balance and accrued interest as at 19/3/75”, being

debts and interest then due, as well as the sums described in the second part of that notice as “moneys contingently owing...amount as at 19/3/75”. According to the notice the latter consisted of two amounts of contingent liability for indemnity guarantees given by the Bank at the request of the Company. The contingent amounts specified in the second part of the schedule to the notice dated 21 March, 1975 presumably represented the maximum sums that might be called up on those indemnity guarantees. In fact, the amounts actually paid out are alleged in para. 10 of the statement of claim to have crystallised at $572,702.26, to which I have referred, of which details are given in” the particulars of that paragraph accompanying the statement of claim. Those particulars show that some 43 such items are alleged to have been paid by the Bank on dates between 25 February, 1975 and 12 October, 1975, and that the total is arrived at after deducting some minor reimbursements made by payees. Of course, If at the time the demand for payment was made by the Bank on 21 March, 1975 an amount claimed under those indemnity guarantees had not, in law become due and owing, it nevertheless remained at that date an amount for which the Lienor and/or Customer “may hereafter-become liable immediately or contingently to the Bank”. It was therefore capable of being demanded pursuant to cl.1 of the scrip lien; but a present liability to pay it under the scrip lien did not arise unless and until it accrued due as a debt presently due and owing, which was the date at which the Bank paid the creditor of the Customer pursuant to the indemnity guarantee given by the Bank. At that moment it became payable as a debt that had earlier been demanded pursuant to the notice of 21 March, 1975. It was therefore on the dates of those payments, which are evidently the dates specified in the particulars to para. 10 of the statement of claim, that the limitation period began to run in respect of each of those items of indebtedness.

The final question on this branch of the appeal concerns the operation, if any, of the statutory limitation period in respect of amounts of interest accruing after notice of demand on 21 March, 1975. Under cl. 2 of the

scrip lien interest is to be considered as accruing from day to day and to be payable on demand “but until demanded shall be payable half yearly on the usual half yearly days for balancing the books of the Bank from time to time”. Interest remaining unpaid on any such half yearly day of payment may together with all customary charges “be turned into principal and shall thenceforth be deemed part of the principal money intended to be secured and carry interest...”. In such circumstances, according to what was said in Bank of Adelaide v. Lorden, interest accruing at the date of demand will continue to run on the balance of the account and continue to be compounded on half yearly rests. Interest accruing daily but not compounded before demand/will, upon demand being made, be added to the principal; interest accruing thereafter will be compounded and so “turned into principal” at succeeding half yearly intervals. The notice on 21 March, 1975 demanded “all the principal and interest set forth in the First Schedule”, which in turn includes a specification of the “daily interest accrual rate” in respect of the debts therein mentioned. Future interest, as it accrued from day to day, was therefore part of what was demanded by the Bank.

The question whether interest accruing on amounts of principal statute-barred in consequence of demand on 21 March, 1975 is itself statute-barred is, like some other questions in this case, on one view not without difficulty. It was said to depend upon factors such as whether interest was to be paid for separately or was simply “accessory” to principal. If the latter, it was submitted that it fell with the principal moneys, in the sense that the claim to interest was barred if the right to recover principal had been lost by effluxion of time. In that context reference was male by the appellant Lienor to Hollis v. Palmer (1836) 2 Bing. (N.C.) 713, 716-717; 132 E.R. 274, 276, and Weigall v. Gaston (1877) 3 V.L.R. (L) 98; and by the respondent Bank to Parr's Banking Company Limited v. Yates [1898] 2 Q.B. 460, and Re Otway Coal Col. [1953] V.L.R. 557, 565. Both sides invoked Commercial Bank of Australia Ltd. v. Colonial Fiance Mortgage etc. Corporation (1906) 4 C.L.R.

57 in support of their opposing contentions. It was also suggested that the question fell. to be resolved according to whether liabilities guaranteed under the scrip lien could properly be considered to be a debt due on a deed under seal or specialty attracting the longer limitation period of 12 years prescribed in s. 10(3); or merely a simple debt attracting the six year period under s. 10(1). That was a question that Dowsett J. declined to decide at the trial, taking the view that it was a matter that the appellant Lienor had failed to raise by its pleadings.

