Stock Motor Ploughs Limited v Forsyth [1932] HCA 40

Stock Motor Ploughs Limited v Forsyth [1932] HCA 40 - HCA 1932 case summary — Zoe

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| Bills of Exchange Act. That consideration is that the Act contains #- C. or A. sf many express provisions referring, or deferring, to that law written rear dy and unwritten oyer which the State legislature retains authority Stock Moror a as the law governing particular matters by which the rights and 9 a0 'Im obligations arising from bills and notes are determined. Apart Rokeees: Th from secs. 27 and 97 (2) which involve the State law as to capacity hey of natural or artificial persons &s well as the mode of authenticating i corporate acts, and sec. 32 which imports the law upon the doctrine

of consideration, and sec. 25 (1) and (4) which recognize the stamp i Jaws of the States, secs. 34 (2), 35 (2), 41 (2) and (5) and 43 (1) (6) se will be found on examination to remit to the operation of the general » law over which the State retains control some of the most important 'v elements in the validity of or title to bills and notes. The references '» to "unlawful means" and "illegality" and " defects of title" as i well as to " personal defences " necessarily involve the proposition i that it is by this general law that the rights arising under bills and '© notes must be ascertained. How far State legislation may and does » affect the acquisition of rights under these instruments is illustrated » by amere reference to enactments relating to money-lending, gaming, » gold-buying and supplying liquor on credit. Finally, it is not possible to neglect the argument of expressio unius exclusio alterius »| which arises from the express and particular annulment contained in sec. 7 of the specified State legislation. These considerations ~ establish that, although Federal law undertakes the definition of what shall be bills of exchange, promissory notes and cheques, the statement of what special properties they shall possess, and the description of some of the consequences which ensue from their use, yet it leaves generally to State law authority to prescribe when and under what conditions, by what persons and subject to what qualifications they may be employed. Further, in matters of procedure, and perhaps in some matters of substantive law, sec. 79 of the Judiciary Act 1903-1927 adopts in the case of causes of action arising under Federal as well as State law the rules and provisions _ of State law so far as they are applicable. It is this provision that, in my opinion, operates to apply the appropriate State law relating _ to the limitation of actions when proceedings to enforce bills, cheques or notes are brought in Federal jurisdiction. (See Federated Sawmill,

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Timberyard and General Woodworkers' Employees' Association (Adela Branch) v. Alexander (1) and the United States cases there ci cf. Cohen v. Cohen (2).) : But large as is the area within which the laws of a State m operate to affect the acquisition and transfer of rights by mean these negotiable instruments, the peculiar nature of the Moratoriy Act appears to me to raise special difficulties in admitting it wit that area. This legislation does not operate to affect or cont the acquisition or transfer of rights by the use of bills and not It is not concerned with conditions attending a transaction in whi¢ such instruments may be employed as are, for instance, the ena¢ ments relating to money-lending, or with the policy of allowin them to be given effectually for some particular consideration, are the provisions relating to gaming founded on 5 & 6 Wm. Il c. 41, sec. 1, or with the possession of them as assets available i execution, as are those based on 1 & 2 Vict. c. 110, sec. 12, or wit matters governing the fairness and propriety of transactions in tht course of which bills and notes may be given, as, for instance, d secs. 258 to 25e of the South Australian Land Agents Act 1925 an 1927. The Moratorium Act does not affect instruments at thei inception, and does not provide in advance how and under wh limitations and qualifications rights may accrue or disabilities m be incurred. It is concerned with accrued rights. It seeks suspend, subject to a discretionary relaxation of the suspension, th enforcement of existing liabilities incurred unconditionally with full allowance of the State law and it includes liabilities upon and notes. That a right is given by the Federal statute to holder of an undischarged instrument validly and regularly m and issued for lawful consideration, by persons of full capacity, enforce it when he is subject to no personal defence seems undeniabl (see secs. 43 (1) (b), 62 (a) and 64 (2) (a) ). It is true that the stat does no more than express and imply what the common law its accomplished. But, by so doing, it has transformed rules of law wh the State Legislature might vary or detract from as it chose int Federal statute law over the operation of which the State has n

