High Court of Australia Gibbs, Stephen, Mason, Jacobs and Murphy JJ. Australia & New Zealand Banking Group Ltd v National Mutual Life Nominees Ltd [1977] HCA 42 ORDER Appeal allowed. Order of the Supreme Court of Victoria varied by substituting for the questions and answers set forth in paragraph D thereof the following questions and answers. D. Question 1. Did the Society issue to the defendant Australia and New Zealand Banking Group Limited documents expressed thereon to be Debenture Stock Certificates as follows:— (i) Certificates Nos. 1 to 15, each dated 9th April, 1975, each in the nominal amount of $100,000 Debenture Stock issued by way of security? Answer: Yes. (ii) Certificates Nos. 21 to 25, each dated 9th April 1975, each in the nominal amount of $100,000 Debenture Stock issued by way of security? Answer: Yes. Question 2. (i) (ii) If either part of Question 1 be answered Yes, is Australia and New Zealand Banking Group Limited the holder of valid Debenture Stock under the Trust Deed, as described in each such Certificate? Not answered. Question 3. (i) (ii) Did the issue of each such Certificate alone or in conjunction with the transaction of which it formed part, confer on Australia and New Zealand Banking Group Limited any and what rights by way of security over any and what assets of the Society to secure payment by the Society to Australia and New Zealand Banking Group Limited of any and what sums? Answer: Yes, the rights of a holder of security stock represented by the Certificates referred to in Question 1 subject to the interest in the mortgaged property of stockholders whose interests were created earlier in point of time unless the Trustee shall waive all breaches by the Society in its issuing of the said security stock of any of the covenants, obligations, conditions or provisions contained in the Trust Deed. Question 4. (i) (ii) If either part of Question 1 be answered, Yes, is the defendant Australia and New Zealand Banking Group Limited a secured creditor of the Society in respect of any and what sums by way of interest, under or pursuant to or in connection with the issue to the said Bank of the said documents. Answer: Australia and New Zealand Banking Group Limited is a secured creditor of the Society in respect of interest accrued and accruing on debts owing by the Society to Australia and New Zealand Banking Group Limited in terms of the contracts between the Society and Australia and New Zealand Banking Group Limited provided that the mortgaged property as defined by the Trust Deed is sufficient to pay in full the moneys secured by the Trust Deed and provided that the total sum owing on the principal sum of Debenture Stock does not exceed $3.5 million and provided that the total sum for principal and interest does not exceed the face value of the security stock held by Australia and New Zealand Banking Group Limited. Question 5. Does the Australia and New Zealand Banking Group Limited have, pursuant to the issue to it of any other documents expressed thereon to be Debenture Stock Certificates, and whether or not such documents were subsequently surrendered to the Society, any and what rights by way of security over any and what assets of the Society to secure payment by the Society to the said Bank of any and what sums? Unnecessary to answer. Order that the costs of all parties to the appeal taxed as between solicitor and client be paid or retained as the case may be out of the property the subject of the charge in the Trust Deed. Cur. adv. vult. The following written judgments were delivered:— 1977, Aug. 10 Gibbs J. I have had the advantage of reading the reasons for judgment prepared by my brother Jacobs. I agree with those reasons and have nothing to add to them. The questions should be answered as he proposes. Stephen J. I have had the advantage of reading the reasons for judgment of Jacobs J. I agree both with the answers which are there proposed and with the reasoning which has led his Honour to those answers. Mason J. I am in agreement with the reasons for judgment which have been expressed by Jacobs J. I would answer the questions asked in the originating summons in the manner proposed by his Honour. Jacobs J. There underlie this case important principles of equity, relating to the creation of equitable interests and the duties of trustees, which, although they were not to the forefront of the argument, cannot be ignored if a correct solution is to be reached to the problems raised. At 7th August 1974 a cooperative society, Co-operative Farmers and Graziers Direct Meat Supply Ltd. ("the Society") was the owner of freehold land and buildings situated at McDonald Road, Brooklyn in the State of Victoria ("the Brooklyn property"). The Brooklyn property was subject to a first mortgage in favour of Sandhurst and Northern District Trustees Executors and Agency Co. Ltd. ("the Sandhurst company") to secure debenture stock of which there was $680,000 outstanding. The Brooklyn property was also subject to three