The Relevant Cases
Contract Formation
133It is hard to find a convincing explanation for the posting of an acceptance sometimes being a sufficient acceptance of an offer, beyond the urgent practical necessity of having some rule to decide by what act and at what time people who are negotiating for a contract, but are not in each other's presence, become bound.
134Indeed, the future existence of the postal acceptance rule itself might be in doubt. In Tallerman and Company Pty Ltd v Nathan's Merchandise (Victoria) Pty Ltd (1957) 98 CLR 93 at 111 Dixon CJ and Fullagar J said:
"The general rule is that a contract is not completed until acceptance of an offer is actually communicated to the offeror, and a finding that a contract is completed by the posting of a letter of acceptance cannot be justified unless it is inferred that the offeror contemplated and intended that his offer might be accepted by the doing of that act ..."
135That statement requires something more precise than a contemplation that the postal services might be used as a medium of communication. For it to be "inferred that the offeror contemplated and intended that his offer might be accepted" by the posting of an acceptance there would need to be a basis in the terms or circumstances in which the parties were communicating from which such an intention could be inferred. The required inference is that it is the posting itself which is the acceptance, not just that the post might be the means by which an acceptance is communicated. For the statement of Dixon CJ and Fullagar J to be the law would accord with current views about it being the objective intention of the parties, ie what the bystander would infer was the mutual intention of the parties, which is of importance in contact formation. However, as Dixon CJ and Fullagar J recognised at 112, their statement of principle was not relevant to the outcome of the case before them, as the parties had agreed that it be conducted on a different basis. Until there is a case whose outcome depends on the present status of the postal acceptance rule it is safer to proceed on the basis that the law as stated in the English cases I shall shortly mention continues to be the law in Australia.
136In Adams v Lindsell (1818) 1 B & Ald 681; 106 ER 250 (a case, incidentally, in which the offer itself stated "receiving your answer in course of post") the Court at 683 used both practicality, and a blatant fiction, to justify their conclusion that the contract was complete upon the acceptance being posted:
"If the defendants were not bound by their offer when accepted by the plaintiffs till the answer was received, then the plaintiffs ought not be bound till after they had received the notification that the defendants had received their answer and assented to it. And so it might go on ad infinitum. The defendants must be considered in law as making, during every instance of the time their letter was travelling, the same identical offer to the plaintiffs; and then the contract is completed by the acceptance of it by the latter."
137In Dunlop v Higgins (1848) 1 HLC 381; 9 ER 805 Lord Cottenham LC said at 348, 812 that the explanation for the contract arising in that case was that there was a usage of trade to accept a postal offer by post. That remark in its context may well have meant that the usage was one of the trade in which the parties were both participants, or perhaps a custom of merchants generally. Either way, a trade custom would provide a legitimate explanation for why the acceptance is complete upon posting.
138However, two years earlier in Potter v Sanders (1846) 6 Hare 1; 67 ER 1057 Sir James Wigram V-C had held that a contract for the sale of land arose when a letter accepting a written offer was put into the post. The decision was given without any explanation as to why that was so, and in circumstances where the parties were not in any way involved in a trade or business.
139In re Imperial Land Co of Marseilles (Harris' Case) (1872) LR 7 Ch App 587 similarly held that posting an acceptance brought about a contract even though it was not formed between merchants. Sir W James LJ at 592 put the power to accept by post as arising from "the ordinary usage of mankind in those matters". Sir G Mellish LJ at 593 put it on the basis that the offeror either directly or impliedly tells the offeree to send his answer by post. He also justified it by reference to the practical necessity of the acceptor having certainty about whether a contract was in existence or not. If it were a provision of the offer itself that provided the basis for the contract arising upon posting an acceptance that would be consistent with the objective theory of contract. However, logically the offer should convey more than that the offeree should send the answer by post - the offeror would need to expressly or impliedly tell the offeree to send the answer by post and that it would be treated as accepted upon posting. In In re Imperial Land Co of Marseilles (Wall's Case) (1872) LR 15 Eq Cas 18 at 21, Sir R Malins V-C justified the postal acceptance rule by reference to the offeror knowing that it was "the regular settled mode of conducting such business" to send the acceptance by post, and thus sending the offer by post involved an implied authority to accept by post.
140It is clear that if a letter accepting an offer is posted, a contract exists even if the letter never reaches the addressee: Household Insurance Co v Grant (1879) LR 4 ExD 216 at 219, 227. (The exasperated dissent of Bramwell LJ contains some plausible objections to this outcome, but has not prevailed). In Household Insurance Co at 228, Baggallay LJ said that it was not in every case in which an offer was accepted by post that a contract resulted, only in "cases in which by reason of general usage, or of the relations between the parties to any particular transactions, or of the terms in which the offer is made, the acceptance of such offer by a letter through the post is expressly or impliedly authorized."