In my respectful opinion, however, this aspect of the appeal is not governed by any of the authorities or of the statutory provisions referred to, but solely by the terms of s. 26(5) of the Act of 1974. So far as material its provisions are as follows:—

“(5) An action to recover arrears of interest payable in respect of a sum of money secured by a mortgage or other charge...shall not be brought after the expiration of six years from the date on which the interest became due.”

The subsection does not, it is true, specifically refer as does s. 26(1) to a charge on property “whether real or personal”. Its terms are nevertheless quite general and as such are applicable to an action to recover interest payable in respect of money secured by a charge over property of any kind. If there were any doubt that its provisions are intended to apply to arrears of interest on principal charged on personal property, it is put to rest by para. (b) if the proviso to s. 26(5), which is specifically directed to the case of a charge comprising a life assurance policy, which is of course a form of personal property. Previously there was no specifically prescribed period of limitation applicable to recovery of interest under a mortgage of personalty, as there was in the case of a charge on land : see Mellersh v. Brown (1889) 25 Q.B.D. 225.

It follows, in my view, that s. 26(5) is the governing provision for determining the appropriate limitation period

in respect of interest payable on the principal secured by the scrip lien in the present case. Action to recover that interest may therefore not be brought after the expiration of six years from the date on which it became due, which was at latest on the half-yearly days on which it became payable in accordance with para. 2 of the scrip lien. See Bank of Adelaide v. Lorden, above. It follows that s. 26(5) operates to preclude recovery of amounts of interest six years after each half-yearly instalment of interest fell to be capitalised with unpaid principal owing to the Bank. Since interest has been accruing daily, the right to recover arrears of interest; is progressively becoming, and has been becoming, statute-barred throughout the period elapsing since 21 March, 1975 when it was demanded.

If amounts of principal and interest due to the Bank under the scrip lien have become statute-barred, the next question is what, if any, effect this has on the Bank's charge over or in respect of the Pioneer shares and share certificates subject to the scrip lien. The answer is, I consider, that it has no effect. The charge created by the lien operated to vest in the Bank an equitable proprietary interest in those shares. The barring of proceedings to recover the debt which the charge was intended to secure does not touch that interest. Few rules were better settled than that under the original Statute of Limitations, which was the Act of 1623; 21 Jac.I., c.16, it was the remedy only that was lost and not the right. In the case of a debt, that meant that an action could not be brought to recover it; but the debt itself was not extinguished. In Courtenay v. Williams (1844) 3 Hare 539, 552; 67 E.R. 494, 552; affirmed (1846) 15 L.J.Ch. 204, Wigram V.-C. said that “the Statute of Limitations that governs the present case is the 21 Jac.I., c.16, which takes away the remedy against the debtor unless the action be brought within six years after the cause of action arose; but it leaves the right untouched...”. See also Re Rownson; Field v. White (1885) 29 Ch.D. 358, 364, per Bowen L.J. Because the debt remained, the proprietary interest of a mortgagee under a mortgage of the property survived. Hence it was possible to

have a case “in which the personal remedy was barred, but not the remedy against the land”. See Barnes v. Glinton [1899] 1 Q.B. 885, 890, per Romer L.J. The same result follows in the case of provisions like those in s. 10 of the Act of 1974, which are introduced by the words “action shall not be brought...”. See Jones v. Bellgrove Properties Ltd. [1949] 2 K.B. 720, 724. The introductory words of s. 26(1) are the same. They do no more than proscribe the bringing of an action to recover the money.

Following the passage in Courtenay v. Williams referred to, Wigram V.-C. went on to observe that the old Statute of Limitations differed from the more recent Statutes of Limitations “by which the right as well as the remedy is barred”. His Honour was referring principally to the Real Property Limitation Act 1833, 3 & 4 Will. IV, c.27, containing various provisions whose effects to extinguish the right and not merely to bar the remedy. For present purposes its most notable provisions were that an action to recover land should be brought within 20 years after accrual of the right : s. 2; and that at the determination of that period the right and title to the land was to be extinguished : s. 34. Section 24 extended those provisions to a suit in equity to recover the land. The result was that after 1833 it was possible for the proprietary interest of a mortgagee under a mortgage of land to be extinguished by effluxion of time, and that was so whether the mortgage subsisted at law or only in equity, Hence, in Kemp v. Douglas (1875) 1 V.L.R. (Eq.) 92 and Barnet v. Williams (1889) 15 V.L.R. 205, it was held that all the interest of an equitable mortgagee by deposit of title deeds to land under or being brought under the Torrens system was extinguished and his right to recover the land was destroyed after the requisite period of limitation had run.