further mortgages in favour of the Australian Industry Development Corporation ("AIDC"). On 7th August 1974 AIDC executed a deed of postponement of its mortgages. The other party to the deed was National Mutual Life Nominees Ltd. ("the Trustee") which was the trustee, pursuant to a trust deed executed the same day, for debenture holders in respect of proposed debenture stock intended to be secured by, inter alia, a legal mortgage of the Brooklyn land. By cl. 1 of the deed of postponement it was provided: 1. AIDC hereby postpones all its rights powers and securities vested in it by virtue of the AIDC charges in favour of the rights powers and securities of the Trustee under the Trust Deed the Debenture Charge and any mortgage or charge given by the Co-operative to the Trustee pursuant thereto. The postponement shall extend to a principal sum not exceeding $3.5 million which shall be at any time or from time to time owing under or pursuant to the Debenture Charge together with all interest, charges, fees, stamp duty costs and expenses and other moneys thereby secured. In the recitals to the deed the debenture charge was defined as the legal mortgage over the Brooklyn property by means of which the Society would secure, in favour of the Trustee, debenture stock up to a maximum value of $3.5 million together with interest thereon and certain charges, costs and expenses and other moneys specified in the trust deed. A copy of the trust deed was annexed to the deed of postponement of the AIDC mortgage. The trust deed was one between the Society and the Trustee. Clause 2 of the trust deed provided as follows: 2. The Society may subject to this Clause 2 and Clause 21 hereof create and issue Debenture Stock at any time and from time to time upon and subject to such terms and conditions (which in the opinion of the Trustee are not contrary to or inconsistent with the provisions of this Deed) as from time to time shall be determined by the Directors of the Society provided that (i) the amount of the Issued Debenture Stock shall not exceed $3.5 million (ii) Debenture Stock may be issued to such persons at such times and in such amounts and either at par or at a premium or at a discount and bearing such respective rates of interest (if any) and payable or redeemable on demand or at such respective dates or period and for such consideration as the Directors of the Society may from time to time determine and on the basis that the holder will be the beneficial owner of the Debenture Stock and generally on such other terms and conditions which in the opinion of the Trustee are not contrary to or inconsistent with the provisions of this Deed as the Directors of the Society may from time to time determine (and in particular but without limiting in any way the generality of the foregoing may be issued to the Prior Stock Holders by way of a conversion of the Prior Stock) but no Security Stock shall be issued otherwise than under the provisions of Clause 5 hereof. The power to create and to issue debenture stock was thus vested in the Society. Until the issue of any stock the Society, subject to the legal mortgage of the Sandhurst company, was the beneficial owner of the interest in the Brooklyn property vested by the trust deed in the Trustee. Clause 5 of the trust deed provided for the issue of "Security Stock" as follows: 5. (a) Without limiting in any way any of the other provisions of this Clause 5 or of Clause 2 of this Deed but subject always to the provisions of Clauses 8 (i) and 21 of this Deed the Society may at any time and from time to time issue Debenture Stock to any bank or other person or corporation by way of security (in this Deed called "Security Stock") for any present or future debts of or advances to (including bank advances by way of fluctuating overdraft accommodation) or liability (whether contingent or otherwise) of the Society (including capitalised or current interest) or for any guarantee indemnity or obligation given or assumed by the Society in respect of any present or future debts of or advances to (including bank advances by way of fluctuating overdraft accommodation) or liability (whether contingent or otherwise) of the Society (including capitalised or current interest) all of which debts advances liabilities and interest are hereinafter in this Clause 5 and in Clause 31 hereof called "the Monies Secured by the Security Stock". (b) Security Stock shall not be transferable save and except with the consent of the Society and of the Trustee, shall not bear interest save as hereinafter mentioned in this sub-clause (b) and may be issued on terms that it is payable on demand. Security Stock may only be issued and shall at all times be held upon and subject to the condition (which shall be endorsed on every Certificate for such Stock) that notwithstanding anything elsewhere contained or implied in this Deed in the event that (aa) the monies available for payment to the Debenture Stock Holders under the provisions of Clause 31 of