Tilley v Official Receiver in Bankruptcy
103 CLR 5291960 - 1128A - HCA
(Judgment by: Kitto J)
Tilley
v Official Receiver in Bankruptcy
Judges:
Dixon CJ
Kitto JMenzies J
Subject References:
Bankruptcy
Undischarged bankrupt
Whether obtaining credit in contravention of Act without disclosing status
Cheques dishonoured
Legislative References:
Bankruptcy Act 1924 (Cth) - s 211
Judgment date: 28 November 1960
Sydney
Judgment by:
Kitto J
KITTO J. The appellant was convicted on six charges under s. 211 (a) of the Bankruptcy Act 1924-1958 (Cth). The charge in each instance was that, being an undischarged bankrupt, the appellant obtained credit to the extent of PD20 or upwards from a named person without informing him that he was an undischarged bankrupt.
On each of the occasions charged, the appellant bought goods and took delivery of them in exchange for his cheque, which was not post-dated, for the amount of the price, without disclosing that he was an undischarged bankrupt. There was no arrangement for any delay in presentation of the cheque to the appellant's bank, both parties treating the transaction as a sale on a cash basis. The seller had no reason to doubt that the cheque would be honoured on presentation. It was, however, dishonoured. The result was that a price which the seller intended should be paid at the time of the sale and believed was then in fact paid, turned out to be unpaid.
The question upon which the appeal depends is whether it can be said a bankrupt "obtains credit", in the sense in which s. 211 (a) uses the expression, whenever he buys goods for which, in the light of after events, it is found that he did not pay at once, or whether it is a necessary element in obtaining credit that the other party to the transaction has assented to payment being deferred. In my opinion the latter is the correct alternative. The mischief to which the provision is directed is that which arises when (I am taking the simple case) a seller of goods delivers them to the buyer without requiring immediate payment, and does so without having present to his mind that the prospect of his receiving payment is subject to the special doubt which arises from the buyer's being an undischarged bankrupt. The section is therefore concerned to protect people in the giving of credit, and it deals with the obtaining of credit as the obverse of that. Accordingly, in my opinion, an obtaining of credit by a bankrupt involves, in addition to conduct on his part which results in a debt remaining for a time unpaid, an assent by his creditor to its remaining unpaid. The assent need not be contractual, and it need not be expressed: Reg. v Peters [F10] . The time allowed may be brief, and it need not be of fixed duration. In Reg. v Peters [F11] there was no period fixed, but the seller, when he dispatched his horse to the buyer without payment, plainly did so in reliance upon a future payment, though no doubt he expected that it would not be long delayed.
In Reg. v Jones [F12] the time allowed was only that between the beginning of a meal and the end of it. The point is that the intending payee must part with his goods (or whatever it be that he does) "without insisting on prepayment or upon interchangeable payment", "relying on the readiness and ability of the (bankrupt) to pay": Reg. v Jones [F13] . The situation is entirely different where the bankrupt leads a person to believe that he is being paid instanter, when in fact he is not. In such a case the bankrupt gains time which the other party has no intention of giving; and gaining time is not the same thing as obtaining credit. As Donovan J. said in the judgment which he delivered for the Court of Criminal Appeal in Reg. v Ingram [F14] "Mere delay in paying a debt ... is not a criminal offence" [F15] . What is a criminal offence is a bankrupt's obtaining, without giving the information that he is a bankrupt, a person's acquiescence in his leaving unpaid for a while what otherwise he would have to pay at once.
This does not mean that the liability to pay must be postponed. It is enough that the discharge of the liability is left, by consent, to the future. The dissenting judgment of Manisty J. in Reg. v Peters [F16] was based on the view that a sale under which the price can be immediately sued for is not a credit transaction but a cash transaction. The majority judgment shows that it is not to the point that a sale is a cash transaction as so defined. What matters in the case of a sale is that for a substantial period of time the price remains unpaid, the seller making, in the words of Webster's Dictionary which Lord Coleridge C.J. quoted [F17] a "transfer of goods in confidence of future payment". The contrast is obvious between such a case and one in which there is a cash sale, using the expression in a sense different from that in which Manisty J. used it, that is to say a sale in which the seller never agrees to or acquiesces in any postponement of payment, and parts with his goods on terms of immediate payment but accepts a cheque in the confidence that in a practical sense it is as good as cash. In such a case what the buyer obtains in exchange for the cheque is goods, not credit. A court consisting of Lord Alverstone C.J. and Mathew, Wills, Grantham and Bingham JJ. had before it the very case, in R. v Cosnett [F18] . The prisoner was convicted of obtaining goods by a false pretence. The prosecution had proved the giving of a worthless cheque in exchange for goods bought on terms of immediate payment, in circumstances implying a representation that the cheque would be paid when presented; and that, of course, was a pretence that the cheque was a good and valid order, and as such was "equal to cash": Reg. v Hazelton [F19] .
The prisoner contended that what he got by the false pretence was credit, and not goods. The contention failed.
There can be no doubt that the acceptance of a payment by cheque implies, if there be nothing to the contrary, an agreement that it shall be considered as payment, subject to the condition subsequent that if the cheque be dishonoured it shall no longer be so considered: Mackenzie v Rees [F20] . "It has been established", said Bowen L.J. in In re Romer & Haslam [F21] , "by a series of authorities, which it would be ridiculous to go through seriatim, that a bill of exchange given for a debt amounts to conditional payment of that debt, and is only conditional payment so long as it is running; the payment is liable to be defeated when the bill is dishonoured" [F22] . But although a person who takes a bill as conditional payment does so in confidence that the payment will not be defeated, the trust he reposes is not that the drawer of the cheque will in the future pay him the amount for which the cheque is taken. On the contrary, he believes that the amount has been paid. He does, of course, trust that a future payment will be forthcoming, but that is a payment by the drawee of the bill (the bank in the case of a cheque), not a payment by the drawer. It is true that if the bill be dishonoured, the original amount may be sued for as if the bill had never been given; the creditor may then look to the debtor for payment. But that is certainly not because he ever intended to give the debtor time for payment.
Accordingly, in the present case the basis on which the sellers gave up their goods in exchange for the appellant's cheques was that they were not going to wait for their money, but, on the contrary, were being paid there and then, since the cheques, they supposed, were good and valid orders for immediate payment of the full price. In my opinion the sellers gave no credit, and the bankrupt obtained none.
I should add that I have not meant in the foregoing to indicate any view on the question which arose in Reg. v Ingram [F23] namely, whether "credit" is obtained when time is allowed for the doing of something other than the payment of money.
I agree that the appeal should be allowed.