Mr Robin Q.C. on behalf of the appellant Lienor relied on those decisions, which were cited with approval by Cussen J. in the Full Court in National Bank of Tasmania Ltd. v. McKenzie [1920] V.L.R. 411, 420; but they turned on

statutory provisions identical to those of the Real Property Limitations Act 1833. Those provisions applied only to land and mortgages of land, and had nothing to say about mortgages of or charges over personalty. To the latter there were no applicably relevant limitation provisions at the time when Stirling J. was called upon to decide a question involving a security similar to this in London & Midland Bank v. Mitchell [1899] 2 Ch. 161. In that case the plaintiff Bank brought proceedings to enforce by foreclosure or sale what was described as an equitable mortgage of shares in a company effected by a deposit of the share certificates accompanied by signed transfers in blank. Accepting that an action for foreclosure was an action for recovery of the mortgaged property, Stirling J. held that the plaintiff was nevertheless entitled to relief by way of foreclosure. He said that the deposit of shares constituted an equitable assignment of them, and ([1897] 2 Ch. 161, 166):—

“The plaintiffs have, therefore, acquired in equity an interest in these shares in the nature of property. Though the debt is barred in the sense that a personal action can no longer be brought to recover it, the debt is not gone; nor is the right or property destroyed, for there is no provision in any Statute of Limitations with reference to personal property similar to that contained in 3 & 4 Will, 4, c.27, s. 34, whereby the title to land is extinguished after a certain period. If, then, the property of the plaintiffs still exists, I fail to see what there is to deprive them of the rights attached to such property.”

The correctness of that decision was accepted by Cozens-Hardy M.R. in Stubbs v. Slater [1910] 1 Ch. 632, 639, and in Weld v. Petre [1929] 1 Ch. 33, 50. If, therefore, it is still good law, it would determine this case in favour of the Bank.

Mr Robin Q.C. submits that it is no longer good law, having as he says been displaced by the provisions of s. 26(2) of Limitation of Actions Act 1974, which were not in

force at the time of the London & Midland Bank v. Mitchell. They are as follows:—

(2) A foreclosure action in respect of mortgaged personal property shall not be brought after the expiration of twelve years from the date on which the right to foreclosure accrued; but if after that date the mortgagee was in possession of the mortgaged property, the right to foreclose on the property that was in his possession shall, for the purposes of this subsection, be deemed not to have accrued until the date on which his possession discontinued.”

Those provisions are identical to the provisions of s. 18(2) of the English Limitation Act 1939, from which they are taken. So far as s. 26(1) is concerned, if the Bank's right to receive the principal money under the scrip lien accrued at the time of the written demand on 21 March, 1975, then an action may not be brought by the Bank to recover that money. But with respect to this aspect of the case, that is not what the Bank is seeking to do here. It is suing for a declaration that it is entitled to a charge over the Pioneer shares and scrip, and to possession of that scrip. The action is not in form a foreclosure action within the terms of s. 26(2); although Mr Robin initially submitted that is what it really is. Of course, if the substance of the action is foreclosure, the fact that it is disguised as something else will not save it from s. 26(2). See Hogg v. Scott [1947] K.B. 759, 767. Hence, it has been said to be not possible to evade the operation of the limitation provisions governing actions to recover land by framing the claim as one for a declaration as to title to land. See Vandeleur v. Sloane [1919] 1 Ir.R. 116, 119, and other cases cited and contrasted by Young : Declaratory Relief, 2nd ed., para. 2405, at 215.

Accepting that to be so for present purposes, I do not consider that the present action is a “foreclosure action” within the meaning of s. 26(2) of the Act. A foreclosure action is one that sets out to extinguish the mortgagor's title to the mortgaged property. It does so by an order nisi calling upon the mortgagor to redeem the mortgage

within a specified time, “or stand absolutely debarred and foreclosed of and from all right, title interest and equity of redemption of in and to” the mortgaged property. See Stevens v. Hoberg [1951] Q.W.N. 44. That was a case involving a mortgage of land under the Real Property Acts, where there is, as there was here, no transfer of the legal title to the mortgaged property as there is in the case of a legal mortgage of old system land, but merely a charge on the property by way of security for debt owing. The report of the proceedings in Stevens v. Hoberg (No. 2) [1952] Q.W.N. 13, and of Walker & Mackenzie v. Sacks (1899) appended as a note thereto, show that, because of that difference, a vesting order may also be necessary to transfer title to land from the registered proprietor to the mortgagee. In the present case even that might not be necessary because cl.21 of the scrip lien contains a provision conferring on the Bank an irrevocable power of attorney enabling it to sign “such transfer as shall be necessary or proper for the purpose of vesting the mortgaged securities...in the Bank...or any purchaser from the Bank...”.