this Deed are insufficient to pay in full the Monies Hereby Secured and (bb) at the date upon which this Security becomes enforceable the aggregate of the Monies Secured by the Security Stock held by any holder is less than the aggregate nominal amount of Security Stock held by such holder then such holder shall be entitled to payment pari passu with the other Debenture Stock Holders pursuant to the provisions of the said Clause 31 of this Deed in respect of Security Stock of an aggregate nominal amount equal to the aggregate (at the date this Security becomes enforceable) only of the Monies Secured by the Security Stock held by such holder. After the date upon which this Security becomes enforceable the said holder shall be entitled to rank pari passu with the other Debenture Stock Holders for current interest accruing on the principal amount secured by such Security Stock at the current rate which is from time to time thereafter payable by the Society to such holder on such Security Stock. In this sub-clause (b) and in sub-clause (a) of this Clause 5 the word "bank" is not limited to any one bank conducting business on behalf of the Society but includes all banks which may from time to time act as bankers for the Society. Clause 8 (i) provided: 8. (i) Whenever the Society desires to issue any Debenture Stock it shall forthwith notify the Trustee in writing of (a) the amount of Debenture Stock it proposes to issue; (b) the terms and conditions of such issue; and (c) whether any and if so what amount of the proceeds of the issue are to be applied by the Society in accordance with the provisions of Clause 22 in repaying or redeeming any Debenture Stock in Issue or any (and if so what) Secured Liability of the Society; and furnish to the Trustee a report by the Auditor as hereinafter provided. It is also necessary to set out that part of cl. 8 (ii) which is incorporated by reference into cl. 8 (i), that part dealing with the auditor's report. 8. (ii) The said report shall state the amount of Debenture Stock which in the opinion of the Auditor may be issued without breach of the limitation imposed by Clause 2 hereof and the covenant contained in Clause 21 (b) hereof and without breach of the limitation on borrowing contained in the Rules of the Society and the lower of the amount as stated in the said report and the amount notified to the Trustee by the Society shall be the limit of the Debenture Stock which may then be issued by the Society (hereinafter in this Clause 8 referred to as "the limit"). Considerable emphasis has been placed during the hearing of the appeal on the remaining provisions of cl. 8 (ii) and on cl. 8 (iii) and it is therefore necessary to set them out: 8. (ii) The Society may thereupon at any time during the period of four months commencing from the date of the said report by the Auditor (hereinafter in this Clause 8 referred to as "the period") issue Debenture Stock to an amount not exceeding the limit in accordance with the terms and conditions set out in the notice given to the Trustee pursuant to sub-clause (i) of this Clause 8 provided always that before issuing any Debenture Stock as aforesaid the Society shall notify the Trustee in writing that the Society's indebtedness to the Trustee acknowledged by Clause 12 of this Deed shall include the Society's indebtedness in respect of all principal premium (if any) interest and other monies payable in respect of such Debenture Stock. (iii) Debenture Stock issued within the limit and within the period and in respect of which the Debenture Stock Certificate bears the endorsement of the Auditor as hereinafter provided shall in favour of the person to whom such Debenture Stock has been issued or other the holder thereof for the time being be deemed to be validly issued under and secured by this Deed notwithstanding that at the time of its issue the Society was in breach of the limitation imposed by Clause 2 of this Deed. Clause 21 (b) provides, inter alia, that the Society will not at any time permit the aggregate of the debenture stock in issue and the stock issued under the trust deed with the Sandhurst company to exceed the sum of $3.5 million. Clause 9 of the trust deed provides as follows: 9. (a) The Society shall issue to Debenture Stock Holders Debenture Stock Certificates in a form to be approved by the Trustee stating (inter alia) the amount of Debenture Stock held by the Debenture Stock Holder, the relevant date of interest and the maturity date of the Debenture Stock and every such Certificate may have endorsed thereon and the Debenture Stock comprised therein shall be issued subject to the conditions in the form or to the effect of those set forth in the First Schedule hereto and the Debenture Stock shall also be issued subject to the conditions contained in the Second Schedule hereto. Every Certificate issued in respect of the Debenture Stock shall bear a printed endorsement by the Auditor that the Debenture Stock in respect of which such Certificate is