David v Malouf [1908] HCA 35; (1908) 5 CLR 749 (12 June 1908)

The petitioning creditors' debt in this case is described as "the sum of £151 12s. 7d. on six promissory notes signed by the said Joseph David in favour of the petitioners and of which promissory notes the petitioners are the holders." The dates of the promissory notes are then given, showing that none of them had fallen due at the date of the petition. The objection is taken that that is not a good petitioning creditor's debt. Whether it is or is not depends entirely upon the Insolvency Acts. Sec. 37 of the Insolvency Act 1890 provides that "the debt of the petitioning creditor must be a liquidated sum due at law or in equity;" and it was held in Victoria in In re Taylor; Ex parte Young Bros.[1], following the decision of Sir James Bacon C.J. in Ex parte Sturt & Co.; In re Pearcy[2], that those words did not include the case of a debt in respect of which credit, which was unexpired at the time of the presentation of the petition, had been given. That case, which was not a case of a promissory note, but of credit given for goods sold, was decided in 1871, shortly after the English Bankruptcy Act 1869 was passed. That view does not appear to have been disputed, although much might possibly have been said against it.

The English Bankruptcy Act 1883, by sec. 6, substituted a new definition of a petitioning creditor's debt, viz., "a liquidated sum payable either immediately or at some certain future time," leaving out the word "due." Under that provision there have been many petitions in England founded upon debts not payable until a future time. It is suggested that in all of them, even if a promissory note or a bill of exchange had been given, the petition was founded on the original debt. That may be so. Sec. 37 of the Victorian Act of 1890 was amended by the Act of 1897, which added after the words "in equity" the words "payable either immediately or at some certain future time." The question for our determination is whether under the definition now given in the Victorian Acts the holder of a current promissory note of sufficient amount can present a petition. That depends upon whether it is such a debt as can be described as "a liquidated sum due at law or in equity, payable either immediately or at some certain future time."

It was not disputed that in this case, if there was an original debt in respect of which the promissory notes were given, and that fact had been set out, the petition would be good. If it were only a question of fact the matter could probably be cured by amendment. The other point is of considerable importance, because, if the objection is good, an indorsee could not become a petitioning creditor for the sequestration of the estate of the maker of a current promissory note.

It seems to me that the relation between the maker and the holder of a promissory note is that of debtor and creditor—certainly for the purposes of the Insolvency Acts. There can be no doubt that, if a man in insolvent circumstances deliberately preferred one person in that position to another, it might be a fraudulent preference. Again, if he made a preferential payment with a view to defeat or delay such persons, they would be creditors who would be defeated or delayed. Again, if it became necessary to inquire whether a debtor was able to pay his debts as they became due out of his own moneys, certainly his obligations on promissory notes falling due on subsequent dates would be regarded as debts which he might be unable to pay out of his own moneys. So that, unless the words of the Acts compel us to hold the contrary, we are bound to decide that the holder of a current promissory note is a creditor of the maker and has a good petitioning creditor's debt.

Under sec. 37 of the Act of 1890 before its amendment the word "due" was capable of meaning "presently payable"; it was also capable of meaning "owing"; and a third meaning was that the debt was a sum due either at law or in equity, regarded as a debt, without reference to the time of payment. Sir James Bacon C.J. took the view that it meant "presently payable."

Assuming that that was the meaning of the word "due" in sec. 37 of the Act of 1890, when sec. 106 of the Act of 1897 added other words the context became different, and the meaning of the word "due" may, therefore, have become different. If we substitute in the phrase as amended the words "presently payable" for the word "due," and add the other words "payable either immediately or at some certain future time," we get "a liquidated sum presently payable at law or in equity, payable either immediately or at some certain future time." But that clearly would not be giving effect to the intention of the legislature. It seems then that, whatever the word "due" meant in its original context, it can no longer have reference to the time of payment, but must now refer to the nature of the obligation.

Another argument was that, although that view might apply to an obligation arising under a covenant or goods sold on credit, it does not apply to negotiable instruments, because the words "due" and "payable" are used as synonymous terms in the Instruments Act of 1890. That is, no doubt, the meaning of the word "due," as used in that Act. But it does not follow that in an other Act, in an entirely different context, the word "due" has the same meaning, nor that, if it once had that meaning in the Act of 1890, it can any longer have it after the Act of 1897. I think, therefore, that the petition is good on its face without amendment.

[1] 17 V.L.R., 121; 12 A.L.T., 158.

[2] L.R. 13 Eq., 309.

High Court of Australia

David v Malouf [1908] HCA 35; (1908) 5 CLR 749 (12 June 1908)

HIGH COURT OF AUSTRALIA