Coles Meyer Finance Limited v The Commissioner of Taxation of the Commonwealth of Australia
[1992] HCATrans 131
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IN THE HIGH COURT OF AUSTRALIA
Office of the Registry
Melbourne No M33 of 1991 B e t w e e n -
COLES MYER FINANCE LIMITED
Appellant
and
THE COMMISSIONER OF TAXATION OF
THE COMMONWEALTH OF AUSTRALIA
Respondent
MASON CJ
BRENNAN J
DEANE J
DAWSON J
TOOHEY J
GAUDRON J
MCHUGH J
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TRANSCRIPT OF PROCEEDINGS
AT CANBERRA ON TUESDAY, 5 MAY 1992. AT 10.18 AM
Copyright in the High Court of Australia
MR F.H. CALLAWAY, OC: If it please the Court, I appear with
my learned friend, MR G.T. PAGONE, for the
appellant. (instructed by Freehill Hollingdale &
Page)
| MR J.M. BATT, QC: | May it please the Court, I appear with my |
learned friend, MR C.M. MAXWELL, for the
respondent. (instructed by the Australian
Government Solicitor).
| MASON CJ: | Mr Callaway? |
MR CALLAWAY: If the Court pleases. Your Honours, in this
matter written submissions have been filed and
exchanged so there is no three page outline, but I
thought it might, nevertheless, be helpful to the
Court if I indicated the shape of this morning's
submissions. I propose to ask the Court to go first to the special case, not for the purpose of
reading it but just to identify some of the
critical facts on which the matter turns, and then,
I hope this is not too ambitious, to try to put our
argument in a nutshell, and only after then to go
to those paragraphs of the written submission that
might require some amplification but, hopefully, at
the end of the nutshell the principal issues
between the parties will have been laid out.
The special case is at the beginning of the
appeal book, starting at page 2, sets out the
questions with which Your Honours are familiar from
reading the judgments of the court below, the
history of the appellant and the nature of its
business, and at paragraphs 3 and 4 annexes
representative bills of exchange and representative
promissory notes.
We have prepared a little chart which simply
summarizes the representative bills and notes
showing who the acceptor was, who the payee was, what the respective periods were, and the like. If
that might be of assistance to Your Honours,
perhaps I might hand the chart up. It was a chart that was made available to the court below.
We also have in Court, but we do not press on
Your Honours, the original bills of exchange and
promissory notes. In some ways they are more informative because they are much easier to read
than the photocopies in the appeal book. We have them here if the Court desires to see them. For
present purposes, it may be sufficient just to go
to one of the bills and one of the notes.
If Your Honours turn to annexure 3B at
page 21, one sees an example of a bill drawn on the
| Coles(2) | 2 | 5/5/92 |
ANZ Bank. Down the bottom right-hand corner, one sees that the drawer is the appellant. Next to
that, one sees that it is drawn on the ANZ Bank, and in this case if one looks a little higher up
the page, it is "Pay to order of" the ANZ, so in
the case of this bill, the drawee was also the
payee.
That was also true of the bills drawn on the National Bank. In the case of the Commonwealth,
the payee was the appellant. Then to the left, one sees the acceptance. On the back of the bill, which of course is page 22 of the appeal book, one
sees the successive endorsements beginning with the
endorsement of the original payee, the ANZ Bank.
For an example of the notes, if one goes
really to either of them, but annexure 4A, page 34,
a much simpler document, the appellant:
promises to pay to the bearer the sum of One
Hundred Thousand Dollars ($100,000) on the
TWELFTH day of OCTOBER 1984 fixed -
the significance of the word "fixed" of course is
to exclude the days of grace -
upon presentation and surrender of this note.
Then down the bottom left-hand corner, it is payable at the National Bank, but that is not in
the body of the note. On the back there is simply a provision to acknowledge surrender and payment.
The second note is in the same form, and the
surrender provision on the back is somewhat more
legible.
The special case, then, back at page 4, in
paragraph 5, records that:
The relevant bills and relevant notes were in a usual or common form. The relevant bills were drawn in June 1984 -
that is to say, in the year of income -
and the number of days between their drawing
and maturity ranged from 98 to 183 -
That, in fact, is not right, because if one looks at annexure 3A the period is 69 days, but nothing
turns on that.
The relevant notes were made between January
and April -
in the year of income -
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and the number of days between their making
and maturity ranged from 181 to 183.Then the special case sets out the face value of the bills and notes and the amount received when they were discounted, giving rise to the amounts of
$2,375,579 and $2,359,893, which are the deduction
claimed. The following paragraphs set out the history of the return and assessment, objection,
disallowance and, at paragraph 11, records that:
The relevant bills were accommodation bills
accepted by one or other of -
the three banks "for the accommodation of the",
now, appellant. Paragraph 12 sets out what
happened in relation to raising finance by means ofbills. Paragraph 13 sets out what happened in the
case of the notes. Staying for a moment with
paragraph 12, it is unnecessary to read paragraphs (a) and (b). Paragraph (c):
The applicant typed the bills on a printed
form provided by the accepting bank, signed
the bills and presented them to the accepting
bank for acceptance. Upon acceptance the bills were returned to the applicant's offices
where a representative of the successful
tenderer or tenderers (which may have been or
included the accepting bank) was handed the
bills in exchange for a cheque for the purpose
price.
And it may be inferred that the payee had endorsed
them for that transaction to make sense and one
sees that endorsement in the representative notes.
Paragraph (d) - it does not matter that there
is a typographical error - is:
In the case of the representative bills referred to in paragraph 3 the successful
tenderers were Westpac Banking Corporation in
respect of annexure "3A", Spedley Securities
Limited in respect of annexure "3B" -
that it is transposed. In fact, it is Spedley in
respect of A and Westpac in respect of B.
All of that occurred on the same day, so that
the bills were drawn, accepted and discounted on
the same day. The bank charged an acceptance fee, but that is not in issue:
The purchaser or purchasers of the bills
commonly sold them at some time prior to their
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maturity date. In many cases a bill was sold
several times before that date -
and, of course, that is normal practice in the bill
market.
Because they will be relevant to the argument,
I should read the next few paragraphs:
(h) There was no legal impediment to the
applicant repurchasing the bills in the market before their maturity date, but in fact it has
never repurchased any bills drawn by it -
not just the relevant bills the subject of this
appeal, but any bills:The applicant has at all times participated in the market not as an investor but solely to obtain funds.