issued forms part of the Issued Debenture Stock issued under and in accordance with this Deed and was issued within the limit and the period herein defined and such endorsement shall be authenticated by the signature of the Auditor endorsed thereon by any means authorised by the Auditor. (b) Such Certificates shall be executed by the Society under its common seal or such other seal or by such other means or method as may from time to time be adopted for the purpose by the Society and shall be approved by the Trustee. The appellant Bank was the Society's banker. The Society required advances from the Bank over the period between execution of the trust deed and May 1975 and the Bank agreed to provide advances upon the security of security stock under the trust deed. The Society isued security stock to the Bank in the form of stock certificates, the ones presently relevant being fifteen certificates Nos. 1 to 15 for $100,000 each bearing date 9th April 1975 and five certificates Nos. 21 to 25 for $100,000 each also bearing date 9th April 1975. Each was under the common seal of the Society and each bore the following certificate signed by the Society's auditor, Mr. H. C. Clegg: The debenture stock in respect of which this certificate is issued forms part of the issued debenture stock issued under and in accordance with the Trust Deed and has been issued within the limit and within the period as provided by Clause 8 of the Trust Deed. The first fifteen of these certificates were received by the Bank on 11th April 1975. The further five certificates were in fact issued on 22nd May 1975. AIDC has claimed that the security stock which the above described certificates purport to create or evidence does not have the benefit of the legal mortgage which was given by the Society to the Trustee and which has priority over the mortgages of AIDC pursuant to the deed between AIDC and the Trustee. The ground of this claim is that requirements of the trust deed were not complied with in respect of the issue of that security stock and that therefore the moneys owing under the security stock are not now secured by the legal mortgage from the Society to the Trustee. It is not suggested that on any view the amount owing by the Society on debenture stock isued or purported to be issued exceeded the limit of $3.5 million specified in the deed of postponement and in cll. 2 and 21 (b) of the trust deed. The security stock was issued within the limit referred to in cl. 8 and it bore the indorsement of the auditor but what is claimed is that the security stock was issued without compliance with cl. 8 (i) in that the Trustee was not notified and an auditor's report was not furnished stating the amount of the debenture stock which might be issued without breach of the limitation imposed by cll. 2 and 21 (b) and without breach of the limitation on borrowing contained in the rules of the Society. The question thus in dispute came before the Supreme Court of Victoria in proceedings commenced by originating summons. I find it necessary to say something of the form and nature of those proceedings because that form may obscure the rights of the respective parties unless particular attention is given to it. The proceedings were commenced by the Trustee "In the matter of" the trust deed. The Society was joined as a defendant and there were also joined various parties either in their individual right or as representatives of classes of persons claiming to be debenture stock holders, the different classes being stated to be various groups of stockholders whos stock had been issued or purported to be issued at different times and under different circumstances. The Bank was joined as a defendant since it claimed to be a stockholder as the holder of the security stock. Proceedings so constituted were appropriate to the determination of questions affecting the rights or interests of these various persons or any of them, they claiming to be cestuis que trustent, and of questions arising in the administration of the trust. See Rules of the Supreme Court, O. 55, rr. 3, 4 and 5. However, the Trustee also joined AIDC and a representative of the unsecured creditors. I am not clear what proceedings could be brought by originating summons against these parties, or either of them, unless in the case of AIDC the action was one brought under O. 55, r. 5A by the Trustee as mortgagee joining the Society as mortgagor and AIDC as a subsequent incumbrancer, or unless they were for construction of the postponement deed pursuant to O. 54A, r. 1. But no relief appropriate to such an action was claimed. It would no doubt be captious to draw attention to these matters at this stage of the procedure of combining two kinds of originating summons was found to be convenient, but underlying the procedure adopted is a most important circumstance, fundamental to the relationship of trustee and beneficiary. In so far as the proceedings were for administration of the trusts constituted by the trust deed, the