Herbert v R [1941] HCA 12

High Court of Australia|1941-07-01

y - Offence - "' Credit" obtained by fraud - Loans of money - Bankruptey (ct 1924-1933 (No. 87 of 1924 - No, 66 of 1933), sec. 212 (1) (a).

212 (1) (a) of the Bankruptcy Act 1924-1933, which provides that any

or liability has obtained "credit" by means of fraud shall be guilty of an 00, is not restricted to debts or liabilities incurred for goods sold or services

. from the Federal Court of Bankruptcy (District of New South the Territory for the Seat of Government).

| Lionel Herbert was tried summarily on four charges, laid 'sec, 212 (1) (a) of the Bankruptcy Act 1924-1933, that on or 27th July 1939, 3rd August 1939, Ist September 1939, and tember 1939 respectively at Sydney he, being a person whom, on 12th December 1939, a sequestration order was under the Act, did, in incurring a liability to one Blanche lor, obtain credit from her to the extent of the sum mentioned

tbert borrowed the money the subject of the charges by making ns which Judge Lukin found to be false. For the loans tained Herbert gave Mrs. Taylor promissory notes, payable on ied future dates, which upon maturity were presented and

on against whom a sequestration order is made who in incurring any debt _

'is generghin its operation and applies where a loan of money is

A submission made on behalf of Herbert at the conclusion of the case for the Crown that sec. 212 (1) (a) only applies to a debt or liability incurred after the date of the sequestration order was over- ruled by the trial judge. After hearing evidence by and on behalf of Herbert, the trial judge accepted the evidence of Mrs. Taylor.in regard to the facts constituting the offences, but not that of Herbert, Herbert was accordingly found guilty of each of the four charges and was sentenced to imprisonment for four months in respect of each offence, such sentences to be concurrent. The trial judge recommended that the sentences so imposed should be served on. a State prison farm if available.

From those convictions and sentences Herbert appealed to the High Court.

Barwick (with him Falstein), for the appellant. The offence, if any, here proved was that of obtaining money by fraud within the meaning of sec. 210 (3) (d). To obtain money on loan is not to: obtain credit within the meaning of sec. 212 (1) (a). What has to. be obtained under the section is credit. Credit is only obtained where the other party has the choice either of demanding instant. payment or of allowing time. There is no such choice in the lending of money. The matter is well illustrated in R. v. Pierce (1), where, because of an existing liability, the creditor was entitled to insist. on prompt payment, but because of the fraud chose to extend credit by not insisting on prompt payment. Until credit in this. sense is obtained by the fraud, sec. 212 (1) (a) does not apply (2. v. Cosnett (2) ). The essence of the offence is the fraudulent persuasion to adopt one of two possible alternatives. The distinction between obtaining goods by fraud and obtaining credit by fraud is substantial

R. y. Peters (3) and R. v. Juby (4) are not authorities to the con- trary. In Re Gilroy; Ex parte Gilroy (5), R. v. Carpenter (6) and R. v. Parker and Bulteel (7) it was assumed, without actual decision, that to obtain a loan is to obtain credit, but the point was not raised. The obtaining of credit was also discussed in R. v. Jones (8). In. the present case a negotiable instrument was given in exchange for the loan. A negotiable instrument is in the nature of cash, and may be negotiated immediately. In this matter, therefore, the appellant. did not obtain credit from Mrs. Taylor, as he placed her in a position.

(1) (1887) 3 T.L.R. 586; 56 L.T. 532. (5) (1892) 3 B.C. (N.S.W.) 45.

(2) (1901) 17 T.L.R. 524; 84 L.-T. (6) (1911) 22 Cox C.C. 618, at p. 622. 800. (7) (1916) 25 Cox C.C. 145, at pp

(4) (1886) 3 T.L.R. 211 ; 55 LT. 788. (8) (1898) 1 Q.B. 119, at pp. 124, 125.

On an analysis what was obtained by the representation matter was money and not credit. In sentencing the appellant judge erred in taking into consideration extraneous matters.

osh, for the respondent. Credit is obtained even though a y be given (R. v. Fryer (1) ). To obtain a loan is to obtain ir ¥ p- 1269, cases there cited. The moment money is borrowed which yable not instanter but at some future date credit is given borrower for the repayment of the money over that period. Ht and credit are related (Re Pierce (2); R. v. Peters (3) ). 'ic idea of credit is exactly opposite to cash payment. A loan y is based on the repayment of it. Where, therefore, there n of repayment, that must be based on the trust imposed the borrower, in other words, upon his credit to repay. The relies upon Re Gilroy; Ex parte Gilroy (4), R. v. (5), R. v. Parker and Bulteel (6) and R. v. Jones (7). orrectness or otherwise of the sentences is a matter which is the discretion of the court.