(i) On the maturity date the then holder or
any of the relevant bills, the accepting bank -
holders of the bills presented them to the the case of
accepting bank for payment and they were paid.
so that - and this will material later - the
accepting bank sometimes was the successful
tenderer and the first holder for value of thebill, but the accepting bank was never the holder
on the date of maturity. If the accepting bank had been the holder on the date of maturity the bill
would have been discharged pursuant to section 66
of the Bills of Exchange Act, but as we will see
later, the appellant would still have had to pay
the face value to the bank as the holder.
(j) All three accepting banks debited the
applicant's account on the maturity date with
an amount equal to the face value of the bills maturing on that day. ANZ did so shortly after they were presented and paid. NAB and CBA did so shortly after the commencement of business on that day and usually before they were presented or paid.
The relevance of that, of course, is that the court
below said that there was no liability incurred
until the accepting bank had paid the third party
holder. In fact, only one bank followed that
practice. The other two banks commonly put themselves in funds before paying the holder which,
indeed, is the appropriate course with an
accommodation bill.
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(k) sets out the letters and the like that lay
behind these arrangements but it is common ground,
I think, that nothing turns upon those letters.
This was a simple bill discounting arrangement, not
a bill discounting arrangement governed by a
facility agreement that impinged on the general
law.
In the case of the notes, similarly, 13(c):
The appellant typed the notes on a form
printed by the applicant and signed them. A
representative of the successful tenderer or
tenderers was handed the notes in exchange for
a cheque for the purchase price.
That all occurred on the same day, too.
(e) The purchaser or purchasers of the notes commonly sold them at some time prior to their
maturity date.
(f) There was no legal impediment to the
applicant repurchasing the notes in the marketbefore their maturity date. The applicant has
at all times participated in the market not as
an investor but solely to obtain funds. It has repurchased notes on only four occasions
since its incorporation.
But those are all after the year of income.
(g) The applicant did not repurchase any of
the relevant notes or any other notes during
the year of income or during the -
following year, the 1985 year of income. And then,
on the maturity date the notes were presented for
payment.
Paragraph 14 deals with any concern there
might have been that the bills or notes might not have been presented on the maturity date:
It is extremely rare for a bank accepted bill not to be presented for payment. In the case of NAB, which in the course of a year accepts
many thousands of bills to a total amount in
billions of dollars, every bank accepted bill since at least 1981 has been presented on its maturity date or in a very few cases shortly
thereafter and then have all been paid. Where
a bill has been lost or destroyed arrangements
have been made to pay the former holder its
face value upon receiving a suitable
indemnity. The experience of NAB is similar
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to that of all other Australian banks
operating in the bill market, including -
the two other banks with which this case is
concerned.
In the experience of -
those three banks -
it is also extremely rare for a promissory
note not to be presented and paid on itsmaturity date and, in the isolated cases where
late presentment has occurred, it has been
within a few days of that date and the note
has then been paid. All the relevant bills
and relevant notes ere presented and paid on
their maturity dates.
The special case then turns to the alternative
submissions of the parties, because the primary
submission of the appellant is that the liability
on the promissory notes was incurred on the day
they were discounted, and the liability on the
bills to the accepting bank was incurred on the day
they were discounted, and the Commissioner's caseis that in both cases one waits till the day of
maturity. The middle ground - - -
| BRENNAN J: | I thought the day of acceptance was on the day |
of discounting?
| MR CALLAWAY: | On the day of discounting, Your Honour, |
because if one takes this sequentially, if I am the
drawer first I draw a bill, there is no pecuniary
liability. I give it to the bank to accept, and at that stage there is still no pecuniary liability,
there will be nothing that has to be paid. But
once it is discounted for value then, of course,
there is someone who will be entitled to payment on
the day of maturity.
BRENNAN J: Yes.
| MR CALLAWAY: | The middle ground is that one should spread |
the allowable deduction over the life of the bill
or note. In the case of the appellant that is a subsidiary, alternative submission if we are wrong
about the primary submission, but it was all
incurred in the 1984 year of income. In the case of my learned friends it is an alternative
submission if they are wrong, that one waits for
the 1985 year of income before the relevant
liabilities are incurred. It is not necessary to
read these paragraphs at any length, they set out
the accounting practice. The accounting practiceis to spread the discount over the life of the
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bill, and that is set out in detail in
paragraphs 15, 16, 17 and 18 of the special case.
At the time the special case was drafted the
relevant companies legislation was the Companies
Act 1981 and the corresponding State Codes, but our instructions are that there are still no applicable accounting standards within the meaning of the
corporations law and its associated legislation, so
that the reference to the Companies Act 1981 in
paras 15(a) and 16(a) need not cause the Court any
concern.
This case as regards bills is, of course,
about the liability of the party accommodated to
the accepting bank as the accommodation party.
There is, I think, no controversy that the bank as
acceptor has a present liability from thebeginning, from the time the bill is first
discounted. So the bank is the party primarily liable on the bill as acceptor.
One finds that reflected in the accounting
practice under which the bank's liability as
acceptor to the holder of the bill is recognized as
a liability of the bank from the day on which the
bill is drawn, accepted and discounted. There is
an illustration of that in the appeal book in the
balance sheet of the National Bank at page 137.In annexure 17A, line 26, one sees in the
bank's liabilities, Liability on acceptances,
$4 million-odd. That is the bank's liability as
acceptor. On the next page, one finds the corresponding item in the assets, line 23, "Due
from customers on acceptances", the same amount.
That is the bank's right to turn to the party
accommodated for its indemnity.
If the Court ultimately decides that the
accounting practice is relevant and apportionment is the appropriate course, paragraph 19 records
that the appellant followed that accounting
practice in relation to the relevant bills and the
relevant notes.
Your Honours, let me turn to the more
difficult part of the three-section assignment I
gave myself 20 minutes ago, and try to put the case
in a nutshell, putting to one side the
apportionment-spreading alterative submission.
First as regards the notes, if one goes to the
Bills of Exchange Act, one finds in section 89(1)
that:
A promissory note is an unconditional promise
in writing -
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an unconditional promise in writing -
made by one person to another, signed by the
maker, engaging to pay, on demand or at a
fixed or determinable future time, a sum
certain in money, to or to the order of a
specified person, or to bearer.