Trustee was seeking the assistance of the Court in the administration of the trust and in the determination of the rights of beneficiaries or persons claiming to be beneficiaries among themselves. Though there was no shortage in value of the security, that is to say, though the total of all debenture stock issued or purported to be issued under the deed did not exceed the $3.5 million limit of the legal mortgage which had been given priority and though it is not disputed that the value of the Brooklyn property, after allowing for any prior interests other than that of AIDC, exceeded the amount owing on stock, the Trustee might have been concerned about its duties in respect of possible future issues or something of that kind and was entitled to submit the questions to the Court, holding the scales evenly between the various beneficiaries and apparent or purported beneficiaries. However, in so far as the action was one between the Trustee and strangers to the trust, namely AIDC and the unsecured creditors, the action was litigation adverse to the interests of various persons or classes of person who claimed to be debenture holders. In such litigation the Trustee was the proper party to represent all the beneficiaries of the trust, not only those whose interest thereunder was unquestionable but also those whose entitlement was doubtful but not clearly illusory. It was bound in those circumstances both to assume the validity of the title of such beneficiaries until the title was negatived and to protect that title as against the claims of strangers to the trust to the best of its ability. The question before me is, whether the deed is ipso facto, upon the face of it and with the surrounding circumstances, void, because if it be not, so long as it stands, the cestuis que trust under it are entitled to call on this Court to carry its provisions into effect for their benefit, they being in no respect tainted with any conduct which can disqualify them from receiving any benefit intended to be secured to them by its provisions. My opinion is that it is not void on the face of it, and that until this deed has been declared to be void, and ordered to be delivered up to be cancelled, this Court must act on its provisions. I also think that a declaration of the invalidity of the deed could only, if at all, be made in a suit regularly instituted for that purpose (Beddoes v. Pugh [1] .) 1. (1859) 26 Beav. 407, at pp. 416-417 [53 E.R. 955, at p. 959]. 1. (1859) 26 Beav. 407, at pp. 416-417 [53 E.R. 955, at p. 959]. The questions asked in the originating summons in respect of the security stock apparently held by the appellant were as follows: D. 1. Did the Society issue to the defendant Australia and New Zealand Banking Group Limited documents expressed thereon to be Debenture Stock Certificates as follows: (i) Certificates No's 1 to 15, each dated 9th April 1975, each in the nominal amount of $100,000 Debenture Stock issued by way of security? (ii) Certificates No's 21 to 25, each dated 9th April 1975, each in the nominal amount of $100,000 Debenture Stock issued by way of security? 2. (i) (ii) If either part of Question 1 be answered, Yes, is Australia and New Zealand Banking Group Limited the holder of valid Debenture Stock under the Trust Deed, as described in each such Certificate? 3. (i) (ii) If either part of Question 2 be answered, No, did the issue of each such Certificate, alone or in conjunction with the transaction of which it formed part, confer on Australia and New Zealand Banking Group Limited any and what rights by way of security over any and what assets of the Society to secure payment by the Society to Australia and New Zealand Banking Group Limited of any and what sums? 4. (i) (ii) If either part of Question 1 be answered, Yes, is the defendant Australia and New Zealand Banking Group Limited a secured creditor of the Society in respect of any and what sums by way of interest, under or pursuant to or in connection with the issue to the said Bank of the said documents? 5. Does the Australia and New Zealand Banking Group Limited have, pursuant to the issue to it of any other documents expressed thereon to be Debenture Stock Certificates, and whether or not such documents were subsequently surrendered to the Society, any and what rights by way of security over any and what assets of the Society to secure payment by the Society to the said Bank of any and what sums? Question 1 admits on the evidence only of an affirmative answer. Questions 2, 3, and 4 have a duality of aspect as a result of the form of the proceedings. In relation to other stockholders, other beneficiaries under the trust deed, the questions raise the issue whether the security stock of the appellant ranks pari passu with such other debenture stock as was regularly issued under the Trust Deed. That is the only issue which concerns other stockholders. This was the question for determination in State Superannuation Board v. Trustees Executors & Agency Co. Ltd. [2] . Even though a subsequent incumbrancer and unsecured creditors were represented, the majority of the Court dealt with no wider question. See per Dixon C.J. [3] ; Kitto J. [4] ; and Taylor J. [5] . Since the total amount of stock issued by the Society purportedly pursuant to the trust deed does not exceed $3.5 million and since the value of the Trustee's interest in the Brooklyn property exceeds that figure, there is no occasion to determine as between the various holders of debenture stock whether they all rank pari passu in terms of the trust deed. 1. (1964) 38 A.L.J.R. 1. 