141Some cases have held that putting an acceptance of an offer into the post constitutes a contract because the Post Office is the agent of both parties: In Re National Savings Bank Association (Hebb's Case) (1867) LR 4 Eq 9 at 12; Household Insurance Co at 221. However, that justification for the contract arising has been convincingly rejected. In Henthorn v Fraser [1892] 2 Ch 27, Lord Herschell (with whom Lindley LJ agreed) said at 33:
"It strikes me as somewhat artificial to speak of the person to whom the offer is made as having the implied authority of the other party to send his acceptance by post. He needs no authority to transmit the acceptance through any particular channel; he may select what means he pleases, the Post Office no less than any other. The only effect of the supposed authority is to make the acceptance complete so soon as it is posted, and authority will obviously be implied only when the tribunal considers that it is a case in which this result ought to be reached. I should prefer to state the rule thus: Where the circumstances are such that it must have been within the contemplation of the parties that, according to the ordinary usages of mankind, the post might be used as a means of communicating the acceptance of an offer, the acceptance is complete as soon as it is posted."
142That amounts to saying that there is a rule of law that posting counts as the acceptance of an offer in certain circumstances. The "agency" of the Post Office is not part of his Lordship's account.
143Kay LJ at 35-36 was more robust:
"Dunlop v Higgins has been explained by saying that the Post Office was treated as the common agent of both contracting parties. That reason is not satisfactory. The Post Office are only carriers between them. They are agents to convey the communication, not to receive it. The communication is not made to the Post Office, but by their agency as carriers. The difference is between saying 'Tell my agent A, if you accept,' and 'Send your answer to me by A.' In the former case A is to be the intelligent recipient of the acceptance, in the latter he is only to convey the communication to the person making the offer which he may do by a letter, knowing nothing of its contents. The Post Office are only agents in the latter sense. All Dunlop v Higgins decided was, that the acceptor of the offer having properly posted his acceptance, was not responsible for the delay of the Post Office in delivering it; so that after receipt the said party could not rescind on the ground of that delay."
144As Dr Pannam put it, "the Post Office is no one's 'agent' but is a public institution under a public duty to carry the mails": CL Pannam "Postal Regulation 289 and Acceptance of an Offer by Post" (1960) 2 Melbourne University Law Review 388 at 393. See similarly RA Samek "A Reassessment of the Present Rule Relating to Postal Acceptance" (1961) 35 Australian Law Journal 38 at 39, Simon Gardner "Trashing with Trollope: A Deconstruction of the Postal Rules in Contract" (1992) 12 Oxford Journal of Legal Studies volume 12 170 at 173-175.
145There is widespread acceptance among commentators that it is hard to find an explanation for the postal acceptance rule, other than the pragmatic necessity of having a rule of some sort, and that rule being no worse than any alternative: Pannam, op cit; Gardner, op cit; Carter, Peden & Tolhurst, Contract Law in Australia, 5th ed (2007) LexisNexis Butterworths [3-35]; Chitty on Contracts, 30th ed (2008) Thompson Reuters, vol 1 [2-048] ("best explained as one of convenience"); Holwell Securities Ltd v Hughes [1973] 1 WLR 757 at 763-764 per Templeman J; Nunin Holdings Pty Ltd v Tullamarine Estates Pty Ltd [1994] 1 VR 74 at 81 per Hedigan J. The relevance of this for the present case is that if no more satisfactory explanation for the postal acceptance rule is available than that a rule of some sort is needed to enable there to be certainty about when and how a contract may be formed by people communicating at a distance, that does not provide a very promising basis for arguing that there is a general rule of law whereby, if the parties envisaged that the post will be used, posting a document has the same effect as handing it to the intended recipient.
146Further, it is not as though, even concerning contract formation, there is a rule that in all circumstances when the parties envisage communication by post, putting a document into the post has the same effect as handing the document to the intended recipient. That is because for an offeror to withdraw the offer it is not enough to put the letter of withdrawal in the post - the withdrawal must actually be communicated to the offeree before it is effective: Henthorn v Fraser.
147Even if one accepts that there is a pragmatic justification for the postal acceptance rule, that does not mean that there is also a pragmatic justification for a "postal rule" concerning payment of a debt. The pragmatic circumstances that attend the payment of a debt by a debtor to a creditor who is not in the creditor's immediate vicinity are different to those that attend the entering of a contract between people who are not in each others' immediate presence. The contract is the start of a legal relationship between the parties, while payment of a debt is performance of an existing legal obligation. In particular, the debt already has a known date when it is due, while the contract does not exist until there is acceptance. The means that are available for payment of a debt are different to those that are available for entering a contract. It is always possible to pay a debt before its due date, but there is no analogous concept concerning entering a contract.
Service Out of the Jurisdiction
148Comber v Leyland [1898] AC 524 concerned a rule of court that enabled service outside the jurisdiction of a writ alleging a breach within the jurisdiction of any contract, wherever made, which according to the terms of the jurisdiction must be performed within the jurisdiction. The contract in question was between an English banker and its Brazilian agent. The English banker had financed the export of goods to Brazil. It sent the bills of lading to the agent, with instructions to hold them and the property represented by them, and the net proceeds when realised in trust, with those proceeds to be remitted in first-class bank bills, within 30 days after arrival of the vessels at the Brazilian port. The writ alleged that the Brazilian agents had realised the goods, and not remitted the proceeds.
149The House of Lords held that the obligation to "remit" was performed by putting bank bills into the mail in Brazil. Thus there was no part of the contract of the agents that was to be performed within the jurisdiction of the British courts, and hence service out of the jurisdiction was not justified.