And in section 94(a), that:
The maker of a promissory note, by making it:
(a) engages that he will pay it according to
its tenor -
and, if it matters, section 93(1) provides, so far as these notes are relevant - are concerned - that
presentment for payment is not necessary in order
to render the maker liable, because the place of
payment is not in the body of the note, it is an
annotation in the left-hand corner and that is what
the authorities say.In our respectful submission, if, as the Bills
of Exchange Act says, the promissory notes are
unconditional promises in writing, they must be
presently existing liabilities.
| TOOHEY J: | To whom? |
| MR CALLAWAY: | To the bearer of the notes, Your Honour, |
because of course we do not have to worry about the
accepting bank, but the promissory notes, and
therefore incurred for the purposes of section 51.
We would submit they are a clear example of a
presently existing liability of an obligation that
is fully incurred, even though it is to be paid at
some future time, and clearly distinguishable from
Nilsen's case.
BRENNAN J:
Is it an implication of your argument that the discounted price should be brought to account as
revenue in one year and the discharge price brought
to account as an outgoing in the next?
| MR CALLAWAY: | No, Your Honour. | Our submission is the loss |
which is known from the beginning should be brought
to account as an allowable deduction in the first
year of income.
| BRENNAN J: | So your argument turns upon the fact that a loss |
is known to be incurred from the beginning?
| MR CALLAWAY: | Yes, Your Honour. |
BRENNAN J: What would happen if a bill was repurchased on
1 July by the drawer?
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| MR CALLAWAY: | Your Honour, that is an event of defeasance |
within the meaning of authorities like Commonwealth
Aluminium and an event of defeasance which the
special case shows was remote at the time the note
was made and which, in the event, did not happen,
so that again, in accordance with Commonwealth
Aluminium and Willis v Commonwealth, referred to by
Mr Justice Newton in that case, one is entitled to
disregard the remote possibility which, in fact,
did not happen. That, indeed, would have preventedthe note having to be paid in the next year of
income, if it had been repurchased and held at any
time.
BRENNAN J: What would be the tax implications?
| MR CALLAWAY: | There would have to be an adjustment in that |
case, Your Honour, and the amount that was
successfully claimed as an allowable deduction inthe first year of income would have to be brought
to account as assessable income in the second. It
may not be quite as simple as that, not in relation
to promissory notes, but the matter of adjustments
and the authorities are referred to by
Mr Justice Newton in Commonwealth Aluminium at
page 4161, left-hand column, point 5. I do not promise I can always do that. In Nilsen, if the Court pleases, the case that
was concerned about annual leave and long service
leave, there simply was no pecuniary liability
until the employee actually entered on the periodof leave. That, with respect, is what Nilsen's
case is all about whereas in the case of the
promissory notes there is a pecuniary liability
from the beginning. A promissory note is, "Ipromise to pay". Nilsen's case is, "I am under an
obligation to allow you leave. When you take it,
of course, I'll have to pay you", but the
obligation is actually to allow the leave.
| DAWSON J: | Why is not the obligation to pay when the day |
arrives?
| MR CALLAWAY: | Your Honour, that, with respect, is a general |
formula that would cover both, but in the case of
the promissory note, the obligation is at all times
pecuniary from the beginning to the end. In the case of leave, the obligation is to allow the
leave. It has no pecuniary aspect at all until the
employee actually enters on to the leave and then,
of course, has to be paid.
Later on I propose to take the Court to the
High Court's decision in Nilsen but it is, in our
submission, instructive to begin with what was said
in the Full Court of the Federal Court and it is
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also, I think, a further answer to Your Honour
Justice Dawson's question.
Nilsen's case in the Full Court of the Federal
Court is number 10 on our list of authorities and
the majority consisted of Your Honours
Justices Brennan and Deane, and in both
Your Honours' judgments the distinction on which we
rely appears and it similarly underlies the
decision of this Court affirming the court below.
For example, in the judgment of Your Honour
Justice Brennan at page 242, line 39:
At the end of the year, the entitlement of the
relevant employees was not a present
entitlement to money. Reciprocally, the
respondent's obligation was not then a
liability to pay money.
And three lines from the bottom:
no pecuniary liability was imposed during the
income year.
Then, on page 244, line 13:
At the end of the income year, none of these employees had an entitlement to be paid money.
The respondent's pecuniary liability to any
employee would not arise until the time
specified in sub-cl (j), that is "before going
on leave", or the time specified in
sub-cl (1), that is, when the employee "leaves
the employment of the employer or his
employment is terminated", whichever first
occurred.
Then, a few lines later, around about line 26:
In respect of neither kind of deduction
can it be said that the respondent was under a
present pecuniary liability at 30 June 1974. None of the amounts provided by the respondent
in its 1974 accounts represent a debitum in
praesenti, solvendum in futuro: there was no
present pecuniary liability.
But, Your Honours, that is, of course, exactly what
a promissory note is, a debitum in praesenti,
solvendum in futuro and, Your Honour, distinguishes
the non-pecuniary liability in Nilsen from such a
debitum in praesenti. Your Honour goes on to say:
This is not a case of an award which entitles
the employer to defer payment of moneys due to
a workman.
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That, of course - Your Honour's hypothetical
example - would be an example of a pecuniary
liability incurred now, presently existing
obligation, though not to be paid until the future;
owing now, payable later, like the deferred
interest in the debentures Your Honour
Justice Toohey considered in AGC: present obligation though payable at a future time,
incurred once it is a present obligation.
| TOOHEY J: | Mr Callaway, you said in respect of the |
promissory note that there was a liability from the
beginning. What do you mean by that? Do you mean
at the moment of execution or when someone came inpossession of the note or what?
MR CALLAWAY: As soon as it is discounted, Your Honour.
TOOHEY J: But it does mean at the moment of execution?
| MR CALLAWAY: | No, Your Honour, it is a bit like the answer |
to His Honour's about the bills: once I sign the
promissory note that does nothing but when I
deliver it for value to the successful tenderer
that is when the present obligation accrues.
TOOHEY J: And that is what we are to understand by the
expression "from the beginning"?
| MR CALLAWAY: | Yes, Your Honour, my fault for not putting it |
clearly from the beginning. Yes, Your Honour,
from the day of discounting, because there is then
a holder for value. And, similarly, with the
bills of exchange.
Your Honour Justice Deane, at page 248,
line 31, said:
The primary entitlement of a continuing
employee in respect of long service leave and
annual leave is an entitlement, during a
period of employment in respect of which he will be entitled to the payment of salary or
wages (sometimes with a loading), to be
excuse the employee from work and from
excused from working or attending for work.
attendance at work while paying the employee's
salary or wages, together with any loading, in
respect of the period of leave.
