Bonython v The Commonwealth

The Commonwealth Inscribed Stock in question represents Queensland Government debentures that were issued by the Colony of Queensland in 1895 with a currency of fifty years.

The liability upon the debentures passed to the Commonwealth as on 1st July 1929 pursuant to Part III. of the Financial Agreement (p. 175 of vol. 42 of the Commonwealth Acts) and to s. 4 of the Financial Agreements (Commonwealth Liability) Act 1932.

In March 1932 the debentures were surrendered in exchange for Commonwealth Consolidated Inscribed Stock, presumably pursuant to the Commonwealth Debt Conversion Act 1931. It is conceded that there was conferred upon the registered holders for the time being of the stock rights which conformed in all particulars with the rights conferred by the debentures. Compare s. 12 (4) of the lastmentioned Act, which speaks of "stock conforming with the conditions of the existing securities in respect of duration redemption rate of interest and in all other respects."

The debentures were originally issued by the Governor in Council of the Colony of Queensland under the authority of a statute of that colony entitled The Government Loan Act of 1894. The statute authorized the Governor in Council to raise by way of loan such several sums not exceeding two million pounds as might be required. A particular authority was included for the sale of the debentures or inscribed stock securing the amounts, in places beyond the limits of Queensland, and the employment of agents for the purpose. The statute provided that all sums borrowed under the authority of the Act should be repayable on 1st January 1945. In the exercise of these powers an amount of one and a quarter million pounds was first raised in London. Then two or three months later two sums, one of a quarter of a million and the other of half a million pounds, were raised in Australia. These loans were all secured by debentures in the same form, in denominations of £1,000 and £500. The particular debentures which were afterwards transmuted into the Commonwealth Inscribed Stock now held by the plaintiffs formed part of the loan of £250,000 raised in Australia. The amount was wholly subscribed by one lender, a body carrying on business in Queensland and elsewhere in Australia, and debentures securing the loan were issued to the lender in Queensland.

The debentures were dated 1st November 1895 at Brisbane and bore the signatures of the Governor and the Colonial Treasurer and of two officials. They were expressed to be issued by the authority of the Parliament of Queensland, citing the statute. The operative words then proceeded - "This debenture entitles the holder to the sum of one thousand pounds sterling which together with interest at the rate of three pounds ten shillings per cent per annum is secured upon the consolidated revenue of Queensland. The principal sum will be payable on the first day of January 1945 either in Brisbane, Sydney, Melbourne or London at the option of the holder; but notice must be given to the Treasurer of the Colony, on or before the first July 1944, of the place at which it is intended to present this debenture for payment of such principal."

The rest of the form of debenture was given up to interest and provided that interest coupons might be presented at any of the same four places but required that the place where "the purchaser," as he was called, wished interest to be paid should be endorsed on the debenture when issued and that any change should be registered at the Treasury in Brisbane six months before the interest date.

It will be noticed that each of the four places named for the repayment of principal has an equal status, none has any prima-facie priority over the others, and that nothing is said as to place of payment if the holder fails to choose one of them before 1st July 1944 or at all. In fact the stockholders failed to name any place until 22nd December 1944, when they sent to the Deputy Registrar of Inscribed Stock at Adelaide, the place of registry, a request that "in accordance with the conditions on which the stock was issued the amount of the stock be paid on maturity in London in sterling."

It would have been absurd to notify the Colonial Treasurer of Queensland, as the terms of the debenture prescribed, and of course the debentures could not be presented in London or anywhere else, for they had already been surrendered in exchange for the stock. No point seems to be taken that in these respects there was a noncompliance with the terms of the debenture, but the Deputy Registrar refused the request for payment of the loan in London, stating that the conditions provided that six months' notice to redeem in London would be necessary.

The contention of the Commonwealth is that unless the choice as to the place of payment was exercised before 1st July 1944 it was lost. What would be the result in ascertaining a place of payment is not clear. Presumably it is of small importance in the decision of the case whether the consequence of the loss of the option of place of payment would be that the choice passed to the Commonwealth or that the stock became redeemable as ordinary inscribed stock is or that the Commonwealth became liable to pay at the place of residence of the stockholder. Whichever was the result, the place would be within Australia. A fourth position, however, was put for the Commonwealth, namely, that the terms of the debenture contemplated that payment should be made on presentation of the debenture and that once the option of place was lost it would naturally be implied that the holder must present the debenture at the Treasury of the Government concerned, which originally was Queensland.