150Comber is purely a case concerning construction of the terms of the individual contract. The requirement to remit within 30 days after arrival of the vessels made clear that it was putting the bills into the mail that was performance of the contractual obligation. No general principle is stated in it concerning whether the posting of a communication that effects a legal act has the same effect (including in particular as to the time at which it is performed) as if that communication had been handed directly to its intended recipient. Nor can any such principle be derived from it.
Equitable Assignment
151Alexander v Steinhardt, Walker & Co [1903] 2 KB 208 concerned a Chilean firm which owed money to the plaintiff, an English firm. The Chilean firm shipped copper ore to England. It sent the bill of lading relating to the ore to the defendants, another English firm, with instructions to pay a certain part of the proceeds to the plaintiff. It also wrote to the plaintiff, informing it of the instruction given to the defendant. Before that letter reached the plaintiff the Chilean firm became bankrupt. The Chilean administrator of the bankruptcy gave instructions to the defendant by telegram not to pay the plaintiff.
152Bigham J held that the plaintiff was entitled to be paid, because the Chilean firm had made an effective equitable assignment of part of the debt that would arise upon sale of the ore. He held that the assignment was complete at the time the Chilean firm posted its letter to the plaintiff. His reasoning was brief, and by analogy to what the situation would be if a draft at sight had been posted, but the result accords with Australian law. Under Australian law, an equitable assignment of part of a debt can be effected by a manifestation of an intention to assign: Norman v FCT (1963) 109 CLR 9 at 32; Shepherd v FCT (1965) 113 CLR 385, Meagher, Heydon & Leeming, Meagher Gummow & Lehane's Equity Doctrines & Remedies 4th ed (2002) LexisNexis Butterworths, [6-175], [6-180]. The writing and posting of the letter would count as such a manifestation of intention. The case does not assist in deciding when payment occurs, if a cheque is posted to pay a debt. Paying a debt takes more than a manifestation of intention.
Notice of Dishonour of the Bill of Exchange
153Authorities before the enactment of the Bills of Exchange Act 1882 (Imp) held that regardless of whether it is actually delayed in the post, a notice of dishonour of a bill of exchange is adequately given if the notice is put into the post at a time such that, in the usual course of post, the addressee would receive it on the day following that on which the bill is dishonoured: Stocken v Collins (1841) 9 C & P 853; 173 ER 997, nonsuit refused Stocken v Collin (1841) 7 M & W 515; 151 ER 870; Woodcock v Houldsworth (1846) 16 M & W 124; 153 ER 1126. An important factor in the reasoning in those cases was that the person giving the notice had put it into the post promptly after dishonour, and thus done all that could be required of him to give notice of dishonour promptly. Necessarily, the notice would not be "of dishonour" unless it was given after the dishonour had occurred.
154It is no surprise that considerations of practicability, concerning what was in someone's power to do, loom large in the formulation of the law that governs everyday commercial dealings involving rights and obligations concerning a bill of exchange. But the factor that was important in the notice of dishonour cases, of doing all one can, is not present when considering payment of a debt by post. This is because it is quite practical for the debtor to put a cheque into the post well in advance of the time the debt is due for payment. It is also important that the issue in these cases about notice of dishonour was whether the notice had been given sufficiently quickly, not with the precise time at which it was given.
155Now, s 54 Bills of Exchange Act 1909 (Cth) provides specific rules that deal with the manner in which the post can be used in giving notice of dishonour of a bill of exchange. One such rule is s 54(o), which provides:
"where a notice of dishonour is duly addressed and posted the sender is deemed to have given due notice of dishonour, notwithstanding any miscarriage by the post- office."
That rule gives effect to the outcome in Stocken and Woodcock.
156In Eaglehill Ltd v J Needham Builders Ltd [1973] AC 992 Lord Cross of Chelsea (with whom Lords Reid, Diplock and Simon agreed) said at 1009 that the analogous English rule:
"... affords no ground for the view that if there is no miscarriage and the notice is received in the ordinary course of post it is given when it is posted and not when it is received. Indeed, the word 'deemed' suggests the contrary."
157The time of giving a notice of dishonour was of critical importance in Eaglehill. This was because it had been predictable that the bill of exchange in question would not be met on presentation, the notice of dishonour had been prepared in advance, and by a clerical error was put into the post before the dishonour had actually occurred. However, the notice was not received until after the dishonour had occurred. It was held that the time of receipt of the notice was the time when the notice of dishonour was given, and thus adequate notice of dishonour had been given.
158When legislation governing bills of exchange envisages that notice of dishonour might be given by post, it is hard to see how that creates a different situation to that which arises if the parties to a contract envisage that a particular type of document might be sent by post. Yet Eaglehill provides a direct authority against the time of posting being the time at which a posted notice of dishonour is given.
Payment of a Debt
159The law concerning payment of a debt by cheque is accurately summarised in Contract Law In Australia, op cit at [28-16]. The learned authors say that where a creditor accepts a cheque as payment of a debt:
"... the consequences depend on the intention of the parties. There are two possibilities: the cheque may be accepted as conditional payment; or as a discharge of the debtor's obligations. In the former case the debtor will be discharged only if the bill is honoured on presentation, and, if it is not, the creditor has the choice of suing on the original contract or on the separate contract evidenced by the bill. On the other hand, if the intention was for the debtor to be treated as discharged under the contract, the creditor is restricted to an action on the bill of exchange. In the absence of indications to the contrary, payment will be presumed to be conditional on the bill of exchange being met." (footnotes omitted)
160Concerning the first situation, of a cheque operating as a conditional payment of a debt, Dixon CJ said in Tilley v Official Receiver in Bankruptcy (1960) 103 CLR 529 at 532:
"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."