H A.C.J, This is an appeal from the conviction and sentence 'the summary trial of the appellant under sec. 212 (1) (a) of kruptey Act 1924-1933.

appellant, against whom a sequestration order had been on 12th December 1939, was charged that he did on prior to the date of this order in incurring a_ liability Blanche Taylor obtain credit from her to the extent of amounts. The appellant borrowed the money the subject charges by making representations which the trial judge to be false. For the loans obtained the appellant gave promissory notes, which were presented and dishonoured. were five charges, but at the trial the Crown did not press charge. The remaining four charges were heard together. conclusion of the case for the Crown appellant's counsel ed that the facts proved did not bring his client within the 'of see, 212 (1) (a), because the section only applies to a debt

(1) (1912) 7 Cr, Ay R189, at p. 185, (4) (1892) 3 B.C. (N.S.W.) 45. ) 3 TLR. (5) (1911) 22 Cox C.C. 618. ) 16 Bde a. at p. GAL, (6) (1916) 25 Cox C.C. 145.

in by negotiation of the bill an immediate return of her H- ©. oF 4

or liability incurred after the date of the sequestration order, His Honour overruled this objection, and, after hearing appellant's evidence, accepted the evidence of Mrs. Taylor in regard to the facts constituting the offences, but not that of the bankrupt, and accord- ingly found him guilty on the second, third, fourth and fifth charges, On the appeal before this court counsel for the appellant did not argue the objection overruled by the learned primary judge, or that the sums obtained by the appellant were not obtained by means of fraud, but he contended that sec. 212 (1) (a) only relates to transae- tions in which goods or services are obtained on credit. The question which falls for determination is whether the section is general in its application or merely restricted to particular types, e.g., obtaining goods. The opening phrase in the section is perfectly general. It says "any debt or liability." And there appears to me to be no reason for assuming that the generality of this phrase was intended to be limited by any restricted meaning of the word "credit." In other words, in incurring any debt or liability a party may succeed in doing so by means of fraud.

This general operation of the section is supported by the opinion of Manning J. in Re Gilroy (1), where similar words in sec. 123 (a) of the New-South-Wales Bankruptcy Act 1887 (51 Vict. No. 19) were under consideration. In that case, on an application for a certificate of dis- charge it appeared that the bankrupt before the passing of the Act had obtained a loan on the security of certain mortgages and a promis- sory note bearing an approved indorsement which was subsequently found to have been forged. His Honour, after holding that it was not material whether the offence in question was committed before or after the Act came into operation, said : - '* A further question is whether the bankrupt has obtained credit by fraud in incurring a debt or liability. I think he has so obtained credit. A man must be said to have so obtained credit if he has obtained money or goods by a false representation. If he creates the relation of debtor or creditor, he obtains credit" (1). Similarly, in a case under the English Debtors Act 1869, sec. 13 (1), from which the Federal and New-South-Wales sections are derived, in the course of a summing up to a jury Channell J., dealing with a number of charges of obtain- ing money on loan by deposit, said : " You know he " (the defendant) " got the money on loan: now that being so, of course he got credit, but it does not prevent the charge being established of obtaining money by false pretences . . . the defendant obtained both money and credit" (R. v. Carpenter (2) ) - See also R. v. Parker

(1) (1892) 3 B.C. (N.S.W.) 45. (2) (1911) 22 Cox C.C., at pp.

mary one of the meanings of " credit" is " trust in a person's ty and intention to pay, as give credit, deal on credit, long and a quotation is given from Jevon's Primer of Political p- 110, " Anyone who lends a thing gives credit, and he 8 it receives credit." In Johnson's Dictionary " credit " d as being "correlative to debt." And it is immaterial ecurity is given. '* There is a personal trust" (reposed) "none though it is not to the extreme extent" (Re Fryer (4) ). a man who takes a bill from the drawer is surely a person credit to him (Hx parte Douthat (5), per Bayley J.).