These contentions assume that in requiring notice before 1st July 1944 the debenture made time an essential condition of the holder's right to choose the place of payment. It might have been reasonable so to understand the provision if a place had been designated as the place where prima facie payment was to be made and the option had been to change it to some other place. But, as the debenture is expressed, there is no place of payment named unless and until the holder exercises his choice among the four places included within his option, all of them having equal status and none having a priority. If time is of the essence of his right to choose, a failure to give notice before the expiry of the time limited would leave the determination of the place of payment to implication. It therefore appears to be a better interpretation to associate the length of notice required with the obligation of the Government to provide the money on the due date at any of the places named, and not with the existence of the option. That is to say, the more natural meaning to ascribe to the provision is that unless notice of the place where the holder intends to present his debenture is given before the specified date, he cannot insist on payment at that place on the due date. In other words, before he can insist on payment anywhere he must give notice of the place and it must be a reasonable notice, the length being fixed, if payment is to be made on the due date, at six months. Full effect is thus given to the words, payable either in Brisbane, Sydney, Melbourne or London at the option of the holder and the ensuing words as to notice on or before 1st July 1944 are treated as a qualification of the words, on the first day of January 1945.

The basal consideration justifying this interpretation of the provision as to the time for giving notice is a consideration which lies at the foundation of the whole case. It is that in 1895 when the debentures were issued it could be of no substantial importance in which of the four places named the sum denominated was paid. The same sovereign formed the basis of the currency of Queensland and of Great Britain. The exchange between the two countries was unlikely to move outside the gold points. The Australian colonies were regarded as enjoying the same monetary system as Great Britain and it is safe to assume that the possibility of a divergence was as little considered as that of an inconvertible paper currency. Accordingly a choice among three Australian capitals and London could be regarded as affecting only the convenience of payment and not the measure of the liability.

For much the same kind of reason it is difficult to find any significance in the use of the word "sterling." It was of course not used at that date to distinguish the money of the United Kingdom from Australian money, that is money current in the Australian colonies. The distinction did not exist. Measures had been taken in 1826 by 7 Geo. IV. No. 3 to drive out the Spanish dollar and "to promote the circulation of sterling money of Great Britain in New South Wales" and 19 Vict. No. 3 had declared that for payments over forty shillings gold coin from H.M.'s Royal Mint in London or from the Royal Mint in Sydney should be the only legal tender. For the rest it is enough to refer to the legislative and administrative history given in the argument of the Adelaide Electric Supply Co. Ltd. v. Prudential Assurance Co. Ltd. [1] . The debentures were thus issued when the same money of account and legal tender prevailed in Australia and in Great Britain and no other state of affairs was in contemplation. Although no doubt the use of the word "sterling" to denote the British money of this system when distinguishing it from foreign money had long obtained within the system itself the word added nothing to the meaning or effect of a monetary expression to which it was attached. Tradition and the persistence of habit were responsible for its frequent use in a document after the word "pounds" in any monetary expression. It rounded off the statement of the amount and it sometimes served the humble but perhaps more useful purpose of preventing an unauthorized addition of shillings and pence to the pounds. To employ the word "sterling" or to fail to employ it in expressing a sum of money had no significance. It was a fuller and more formal description of the only money in use in Australia and in Great Britain whether as money of account or as currency. But in all domestic transactions it was an otiose addition to the expression of a sum of money. When the changes of currency and the separation of the money systems made the use of the word in Australia somewhat inappropriate some difficulty was experienced in breaking people from the habit of writing it in cheques after amounts of money. How accidental its former use here had been is well illustrated by the money expressions occurring in Federal statutes to which counsel for the Commonwealth referred during the argument. Since the divergence of the two monetary systems and the establishment of a high premium on exchange on London it has become the custom to use the word "sterling" to distinguish the £E from £A. But that more recent usage appears to have no bearing upon the meaning or application of the monetary expression employed in the debentures.

