Bonython v The Commonwealth

In an action before the High Court of Australia, Sir John Lavington Bonython and others (the plaintiffs) sued the Commonwealth of Australia (the defendant). The dispute concerned the redemption of Commonwealth inscribed stock, which had been issued in 1932 to the Australian Mutual Provident Society upon the surrender of Queensland Government debentures originally issued in 1895. The plaintiffs, as holders of this stock, claimed they were entitled to be paid in London in pounds sterling, or the equivalent in Australian currency, whereas the Commonwealth contended that payment was due in Australian currency in Australia.

The central legal issues before the court were: firstly, the proper law governing the obligation of the debentures; secondly, whether the obligation, expressed as "pounds sterling," constituted a promise to pay a specific amount of English currency or its equivalent; and thirdly, if the obligation was payable in Australia, whether the plaintiffs were entitled to receive the Australian currency equivalent of English pounds sterling. The court was also asked to determine if the plaintiffs were entitled to interest on the principal sum from the maturity date.

A majority of the High Court (Rich, Starke, Dixon, and McTiernan JJ.) held that the proper law of the debenture obligation was the law of Queensland. They further determined that the obligation was not to pay a specific amount of English pounds sterling, but rather an obligation expressed in a money of account common to both Great Britain and Australia at the time of issue. Given the divergence of the monetary systems by 1945, the obligation was deemed to belong to the Australian system, meaning payment of £1,000 Australian currency would discharge the debt if payable in Australia. Justice Starke, however, held that if payable in London, £1,000 English currency must be paid. Latham C.J. dissented, finding that the obligation was to pay £1,000 sterling. The court also found that the plaintiffs had failed to give the requisite notice by the stipulated date to exercise their option for payment in London, and therefore, payment was due in Australia.

Consequently, the court ordered that the principal sums were payable in Australian currency in Australia. The plaintiffs were not entitled to payment in London in English sterling, nor were they entitled to the Australian currency equivalent of English sterling if payment was made in Australia. Furthermore, the plaintiffs were not entitled to interest on the principal sum from 1st January 1945.