So, again, the obligation is actually to allow
the leave. There is no pecuniary obligation until
the leave is entered upon. On the next page, at line 36, in a passage which Your Honour the
Chief Justice later quoted and endorsed in this
Court, Your Honour said:
| Coles(2) | 12 | 5/5/92 |
at the heart of the joint judgment in the
James Flood case, supra, lies a recognition of
the competing concepts of the nature of the
liability to make payments in respect of
annual leave, namely, the commercial view of
that liability as a progressive one which
should be treated as part of the cost of
labour employed from day to day and the
jurisprudential view that the liability
remains the ordinary liability to pay wages to
an employee in respect of a period of
employment notwithstanding that the employee's
entitlement to leave excuses him from working
or attending for work during the period.
Your Honour then says that the latter is the
correct legal view. And I might just add, as a
footnote, that that is the way in which Nilsen's
case in both courts has been understood, and its
ratio is described in similar terms by
Mr Justice Hill in Ogilvy & Mather. I do not wish to read that passage to the Court, it is referred
to in our written submissions at paragraph 22. In Nilsen's case the taxpayer's obligation was an obligation to allow leave to employees and, until
the period of leave was entered upon by an employee, there was no pecuniary obligation either
due or payable and that is a summary of what
Mr Justice Hill said was his understanding of
Nilsen in Ogilvy & Mather at page 4862.
Your Honours, the importance of this lies in a
passage in the judgment under appeal at page 184 of
the appeal book. In the part of the judgment
dealing with promissory notes, Their Honours drew
support from Nilsen. Reading from line 14,Their Honours say:
It will be recalled that, in Nilsen, the
employees had already become entitled to take
their long service leave. So the taxpayer, within the relevant tax year, was in the position that it was bound to pay the value of
that leave on demand.
As we have seen that is, with respect, a
misapprehension of the basis of the decision in
Nilsen's case. Then, omitting the next sentence: In the present case, in the relevant year of income, the applicant certainly incurred a
legal obligation to pay the value of the
promissory notes.
With respect, that is so, incurred a present pecuniary obligation, unlike Nilsen's case.
| Coles(2) | 13 | 5/5/92 |
Your Honours, it must, in our respectful
submission, be significant that neither in the Full
Court of the Federal Court, nor in the written
submissions in this Court, have the veryexperienced counsel for the Commissioner propounded
any reason of principle why the liability on the
promissory notes would not be incurred at the time
of discounting. The only argument that has ever been advanced by the Commissioner is that, in the
Nevill's case, this Court decided that the
liability on promissory notes was incurred in the
year in which they were paid, not the year in whichthey were made.
I will be saying more about Nevill's case
necessarily later in the argument, but bearing in
mind that this is the nutshell section of the
argument, might I content myself with just
referring Your Honours to what we say in the notice
of appeal about Nevill's case at page 195. That
really sets out our submission in brief form. In
paragraph 17, our first submission is that Nevill,
to the extent it dealt with the timing issue on
promissory notes - it deals with other matters
which we do not need to address - was wrong in
principle but it was not a binding authority.
Speaking very generally, it was not a binding
authority, in our submission, because the
Chief Justice expressly said that he was not
deciding the question; Mr Justice Rich expressly said that he was not deciding the question. In our submission, on a fair reading nf Mr Justice McTiernan's judgmenc, His Honour was
agreeing with the Chief Justice. So that only one
member of the Court, Mr Justice Dixon, decided the
question in a sense that would be binding even on a
court below this Court.
But if we are wrong about that, our second submission about Nevill is that it was
authoritatively explained by this Court in Flood at
the reference given in the notice of appeal and, as
so explained, does not apply to these promissory
notes. It is only really if we are wrong on both those points that we come to the point of asking
for leave to argue that it should be overruled on
the timing point. So that essentially on the notes, we submit they are a clear example of a
presently existing liability that is incurred, and
there is no reason in principle why that should not
be so, and that Nevill's case is not a bar to that
conclusion.
The bills of exchange are more complicated,
but the essential issue between the parties is
whether the liability of the party accommodated,
| Coles(2) | 14 | 5/5/92 |
the appellant, to indemnify the accepting bank is a
presently existing liability or just a contingent
liability which is not a presently existing
liability until, for some reason, the day of
maturity.
In response to that, we advance five
submissions. The first is that it appears from the judgments in K.D. Morris that the liability of the party accommodated to indemnify the accepting bank
is a presently existing liability from the time of
discounting. In a moment I will ask the Court to
go to K.D. Morris, but it might be convenient,
Your Honours, if I say what the five submissions
are rather than get them separated by long parts of
transcript.
Secondly, the test of whether a liability is
incurred is not whether the other party has a cause
of action. So that it is not to the point to refer
to cases which say that a surety has no cause of
action against a principal debtor until the surety
pays the debt. The test is not cause of action. If it were, of course, a liability would never be
incurred for the purposes of section 51 until it
was payable. ·
| DAWSON J: | The bills were presented to the bank rather than |
to the appellant for payment, were they not?
MR CALLAWAY: That is so, Your Honour, yes, because the bank
is the acceptor, so that the holder will necessary
go to the acceptor on the day of maturity - - -
DAWSON J: Although he also indemnifies the drawer of the
bill.
| MR CALLAWAY: | With respect, no, Your Honour. | On the day of |
maturity, the holder goes to the bank as the
acceptor because on the face of the instrument theparty primarily liable is, of course, the acceptor.
The acceptor, because it is an accommodation bill, is entitled to be indemnified by the appellant.
| DAWSON J: | I see. |
| MR CALLAWAY: | It is that liability of the appellant to |
indemnify the bank which is what this branch of the
case is all about. We submit that that is a present liability from the time of discounting,
though to be performed in the future, but a
presently existing liability and my learned friends
say, "No, it's not a presently existing liability.
It isn't incurred until the day of maturity". A major plank of my learned friend's argument is to
say the accepting bank is, in the case of an
| Coles(2) | 15 | 5/5/92 |
accommodation bill, a surety for the party
accommodated which is true as far as it goes.