On the part of the plaintiffs an attempt was made to place upon the word "sterling" in the debentures a meaning which identified the money intended by the debenture with the English pound as sterling par excellence and then to treat that money as being continued only in Great Britain and as discontinued in Australia. From this it was said to follow that the measure of the liability was in English money. But the contention involves more than one fallacy in the use of terms. The intention of the debenture was to denote the money of Queensland, and of Australia generally, at least as much as that of Great Britain, and the connotative names which it used for that purpose were pounds sterling. It used these names because they denoted what was then the money obtaining in the "sterling" parts of the Empire.

Upon the divergence of the money of this country from that of the United Kingdom, the continuity within Australia of the country's money system was no more broken than the continuity within the United Kingdom of the money system of Great Britain. The "links" in the chain of forms of currency were just as unbroken here as they were in England. Continuity or unbroken succession is a mark of moneys of account and in this sense the historical continuity in the two countries of their moneys of account was, almost necessarily, complete. Indeed it was the inability to discern a point of change that led Lord Tomlin to the conclusion that up to 1932 the moneys of account had not diverged but were still one: Adelaide Electric Supply Co. Ltd. v. Prudential Assurance Co. Ltd. [1] . The experience, however, of the last fifteen years has made it impossible to doubt that the monetary systems are no longer one. Naturally, when the divergence took place the word "sterling" followed the money of the United Kingdom, not because Australia left the gold standard earlier but because the world was accustomed to use it of British money, the money of a great financial nation. Nevertheless, the sense, the denotation, of the word "sterling" underwent some change because it no longer applied to the money of Australia and New Zealand except according to an extended and secondary meaning. The accident that the word "sterling" was used in the debentures, for in truth it is little more than an accident, is no warrant for the conclusion that when a difference developed between the money of account of Great Britain and that of Australia, the debentures applied only to the former.

More substantial considerations must determine the money by which the liability is to be measured. It is a case of an obligation incurred under one undivided monetary system but maturing after a division in the system has taken place, the obligee having an option of place of payment which was not intended to give him an option between two differing monetary systems as measures of value.

As has already been said, at this date there can hardly be any doubt that the Australian pound, considered not only as money of payment but also as money of account, is different from the English pound. In cases arising before the development was complete much judicial difference of opinion was disclosed upon the subject, particularly when read with some decisions upon New Zealand obligations: see Westralian Farmers v. King Line [1] ; Broken Hill Proprietary Co. v. Latham [2] ; Adelaide Electric Supply Co. Ltd. v. Prudential Assurance Co. Ltd. [3] ; Auckland Corporation v. Alliance Assurance Co. Ltd. [4] ; De Bueger v. J. Ballantyne & Co. Ltd. [5] . But the necessary implication of Payne v. Deputy Federal Commissioner of Taxation [6] appears to be that, by the time when the facts of that case arose, the English pound and the Australian pound had become different measures of value, different expressions in which to calculate debts, prices and therefore income.

1. (1932) 43 Ll.L.R. 378, at p. 381. 2. (1933) Ch. 373. 3. (1934) A.C. 122. 4. (1937) A.C. 587. 5. (1938) A.C. 452. 6. (1936) A.C. 497, at p. 509.

However that may be, it has long been clear that although the Australian pound and the English pound have a common origin and a common denomination they now lack every other attribute which would make them a single money of account. The monetary systems of the two countries depend upon two independent legal sovereignties, or perhaps it would be better to say supremacies, each exercising their separate legislative authority and exercising it differently. The currency of the United Kingdom is entirely different except in denomination from that of Australia. It depends upon a different note issue, a different coinage and a different banking system. No Australian legal tender that is in circulation is legal tender in Great Britain and, except for a tender of not more than forty shillings in silver and not more than one shilling in bronze, no English legal tender in circulation in England is legal tender in Australia. Finally, there is the perhaps decisive fact that since December 1931, when the Commonwealth Bank Board undertook the responsibility of regulating the exchange between the £E. and the £A., a fixed rate of exchange has existed in which the buying rate of £E.100 is £A.125. It is fixed by governmental authority. There are thus two independent monetary systems established by the governments of two different countries adopting or continuing the same nomenclature but expressing different measures of value in terms of one another.