2. (1964) 38 A.L.J.R., at p. 4. 3. (1964) 38 A.L.J.R., at pp. 4-5. 4. (1964) 38 A.L.J.R., at p. 5. In relation to AIDC, the questions have a different complexion. The questions are intended to raise the issue whether the security stock is entitled to the priority of the debenture charge under the deed of postponement between AIDC and the Trustee. In this aspect the dispute reflected in the questions is between the Trustee representing all stockholders, including those whose title is doubtful, and AIDC. It may presumably be dealt with as though it arose on the taking of an account of the moneys owing under the Trustee's mortgage, the debenture charge, for, on the taking of such an account, AIDC as a subsequent incumbrancer is a necessary and proper party. As between the Trustee and AIDC it needs to be considered (a) whether the deed of postponement on its true construction gave priority in security only to moneys owing on debenture stock which was issued strictly in compliance with the terms of the trust deed; and (b) if not, in what circumstances moneys owing by the Society on debenture stock not so issued would nevertheless be money owing under or pursuant to, and be entitled to the priority of, the debenture charge. The first question is whether the debenture charge has priority over the AIDC mortgages only for moneys owing on debenture stock issued strictly in compliance with the terms of the trust deed. The answer depends upon the true construction of the deed of postponement. It does not depend upon any notion of essential validity or invalidity of stock purported to be issued under or pursuant to the trust deed. Much argument was presented on the question whether certain requirements of the trust deed were conditions precedent to the validity of an issue of stock, and the argument proceeded on the premise that a failure to observe a condition precedent would make the issue of stock ultra vires and void. This premise is a mistaken one. The rule that the ultra vires act of a corporation is legally void has no operation because no question of legal capacity arises. The Society created a legal mortgage and vested it in the Trustee for those persons whom it should in terms of the trust nominate as beneficiaries. The interests of nominees were equitable interests created by the Society on exercise of the power reserved to it in the trust deed, and the principles applicable to the questions which arise are equitable principles, not the law of ultra vires. The effect of an irregularity or defect in the exercise of the power given to the Society under the trust deed would be to relieve an earlier appointee, i.e. stockholder, of his agreement, given by the acceptance of stock issued under the provisions of the trust deed, that his equitable interest though earlier in point of time should not have priority over but should rank pari passu with later equitable interests duly created by the Society. This effect of irregularity is in the present case subject to the power of the Trustee under cl. 35 (f) (i) to waive any breach by the Society of any of the covenants, obligations, conditions or provisions contained in the trust deed. Indeed the purpose of the waiver provision is that its exercise will give or preserve a pari passu ranking which would not otherwise exist. However, subject to these aspects of priority between the debenture holders, equity will have regard to the intention of the Society which is the beneficial owner of the Brooklyn property. Moreover, in favour of the appellant, a purchaser for value, equity would if necessary aid a defective execution of the power. I return therefore to the question whether the deed of postponement on its true construction gives priority only in respect of moneys owing on debenture stock which was issued strictly in compliance with the terms of the trust deed. The postponement is in favour of the rights, powers and securities of the Trustee under the trust deed, the debenture charge and any mortgage or charge given by the Society to the Trustee pursuant thereto. The rights, powers and securities here referred to are those which are given by the Society to the Trustee as mortgagee. By cl. 14 of the trust deed the Society charges, inter alia, the Brooklyn property with the payment of the stock. The latter is defined in cl. 1 to mean the "Debenture Stock (whether issued or unissued so long as it remains uncancelled) from time to time