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ty Now it is conceivable that the Federal Legislature might have H- ©. oF A. | passed a law upon the subject of promissory notes, so that, when vena » an instrument answering the described form came into existence, Srock Moror

any action upon the note by the payee against the maker should - - not be defeated or restrained because of any personal relationship po.°\n, » between those parties. In that event, a question would have arisen | - whether the law was a " properly framed " law with respect to the s subject matter of "bills of exchange and promissory notes." For sec. 51 of the Constitution gives no general power to the Federal » Parliament to pass laws with respect to contracts, other than those : specified in sec. 51 (xx.), and it would be contended that the Federal authority had trespassed beyond the true domain of negotiable instruments because it set at nought the transactions in which » they were given. ' A perusal of the existing Commonwealth Act indicates that it was » not intended to place restrictions upon the contractual freedom . of the two original parties to a promissory note. Personal defences » may be availed of by the maker against the payee (sec. 43 (1) (b) ). Yet it does not follow from the availability of personal defences to , makers against payees, that the State Parliament could pass a law . depriving every payee of a promissory note of the right of suing the maker in the Courts of the State. And such a law is best attacked, not because sec. 43 (1) (a) of the Federal Act enables the holder of a bill to sue in his name, for, as Harvey C.J. in Eq. points out (1), the essence of that provision "is not in giving the holder a right to sue, but a right to use his own name as a plaintiff," but because

"inconsistency " within the meaning of sec. 109 of the Constitution may exist between State and Federal laws even although it is possible to obey both laws. For the Federal Bills of Exchange Act, although leaving a limited number of questions in relation to negotiable instruments to be measured and ascertained by reference to the laws of the States, may well be regarded as intending to exclude from any operation whatsoever State laws which are, in substance, laws with respect to promissory notes. A State law of the character Suggested above could hardly be regarded as a law establishing a personal defence. But it would be correctly described as a law
upon the sole topic of promissory notes.

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purchase agreements. The State Act would be addressed to tra tions of the character described, and may regulate, and, by regulat qualify, limit or even destroy, existing contractual rights. U: may be made less profitable, interest rates may be reduced, rights and remedies of parties to mortgage or hire-p transactions may be altered. Now it is obvious that there often be promissory notes made and delivered in relation to, and a an integral part of, the transactions which the State Legislature is assumed to be regulating. But, in the first place, no such regulat could be described as one merely with respect to " promissory notes"; secondly, there is no express contradiction to the Federal Bills 9 Exchange Act discernible in laws of such a general character. For sake of clearness, let me repeat two sentences from the judgm of Harvey C.J. in Eq. (1) which express his view of the presi problem : - (a) "The general scheme of the" Federal " Act app to me to leave questions arising between the maker and payee , the note to the general law of contract." (b) " As between immediate parties to the note, any equities may arise by contract or conduct, and the mutual rights of the immediate contracting parties are, in my opinion, left to be decided by State law." The first of these two propositions is based upon a construction of the Federal Act. The second expresses the learned Chief Judge's conclusion as to the present dispute. The difficulties I feel about a general adherence to the two propositions is implicit in what I have already said. I doubt whether a State enactment, denyin 7 payees of a promissory note the right of seeking to recover amount thereof in its Courts, could be upheld though the enactment dealt solely with the " mutual rights of the immediate contracting parties " to the note. But the New South Wales Moratorium Act restricts the rights of parties to mortgage and hire-purchase transactions, and it is only an incident of the regulated transactions that one party has be the payee and the other the maker of a promissory note. With such

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the notes is a demand for payment within the meaning of sec. 4; &G that the appellant is a mortgagee within the meaning of that section, ® and that the moneys sued for are instalments of purchase-money due to the appellant by the terms of a hire-purchase agreement. In that view I concur. The defendant's plea, in my opinion, does "® allege that the sums of money for which the appellant is suing are instalments of purchase-money within the meaning of sec. 20 (Counsell v. London and Westminster Loan and Discount Co. (1) ; Levick v. Trevascus (2); Hoare v. Farrow (3)). In this view of | the operation of secs. 20 and 4, the payee of any such note may not sue the maker without the leave of the Court. Should he apply for leave the Act authorizes the Court to refuse the application. If the application be refused, the right of the payee to recover the debt may be indefinitely postponed. The Court is also authorized to grant leave subject to conditions, or it may postpone the date for the payment of the instalment which is due by the terms of the agreement. In Gould v. Robson (4), which was a case in which time was given by the holder to the acceptor of a bill of exchange, Lord Ellenborough said (5): '" How can a man be said not to be injured if his means of suing be abridged by the act of another?" Itis obvious that these sections of the Moratorium Act restrict the right 3 of a person to recover money expressed to be due by the terms of ae promissory note, which is given as security for an instalment due ' _ in the manner mentioned in sec. 20. be Thus a question of considerable difficulty arises, namely, whether these provisions of the Moratorium Act are inconsistent with the Bills of Exchange Act 1909, so that the latter prevails, and the former _ are, to the extent of their inconsistency, invalid. The principle Which should be applied to determine whether there is inconsistency under sec. 109 of the Constitution between a law of the Common- wealth and a State was stated by Dixon J. in Ex parte McLean (6),