161Kitto J at 535-536, with whose reasons Menzies J at 537 agreed, made remarks to similar effect.
162In National Australia Bank Ltd v KDS Construction Services Pty Ltd (1987) 163 CLR 668, Mason CJ, Brennan, Deane, Dawson and Toohey JJ also made remarks to similar effect at 676, and continued:
"The condition is a condition subsequent so that, if the cheque is met, it ranks as an actual payment from the time it was given. Subject to non-fulfilment of the condition subsequent, the payment is complete at the time when the cheque is accepted by the creditor: Thomson v Moyse [1961] AC 967 at 1004."
See also Marreco v Richardson [1908] 2 KB 584 at 592; Hannaford v Smallacombe (1993) 69 P & CR 399 at 406.
163Concerning the second situation, of a cheque being accepted as a total discharge of a debt, Lord du Parcq in Tankexpress A/S v Compagnie Financière Belge Des Petroles SA [1949] AC 76 said at 103:
"If a contract provides for payment in cash, the party to whom payment is due may accept in substitution payment by cheque. Instead of money, a creditor may be willing to accept meal or malt and he may be willing to postpone the date of performance of a contractual duty. No one would doubt this, I think, if a single payment were due under a contract. One who has plainly manifested his willingness to accept a substituted method of performance cannot, when payment is made in the accepted manner, take advantage of some provision in the contract which gives him a remedy in default of payment."
See also Chitty op cit at [21-073], [21-074] and [21-077].
164When a creditor accepts a cheque in payment of a debt it is a question of fact whether the cheque is accepted as a conditional payment or as a total discharge of the debt: Chitty op cit [21-073]; Byles on Bills of Exchange and Cheques 28th ed (2007) Sweet & Maxwell at [31-001]. However, the fact-finding on that question starts from the prima facie position identified in Tilley, that the cheque is accepted as a conditional payment.
165Cases concerning the payment of a debt by the posting of a cheque or bill of exchange need to be considered against the background of those principles concerning the payment of a debt by a cheque.
166In Warwicke v Noakes (1791) 1 Peake 98; 170 ER 93 a creditor gave a specific direction to his debtor to send him by post a bill of exchange in payment of a debt. The debtor was held to have been discharged when the bill was posted but was misappropriated in the course of the post and drawn against. The explanation was: "as the plaintiff ... directed the defendants to remit the whole money in this way, it was remitted at the peril of the plaintiff".
167The case is complicated, though, by the fact that the defendant had acted as an agent of the plaintiff to collect various debts that the plaintiff was owed in the defendant's neighbourhood, and the plaintiff's request was for the whole of the money collected, and the payment of the defendant's own debt, to be remitted by posting a bill. An agent would not be personally liable for losses that were sustained through the wrongdoing of others in carrying out a specific direction of his principal. No distinction seems to have been drawn between at whose risk the bill was posted, insofar as it comprised money that the defendant had collected as agent, and insofar as it comprised money in payment of the defendant's own debt.
168In Norman v Ricketts (1886) 3 TLR 182 Lord Esher MR (Lindley and Lopes LJJ concurring) said:
"if a debtor had to pay his creditor money, as a general rule a debtor must come and pay his creditor. But if the creditor asked him to pay in a particular way, the debtor might do so. If he asked to pay through the post, the putting the letter in the post with the money was sufficient."
He held that, where a debtor had been requested to pay by cheque sent by post, and the debtor duly posted a cheque which was stolen in transit and cashed by the thief, the debt had been paid.
169That case does not explicitly deal with the time at which a debt is paid if it is paid by posting a cheque. As well, being reported only in the summary form commonly used in the Times Law Reports, the reasoning might not be fully exposed. The entire report occupies less than one column of one page (divided into two columns) of the report. Subsequent cases that I discuss below have explained why the decision was made.
170Next in chronological sequence are three cases that held that posting a cheque is not payment of a debt.
171In Luttges v Sherwood (1895) 11 TLR 233 the plaintiff had sold goods to the defendant on credit. The defendant accepted a bill of exchange, and posted the accepted bill to the plaintiff, but it never arrived. The plaintiff sued for the price of the goods. The judge was not satisfied that the plaintiff had suggested that the bill be posted. Charles J, at 234
"was not satisfied that there was any express authority by the plaintiff to use the post for transmitting the bill, and he declined to treat the cases as binding him to hold that the post office was the plaintiff's agent to receive payment. He therefore gave judgment for the plaintiff ..."
172In Pennington v Crossley and Sons (Limited) (1897) 77 LT 43 a wool merchant in Bradford had sold wool to a carpet manufacturer in Leeds for about twenty years. The manufacturer always paid for the goods by a cheque that was posted, and accompanied by a blank form of receipt for signature by the merchant. Concerning the sale in question, the manufacturer followed the usual course, but the cheque was fraudulently cashed. The Court of Appeal gave judgment for the merchant in an action for the price. They distinguished Norman v Ricketts on the ground that in that case there was "what amounted to a request to send a cheque by post" while there was no such request in the case before them. They declined to infer any such request from the course of business. Lord Esher MR said, at 44:
"The course of business was merely that the defendants sent cheques to the plaintiff by post, and the plaintiff never objected to being paid in that way. It would be outrageous for the court to infer from that that the plaintiff ever requested the defendants to send him cheques by post, and agreed to run the risk of loss in the transit."