constituted pursuant to this Trust Deed". Thus the postponement was in favour of the rights, powers and securities of the Trustee under the whole body of debenture stock issued or unissued. The restrictions imposed by the trust deed on the Society were restrictions on the issue, not the creation of stock. Although of course there is no money secured unless it is lent nevertheless the security exists over the debenture stock issued or unissued and will operate when stock is issued. Next, the deed provides that the postponement shall extend to a principal sum not exceeding $3.5 million which shall be at any time or from time to time owing under or pursuant to the debenture charge, that is to say, the legal mortgage of the Brooklyn property. This provision does no more than place a maximum on the extent of the postponement. Provided that the amount owing is within that extent the postponement will enure in favour of the Trustee's rights, powers and securities under the trust deed. The position, therefore, at the time when these proceedings were commenced and indeed at the present time is that the Society purported to issue the security stock to the appellant. It intended to create or constitute debenture stock to that amount. It intended, by exercise of its power under the trust deed to issue debenture stock, to create an equitable interest in the security in favour of the appellant. There was full consideration given on the part of the appellant. The moneys were borrowed by the Society from the appellant with the contractual intention, expressed in writing at the time of borrowing by the form of the security stock, that the appellant should have an equitable interest in the legal mortgage which was held by the Trustee and enforceable by the Trustee against the Society. The Society could not either against the appellant or against the Trustee deny that the moneys thus borrowed were secured under the debenture charge. The Trustee could therefore by the terms of the trust deed itself recover the money from the Society. The question which could arise was not whether the moneys due to the appellant were owing under the legal mortgage of the Brooklyn property but whether on a realisation of the security the moneys were repayable pari passu with the moneys secured by equitable interests in the legal mortgage earlier in time to the interest of the appellant. The deed of postponement is not concerned with these equitable priorities, either in its language or in any implication to be gathered from the purpose and circumstances of its execution. There is nothing in the deed of postponement to indicate a promise, express or implied, by the Trustee or a condition of the postponement that all equitable interests which the Society might create by the issue of debenture stock on the terms of the trust fund, would be created in strict compliance with the procedures prescribed by the trust deed and not otherwise. The existence in the trust deed of the wide power of variation (cl. 40) and of the power of waiver to which I have referred strongly support the view that AIDC was not concerned with the exact observance of the conditions which that deed prescribed for the issue of the debenture stock and the consequent creation of equitable interests in the security, but was concerned only to specify in the deed of postponement the limit of the postponement, $3.5 million. For these reasons I am of the opinion that the deed of postponement on its true construction does not give priority in security over the Brooklyn property only on moneys owing on debenture stock issued strictly in compliance with the terms of the trust deed. It is therefore necessary to consider in what circumstances moneys owing by the Society on debenture stock not so issued would nevertheless be money owing under or pursuant to, and be entitled to the priority of, the trust deed. I am strongly inclined to think that, without any express waiver by the Trustee, and provided that no question arises of competition between beneficiaries inter se, the moneys owing to the appellant on the security stock are secured by the debenture charge for a reason which I have already stated and which I shortly repeat. The debtor mortgagor, the Society, intended to create equitable interests in its Brooklyn property in favour of the appellant under the trust deed, with the Trustee as trustee of those equitable interests. It could not be heard either against the appellant or against the Trustee to assert that the moneys were not so secured and no other person has an interest under the trust so to assert. But if anything more is needed, then the Trustee can at any time pursuant to cl. 35 waive any breach by the Society, the breach here being the failure to comply with the requirements of the deed before issuing the stock. The Trustee, both at first instance and on the hearing of this appeal, has appeared to see some merit of impartiality in the fact that it has not expressly waived the breaches by the Society but