McLean v Discount and Finance Ltd

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.