It is not necessary to say more about this aspect because it is quite plain that neither in form nor substance is the present action one for foreclosure of the Lienor's interest in the Pioneer shares or scrip. Even the appellant's written submissions in reply accept that it is “probably not a foreclosure action”. The Lienor is not being called upon to pay anything in order to retain its equity of redemption in the shares. The plaintiff Bank is not seeking to have its name and title substituted for that of the Lienor in the Pioneer share register in respect of the 132,782 shares. It simply asks for a declaration that it is entitled under the lien to possession of those shares and share certificates or scrip; that by the terms of the scrip lien instrument it has an equitable charge over those shares, the share certificates and the small amount of cash involved; and consequential orders for their delivery and to restrain the defendant Lienor from dealing with them. That is the sole effect of the judgment obtained by the

Bank. If before action and judgment the Lienor was the owner in law of those shares and scrip subject only to the Bank's equitable charge, it is after judgment in the action in precisely the same position. It continues to own the legal title to the shares, in that respect Pioneer's share register and the Lienor's equity of redemption in those shares and scrip remain as they were before. It does not stand absolutely debarred and foreclosed of either its title or its equity of redemption to or in the shares. After final judgment in this action it can, if it wishes and is financially able to do so, redeem the shares by tendering the amount owing to the Bank. As to that, it may be added that, in the appellants' written submissions in reply reference is made to the decision of the Court of Appeal in Park v. Brady [1976] 2 N.S.W.L.R. 329, reversing that of Helsham J. in Park v. Brady [1976] 1 N.S.W.L.R. 119. It concerned an action to redeem what in that case was a legal mortgage of company shares, to which the defendant pleaded s. 41(a) of the Limitation Act 1969 (N.S.W.). Section 41(a) prescribes a limitation period for redemption actions, of which there is no precise analogue in the Queensland Act : cf. s. 20. It is of interest here only for the light it throws on the meaning of the expression “mortgagee...in possession of the mortgaged property” in s. 26(2); but that portion of s. 26(2), which concerns postponement of the right to foreclose, was not relied upon in this case, and appears to have no relevance to the present dispute.

The action here claiming the Pioneer scrip is therefore, according to any view of it, not “a foreclosure action” within the meaning of s. 26(2). It is more akin to an action for recovery of possession, or for specific performance of an agreement that the Bank shall have possession. Of course a foreclosure action may result in the plaintiff mortgagee obtaining possession of the mortgaged land because delivery of possession is a form of relief commonly sought in such cases if the mortgagee is not already in possession. Despite the well-known distinction between delivery and recovery of possession of

land (see Metropolitan Building Society v. McClymont [1983] 1 Qd.R. 160), an action for the foreclosure of land has, for the purpose of the limitation statutes, been held to be an action for recovery of land. See Health v. Pugh (1881) 6 Q.B.D. 345; (1882) 7 App.Cas. 235; Harlock v. Ashbury (1882) 19 Ch.D. 539; London & Midland Bank v. Mitchell [1899] 2 Ch. 161, 164.

It would confound elementary rules of logic to say that the converse applies, viz. that therefore an action for recovery of land is an action for foreclosure within s. 26(2). The Act contains specific provision with respect to limitation of actions to recover land : see s. 13. The period is 20 years from accrual of the right of action. By virtue of an express provision in sub-s.(4) of s. 26 it is not that section but the provisions of the Act with respect to an action to recover land, that apply to a foreclosure action in respect of mortgaged land. The dominant provisions is therefore s. 13. There is nothing corresponding to s. 26 (4) or s. 13 in the case of mortgaged personal property. It was said that equity nevertheless applied the statutory limitation period by way of analogy. Reference was made to s. 10 which, after specifying the limitation periods for actions to recover debts, damages, etc., goes on in sub-s.(6)(b) to declare that the section does not apply to a claim for specific performance of a contract, or for an injunction “or other equitable relief”, save so far as any provision thereof “may be applied by analogy in the same manner” as the corresponding repealed enactment previously applied. It is true that at least in respect of actions to enforce debts, and some other forms of relief, courts of equity used to apply the old Statute of Limitations by analogy; cf. Mellersh v. Brown (1889) 25 Ch.D. 225, 229. The Statute spoke of “actions” to recover debts but was applied by analogy to proceedings in Chancery, which were “suits” begun by bill of complaint. The analogy stopped there. In Mellersh v. Brown (1890) 25 Ch.D. 225, 229, Kay J. refused to apply the analogy of s. 42 of the Act of 1833, limiting the interest recoverable in the case of a charge on land,