Lord Esher had given the judgment in Norman v Ricketts.
173Baker v Lipton (Limited) (1899) 15 TLR 435 concerned a man who applied for shares in the defendant, and sent a cheque with his application. He was not allotted the full amount for which he had applied, and the company posted him a cheque for the balance. The cheque was misappropriated and fraudulently cashed. Ridley J gave judgment for the man's executrix, in an action for the balance. He held that "where there was no request by the plaintiff that a cheque should be sent by post, ... the cheque was so sent at the risk of the sender. It did not constitute payment until the cheque was received."
174Thairlwall v Great Northern Railway Company [1910] 2 KB 509 contains a discussion of the justification for the decision in Norman v Ricketts. Thairlwall held that a company had no debt to its shareholder for a dividend when it had posted a dividend warrant (the equivalent of cheque) to the shareholder at his registered address, but that cheque had not arrived. Bray J put the decision on the basis that the shareholder had agreed that the act of posting of the cheque should be payment. Bray J explained Norman v Ricketts at 515 as depending upon the principle:
"... that the parties, debtor and creditor, can agree to make and accept payment of the debt in some form other than cash, and that when the creditor asks his debtor to send the amount due by post, then if the debtor sends a cheque for the amount by post the risk of loss in transit falls on the creditor, and the posting is equivalent to payment. It is true that in the case of Norman v Ricketts the cheque sent had got into the hands of a third person and the money had been paid to that person. But I can find nothing in the report to shew that those facts entered into the consideration of the Court when giving their decision. The ground of their decision was that the creditor had agreed that the posting of the cheque should be payment, and that therefore it was payment."
175In other words, he regarded Norman v Ricketts as involving an agreement that the posting of the bill of exchange itself is accepted as a discharge of the debt. It is clear that that is the way he regarded Norman v Ricketts, because he went on to say:
"The first question is whether there was any agreement by or obligation on the plaintiff to accept this dividend warrant as payment."
176The "agreement" that he found the shareholder had made was no ordinary contract. It arose from three facts. First, a proposal had been put to a general meeting that a dividend of a certain amount be paid by dividend warrant and sent by post to proprietors. Second, the meeting had passed a resolution approving the payment of the dividend without proposing any amendment to the way in which the directors said they intended to make the payment. Third, there was a provision in the legislation governing corporations that directors have the management and superintendence of the affairs of the company and power lawfully to exercise all the powers of the company.
177He found, at 517-518, that this agreement:
"was equivalent to the request in Norman v Ricketts. After that the stockholders became entitled to payment in that way and in that way alone. Therefore, when the dividend warrants had been sent by post to the proprietors on February 15, the dividends were paid, and the stockholders had no further remedy, except upon the dividend warrants."
178Lord Coleridge J at 520 said that it would be sufficient if the company could:
"prove a request by the plaintiff or agreement between the plaintiffs and defendants that payment should be made by means of a warrant posted to the plaintiff."
179Like Norman v Ricketts, Thairlwall is a decision about what is the mode by which payment could be made, not explicitly about the time at which it was made. However, if the consensus of the parties was that the posting of the cheque was itself unconditional payment, it would inevitably follow that the time of payment was the time of posting the cheque.
180One matter relevant to the outcome in Thairlwall is that it would only have been the resolution declaring the dividend that created a debt to the shareholder. That resolution (itself contractually binding between the shareholders and the company) in effect left it to the directors to decide by what means to pay it. The shareholder could have no higher right than was conferred by the resolution that had created the debt in the first place.
181Thairlwall is to be contrasted with a case that was decided in the previous month. In Acraman v South Australian Gas Company [1910] SALR 59 the South Australian Full Court upheld a claim for payment of a dividend, brought by a shareholder against the company in which he held shares. A cheque for the dividend had been posted to him, but gone astray. Way CJ reached his conclusion on the ground that the shareholder had neither requested nor consented that the dividend be paid by a posted cheque. That conclusion was reached notwithstanding that the shareholder had twice previously received dividends in that way, and that he had received a notice from the company informing him that it would post the dividend in question on a particular date. Way CJ said, at 66:
"But these facts did not amount to a request or consent. All they established was that the company had twice taken the risk of sending dividend orders to the plaintiff through the post, that he had received the cash to which he was entitled on presenting them, and that he knew that the company proposed to take the same risk a third time."
182In D & J Fowler Limited v French [1914] SALR 254 a storekeeper posted a cheque in payment of an account to a supplier, but the cheque was stolen. When the storekeeper refused to supply another cheque, the supplier sued him for the price of the goods. The supplier succeeded. Gordon J stated the principle at 261 as being:
"In order to make the posting of a cheque by A, a debtor, to B, his creditor, payment, A must prove that B authorized him to send the cheque by post, B thus impliedly agreeing to run the risk of the loss of the cheque in the post office."
