Tilley
v Official Receiver in Bankruptcy

Judges: Dixon CJ
Kitto J

Menzies 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

Sydney

Judgment by:
Menzies J

MENZIES J. The appellant was convicted upon a number of counts of having, while an undischarged bankrupt and without disclosing this, obtained credit to the extent of PD20 or upwards contrary to s. 211 (a) of the Bankruptcy Act (Cth). On each occasion the appellant ordered building material and, instead of paying for it in cash upon delivery-as in some cases he had agreed to do expressly-he gave the supplier or his agent a cheque which was dishonoured upon presentation. Stable J. decided that in so doing, the appellant obtained credit within the meaning of the section and, as the other elements of the offence were proved, convicted him. It is from that decision that this appeal has been brought.

The case for the appellant is that he obtained no credit because in each case he gave and the supplier accepted a cheque for the goods. It was not suggested that on any occasion the supplier's acceptance of the appellant's cheque amounted to more than conditional payment, but it was argued that the making of such payment at the time of delivery was inconsistent with the appellant's having obtained credit for the goods which he bought; he paid at once and was not given time to pay.

Although to take a cheque is to receive payment conditionally, upon the dishonour of the cheque there never was any payment for the goods for which it was given, so to obtain goods by giving a cheque which is dishonoured upon presentation does, in fact, amount to obtaining goods without payment. As was said by Cockburn C.J. in Cohen v Hale ^[F24] : "It is very true that a man who takes a cheque may be estopped from proceeding to enforce payment of the debt until presentment of the cheque, and if the cheque is ultimately paid the debt is extinguished .... But when the cheque is presented and dishonoured, the debt, the remedy for which was suspended until presentment of the cheque, may be treated as a debt subsisting all along, just as if the cheque had never been given. ... Therefore when the Midland Railway Company stopped this cheque it was, in my opinion, as if it had never been given. ... The suspension of the remedy then ceased, and the debt remained just as if the cheque had never been given" ^[F25] . In these circumstances it was held that a garnishee order, obtained against the Midland Railway Company after the giving and before the stopping of a cheque in payment of a debt, was effectual to attach the debt which remained owing by the company to the judgment debtor. On no occasion, therefore, with which we are concerned was there payment for the goods which the appellant received, and in every case the appellant upon delivery of the goods became a debtor of the supplier for the price of the goods.

The question is then whether a buyer of goods who does not pay for them upon delivery to him and so becomes a debtor ipso facto obtains credit from the seller. Although it is true that to give time to pay is to give credit, it does not follow that to gain time to pay is always to obtain credit, for credit involves the creditor trusting the debtor to pay. In this case the suppliers did not trust the appellant to pay for the goods supplied to him; their belief, mistaken as it turned out to be, was that he paid upon delivery, not that he would pay later. I will not elaborate this further myself because I agree with the reasons given by Kitto J. for the conclusion that in all the circumstances the appellant did not obtain credit from his suppliers. The appeal must therefore be allowed.