to a claim for interest on foreclosure of an assignment by way of mortgage of an equitable interest under a trust of personalty. He refused to do so because “if the Legislature has enacted that there shall be that limit with regard to real estate, and has not so enacted with regard to personal estate on what general ground am I to follow that analogy?” He added that he had “never heard that a court of equity is under any obligation to follow, as regards personal estate, the analogy of a statute which applied to real estate”. See also Weld v. Petre [1929] 1 Ch. 33, 49-50. It is clear from the ensuing passages in his Lordships's judgment that he considered the express provisions of the enactment with respect to one to be an indication of intention to exclude the other. In like manner, so do I here. Section 26(4) expressly applied the limitation provisions with respect to recovery of land to an action in respect of mortgaged land. There is no corresponding provision in the case of an action with respect to mortgaged personal property. If the provisions with respect to recovery of mortgaged land could have been applied by analogy to recovery of mortgaged personalty, I expect they would have been so applied in London & Midland Bank v. Mitchell; but they were not. See also Weld v. Petre, above.

In my opinion the decision in London & Midland Bank v. Mitchell still occupies the field except in so far as its effect has been displaced by s. 26(2) of the Act. I have already held that subsection to be inapplicable to the present action. As a final throw, Mr Robin then turned to the statement of Cave J. in Re Hepburn, ex p. Smith (1884) 14 Q.B.D. 394, 399, that there is in law “no right without a remedy; and, if all remedies for enforcing a right are gone, the right has in point of law ceased to exist”. Cave J. went on to add that another remedy, not by action against the debtor, might exist arising out of the possession of property of the debtor which may by law or contract be detained by the creditor until the debt is paid. This was said to mean that the Bank can succeed in the present case only if, “by means of a lien or other lawful means”, it can pay itself “without resorting to an

action against the person of the debtor” : Courtenay v. Williams (1844) 3 Hare 539, 552. But neither statement is authority for a general proposition that a creditor with security for a statute-barred debt is unable to enforce that security, unless he is able to realise it without assistance from the courts. The limitation legislation does not function in that way. Its operation depends upon the particular terms of individual provisions. Some of them do no more than inhibit the bringing of certain designated actions. Others expressly extinguish the underlying right. Most of them do not. Outside their prescribed field of operation, they do not apply at all. The Bank is therefore entitled to claim the assistance of the courts in any way not denied to it by particular provisions of the Act, such as s. 26(1) (action to recover money secured by mortgage or charge on property); s. 26(2) (action to foreclose mortgaged personal property); s. 26(5) (action to recover interest).

Foreclosure is a remedy available to a mortgagee of company shares : see Harrold v. Plenty [1901] 2 Ch. 314, in which a deposit of shares as security for a debt was treated as an equitable mortgage. London & Midland Bank v. Mitchell is another such instance, although there, as I have mentioned, the deposit was accompanied by signed transfers in blank. For Professor E.I. Sykes, the critical feature of an equitable mortgage is the existence of an agreement to give a mortgage, which is absent in the case of an equitable charge. See Sykes : Law of Securities, 4th ed., at 193-194. The right to foreclosure, he says, is distinctive of the former but not the latter : ibid. If foreclosure is not available to the holder of a mere equitable charge, then that is a further reason for holding that the Bank's action in the present case is not barred by s. 26(2) of the Act. The scrip lien affects to be nothing more than a charge in favour of the Bank and of the shares and scrip that are subject to it. It does not in terms embody an agreement to give a mortgage. Foreclosure is, in any event, not the only remedy available under an equitable mortgage or charge of shares in a company effected by