183Murray J took the view that the outcome depended upon whether the creditor had become the holder of the cheque immediately upon its being posted. He said, at 267, that whether that is so:
"depends upon whether there is evidence that the plaintiffs had agreed to the Post Office being treated as their agents for the purpose of receiving a cheque. They may be shewn to have so agreed by having requested that a cheque should be sent by post ... but consent or agreement, in this or some other form, express or implied, is necessary in every case ... It was argued for the defendant that a request or agreement can be implied from a previous course of dealing between the parties ... I do not doubt that there may be cases where such an inference may be drawn, but each case depends on its own circumstances. It is not enough merely to prove that the debtor has been in the habit, even over a course of years, of making payment by cheque forwarded through the post, and that the creditor has accepted the cheques when they arrived ... There must be evidence to justify the inference that the Post Office was accepted by the creditor as his agent from the moment the cheque was posted." (citations omitted)
184On the facts of the case, he declined to draw such an inference. Buchan, Temporary J at 269-270 reasoned to similar effect. The last sentence should, I think, be understood in the sense that it must be a justifiable inference that the creditor accepted that the act of posting was payment.
185In Mitchell-Henry v Norwich Union Life Insurance Society Ltd [1918] 1 KB 123 the defendant sent the plaintiff a letter reminding him that a particular amount would become due on May 15, asking that it be paid at a particular office, and saying, "please return this notice when remitting". The debt in question was £48. The defendant posted the amount, in cash, and by registered letter, but an employee of the defendant's landlord, who signed for the letter, stole the money. Bailhache J declined to make a declaration that the debt had been paid. He said, at 125:
"By the ordinary law it is clear that a debtor must seek out his creditor and pay his debt at the creditor's house or place of business. Therefore it was prima facie the duty of the plaintiff to pay the defendants at their office. But this duty may sometimes be varied by a creditor intimating to his debtor that he is prepared to receive payment through the post, and in modern times payment of debts is more usually made in that way. It was decided by the Court of Appeal in Pennington v Crossley & Son [77 LT 43] that where there has been a practice between parties to make payments by cheques sent through the post, that fact is not of itself sufficient evidence from which can be inferred a request by the creditor for payments to be made in that way. There must be a request, either express or implied, but very little evidence beyond a course of dealing is evidence of an implied request:"
186He went on to say, at 126 "the use of the word 'remitting' is sufficient evidence of a request by the defendants to the plaintiff to make the payment through the post", but that the remittance "must be made in the ordinary way in which sums of money are remitted through the post", and sending as large a sum as £48 in cash through the post was outside that ordinary course. The decision was affirmed on appeal, without departing from the reasoning in the court below: Mitchell-Henry v Norwich Union Life Insurance Society Ltd [1918] 2 KB 67. Again, this case concerns whether a debt has been paid when payment is sent through the post, not when it is paid.
187Tankexpress, mentioned at [164] above) was a case in which the time of a payment made by cheque was critical. It concerned a time charterparty under which Norwegian shipowners made their ship available to a Belgian company. Clause 11 of the charterparty required payment of the hire to be "in cash, monthly, in advance, in London" and conferred an express right of withdrawal if such payment was not made. The hire fell due on the 27th of each month. A cheque for the hire that was due on 27 September 1939 was dispatched from Brussels on 25 September, addressed to Hambros Bank of London, but did not arrive until 3 October. The House of Lords held that the shipowner was not entitled to withdraw the ship.
188The case in the House of Lord proceeded by reference to the findings of an arbitrator. One of those findings was (81):
"The accepted method between the parties, during the currency of the charter, with regard to the payment of hire had been for the charterers to make the payment of hire in London at the office of Hambro's Bank, Ld by sending a cheque in favour of Hambro's Bank, Ld (drawn on the Italo-Belgian Bank, Ld of London) to be placed by them to the credit of the owners with the Kristiana Folkebank, Oslo, and the payment of hire had been regularly and properly paid in this way during the currency of the charter and had always been paid on its due date until this payment of the hire due on September 27."
189Until the disputed payment, that way of proceeding had always resulted in the cheque for the hire arriving in London by the due date, but in September 1939 the outbreak of war delayed it. As Lord du Parcq said at 104, there was no finding, and nothing to suggest, that the charterers had any reason to expect that there would be an unusual delay in transmission.
190All their Lordships took the view that, as a matter of construction of the charter party, strict punctuality of payment was required: 91, 94, 100, 102.
191Lord Porter took the arbitrator's finding that the hire "had always been paid on its due date" to mean that the cheque had always been received in London on the 27th of each month (92). He said, at 93:
"the true inference to be drawn is that the method of performance of the contract was varied by an arrangement for payment to Hambro's Bank by cheque posted at such time as would in the ordinary course of post reach London on the twenty-seventh of the month. 'Regularly and properly' are the words used by the arbitrator, and 'properly,' I think, means in accordance with the accepted practice. No doubt the appellants could at any time have insisted upon a strict performance of the contract after due notice, but they were not, in my view, entitled suddenly to vary the accepted method of performance without first notifying the respondents in time to enable them to perform the contract in strict conformity with the terms of the charterparty. I think, therefore, that payment was duly made in accordance with the practice adopted and accepted between the parties and in the way and at the time stipulated."