its duty of impartiality is towards the beneficiaries and in the present circumstances to those whom the Society intended to make beneficiaries. Impartiality of a trustee towards a stranger, AIDC, is no virtue. There appears to be no doubt that the security was sufficient to cover the interests of all who were or claimed to be entitled to the benefit of the security under the trust deed. In these circumstances, if the Trustee in this action for limited administration by the Court (which is the essential nature of an originating summons "in the matter of a trust") were to submit its discretion to the Court, or were to seek advice, the manner of exercise of the discretion, or the advice relating thereto, would inevitably be that the discretion should be exercised in favour of the intended beneficiary and against the stranger. Since equity regards that as done which ought to be done, the only proper exercise of all discretions by the Trustee in favour of the intended beneficiary might be assumed and it is probable that question 2, in both its parts, could be answered yes. However, it is unnecessary so to decide for the substance of the matters raised can be answered in respect of question 3 as follows, deleting the words "If either part of Question 2 be answered, No," D.3 Yes, the rights of a holder of Security Stock represented by the Certificates referred to in Question 1 subject to the interest in the mortgaged property of stockholders whose interests were created earlier in point of time unless the Trustee shall waive all breaches by the Society in its issuing of the said Security Stock of any of the covenants, obligations, conditions or provisions contained in the Trust Deed. It therefore becomes unnecessary to answer question D.5. There remains question D.4. Clause 5 (a) provides that the security stock shall be by way of security for, inter alia, any liability of the Society (including capitalized or current interest). Under cl. 5 (b) the security stock itself does not bear interest save as thereafter mentioned in cl. 5 (b), that is to say: in the event that (aa) the monies available for payment to the Debenture Stock Holders under the provisions of Clause 31 of this Deed are insufficient to pay in full the Monies Hereby Secured and (bb) at the date upon which this Security becomes enforceable the aggregate of the Monies Secured by the Security Stock held by any holder is less than the aggregate nominal amount of Security Stock held by such holder. If, as has not happened, those events occur then special provision is made. The holder of security stock ranks pari passu in respect of an amount of security stock in nominal amount equal only to the aggregate "of the monies secured by the Security Stock" at the date the security becomes enforceable. Further, after the latter date, the holder of security stock is entitled to rank pari passu with other stockholders for current interest accruing on the amount secured by the security stock at the current rate thereafter payable by the Society to the holder of the security stock. These last words are difficult to construe but there is no need to do so. The "monies available for payment to the Debenture Stockholders under the provisions of Clause 31" are not "insufficient to pay in full the monies secured". Although the provision in cl. 5 (b) for interest after the date upon which the security becomes enforceable is in a separate sentence from the preceding one which contains the condition governing the event of an insufficiency of the security, it is clearly subordinate to the preceding sentence and only has effect if the security is insufficient to pay all moneys owing in respect of debenture stock. If, as is the case, the security is sufficient, then the holder of security stock is entitled, not to its face value, but to all "the monies secured by the Security Stock". Under cl. 5 (a) these moneys include all interest as it accrues on the indebtedness in respect of which the security stock was given. The only limit would be the nominal amount of the security stock issued. In so far as it is not certainly proved that at 8th July 1975, the date when the Trustee appointed a receiver of the mortgaged property, the moneys realized from the security will be sufficient to pay in full the moneys secured by the Trust Deed, it is premature to answer question 4 beyond the following answer: 4. (i) (ii) The appellant is a secured creditor of the Society in respect of interest accrued and accruing on debts owing by the Society to the appellant in terms of the contracts between the Society and the appellant provided that the mortgaged property as defined by the Trust Deed is sufficient to pay in full the moneys secured by the Trust Deed and provided that the total sum owing on the principal sum of Debenture Stock does not exceed $3.5 million and provided that the total sum for principal and interest does not exceed the face value of the Security Stock held by the appellant. Murphy J. I agree with Jacobs J.