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97 (2) of the original English Act. The instruments to which the Act relates are commonly known as negotiable instruments. They have also been described as " instruments of commerce " (Nathan v. State of Louisiana (2) ), " circulating medium " (Byles on Bills, 16th ed. (1899), p. xiii.), and " circulating credit" (Story, Commentaries on the Law of Promissory Notes, 5th ed. (1859), p.3). They are contracts possessing special advantages and privileges, in virtue of which they perform the functions implied in the above-mentioned descrip- tions. "The particular conduct or matter" to which the Parlia- ment of the Commonwealth directed its attention in passing the Bills of Exchange Act, was, in my opinion, the characteristics or attributes which distinguished these contracts as a class apart from other contracts. Viewed as "negotiable instruments" or "instruments of commerce" or "circulating credit" they fulfil after a fashion a function of currency, and in that character are matters of general and national importance. Speaking of the attributes of negotiability, which in the course of legal development became attached to a promissory note, Story, in his Commentaries on the Law of Promissory Notes, 5th ed., at p. 3, writes " yet it is the latter quality which gives it its principal importance and value in modern times, and makes it circulating credit, so extensively useful and so generally resorted to in the commerce of the world." 'The language of Parliament is the guide to its intention. However, it would probably not be a false assumption, and it is not, in my opinion, inconsistent with the language of the Act, to say that the motive of public policy and convenience which led to the enactment of this Act by the National Legislature was to obtain uniformity throughout Australia in the rules of law to which these instruments owe their utility in commerce. In summarizing the characteristics of these instruments the learned author of Halsbury's Laws of England, 1st ed., vol. 1, p. 461, writes the following statement concerning the nature of the original English Act: "The outstanding

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characteristics common to bills, cheques and notes which fo un expression in the cases before 1882, and are embodied in codifying statute, are - (1) that in the case of such instrument a valuable consideration is presumed, so that there is no necessi to state it; (2) that such instruments may be transferred from or person to another by indorsement or by delivery, so as to enabli the transferee to sue thereon in his own name ; (3) that the transferee who takes such an instrument in good faith and for value obtains a good title in spite of any defect of title in the transferor. codifying statute is based upon these broad principles, and, ev in its details, for the most part crystallizes in permanent form effect of the many judicial decisions which preceded it. But excep tions are to be found where the law has been deliberately altered by it." The Australian Act is based upon the same principles as the English Act. The gist of its provisions is that it defines th nature of the instruments to which it relates, prescribes the requisit of such instruments respectively and, generally, with some variation, gives statutory effect to a set of rules which effected and reg: their complete operation as negotiable instruments and gave then special advantages and privileges over other classes of contracts Within the Act itself there is full recognition of the existing law on matters with respect to which the Parliament of a State may have legislated or could legislate in exercise of the powers reserved to it by the Constitution. By the operation of the Bills of Exchange Ad a promissory note reduces a debt to certainty, renders it transferable and the maker is provided with credit while the payee is afforded the means of obtaining ready money by discount. But the Act recognizes that the transaction out of which the debt arises may bt governed by the law of a State. The Federal Act is a special system of law erected upon a foundation of which State law forms part for resolving debts into negotiable paper. If debts were not contra the instruments to which the Act relates would not come into ence. Any law of a State which purported to set up a rule with respect to the operation of a bill of exchange, cheque or promiss note, as a negotiable instrument would be with respect to a " pi ticular matter or conduct " to which the Parliament of the Common

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Judgment (189 paragraphs)

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