DAWSON J: Could the bill be presented to the drawer for
payment?
| MR CALLAWAY: | It could, Your Honour, and if it were paid by |
the drawer it would, in fact, discharge the bill
because there is a provision in the Bills ofExchange Act which says, exceptionally, that where an accommodation bill is paid by the party
accommodated, the bill is discharged.
| DAWSON J: | So that there is a liability in respect of the |
drawer, also from the moment of -
MR CALLAWAY: | Yes, Your Honour, because it is an accommodation bill. |
DAWSON J: But if the acceptor pays, then the acceptor is
entitled to be indemnified by the drawer?
| MR CALLAWAY: | Yes, Your Honour. So, the second submission |
is that the test is not when the bank has a cause
of action.The third submission is that the test is not whether there is a debt, and really that is our
respectful answer to paragraphs 10 to 12 of my
learned friend's written submission. I will say
more about it in a moment but that is what it is
relevant to.
| DAWSON J: | If I can just come back, Mr Callaway. Why do you |
concentrate on the liability to the bank and not the liability as drawer? I mean, that is in the events as they happened, but the drawer is liable
one way or another.
| MR CALLAWAY: | Yes, Your Honour. | If one has an ordinary bill |
of exchange, not an accommodation bill, of course, the hierarchy of liability is the acceptor is
primarily liable and if the acceptor does not pay,
the holder can turn to the drawer. If the drawer does not pay, one can go successively down the
endorsers. That liability of the drawer, we wouldnot be able to rely on because that is a contingent
liability. That is a liability to pay if the
acceptor defaults.
Because it is an accommodation bill, although
the bank on the face of the instrument is the party
primarily liable, the bank is entitled to be
indemnified by the drawer. That obligation, asbetween the appellant and the bank, is the
obligation on which we rely. That is the
obligation, we say, is the presently existing
| Coles(2) | 16 | 5/5/92 |
obligation and it can only arise because of the
accommodation bill.
The fourth submission is this, that true it is that with an accommodation bill the accepting bank
is a surety for the party accommodated and that is,
of course, what leads my learned friends to make
their submission that in such a case the liability
must be contingent and why my learned friends do
not say this in the written submission, no doubt
what lies behind them is the thought that in an
ordinary principal surety situation, the liability
of the principal debtor to indemnify the surety
would be contingent because the liability of thesurety, the guarantor, is contingent, and the
liability to indemnify the guarantor must be
contingent.
But in the ordinary principle and surety situation it is very different.
"I guarantee the
debt of X" means, "I will pay if X does not". Of course that is contingent. "And X's obligation to indemnify me if I have to honour the guarantee"
must be contingent too. But the relationship on an accommodation bill is quite different. The promise by the accommodated party, the appellant, where
there bill is in the hands of a third party, as all
these bills ultimately were, is to indemnify the
bank when the day of maturity arrives. There is no question of, "I will pay if in default and
unexpectedly, you do not pay". It is, "I will pay
willy-nilly, on the day of maturity because the
bill is accepted for my accommodation". I will say a bit more about that in a moment. The fifth of the five submissions which is not
reflected in our written submissions which I
apologize, the full significance of which, if it is
significant, has only dawned on us in the last few
days, is that the best way of describing the
contracts between the party accommodated and an
accommodation party, is that the party accommodated will, as between them,be regarded as the real
acceptor of the bill, and there is authority for
that that I will take the Court to in due course.
So that, as between the appellant and the bank, the contract of accommodation is that the appellant
will be regarded as the real acceptor of the bill.
Everything, in our respectful submission, flows from that. If the bill is in the hands of a
third party on the day of maturity, the
understanding that the appellants will be the real
acceptor of the bill is what gives rise to the
obligation to indemnify the bank. If the bill were held by the bank at maturity, it would be
| Coles(2) | 17 | 5/5/92 |
discharged because section 66 provides that where a
bill is held by the acceptor at maturity, it is
discharged. But obviously the bank, having given
value for the bill, would still be entitled to be
paid the face value by the appellant, because the
bargain, as between them, is that the appellant
will be regarded as the real acceptor. If theappellant were the acceptor the holder would be
entitled to go and be paid and the bill would not
be discharged because it would not be - the
acceptor and the holder would not be the same
person.
It is still appropriate to talk about an
obligation to indemnify, but the obligation there
is to indemnify the bank against the consequence of
accepting that the bill has been discharged. So that the critical thing is that, as between the
bank and the appellant, the agreement is that the
appellant will be regarded as the real acceptor ofthe bill.
| DAWSON J: | And it is true to say that if an accommodation |
bill were presented for payment to the drawer and
the drawer paid, the bill would be discharged?
MR CALLAWAY: That is so, Your Honours, yes.
DAWSON J: Unlike the case of a non-accommodation bill, in
which case there would still be recourse to the
acceptor.
| MR CALLAWAY: | Yes, Your Honour. | Would Your Honours pardon |
me a moment, I will see if I can find the section
quickly; otherwise we will find it over lunch. I am very grateful to my learned friend who says
that it is section 64(3):
Where an accommodation bill is paid in due
course by the party accommodated, the bill is
discharged.
If I could just develop those five submissions, beginning with K.D. Morris, which is No 6 on our
list of authorities. Your Honours will recall that that case concerned a bill facility under which a
company raised finance by discounting bills of
exchange, went into liquidation and the liquidators
continued to roll over the bills. The critical issue in the case was whether the amounts raised by
the liquidators could be regarded as costs and
expenses of the winding up with the attendant
priority.
That, in turn, depended on the view one took
of the bill transactions. One view was that by reason of the facility agreement, an elaborate
| Coles(2) | 18 | 5/5/92 |
facility agreement, there was but one continuous
transaction. Even when the liquidators raised money by rolling over the bills, that was just a
continuance of a transaction that had begun before
the liquidation. The other view was that each time the bills were rolled over there was a fresh
raising of finance by the discounting of bills.
Mr Justice Murphy decided the case on a basis
which did not touch on that distinction. The other members of the Court were evenly divided: Mr Justice Stephen and Mr Justice Wilson held that
there was but one continuous transaction going back
before the date of winding up and, accordingly, the
moneys raised by the liquidators after winding up
were not costs and expenses of the winding up.
Your Honour the Chief Justice and Mr Justice Aickin
held that each time the bills were rolled over
there was a discrete transaction and the moneys
raised by roll over after winding up could be
regarded as costs and expenses of the winding up.
It is not necessary - unless the Court wishes
me to do so - to read the headnote and I would
simply mention to Your Honours that the headnote, as we understand it, is wrong. In the sixth last
line on page 165, the writer of the headnote says:
As a result of the arrangement, the company
was contingently liable to the bank for
$1,000,000.00 when the term of the facility
should end.
One issue on which the four members of the Court
who had dealt with this issue were unanimous was
that it was not a contingent liability. That mustcome just from a misreading of the judgment.
