Jolley v Mainka

The appellant, Frederick Reidy Jolley, appealed to the High Court of Australia from a decision of the Central Court of the Territory of New Guinea. The dispute concerned the payment of £900 in interest due under mortgages executed in 1926. The mortgages stipulated that payments were to be made "in gold or in currency equivalent thereto at the market or exchange rate current at the time when every such payment is actually made." The appellant paid £900 in Australian one pound notes, but at the time, the equivalent of £900 in gold in Rabaul was £1172 in Australian pound notes. The respondent argued this payment was insufficient, while the appellant contended it satisfied the debt.

The legal issues before the High Court were whether Australian notes constituted legal tender in the Territory of New Guinea and, if so, whether the contractual stipulation for payment in gold or its equivalent rendered the payment of Australian notes insufficient to discharge the debt. The court was required to consider the constitutional authority of the Commonwealth Parliament over the Territory of New Guinea and the effect of Commonwealth legislation, specifically the Commonwealth Bank Act 1911-1931, on contractual obligations within the Territory.

The High Court, in allowing the appeal, reasoned that section 60H (1) (b) of the Commonwealth Bank Act 1911-1931, which declared Australian notes to be legal tender throughout the Commonwealth and all territories under its control, applied to the Territory of New Guinea. This was based on the interpretation that the Territory, acquired by the Commonwealth under mandate, fell within the scope of "territories under the control of the Commonwealth" as contemplated by the Act and the Constitution. The Court held that once Australian notes were established as legal tender, a contractual provision attempting to stipulate for payment in a specific form of legal tender to the exclusion of other forms of legal tender was ineffectual. Therefore, the payment of £900 in Australian pound notes was a valid discharge of the debt.

The High Court ordered that the appeal be allowed, the judgment of the Central Court of the Territory of New Guinea be reversed, and the cause be remitted to that court.