remaining ground of appeal, that in imposing sentence the ge took into consideration matters extraneous to the charges fore the court, cannot in my opinion be sustained, and the appeal

xe J. The appellant was summarily convicted under the of the Bankruptcy Act 1924-1933 of four several offences the provisions of sec. 212 (1) (a) of the Act. The section ) that any person against whom a sequestration order is de who in incurring any debt or liability has obtained credit by of fraud shall be guilty of an offence. The appellant borrowed four several sums of money from Mrs. inche Taylor by means of fraud or by statements known by him false. He gave a promissory note for two of the amounts payable three months after date, and for the other he gave a post-dated cheque, for which a promissory note ns to have been substituted payable one month after date. All negotiable instruments were dishonoured. e of goods or other things upon the promise of deferred or payment is a sale upon credit. The purchaser is trusted with or things without present payment and obtains or is given t for the debt or liability which he incurs in the acquisition of goods or things. But it was argued that a person incurring or liability for money lent repayable at a future time does any credit, but money. It was conceded that, if false s were used for the purpose of obtaining the loan, then the of obtaining money by false pretences would have been d, but not the offence of obtaining credit by means of id: See R. v. Green (6).

25 2) 7 Cr. App. R., ' i 16 geht tae hs ties is ret one for

[106 E.R. 863, at p. 864). (6) (1913) 9 Cr. App. R, 127.

(1); B. v. Peters (2); R. v. Jones (3). In the Ozford 4. ©. oF A

In my opinion, the argument ought not to succeed. The appellant admittedly incurred debts or liabilities to Mrs. Taylor for money lent to him. Mrs. Taylor gave him time to repay to her the amount of those debts or liabilities. She thus gave, and the appellant obtained, credit for the amounts of these debts or liabilities incurred by him for money lent. Credit was not the less obtained because negotiable instruments were given by the appellant to Mrs. Taylor for the amount of the debt or liability (R. v. Fryer (1)). And he incurred these debts or liabilities by means of fraud. All the elements constituting the offence under sec. 212 (1) (a) are thus present. It may be that the facts constitute the offence of obtaining money by false pretences as well as another offence, namely, that in incurring debts or liabilities the appellant obtained credit by means of fraud. There is authority in support of the foregoing conclusion: Re Gilroy (2); Re Salomons (3), noted in Archbold's Criminal Practice, 30th ed. (1938), p. 1296; R. v. Carpenter (4).

McTiernan J. The appellant was upon a summary trial by the Court of Bankruptcy found guilty of four offences against sec. 212 (1) (a) of the Bankruptcy Act and was sentenced to imprisonment for four months for each offence, the sentences being ordered to be concurrent. The maximum penalty provided by the section is one year's imprisonment.

The grounds relied upon in this appeal are, first, that the facts proved do not come within sec. 212 (1) (a), and, secondly, that the sentences were excessive.

It was proved by the evidence of a Mrs. Taylor that in July 1939 the appellant told her that he had put all his capital into a company in which they were interested and asked her to lend him £25. He made a representation that he had a property which he was trying to sell to enable him to get some ready money. The representation was false. The appellant, she said, promised he would repay the money. He gave the witness a promissory note for £25 dated 27th July, due 28th October, and signed by himself. The witness gave him her cheque for £25, which he cashed. She said that when the money was lent she relied upon the representa- tions he made to her.

The first point taken for the appellant is that the sub-section is limited to debts or liabilities incurred for goods sold or services ren-

'dered. The second point is that where the seller of goods, or the party

(1) (1912) 7 Cr. App. R., at p. 185, (3) (1890) 1 B.C. (N.S.W.) LL. (2) (1892) 3 B.C. (N.S.W.) 45. (4) (1911) 22 Cox CC, 618.

ng services, or, assuming the sub-section applies to a loan, enters into a binding stipulation with the other party. oning payment to a future date, that party does not obtain This view of what is meant by obtaining credit would limit ration of the sub-section to the case where the creditor, Vv e option to stipulate for immediate payment or for payment future date, gives the debtor the benefit of the second alternative. or this reason that the contention is made that the sub-section es not apply to a loan for a fixed period. Necessarily, in that 'the alternatives are not before the lender. The only method out the transaction is to advance the money and stipulate nent at a future date. » sub-section is not by express words limited to goods and Is the implication necessarily implied ? The implication, be observed, would exclude land and possibly other property m the operation of the sub-section as well as loans of money. is nothing in the Act to lead one to suppose that its framers not intend the sub-section to apply to any debt or liability, vhether in respect of goods, services, money lent, or property of ny kind, There can be no doubt that a loan is within the mischief dat by the sub-section. If in incurring such a liability credit ned by fraud, the transaction is, in my opinion, within the ds of the sub-section. The Act is not limited to traders, and is no reason to suppose that the sub-section was enacted to nothing but frauds in trade strictly so called and in the hiring es. The points taken on behalf of the appellant are conclu- answered by at least four decisions. They are R. v. Peters (1); -v. Jones (2); R. v. Fryer (3); Re Gilroy (4). commercial and financial affairs the word " credit " may iify the financial arrangement in a transaction or the reputation lvency and honesty which entitles a person desirous of incurring or liability to do so on the terms that payment is to be erred. In its former meaning it includes the delivery of goods r the advancing of money with the trust that the debtor will have . to pay and will pay at a future date. The element of confidence in the creditor is not eliminated by taking a 'sory note for the debt. It is rather manifested by doing so. C.J. in R. v. Peters (5) quoted Johnson's definition of He said it was "the correlative to debt." 'That authority not, I think, have agreed that in incurring the liability