Mr Justice Stephen and Mr Justice Wilson make it
clear they do not regard it as a contingent
liability, at page 174. Your Honour
His Honour made it clear that it was not a the Chief Justice agreed with Mr Justice Aickin and contingent liability passim throughout the judgment but, particularly, perhaps, at pages 193, 200 and 202. For present purposes, it is sufficient to ask the Court to go first to page 175 in the joint
judgment of Mr Justice Stephen and
Mr Justice Wilson. On the opposite page, 174, Their Honours had been analysing the position in
terms of the facility agreements. Now, of course, we cannot rely on that because here there was no relevant facility agreements. It is common ground that the letters left the common law position in tact. But, at page 175, Their Honours dealt with
| Coles(2) | 19 | 5/5/92 |
what the position would have been without a
governing facility agreement:
Had the Bank been only a casual acceptor of the Company's bills, bound by no agreement
to accept them and only doing so in each case
as an isolated transaction, there would be no
continuing liability. Instead there would be
a series of unconnected relationships whereby
the Bank became surety for the Company for
particular accommodation bills and the Company
assumed a liability to the Bank accordingly - we submit that that means assumed the liability at
the time of discounting -
which liability would be discharged when the
Company put the Bank in funds to retire the
bills on maturity.
A present obligation to be discharge in the future.
The acceptance of each new bill would give
rise to a fresh liability.
The context makes it clear that that means a fresh
liability on the part of the company.
DAWSON J: But it would occur on acceptance.
| MR CALLAWAY: | Yes, Your Honour, the acceptance of each bill |
would give rise to a fresh liability on the part of
the company. That is the liability in effect to
indemnify the bank.
DAWSON J: But you say the liability arises on discounting.
MR CALLAWAY: That is true, Your Honour. These of course
were roll-overs, so it is accepted and discounted
probably almost on the same day. With respect, it
cannot be that Their Honours are saying that it arises simply on the acceptance.
Your Honour the Chief Justice concurred with
Mr Justice Aickin at page 179, and the two critical
passages - although I will mention a third for a
reason that will become relevant later - in
Mr Justice Aickin's judgment, the first is atpage 200, point 6 of the page, the beginning of the
first full paragraph:
The liability to indemnify the Bank was
not contingent except in the sense that, if a
bill were not presented, there would be no
occasion for indemnification.
In tax terms, there would be a defeasance.
| Coles(2) | 20 | 5/5/92 |
Once the bills were presented the Bank was
obliged to discharge its liability to the
holders, and the obligation on the Company to
indemnify it arose, unless it had been
discharged by the provision of the full face
value to the Bank in advance.
If I can then go to the other two passages and
come back to the third one. On page 202, about point 4 of the page - it is a line beginning with
the word "agreement" - His Honour then says:
The liability of the Company was not dependent
upon any contingency once the bills had been
discounted.
That, with respect, is our case on this branch.
On the Bank paying each bill on presentation,
the liability to indemnify arose by reason of
the inherent characteristics of an
accommodation bill. The liability of the
Company under the agreement was to provide
funds to the Bank in advance of the maturity
date by discounting replacement bills but that
was a mere consequence of the liability to
indemnify the Bank. It was rather a means of
satisfying the primary liability to indemnify
than a separate and independent liability.
The reference to the liability arising is speaking only of the need for performance, as His Honour
clearly says that the liability was not dependent
on any contingency once the bills had been
discounted.
Your Honours, where the bill is in the hands
of a third party, in practice there are three ways
in which the party accommodated can indemnify save
harmless the accepting bank. One is to pay the
bill itself at maturity. The old cases say to take
up the bill at maturity. The other is to put the accepting bank in funds in advance. The third way
of indemnifying the bank, although I will say more
about this later - is to let the bank pay and then
reimburse the bank. The way it was described frequently in the court below was you either take
up the bill yourself or you pay the bank in the
morning or you pay the bank in the afternoon. In
the case of two of these banks, they were paid in
the morning - they did the debiting themselves, ofcourse - and in the case of one bank, it was paid
in the afternoon.
His Honour Mr Justice Aickin refers to this
matter at the foot of page 201, where His Honour
says, about seven or eight lines from the bottom:
| Coles(2) | 21 | 5/5/92 |
The Company was however at liberty to draw on
the facility in part or in full from time to
time and could satisfy its obligation toindemnify in respect of each bill by putting
the Bank in funds to meet the liability or by
paying the Bank after it had met its liability
to the holders, using for that purpose funds
from any source it chose. Indeed it could
have acquired the bills from Tricontinental or
subsequent holders and cancelled them.
Of course, we know in this case that did not
happen.
So our first respectful submission is that it
is consistent with what is said in K.D. Morris not
only by Your Honour the Chief Justice and
Mr Justice Aickin, but also by Mr Justice Stephen
and Mr Justice Wilson, to regard the obligation of
the party accommodated, the appellant, to the
accommodation party, the bank, as a present
obligation from the time of discounting, even
though of course it has to be performed in the
future.
The second of the submissions was that the
test is not a reciprocal cause of action, and that
submission is perhaps clear enough. If
Your Honours go, briefly, to the respondent's
written submissions, in paragraph 10, the Court
will see my learned friend's submission that theappellant:
came under no liability to indemnify the bank
until the bank had paid the holder of the
bill. Until that even occurred, there was no
doubt between CMF and the bank.
And in 11:
Even in equity, the bank as surety had no right to relief against CMF as principal debtor until the time for payment had arrived.
Now, it is true that until the day of maturity the
bank would have no cause of action against the
appellant, how could it, and it is true that until
the day of maturity there is no debt, in the strict
sense of the word. There is a present obligation
to indemnify but there is no debt in the strictsense, but they are not the test.
| BRENNAN J: | The test of what? |
MR CALLAWAY: Simply whether as a presently existing
pecuniary obligation, Your Honour.
| Coles(2) | 22 | 5/5/92 |
BRENNAN J: But the test of what is deductible under
section 51?
| MR CALLAWAY: | A test of whether it is incurred under |
section 51, Your Honour. It has, of course, to be
of a revenue nature and so forth, but this case is
solely concerned with the time of incurring.
| BRENNAN J: | You are not seeking a deduction of the amount |
for which they are liable, you are seeking a
deduction for something which is a balance and abalance struck within the income year?
| MR CALLAWAY: | Yes, Your Honour. |
| BRENNAN J: | Why do you, in striking that balance, take the |
amount that will be payable in the following income
year and use that as your measuring stick?
MR CALLAWAY: Because, Your Honour, in the year of income,
if one takes a bill for $100,000 that is discounted
at $96,000, in the one year of income one both
receives the $96,000 and comes under what we submit
is a presently existing obligation to pay $100,000.