This must mean that they provide separate moneys of account. The expression "money of account" now appears to be recognized in English law. Indeed the expression was used in a statute as early as 1826. For 6 Geo. IV. c. 79 spoke of "assimilation of the currencies and monies of account throughout the United Kingdom of Great Britain and Ireland." When the world passed away from metallic money and the conception of money as a commodity chosen for its intrinsic value and bearing the imprimatur of the State, it was doubtless inevitable that the courts should adopt the distinction drawn by economists between currency and money as a unit of account. For it became more apparent that the distinction was reflected in practical consequences that could not be ignored. Plainly a monetary expression could not be considered a numerical reference to metallic currency or coins, concrete things. The conception, so familiar to economists, of money as a description of a standard or measure of value, as a unit in which debts and therefore prices might be calculated or expressed, was found to be one that was needed for some of the purposes of the law. For it is involved in the not unimportant legal proposition that the obligation to which a contract to pay a sum of money gives rise is to pay, in whatever the law regards as legal tender at the time when payment is made, as many of the units of currency as amount to the sum. This proposition lay at the foundation of the decision of the Supreme Court of the United States in the Legal Tender Cases [1] that the Legal Tender Acts did not impair the obligation of contracts. The Court acknowledged that in consequence of the Acts a debt contracted before they were passed might be discharged with the notes the Acts authorized instead of the gold or silver coins forming legal tender when the debt was incurred. But the Court denied that this impaired the obligation of a contract to pay money generally as distinguished from some defined species of money. "It was not a duty to pay gold or silver, or the kind of money recognized by law at the time when the contract was made, nor was it a duty to pay money of equal intrinsic value in the market But the obligation of a contract to pay money is to pay that which the law shall recognize as money when the payment is to be made" - per Strong J. [2] . The distinction between money as the expression of a standard or unit of value, as the means of measuring an obligation, and the money which forms the means or instrument of discharging the obligation, the legal tender or the representative money by which it is paid, has another importance for the law. For where two or more countries are involved in a transaction, as apparently is thought to be the case here, the court may be called upon to decide what is the money that the obligor or debtor owes.

1. (1871) 79 U.S. 382 [20 Law. Ed. 287]. 2. (1871) 79 U.S., at p. 548 [20 Law. Ed., at p. 311].

In deciding such a question the distinction enables the law to avoid a confusion between the money which the parties intended to use for the purpose of expressing the obligation, the money of account which serves to measure the obligation, and the money in which the debt so ascertained is to be discharged. Where the monetary units of the two countries have different names the parties may be expected to express their contract in a way which observes the distinction. For instance, if in New York a debt is contracted in dollars and made payable in Paris, there may be a question whether it was meant that the debtor should produce dollar bills in Paris and pay them over to the creditor or that he should convert the amount of the dollar debt into francs at the current rate of exchange and pay over the equivalent, but there could be no doubt that the amount of the indebtedness was to be measured in United States dollars. On the other hand, if the debt contracted in New York were payable in Vancouver it might be a question whether the parties intended that the obligation should be measured by United States dollars, even though paid in Canadian dollars. It is obvious that once it is determined in what money the obligation is measured the question in what currencies it may be paid can seldom have much bearing upon the value of the obligation, involving, as it will, no more than a question of conversion from one money to another at prevailing rates of exchange. To fail to distinguish between the two questions is to fall into an error of reasoning which may lead to a quite erroneous and unjust conclusion. But a confusion between the two questions is made easier by the natural presumption that when parties contract to pay a sum of money expressed in a form capable of describing the money of account of the place of payment they are referring to that money, not only as the money of payment but as the money of account, a presumption which applies notwithstanding that it is equally capable of describing the money of account of some other place with which one or other or both of the parties are associated, as for instance by domicile or residence or as the locus contractus celebrati: see Auckland Corporation v. Alliance Assurance Co. Ltd. [1] . This presumption of course yields to any sufficient indication of intention arising from the language of the contract or the circumstances of the case. So in a contract of service made in England but to be performed in New Zealand in which the rate of remuneration was expressed in money described as "sterling," it was decided that in the circumstances the use of the word "sterling" had the purpose and effect of distinguishing between the two currencies and displacing the presumption: De Bueger v. J. Ballantyne & Co. Ltd. [1] . In that case the money of account was the £E but the money of payment was the £N.Z.