deposit of scrip. Under s. 83(1) of the Property Law Act 1974-1986, read with s. 77(1)(c) and the definition of “mortgage” in s. 4(1), a power of sale is now implied by statute. The Act was not in force at the time the scrip liens were executed; but, apart from those statutory provisions, there is also under the general law an implied power of sale on default under an equitable mortgage or charge of company shares involving deposit of scrip. See Deverges v. Sandeman [1902] 1 Ch. 579; Stubbs v. Slater [1910] 1 Ch. 632, 639; cf. also Re Otway Coal Co. Ltd. [1953] V.L.R. 557, 568. In any event, the scrip lien itself contains in cl.8 an express power of sale.

The Bank therefore has a power of sale that it can on default exercise without resorting to the court. Under the power of attorney conferred by cl.21 of the scrip lien it can perfect its title by executing a transfer of the shares to itself or to any purchaser from the Bank. The Limitation of Actions Act 1974 presents no obstacle to its doing so. How, therefore, could the Lienor or Pioneer resist a claim by the Bank for delivery to it of the subject share scrip, whether before or after registration of a transfer executed under power of attorney of those shares in favour of the Bank or its purchaser? The Lienor retains legal title to the shares and its equity of redemption in them. Subject to that, it holds its rights on trust for the Bank as equitable chargee and owner in equity of the shares : cf. Re Otway Coal Co. Ltd. [1953] V.L.R. 557, 571. If the share scrip came into the possession of the Lienor, it would, so long as the charge subsisted, hold that scrip on trust for the Bank. As it is, the scrip remains in the possession of Pioneer, which claims no right or interest in it but holds for the person entitled, whoever that may be. Its position is not in any material respect distinguishable from that of the assignee of a reversionary interest in personalty considered by Re Hancock (1888) 57 L.J. Ch. 793. Kay J. there said:—

“But then it is said - or at least this is the only way which the argument could possibly be put, as it seems to me - the debt to secure which this assignment was made is

barred, or rather the right to sue to recover the debt is barred; and that, therefore, the mortgagor has some right to recover back the shares he has assigned. Is that so? For example, let us try it by the most concrete instance one can put. Suppose the assignee of this reversionary interest in personal property had commenced an action against the trustees, claiming to have the share handed over to him. Of course, he need not make the assignor a party. He has nothing to do but prove his assignment, and the trustees would have had no answer whatever; they must have handed it over. Then could the mortgagor have maintained successfully a suit to prevent their handing it over? On what ground? Suppose he had brought an action, saying, ‘True, I did assign this; true, the reversion fell in so lately as October, 1887; but I seek to restrain the trustees from handing over the reversion to my assignee, because I say that the debt to secure which I made the assignment is barred’. What Statute of Limitations, or any other statute, would enable him to maintain an action like that? There is no Statute of Limitations which destroys the debt. The Statute of Limitations only destroys the remedy of the creditor. The creditor could not sue the mortgagor upon the covenant, because he would be met by the Statute of Limitations which bars the action. The mortgagee says, ‘I do not want to sue anybody; all I want is to have this mortgaged property, which is mine, handed over to me’ How it can be kept from him, I cannot conceive.”

This passage was referred to in London & Midland Bank v. Mitchell [1899] 2 Ch. 161, 167-168, and applied by Stirling J. to the case before him of an equitable mortgage of company shares. “How”, asked the learned judge rhetorically, “could a mortgagor interfere to prevent the holder of the fund from handing over the property to the mortgagee?” For precisely the same reasons here, the Lienor cannot interfere with the Bank's right to recover the Pioneer scrip from Pioneer, or prevent that company from delivering the scrip to the Bank.

The final matter for consideration is the respondent's contention that if the indebtedness to the Bank or the Bank's rights under the security of the lien had become statute-barred, whether wholly or in part, the Lienor had acknowledged the lien or its indebtedness in the notes to

its financial statements for the years ending June 30, 1981 and June 30, 1982. Extracts from those statements were admitted at the trial as ex.9. The subject matter of the claim in this action is referred to in those notes under the heading “Investments”, where reference is made to some 106,455 ordinary shares in Besser (Qld.) Ltd. the market value of which is recorded. The total of this and other investments is followed by “provision for diminution”, which is explained to be necessary for two reasons. One is that no amount is expected to be received on the liquidation of Keith Morris Constructions Ltd.; the other is as follows:

“(b) Scrip lien to secure debts of associated company -

The company has undertaken to guarantee the indebtedness of an associated company to the company's bankers. As such, the bank has taken a lien over all of the above investments excluding 4,310 shares and 23,600 notes held in Besser (Qld.) Ltd.). It is expected that this guarantee will need to be met in full, and accordingly, provision has been made to reduce these investments to nil value.”