It does not matter that that is to be discharged in
the next year of income - - -
| BRENNAN J: Why not? | If you are trying to get a balance, |
why do you not take the present value of that
debt - that existing debt?
MR CALLAWAY: | That would run counter to the nominalist theory of money, Your Honour. | |
BRENNAN J: | Of course it does, but you are not seeking to rely upon the nominalist theory of money, as I | |
| ||
| seeking to characterize the liability under these instruments as a 51(1) deduction, you are seeking a | ||
| balance which is arrived at by taking one amount | ||
| ||
| amount payable at another, and if you are striking | ||
| a balance, it seems to me, you are in the area of value, not of nominalist figures. Nevill's case | ||
| was quite different. |
MR CALLAWAY: Nevill's case, the promissory note case,
Your Honour, yes.
BRENNAN J: | I am sorry, not Nevill - Nilsen's case was quite different. |
MR CALLAWAY: Nilsen's case, with respect, indeed, is
different.
| BRENNAN J: | Of course. |
| Coles(2) | 23 | 5/5/92 |
| MR CALLAWAY: | Yes. | I should say - not that this binds the |
Court but - both parties below were content to
regard the better analysis as, that it was a loss
rather than an outgoing, but we have always been
conscious that it might be said that it should be
regarded as an outgoing and that is something thatwe address in paragraph 45(b) of our submissions.
I should mention that as a partial answer to
Your Honour's question too.
In the part of the respondent's written
submissions to which I was referring a moment ago,
having said correctly that there is no cause of
action until the day of maturity and that there is
no debt in the strict sense until the day of
maturity, the conclusion sought to be drawn from
that in paragraph 12 is that the appellant's
position is, therefore, essentially the same as
that of the taxpayers in Nilsen and Bendix. I have said why we submit it is not at all like Nilsen.
There is no need to take the Court to it, but
Bendix was the case of liability on a guarantee,
but at page 562 of the judgment in Bendix, the
learned judge explains that the liability on theguarantee was subject to receiving a written
demand, and no written demand had been received, so
there was a condition precedent to liability that
had not been satisfied in the year of income.
There is no condition precedent to liability
unfulfilled in the year of income in respect either
of the notes or the bills.
I have submitted from time to time that the
test is not whether it is a debt. That is
illustrated by a case such as Commonwealth
Aluminium, where at the end of the relevant year of
income, which was 31 December 1974, one could only
estimate the amount of royalties that would have to
be paid. If one could only estimate the amount of royalties that were going to be paid there was not a debt incurred in the year of income. the meaning of section 51 and that case, along with
Commercial Union and RACV Insurance, was approved by Your Honour the Chief Justice and two other
members of the Court in Nilsen. So, one can have a
presently existing liability short of a debt that
is nevertheless incurred for the purposes of
section 51.
The fourth of the five submissions had to do
with distinguishing the position on an
accommodation bill from the ordinary principal and
surety. It is a matter that we address in
paragraphs 31 and 32 of the written submissions.
The ordinary principal and surety is a case where
| Coles(2) | 24 | 5/5/92 |
the principal debtor is the person primarily liable
to pay. The surety, the guarantor's obligation, is
a contingent obligation if the principal debtor
defaults and, of course, if, and only if, the
surety has to pay, then the principal debtor has to
indemnify him.
In the case of an accommodation bill, the
surety, the acceptor, is the principal debtor
according to the tenure of the instrument. The obligation of the party accommodated, the appellant, is not an obligation that arises if an
event occurs, the principal debtor defaulting. It
is an obligation to be performed when the bill
matures. The bank's obligation as acceptor is
manifestly a present obligation from the day ofdiscounting and, in our submission, the obligation
to indemnify the bank is an obligation that
subsists from the time of discounting which will be
performed at the date of maturity. It is not a matter of, "Look, we'll pay out if somebody else
defaults".
I labour this point a little because no doubt
it is always the fault of those who·draft these
things, but our paragraph 32 has evidently caused
some misunderstanding with our learned friends and,
from what they say about it in their paragraph 17.
We are not, for one moment, suggesting that either the bank's liability as acceptor, or our liability
to indemnify the bank, is a liability which arises in the future. The liability arises on the day of
discounting, but, of course, it is to be performed
in the future. But that is the point: it will be
performed in the future. It is not a contingent
liability to be performed, if need be, in the
future.
But fundamentally one comes back to the fifth
submission on this branch of the case. If Your Honours would go - I think it is probably best to do it by way of developing two paragraphs of the written submission, those paragraphs being 26 and 27, read in conjunction with the respondent's paragraphs of 7 to 9. There we say that the appellant's primary obligation was to indemnify the bank and that, of course, is a quotation from Mr Justice Aickin, or virtually a quotation, not withstanding that the obligation could be satisfied in several possible ways. Now those possible ways are taken up by the respondent in its paragraphs 7
to 9. My learned friends say: The acceptance of the bill by the bank gave
rise to an implied contract of indemnity. In
consideration of the bank's lending its name
by accepting the bill drawn on the bank, CMF
| Coles(2) | 25 | 5/5/92 |
impliedly agreed to indemnify the bank against
loss by reason of its acceptance -and, with respect, that is a happier way of putting it, perhaps, than some of the ways that we have put
it. The obligation of indemnity is to indemnify the accommodation party against the consequences of acceptance. That is the true formulation. So that will cover the case where the bill is held at
maturity by the accepting bank. Then my learned
friends say:
Absent any agreement to the contrary, the
obligation to indemnify the bank could be
performed by CMF, at its own election, in "any
of the ordinary modes of indemnification".
Now, to be fair, that was the submissions of both
parties in the court below, but reflection
suggests, with respect, that it is an
oversimplification.
If I draw a bill - an accommodation bill - on
someone as acceptor and that person agrees to
accept the bill for my accommodation and the bill
is then held by a third party, as all these bills
were, if I am to indemnity the acceptor, the only
two ways I can do it are to take up the bill myself
on the day of maturity or to put the acceptor in
funds in advance. A person is not truly indemnified if he is required to pay the bill
himself and then is reimbursed in the afternoon.
One tends to overlook it with a bank because
it is easy for the bank to pay the bill at
11 o'clock and then debit the account. But if one thinks of individuals, clearly, the acceptor is
entitled to be put in funds. The acceptor is not
exposed to having to raise money himself, herself
or itself, and pay the bill and then turn to the
accommodated party and say, "Please reimburse me?" because the contracted accommodation is not that
the acceptor will pay the bill and then turn to the
accommodated party for indemnity.
