Tilley v Official Receiver in Bankruptcy

103 CLR 529
1960 - 1128A - HCA

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(Judgment by: Dixon CJ)

Tilley
v Official Receiver in Bankruptcy

Court:

Judges:
Dixon CJKitto 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

Hearing date: SYDNEY 29 August 1960; 28 November 1960;
Judgment date: 28 November 1960

Sydney

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Judgment by:
Dixon CJ

DIXON C.J. By s. 211 (a) of the Bankruptcy Act 1924-1958 an undischarged bankrupt is guilty of an offence punishable by one year's imprisonment if he obtains credit to the extent of PD20 or upwards from any person without informing him that he is an undischarged bankrupt. The Supreme Court of Queensland sitting as a court of bankruptcy has convicted the appellant summarily of six offences under this provision and has imposed upon him concurrent sentences for such offences of six months' imprisonment. He appeals from the convictions.

It appears from the findings of fact made by the learned judge who heard the charge (Stable J.) that in each case in respect of which he was convicted the appellant without disclosing his status bought goods for which he paid by cheque upon delivery. In each case the cheque was dishonoured. The question for decision is whether that constitutes "obtaining credit" within the meaning of s. 211 (a).

The appellant was a builder by trade. A sequestration order was made against him on 18th July 1957. He went on in the building trade and the goods with respect to which he gave the cheques were purchased by him for jobs he was doing. They were drawn on bank accounts upon which it is said he was permitted to overdraw, but apparently he exceeded the limit of his overdraft. There is no finding that the appellant gave the cheques knowing that they were valueless, if that be a material fact.

There are two grounds on which, in my opinion, the charge that in these transactions the appellant obtained credit is shown to be misconceived. The first is that the sellers of the goods never intended to give him credit and never did so, nor did he seek credit from them, expressly tacitly or impliedly. They sold for immediate payment and received what they considered immediate payment in a medium common enough commercially in the case of any large amount, namely a cheque.

The second ground is that they took the cheques in the ordinary way, that is to say, as conditional payment. In each case until the cheque was dishonoured the debt was conditionally satisfied. We speak of it as conditional payment although no doubt it would be more technically accurate to say conditional satisfaction. Possibly if the cheque was given as a trick with full knowledge that it was valueless it might be considered to work no satisfaction, conditional or otherwise. But simply because of his trick the drawer of the cheque could not be said to have obtained credit. Credit would be neither given nor obtained. However, not only is there no finding that in the appellant's case it was but a trick, it is an inference of which no court could be satisfied beyond reasonable doubt in these criminal proceedings. The materials before the Court are insufficient.

Prima facie when a cheque is taken for the price of goods, or for that matter in respect of any other debt contracted, it operates as conditional payment. The condition is that the cheque be paid on presentation: if it is dishonoured the debt upon the original consideration revives. The rule is, of course, an old one and the presumption applies to other negotiable instruments as well as to cheques, although perhaps not necessarily with the same strength. Not unnaturally it is sometimes said that the remedy for the primary debt is suspended; but this has no different meaning, for the suspension is the consequence of the conditional nature of the payment. In Bottomley v Nuttall ^[F1] , Williams J. describes it as "the true doctrine upon which this branch of the law is founded, viz. that, in the case of a money demand, if the creditor accepts a bill or note for and on account of the debt, that operates as a conditional payment" ^[F2] . On the same page in reiterating the rule of law he says that it is established in all the cases and is summed up by Maule J. in Belshaw v Bush ^[F3] . In Allen v Royal Bank of Canada ^[F4] Lord Atkinson, speaking for the Privy Council, cited a passage from Byles on Bills expressing the rule in terms of the suspension of remedy.

As some reliance has been placed on this as pointing against the principle of conditional payment it may be as well to refer to the formulation which Byles J. made judicially of the rule in Bottomley v Nuttall ^[F5] . His Lordship said: "it is the first learning that taking a bill for and on account of a debt does not operate as an absolute discharge of the debt. At the most it is only a conditional payment, which is defeated by the subsequent dishonour of the bill, whether total or partial" ^[F6] . In the well-known judgment delivered by Lush J. for the Exchequer Chamber in Currie v Misa ^[F7] this passage occurs: "the title of a creditor to a bill given on account of a pre-existing debt, and payable at a future day, does not rest upon the implied agreement to suspend his remedies. The true reason is that given by the Court of Common Pleas in Belshaw v Bush ^[F8] as the foundation of the judgment in that case, namely, that a negotiable security given for such a purpose is a conditional payment of the debt, the condition being that the debt revives if the security is not realized" ^[F9] . In the present case therefore once the cheque was taken by or on behalf of a seller of the goods the debt was conditionally satisfied; accepting the cheque could not amount to giving credit, but once the cheque was dishonoured the debt revived and of course a cause of action also arose upon the cheque. There was at that stage no question of giving or obtaining credit.

For the foregoing reasons I think that whatever offences the appellant may have committed he did not commit those with which he was charged under s. 211 (a). The convictions cannot therefore be sustained and the appeal should be allowed.