A similar statement appears in the notes to the 1981 accounts.

The question is whether this is capable of being considered an “acknowledgment” for the purpose of s. 35 of the Act. Subsections (1) and (3), which are the only provisions of any possible relevance for this purpose, are as follows:—

“35. Fresh accrual of action on acknowledgement or part payment.

(1) Where there has accrued a right of action (including a foreclosure action) to recover land or a right of a mortgagee of personal property to bring a foreclosure action in respect of the property, and -

(a) the person in possession of the land or personal property acknowledges the title of the person to whom the right of action has accrued; or

(b) in the case of a foreclosure or other action by a mortgagee, the person in possession referred to in subparagraph (a) or the person liable for the mortgage debt makes any payment in respect thereof, whether of principal or interest,

the right shall be deemed to have accrued on and not before the date of the acknowledgment or payment.

(3) Where a right of action has accrued to recover a debt or other liquidated pecuniary claim, or a claim to the personal estate of a deceased person or to a share or interest therein and the person liable or accountable therefor acknowledges the claim or makes a payment in respect thereof, the right shall be deemed to have accrued on and not before the date of the acknowledgement or the last payment.

Notwithstanding subsection (1), a payment of a part of the rent or interest due at any time shall not extend the period for claiming the remainder then due, but a payment of interest shall be treated as a payment in respect of the principal debt.”

Section 35(1) operates where “a right of a mortgagee of personal property to bring a foreclosure action in respect of the property” has accrued. As I have mentioned, Mr Robin Q.C. in his written submissions in reply on the appeal conceded that the present action was “probably not” a foreclosure action. I agree that it is not such an action. But the operation of s. 35(1) is not in terms made to depend on the bringing of such an action but upon the accrual of the right to bring the action. Once such a right of action has accrued, then in the circumstances specified in paragraphs (1a) and (b) of s. 35(1) the right of action is deemed to have accrued on and not before the date of the acknowledgement or payment respectively referred to in those two paragraphs.

Paragraph (a) speaks of an acknowledgment of the title of the person in possession of the personal property. Subject to other matters to be discussed, note (b) to the financial statement seems to me fairly capable of being considered to be or to embody an acknowledgement of the

title of the company's (i.e. the Customer's) bankers, who are the plaintiff Bank in this case, to the charge or lien over the investments referred to, which include the Besser shares in dispute here. The fact that a foreclosure action has not been brought by the Bank does not alter this conclusion because the right to bring such an action has accrued even if it has not in fact been brought by the Bank. What, however, is required by s. 35(1)(a) is an acknowledgement of title by the person “in possession of the...personal property”, and I do not think that this requirement is satisfied. At the date of the two sets of financial statements for 1980/1981 and 1981/1982 the Pioneer takeover had not occurred, and the Besser shares were not in possession of the Lienor but of the Bank. Any acknowledgement, if that is what it is, of the title to the mortgagee Bank therefore emanated from a person that was not in possession of the mortgaged personal property, and so does not satisfy that requirement of s. 35(1)(a).

Turning to s. 35(1)(b), what is required, “in the case of a foreclosure or other action by a mortgagee”, is that there be a payment in respect of the mortgaged debt by either the person in possession referred to in s. 35(1)(a) or by the person liable for that debt. I have already disposed of the suggestion that the Lienor was in possession of the mortgaged property in 1980/1981 or 1981/1982. As to payment, it is not suggested that the Lienor itself has made any payment on account of its liability for the mortgaged debt. Any payments made on that account have resulted from realisation of securities held by the Bank.

It follows that the Bank is not entitled to rely upon any acknowledgment comprised in the notes to those financial statements. For the reasons stated it does not satisfy the requirements of s. 35(1) of the Act. This relieves me of the need to consider whether the notes, or the acknowledgement they are said to contain, satisfy the provisions of s. 36 as having been “made to” the person whose title is being acknowledged or to whom the payment is

being made. As to that, I will say no more than that the evidence does not disclose how ex.9 came into the possession of the Bank, whether by delivery to it by the Lienor or otherwise : cf. The Stage Clubs Ltd. v. Millers Hotels Pty. Ltd. (1981) 150 C.L.R. 535.

