Bonython v The Commonwealth

Bonython v The Commonwealth - [1948] HCA 2 - HCA 1948 case summary — Zoe

[14]

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.

[21]

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.

[23]

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.

[29]

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."

[30]

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.

At a glance

Court

Decision date

Before

Source

Judgment (34 paragraphs)

Parties

Cases Cited (1)