1. (1937) A.C. 587, at p. 606. 2. (1938) A.C. 452, at p. 460.

The presumption that the money of the place of payment was intended as the money of account for the measurement of the obligation can scarcely have any validity when alternative places are stated in the contract. It is true that contracts may, and sometimes do, give an option to the obligee between two different systems of money for the ascertainment of the debt. An example may be seen in the "gold note" forming the subject of R. v. International Trustee for the Protection of Bondholders Aktiengesellschaft [2] set out by Lord Atkin which stated the debt in dollars and made it payable at the option of the holders in New York in gold coin of the United States of specified weight and fineness or in London in sterling at the fixed rate of $4.865 to the pound. The latter alternative said nothing about gold and by fixing the rate of conversion translated the amount of dollars named in the note into a fixed sum of pounds sterling. Thus the obligee took an option of measuring the obligation in American gold dollars or in English sterling. Annexed to the alternatives were different places of payment. But the option was not merely one of place but one of payment, that is to say it involved two alternative standards for the quantification of the debt.

But while, as this example shows, options of payment involving different measures of liability are in practice conferred on obligees in order better to secure them against the deterioration of the money of one country, that is no ground for presuming that when a money instrument names alternative places having different currencies as places at which the obligee may demand payment, the purpose is to give him an option to change the money of account in which the liability is to be ascertained. Options of place are given for the convenience of the payee who may thus obtain the money where he desires and in the form appropriate to the place. They are not directed to a different quantification of the substance of the obligation. Something much more definite is needed to warrant an interpretation ascribing an intention to the parties that there shall be alternative moneys of account for the measurement of the obligation.

Where one place of payment is specified and there is otherwise an ambiguity as to the money of account intended, it is not unreasonable to find in the place of payment an indication of what the parties intend. But all foundation for the inference fails when the place of payment is not fixed but is left to the choice of one of the parties. Other considerations must in such a case determine in which money of account the debt is to be calculated.

It is well settled that under English law the money of account of an obligation must be determined as a matter of interpretation when the question is to which of two or more monetary systems does the obligation refer for its expression. In many cases, however, it must be necessary to decide as a first step whether the question is to be governed by English law or some other law. As the measure of the obligation is the matter to be decided it is governed by the proper law of the contract. Most systems of law made the question by what money of account the obligation is measured depend on the intention of the parties, but there are of course differences in the rules for working out the intention. In the present case, however, the choice of law is of no moment; for in both jurisdictions the same common law supplies the rule. In any case it is difficult to see how any but the law of Queensland could be the proper law of the obligation of the debentures which were issued in Queensland in respect of the loan of £250,000 raised there, whatever may be the case with the loan raised in the United Kingdom.

The result of the foregoing considerations is that the question whether the obligation of the debentures is to be treated as expressed in English or in Australian money must be determined as a matter of interpretation. This means that it depends upon an intention to be extracted from the transaction. It is important to see what is the point to which the supposed intention must be taken to be directed. Where a contract uses a money expression capable of referring to either of two moneys of account which at the time the contract is made are separate and are known to belong to two different recognized monetary systems, it is easy to see that the required intention must be directed to an adoption of or a reliance upon one of the two systems to the exclusion of the other. But in a case such as the present the point is somewhat different. When the contract was made there was one money of account only. There being a subsequent divergence and a separation into two moneys of account, the point must be to which of the two does the obligation "belong," on which does it depend, which does it follow. Clearly enough, no actual intention existed with reference to such a question. The parties never gave it a thought. The "interpretation" of the transaction must be worked out from its character, from the elements which are contained within it. The nature and circumstances of the transaction must supply the grounds from which the so-called "intention" must be deduced as a reasoned consequence. It may be called an implication. Lord Watson in a well-known passage in Dahl v. Nelson [1] explained how a problem of the same general kind is dealt with when it arises under commercial contracts such as a charterparty. His Lordship said: - "I have always understood that, when the parties to a mercantile contract such as that of affreightment, have not expressed their intentions in a particular event, but have left these to implication, a Court of Law, in order to ascertain the implied meaning of the contract, must assume that the parties intended to stipulate for that which is fair and reasonable, having regard to their mutual interests and to the main objects of the contract. In some cases that assumption is the only test by which the meaning of the contract can be ascertained. There may be many possibilities within the contemplation of the contract of charterparty which were not actually present to the minds of the parties at the time of making it, and, when one or other of these possibilities becomes a fact, the meaning of the contract must be taken to be, not what the parties did intend (for they had neither thought nor intention regarding it), but that which the parties, as fair and reasonable men, would presumably have agreed upon if, having such possibility in view, they had made express provision as to their several rights and liabilities in the event of its occurrence."