It is I think convenient to make some attempt to summarise the effect of the conclusions reached in what has turned out to be lengthy reasons for judgment. First, I consider that the plaintiff Bank's scrip liens dated 21 August, 1974 are effective to charge the Besser shares in favour of the plaintiff Bank to secure payment of the amount or balance owing and unpaid by the first defendant Customer. Accordingly I would not disturb the declaration numbered (1) in the formal judgment in this case. It is true it refers to “the amount or balance...for the time being owing and unpaid...as particularised in paragraphs 1 and 2 of the scrip liens”. The real issue is the meaning of the “amount or balance” therein referred to; but, although it may not do much good, it can likewise do no harm to make a declaration in that form, which simply refers the reader back to those paragraphs of the scrip liens.

Secondly, I consider that those scrip liens are effective to charge both the shares in Pioneer and the small cash consideration paid or payable in consequence of the takeover in 1987. The declaration in paragraph (2) of the formal judgment should therefore stand. It does not in terms refer to the Pioneer scrip itself, but that I think is sufficiently comprehended by paragraph (4) of the formal judgment, to be mentioned hereafter.

On the other hand, I consider the relevant limitation period for the purpose of recovering amounts of principal under the scrip liens to be that prescribed in s. 26(1) of the Act; and further that the relevant limitation period of 12 years in the case of sums due and owing commenced to run from the date of the Bank's written notice of demand on 21 March, 1975; or, in the case of contingent sums under indemnity guarantees from the Bank, on the dates

particularised under para. 10 of the statement of claim on which the Bank paid them. In the case of interest on amounts of unpaid principal due and owing, the relevant period is that prescribed by s. 26(5), being the half-yearly days on which interest became payable in terms of cl.2 of the scrip lien. In so far as paragraph (3) of the formal judgment is concerned I would therefore allow the appeal and set aside the declaration contained in paragraph (3) and substitute the following:—

“(3) Declare that

(a) Section 26(1) of the Limitation Act 1974-1981 is effective to bar an action to recover a principal sum payment of which was demanded by the plaintiff by written notice dated 21 March, 1975:

(i) in the case of a principal sum then due and owing, at the expiration of 12 years after the date of that demand;

(ii) in the case of a principal amount then only contingently due, at the expiration of 12 years from the dates specified in the particulars to paragraph 10 of the statement of claim as the dates on which those amounts were paid by the bank.

(b) section 26(5) of the Act is effective to bar an action to recover arrears of interest in respect of the said principal sum of money commenced after the expiration of six years from the half-yearly day on which that interest became payable on principal in terms of cl.2 of the scrip lien.

I recognize that declarations in this form for the most part simply represent a repetition of the words of the relevant subsection of the Act. However, that is a consequence of the plaintiff's election in this case to cast the relief sought in the form of a declaration instead of a claim for a specific money sum or sums. The course of proceeding chosen in this action is one that in my view is

to be deprecated; but, since the dispute seems to have concerned principally the selection of the appropriate limitation period, and its commencing date, a declaration in the form proposed here may not be altogether without utility to the parties.

Finally, it follows from the declarations in paragraphs (1) and (2) of the formal judgment, which are affirmed on this appeal, and from the reasons given here, that the plaintiff is entitled to possession of the share scrip relating to the Pioneer shares. Paragraph (4) of the formal judgment ought therefore not to be disturbed. The other orders in the formal judgment are for the most part consequential upon those referred to and should not be disturbed.

As to the costs of appeal, the appellant Lienor has failed with respect the questions whether the scrip liens were and are effective to charge the Pioneer shares and scrip and whether the Bank is entitled to possession of the scrip. It has, however, succeeded with respect to the question whether a claim to recover the principal money and interest secured by the liens are statute-barred, and with respect to the date from which, for that purpose, time begins to run under the Act. In these circumstances a fair result would be to make no order as to costs of appeal in favour of either side.

No question can in my view arise of a certificate under the Appeal Costs Fund for the reason that the appellant has succeeded in reliance upon s. 26 as the applicable limitation period, which was evidently not the basis on which the matter was litigated before the learned trial judge.

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