The contract is that as between them the party
accommodated will be regarded as the real acceptor
of the bill. It is from that that flows the
obligation to indemnify the acceptor if the bill is
in the hands of a third party who is going to come
and demand payment; and you can only be
indemnified by those two ways.
We submit, with respect, that that must be
right, as a matter of principle, and it derives
support from something that was said by Sir Samuel Griffith in Rankin v Palmer,
| Coles(2) | 26 | 5/5/92 |
(1912) 16 CLR 285. On the last line of page 290, His Honour quoted - I think it was
Lord Justice Buckley - for the proposition:
that "indemnity requires that the party to be
indemnified shall never be called upon to
pay ..... " -
of course, that means to pay out of his own funds.
So that the rider that we would respectfully
attach to paragraph 8 of my learned friend's
written submissions is that strictly speaking the
only true modes of indemnity where the bill is in the hands of a third party are taking the bill up
yourself or putting the bank in funds. The practice of the bank, of course, which is content
to pay the bill and debit the amount later shows
there is no breach of contract. But a paradigm
accommodation bill must be of that character.
It is instructive, in our submission - I
foreshadowed this earlier - to consider the
position if the bank had held the bill to maturity. sometimes the successful tenderer was the accepting bank but paragraph 12(i) says the accepting bank never held at maturity.
I invite the Court to consider what would have happened if the accepting bank had held at
maturity: section 66 would have meant that the
bill was discharged because it was held by theacceptor at maturity but the bank would have given
value and the appellant would still have had to pay
the bank. It would have paid the bank in its capacity as holder for value of the bill, pursuant
to the contract of accommodation under which it,
the appellant, is to be regarded as the real
acceptor. In other words, the bank would have been entitled to come to the appellant and say, "I, the
bank, hold this bill, and if it were an ordinary trade bill it would be discharged. But the bargain between us is that you will be regarded as the real
acceptor. As between us it is irrelevant that I,
the acceptor, hold the bill at maturity. As between us, it is as if you were the acceptor and
if you, appellant, were the acceptor I'd be
entitled to come and ask you to pay the bill.".
That is exactly what the bank would be entitled to
do because it is an accommodation bill.
| TOOHEY J: | Mr Callaway, could I ask you what I am sure is a |
very naive question, but why is so much emphasis
placed on the word "incurred" in section 51(1)? If
certain that it would be overlooked and that that
was an error and, as we say, it is not reconcilable
with Nilsen.
Moving to Comalco, that was a case where, in
our submission - I should qualify its name at the
time, Commonwealth Aluminium - there had been a
complete subjection, and I refer - I am reading
from 77 ATC 4151 at 4162; that case is No 18 on
our learned friend's authorities. In the
right-hand column on page 4162, His Honour said, in
the second paragraph to begin on the column:
It is, I think, clear that the overall
effect of the new sec 70 of the Mining
Act ..... was that Commonwealth Aluminium became
liable to pay a royalty in respect of each
tonne of bauxite which itmined during the 1974 five months' period, so soon as that tonne was
mined. For those provisions imposed a royalty
liability upon Commonwealth Aluminium in
respect of all bauxite which it "won". Thus once each tonne of bauxite was mined during the 1974 five months' period, Commonwealth
Aluminium thereby subjected itself to a
liability to pay a royalty in respect thereof.
It was the mining of the bauxite which
attracted the liability, and once each tonne
had been mined, there was nothing more
required to be done by Commonwealth Aluminium
to subject itself to liability for the
royalty, and there was nothing which
Commonwealth Aluminium could do, which would
affect the amount of the royalty.
The main point of that case is that there had
been a complete subjection. There was, in our
submission, a statutory debt, the amount did
| Coles(2) | 88 | 5/5/92 |
require to be calculated, and there was no other
event, as there is, in our submission, here, on
which liability depended. As there was a statutory debt it only needed to be quantified.
It is not unlike Re Mendonca, a case on income
tax and bankruptcy, which is not on our
authorities, Your Honours, and we can supply,
before the evening is out, the photocopies; Re Mendonca, Ex parte Commissioner of Taxation, (1969) 15 FLR 256. Mr Justice Gibbs, when in the Federal Court of Bankruptcy, was considering liability for taxation for income tax and - this is
only an analogy but we submit that what His Honour
said at page 259, about point 7 on the page:
It is now settled that the effect of -
the various sections in the early 200 of the Income
Tax Assessment Act -
is that the liability to income tax is imposed
by the statute itself and that assessment is
only a method of ascertaining the extent of
the liability, so that the tax is a debt due
and owing, although not payable,
notwithstanding that no assessment has been
made.
And His Honour considers that at least by the end of the year, 30 June, there is such a liability
even though you do not know the figure at that
time. But we say that is a useful analogue to thispresent case.
Your Honour Justice McHugh then raised with me
RACV and it may have been Commercial Union, again.
Those were cases, in our submission, where there
was a complete subjecting even though the figure
was arrived at by a soundly based estimation. The present Chief Justice of this Court in Nilsen spoke
of the liability being incurred and in the passage
in his judgment the word "incurred" appears in italics.
We would say that RACV, Commercial Union, so
far as it is similar to RACV, that is so far as it
is dealing with quantification, at any rate, are
not inconsistent with Nilsen and Flood. Commercial Union may be inconsistent in its treatment of the
condition precedent unless it is right to treat it
as wiped out altogether. I think I have dealt with the cases that Your Honour raised with me.
My learned junior reminds me of Ogilvy &
Mather, which we have listed about a third of the
way down page 2 of our outline. It is Ogilvy &
| Coles(2) | 89 | 5/5/92 |
Mather, (1990) 98 ATC 4836 - I will not go to it at
the moment - a decision of the Full Court of the
Federal Court.That was a case where an advertising agency which placed advertisements with media outlets
had - the time had run whereby it was in what was
called the non-cancellation period. So it had asked for advertisements to be placed, the
non-cancellation period had commenced - that is to
say it was not able thereafter to withdraw - but
the Federal Court held that there was no presentliability until the advertisements were published
and the advertisements, although Ogilvy and Mather
could not thereafter stop the advertisements from
being published, they may not be published because
of a strike or some other printing problem and
therefore there was no liability accrued by the end
of the tax year.
MASON CJ: That may be a convenient time to adjourn,
Mr Batt. We will resume at 10.15 am tomorrow.
MR BATT: If the Court pleases.
AT 4.15 PM THE MATTER WAS ADJOURNED
UNTIL WEDNESDAY, 6 MAY 1992
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