192Lord Wright at 95 regarded the procedure "accepted between the parties" as necessary to fill a gap in the express terms of the contract. He said, at 97, that the arbitrator's finding was "that the allowance of a two days course of post was inter alia the correct procedure under the contract. The trouble was the failure in the course of post", and that "the effect of the method was simply to put on the shipowners the inconvenience of any delay in the course of post". He gave an alternative justification at 98:
"While the shipowners ... were entitled to insist for the future months of the charter on something which might be regarded as a more correct fulfilment of the terms of cl 11, they could only do so on giving reasonable notice of their intention and could not cancel until the notice had operated."
193Lord Uthwatt at 100-101 said:
"So long as the arrangement stood, it represented an agreed method of working out the obligation as to payment imposed by the charterparty, as distinct from an agreement to vary its terms. So long as it stood, the shipowners could not demand, nor the charterers insist on making, payment otherwise than in accordance with the terms of the arrangement."
194He construed the arbitrator's finding as meaning that "sending" was satisfied by the dispatch of the cheque, and did not require its receipt. (Lord du Parcq said the same at 105.) Lord Uthwatt also said, at 101 that:
"the shipowners were (subject to the cheque being duly honoured) bound to accept that cheque so sent and so received as representing by virtue of the working arrangement the payment due to be made on September 27."
195Lord du Parcq (with whom Lord Morton of Henryton agreed on these points) said at 103:
"the parties had, not indeed varied the contract, but adopted for the time being a substituted mode of performance of the contract which was acceptable to, and accepted by, each of them. ... It is true that in the present case your Lordships are concerned not with a single payment but with payments which fell due monthly over a long period, but I think it can hardly be disputed that, where periodical payments have to be made, a substituted method of payment which has been 'accepted between the parties' from the beginning must be regarded as fully satisfying the requirements of the contract until timely notice is given by one or other of the parties that he withdraws his acceptance of it. That such notice might be given effectively I do not doubt."
196In the present case, unlike the situation in Tankexpress, there was no established course of dealing under which dispatch of a cheque a particular number of days before the due date was accepted on both sides as an adequate mode of performance of the obligation to pay punctually. The decision in Tankexpress is a variant of the second of the ways in which a cheque operates to pay a debt discussed at [160]-[164] above. The finding of the arbitrator was to the effect that it was not the handing over of a cheque that was accepted as discharge of the debt, but that in accordance with the arrangement between the parties the posting of the cheque in sufficient time to arrive on time in the ordinary course of post was itself discharge of the debt.
197Beevers v Mason (1978) 37 P & CR 452 is a decision of the English Court of Appeal that turns precisely on when a debt has been paid when the payment is made by posting a cheque. The appellant was the tenant of some agricultural land. He usually paid his rent by cheque through the post, and was invariably late. The agent of his landlord wrote requesting that "in future the rents ... should be paid direct to me at my Goole office." After the tenant was once again late, the landlord's agent sent a statutory notice requiring the tenant to pay the rent within two months from the service of the notice on him. On the last day of that two-month period the tenant put a cheque in the post addressed to the landlord (not the agent), that the landlord received some two days after expiry of the two-month period. The appeal proceeded on the basis that the cheque was then presented and paid (458). Shaw LJ, delivering the judgment of the Court, held that the payment had been made on time. He said at 458-459:
"On general principles, the landlord should have the rent in cash in his hands by the due date. This requirement may, however, be waived by express arrangement, or by necessary implication where the facts are sufficiently strong to establish that the landlord has shown that he is content to accept payment by cheque posted by the due date of payment. Inferences of this nature are not to be too readily drawn, but, where the facts support them clearly and emphatically, they are not to be dismissed."
The first two sentences of this passage were quoted and applied in the English Court of Appeal in Hannacombe v Smallacombe at 405.
198In Beevers, after quoting extensively from Tankexpress, Shaw LJ continued, at 460:
"Where, over the years, the course of dealing has been such as to show that the sending of a cheque by post to the landlord was the accepted mode of payment, a request to send the cheque to the agent does no more than provide an alternative destination for the cheque. A payment direct to a creditor, other things being equal, can hardly be less effective in law than a payment made in the same way and in the same conditions to the [agent]. It might be otherwise if, for example, the creditor were out of England or his whereabouts were uncertain. Here, the cheque was sent to a known address and was delivered. If, in the circumstances, the post is properly to be regarded as the agent of both landlord and tenant with regard to the transmission of the rent (as was conceded for the respondents in the argument before us) it is irrelevant and immaterial that, despite the request referred to, the cheque was sent to the landlord direct. When the cheque was put in the post, then, subject only to its being honoured, the rent was paid." (emphasis added)
199That case is distinguishable from the present case. One reason is because of the concession made by counsel for the landlords (italicised above) about the post office being the agent of both parties. Another is because the long history of rent being paid by cheque, and late, provided the only possible basis for the factual finding that "the sending of a cheque by post to the landlord was the accepted mode of payment". Without those matters, the general principle quoted at [198] above would have led to the conclusion that the payment was late.
200An Australian first-instance decision that deals with this topic is the decision of McGregor J in the Australian Mutual Provident Society v Derham (1979) 25 ACTR 3. The plaintiffs had a life insurance policy issued by AMP. To obtain a payment of the surrender value they signed a form addressed to AMP that contained a direction for a cheque for the surrender value to be posted to a particular address. They signed that form when the space for the address was blank, and handed it to their agent for delivery to AMP. He fraudulently filled in an address that was not their address. AMP posted the cheque to the address on the form; the agent obtained it, and misappropriated it. The plaintiffs failed in an action against AMP to recover the surrender value. McGregor J at 9 accepted a principle that:
"the posting of a cheque or other instrument, or of money which is lost before it reaches the creditor does not amount to payment, unless the creditor requested the debtor to pay in that manner, in which case he will be taken to have run the risk of its being lost."
