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McLean v Discount and Finance Ltd

McLean v Discount and Finance Ltd

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Case Copied 13 December 1939 82 min read

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64 CLR 312

DISCOUNT AND FINANCE LIMITED AND

DEFENDANTS,

ON APPEAL FROM THE SUPREME COURT OF

NEW SOUTH WALES. Guarantee-Default of principal debtors-Independent sureties-Bonds deposited with

creditor by one surety-Sale-Proceeds credited to suspense account-Balance of indebtedness paid by co-surety-" Payment"-ContributionMoratorium legis- SYDNEY,

lationMoratorium Act 1930-1931 (N.S.W.) (No. 48 of 1930-No. 66 of 1931), Aug. 4, 8-11;

secs. 2, 6-Moratorium Act 1932-1937 (N.S.W.) (No. 57 of 1932-No. 3 of 1937), secs. 2, 6, 14A, 20, 41.

The plaintiff guaranteed the liability of a firm to a bank by the execution of a letter of lien over Commonwealth bonds which were deposited with the bank. Authority was given to the bank to sell the bonds and to apply the proceeds in discharge of the firm's indebtedness. The principal debtor having made default, the bank, with the consent of the plaintiff, sold the bonds, and, on 19th August 1932, without the knowledge of the plaintiff, credited the proceeds to a suspense account. Thereafter interest on the amount of such proceeds was not credited to the suspense account nor debited to the principal debtors' account. On 23rd February 1937 a co-surety paid to the bank a sum of money which together with the sum in the suspense account amounted to the full amount of the firm's indebtedness to the bank, and certain documents given by the co-surety to the bank in respect of the guarantee were cancelled. After the commencement of a suit brought by the plaintiff against the co-surety for contribution the bank credited the principal debtor's account with the amount at the credit of the suspense account and thus closed the latter account. The defence was raised in the suit that the amount at the credit of the suspense account could not be treated as paid before the commencement of the suit.

64 CLR 313

Held, by Rich, Starke, Evatt and McTiernan JJ., (Latham C.J. not deciding), H. C. OF 1A. that payment had been made and the proceeds of the bonds applied in discharge of the principal debt before the commencement of the suit. Per Rich and McTiernan JJ.: Payment was made when the proceeds of the bonds were carried to a suspense account on 9th August 1932. Per Starke and Evatt JJ. There was a final and definite appropriation of the proceeds of the sale of the bonds towards the payment of the guaranteed debt on 23rd February 1937.

Held, also, by Starke, Evatt and McTiernan JJ., (Latham C.J. dissenting, and Rich J. not deciding), that a surety whose liability is secured and therefore postponed by the New-South-Wales moratorium legislation is not precluded from recovering from a co-surety contribution in respect of a payment made to the principal creditor by reason of the fact that such payment was made before the date to which the liability was postponed.

Decision of the Supreme Court of New South Wales (Nicholas J.) reversed.

APPEAL from the Supreme Court of New South Wales.

A suit by way of statement of claim was brought…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [1939] HCA 38
Decision Date: 13 December 1939

CaseChat Overview and Summary

The High Court of Australia heard an appeal from the Supreme Court of New South Wales concerning a dispute between co-sureties, William King McLean (the appellant) and Discount and Finance Ltd. (the respondent). McLean sought contribution from Discount and Finance Ltd. regarding a debt owed by the firm George Wall to the National Bank of Australasia Ltd. The core of the dispute involved whether payments made towards the firm's indebtedness were sufficient to establish McLean's right to contribution, particularly in light of the Moratorium Acts.

The legal issues before the High Court were twofold. Firstly, the court had to determine whether the proceeds from the sale of McLean's Commonwealth bonds, deposited with the bank as security, constituted a "payment" that discharged the principal debt, or at least a portion of it, before the commencement of the suit. Secondly, the court was required to consider whether the New South Wales moratorium legislation precluded a surety from recovering contribution from a co-surety if the payment was made before the date to which the liability was postponed under the Act.

The High Court, by a majority, found that payment had been made. Rich and McTiernan JJ. held that payment occurred when the bond proceeds were placed in a suspense account in August 1932, thereby reducing the principal debtors' interest liability. Starke and Evatt JJ. considered that a final and definite appropriation of the bond proceeds towards the debt occurred in February 1937. Furthermore, a majority of the court (Starke, Evatt, and McTiernan JJ.) determined that the moratorium legislation did not prevent a surety from claiming contribution for a payment made before the postponed date of liability. The decision of the Supreme Court of New South Wales was accordingly reversed.

Orders