16 Q.B.D. 636, (3) (1912) 7 Cr. App. R. 183. (4) (1892) 3 B.C. (N.S.W,) 45. (5) (1886) 16 Q.B.D., at p. 641.

expressed in a promissory note the maker does not obtain 1 In his letter to Boswell, 28th March 1762, on the evil of poverty h , wrote: "To come hither with such expectations at the expense of borrowed money which I find you know not where to borrow, can hardly be considered as prudent. I am sorry to find, what your solicitation seems to imply that you have already gone to the whole length of your credit. - This is to set the quiet of your whole life at hazard." i

The learned trial judge considered the appellant deserving of four- months' imprisonment because he used fraudulent solicitations to influence Mrs. Taylor to give him credit. It is submitted that the sentence was excessive. The fraud was systematic and it involved loss to Mrs. Taylor. There is nothing to suggest that the learned judge did not most properly exercise his discretion in imposing this sentence.

Wituams J. The facts have been referred to in the judgments of the Acting Chief Justice and of my brother Starke, with which I agree, and I have little to add.

The short point involved in the appeal is whether sec. 212 (1) (a) of the Bankruptcy Act 1924-1933 applies to a case where a person, who subsequently becomes bankrupt, has obtained a loan of money, payable in futuro, by fraud.

Mr. Barwick for the appellant has submitted that the sub-section only applies where the person who gives the credit can have a choice whether to do so or not, as, for instance, whether to supply goods or give services on credit as opposed to a cash payment. He said such a choice cannot arise in the case of a loan because such a transac- tion necessarily involves the giving of time to pay.

As I stated during the argument, it appears to me that the real question for the prospective creditor to decide is whether or not he can trust the intending debtor to satisfy the debt or liability on its due date. Such a debt or liability could be incurred just as easily as a result of a loan as it could be in respect of goods sold and delivered or services rendered. Indeed, the contract of service resembles a loan in this respect, because it usually involves the giving of some credit, as services are almost universally rendered before they are paid for, whereas in the case of a sale of goods the delivery and payment are often simultaneous.

The sub-section applies to any debt or liability, and I can see no warrant for confining its meaning in the manner Mr. Barwick has suggested. His argument is opposed to the authorities referred to

udgments already mentioned and to R. v. Brownlow (1): See H- C. or A. 'Corby (2). 141.

¢. 210 (3) (2) makes it an offence to obtain money by fraud, and Ec ib-section does to some extent overlap with the sub-section v.

er review, but it also covers a far wider field. A similar position T™® K™ in the case of sec. 210 (3) (a). This consideration does not Williams 5 to me to throw any light on the true construction of sec. (a). he Act contains other sub-sections relating to the obtaining of it: See sec. 119 (7) (c), sec. 210 (3) (b) and (c), and sec. 211 (a). rs from sub-secs. 210 (3) (a), (b) and (c) that when the mt intended to confine the offence to the obtaining of any erty on credit it was careful to limit the liability of the bankrupt ess words. The interpretation section, namely, sec. 4, that, unless the contrary intention appears, property es money, but there is a sufficient indication of such an inten- n the case of sub-secs. 210 (3) (a), (b) and (c). conclusion I have come to is that sec. 212 (1) (a) does apply ning a loan by fraud. Barwick also contended that the sentence imposed upon the nt should be reviewed because the learned Judge in Bank- had taken certain extraneous matters into consideration, but, this is so, I do not think the sentence which he imposed , under the circumstances, too severe. he appeal should be dismissed with costs.

for the appellant, Abram Landa, Barton & Co. for the respondent, H. F. E. Whitlam, Commonwealth Solicitor.

ie (1910) 4 Ce, App. R. 131, 2) (1908) 8 S.R. (N.S.W.) 252, at p. 257.

At a glance

Court

Decision date

Source

Judgment (50 paragraphs)