201Weinberg J made mention of Norman v Ricketts and Thairlwell in Lindholdt v Merritt Madden Printing Pty Ltd [2002] FCA 260 at [51]. However, it is apparent from [50] and [52] that the question of whether a payment was made at the time of posting a cheque was not fully argued before him, and His Honour did not come to a conclusion concerning it.
Title to a Bill of Exchange
202Before reaching a conclusion about what can be drawn from these cases about payment of a debt by the posting of a cheque, it is appropriate to consider the related topic of the passing of title to a cheque or bill or exchange.
203It has been held that title to a bill of exchange would pass under English law if the bill was put into the post addressed to an intended holder, but as French law at the time permitted the person who had posted it to there was no delivery of the bill until the letter left the town at which it was posted: Ex parte Cote; in re Deveze (1873) LR 9 Ch App 27.
204Channon v English, Scottish & Australian Bank (1918) 18 SR (NSW) 30 arose when a debtor posted a cheque addressed to his creditor, because someone who said he was from the creditor's office telephoned and asked him to do so. The cheque was stolen and fraudulently cashed. The debtor sued his banker for negligence and conversion in cashing the cheque. The outcome turned on whether the plaintiff had title to the cheque at the time of its conversion. Pring J (with whom Sly J agreed on this point) held at 33 that because the authority of the telephoner to act for the creditor was not established "the post was the messenger of the plaintiff only", and thus the debtor retains title to the cheque until it came into the hands of the creditor. Similarly, Ferguson J at 37 said:
"if [the creditor] did ask the plaintiff to post the cheque, he made the post office his agents to receive it, and delivery to the post office was delivery to him. If the plaintiff posted it without any such request, express or implied, the post office was his agent, and the cheque remained his property until delivery to [the creditor]."
205In Kendall v London Bank of Australia Ltd (1918) 18 SR (NSW) 394 the plaintiff had received an assessment of New South Wales income-tax. It stated that payment could be made at the Taxation Office or remitted to the Commissioners of Taxation by draft or by cheque crossed and marked "Commissioners of Taxation - not negotiable". He wrote a cheque payable to "50 or Bearer", crossed it with two parallel transverse lines (but no words), and posted it. The cheque came into the hands of a fraudster, on whose behalf the defendant bank collected it. The plaintiff succeeded in an action against the defendant for conversion. One issue was whether the plaintiff retained title to the cheque. Cullen CJ said, at 404:
"If [the] terms of the Commissioners' notification had been observed, there would be authority for saying that as soon as the letter containing the cheque was put in the post any risk of loss would be on the Commissioners, and not on the taxpayer: Norman v Ricketts (3 TLR 182). As it was, the risk remained with Kendall, the drawer of the cheque. Assuming, however, that this cheque reached the office of the Commissioners in due course of post there was nothing binding on the Commissioners to accept it as payment."
206Sly J said, at 409:
"... as [the] plaintiff had not complied with the directions of the Commissioners in sending cheques, the post office was not the agent of the Commissioners in this case. And although the cheque may have been received in the office of the Commissioners (I do not say that it was so received) the Commissioners themselves never received the cheque or payment of it."
207Ferguson J dissented as to the result, because he took the view that the defendant had acted without negligence, but agreed that the plaintiff had title to the cheque. He said, at 412:
"The post office was not the agent of the Commissioners to receive cheques unless they were drawn in accordance with this direction. It was the agent of the plaintiff so far as this cheque was concerned, and the property in the cheque remained in him until it had been received and accepted by the Commissioners, or by some person authorised to accept on their behalf. There is no evidence of any act of acceptance, so the plaintiff continued to be the owner of the cheque ..."
208An appeal to the High Court failed: Kendall v London Bank of Australia Ltd (1920) 28 CLR 401. The reasons of Isaacs and Rich JJ for holding that the plaintiff had title were, at 409:
"Had that direction been followed, the cheque would have been at the risk of the Commissioners so far as the respondent is concerned, and probably would never have gone astray. But the cheque never reached the Commissioners' hands, and was never accepted by them. Not having been sent in the form directed, the sending of the cheque was a mere offer of the cheque by Kendall to the Commissioners, which, until accepted, remained his."
209It should be observed that these reasons do not depend on the notion of agency that Sly and Ferguson JJ had invoked. Further, they stress the need for the cheque to be accepted by the creditor. It is the reasons of the High Court, not the reasons of the judges in the NSW Full Court, which are the binding precedent: Mid-City Skin Cancer & Laser Centre Pty Ltd v Zahedi-Anarak [2006] NSWSC 844; (2006) 67 NSWLR 569 at [300]-[327] and cases there cited; Andrews v Calori (1907) 38 SCR 588 at [24] (Supreme Court of Canada). (Some analogical support for that proposition also comes from how, when the decision of a court that held A, B and C is reversed because its finding of C was wrong, its finding of A and B does not constitute a binding precedent: Balabel v Air-India [1988] 1 Ch 317 at 325-326).