In the present case the transaction giving rise to the obligation was connected in every way with Queensland except for the reference to London, Sydney and Melbourne in the option of place of payment. The borrower issuing the debentures was the Government of Queensland. The loan was raised under a statute of the Queensland legislature. The statute secured it on the public revenues of the colony. The statute even fixed the currency of the loan and made it repayable on 1st January 1945. The debentures were issued in Queensland. The loan was raised in Queensland. The lender who "purchased" the debentures from the Government was a body carrying on business in Queensland, as well as elsewhere in Australia. In these circumstances the transaction was bound up with Queensland. The tenor of the debentures and the localization of the particular transaction therefore suggest that pounds sterling formed the money of account of the obligation in virtue of its being the money used in Queensland rather than in virtue of its being the money used in the United Kingdom. If about the same time a local authority of the colony had raised moneys by the sale of debentures in Queensland expressed to be repayable in Queensland on 1st January 1945 (see now Local Government Act of 1936, s. 22 and s. 28 (11)) it is to be assumed that without question the money of account would have followed that of Queensland, or in other words of Australia, throughout. Is there any substantial reason why the debentures of the Government of Queensland which have given rise to the present controversy should occupy any different situation? Apart from the use of the word "sterling" and the reference to London and possibly Sydney and Melbourne as alternative places of payment, matters about which it is unnecessary to say anything further as indications of the money of account quantifying the obligation of the debentures, there appears to be only one other consideration tending against the view that the money of account is that of Queensland or Australia. That consideration is that under the authority of the same Loan Act debentures identical in form were issued in England, presumably in respect of moneys lent in England. We have no details of this transaction and we do not know what has been the history or fate of those debentures and whether they have been paid off in English sterling or not.

It is easy to see that so far as the construction of the language of the debentures goes, it ought not to receive one meaning in one country and another meaning in the other country. But it is not a question of verbal or grammatical construction. It is a question of the intention to be ascribed to the parties as a consequence to be deduced from the nature of the transaction and the situation in which they stood. The question may be propounded in somewhat the form of the test which Lord Watson framed. That is to say, it may be asked which of the two moneys of account would the parties have presumably adopted as fair and reasonable men, if, having the possibility of a separation of the two money systems in view, they had expressly provided for its occurring. But if the question is so propounded it is important to remember that the contingency for which they are supposed to be providing in advance is not that of a rate of conversion unfavourable to Australia. The contingency is simply of a separation of the moneys of account, without any foreknowledge of the rate of conversion. In fact the rate has not always been unfavourable to Australia and it may not continue always to be so.

On the limited hypothesis stated, the answer that a Queensland purchaser of debentures from the Government of Queensland must be assumed to make is that he would abide by the monetary system of the country where his business was and his investments were to be made. The answer of the Queensland Government would of course have been that its financial dealings in Australia must be governed by Australian money. From the foregoing reasoning it follows that the debentures are redeemable in Australian money of the same amount as is expressed in pounds in the debentures. Upon this footing no question as to interest since 1st January 1945 can arise, because the Commonwealth has not been in default. In any case, it is a question whether the Crown in right of the Commonwealth would be under a liability for interest. See Clode, Petition of Right, p. 96 and quaere as to the sufficiency of s. 64 of the Judiciary Act 1903-1947 to carry such a liability.

I would answer the questions lettered (a), (c) and (d) in the case stated: No. It is unnecessary to answer question (b).

I agree with the answers proposed by my brother Dixon to the questions in this case; I also agree with his Honour's reasons for such answers.