Smith v Graham [1916] HCA 33; (1916) 21 CLR 503 (18 May 1916)

HIGH COURT OF AUSTRALIA

Smith Appellant; and Graham and Another Respondents.

H C of A

On appeal from the Supreme Court of Victoria.

18 May 1916

Barton, Isaacs, Gavan Duffy and Rich JJ.

Starke (with him Morley), for the appellant.

S. R. Lewis, for the respondents.

The judgment of the Court, which was delivered by Barton J., was as follows:—

Barton, Isaacs, Gavan Duffy and Rich JJ.

This is a case in which, under sec. 230 of the Insolvency Act 1915, there was a compulsory application for a certificate—if, indeed, a proceeding which is compulsory can be called an application. After a long and apparently very careful hearing before the Judge of the Court of Insolvency an order was made by which it was stated that the Court was of opinion and adjudged that the insolvent "has been guilty of two misdemeanours under sec. 275 (I.) of the Insolvency Act 1915, each namely—that the insolvent incurring a debt or liability to the Colonial Bank of Australasia Ltd. has obtained credit from the said Colonial Bank of Australasia Ltd. by means of fraud." Upon that, the two separate misdemeanours not being further delineated in any way, there was an order that the certificate should be refused absolutely, and that the insolvent should be imprisoned for one year with hard labour. The order further stated that the Court was of opinion and adjudged that the insolvent had been guilty of an offence under sec. 235 of the Act, namely, that he appropriated to his own use cartridges the property of Dalgety & Co. Ltd. of which he had at the time charge or disposition as agent, factor or broker only and not in any other capacity. On that the Court of Insolvency did not award any punishment.

The matter then came before the Supreme Court, whose judgment was a dismissal of the appeal with a variation of the order in regard to the two misdemeanours there referred to. The variation consisted mainly, as to one misdemeanour, of grouping together a number of items of debt incurred on 24th August 1914 so as to make up a sum of £204 1s., and as to the other misdemeanour, of inserting a sum of £34 14s. 6d. which represented the cashing of a cheque on 28th August 1914.

Special leave was granted to appeal to this Court, the real reason for granting it being that the true ground of objection both to the order as varied and to it as originally made was as to the sentence of imprisonment. That does not now constitute the decision one as to status. It is unnecessary to determine whether an appeal as of right would still lie to this Court in the event of the refusal of the certificate being sustained.

One contention urged before the Supreme Court and repeated here is that in the order of the Court of Insolvency the misdemeanours were too vaguely stated and that the Supreme Court had grouped together several items of advance and called them one advance. We agree that that was wrong and that each separate advance must be treated as a separate incurring of a debt for the purpose of sec. 275 (I.). Treating them as separate advances there is evidence before us, which we may treat as accurate, that they were only made on the faith of security being given. This giving of security by the appellant involves, on any possible interpretation of sec. 275 (I.), that credit was in turn given to him, the debtor, in respect of that security, inasmuch as the giving of it involved the giving of time or forbearance and therefore of credit. Therefore, in incurring the several debts the insolvent committed a breach of sec. 275 (I.), inasmuch as this credit was obtained by fraud. The order, therefore, should be varied by stating the debts individually and separately, instead of grouping them all together.

We entertain no doubt that the insolvent, as he himself admits, was deliberately and systematically dishonest, and also, putting technicalities aside, that he had full opportunity of meeting the substance of the charges made against him, and, so far as the proceedings are concerned, that in substance the technicalities necessary were complied with.

The order of the Court of Insolvency will therefore be varied so as to read as follows:—This Court having considered the evidence is of opinion and doth adjudge that the said insolvent hath been guilty of certain misdemeanours under sec. 275 (I.) of the Insolvency Act 1915, namely, that in respect of each and every of the following sums advanced to him by the Colonial Bank of Australasia Ltd. on 24th August 1914, that is to say, £8 14s., £4, £7 1s. 11d., £26 15s. 2d., £40 10s. 2d., £29 1s. 7d., and £28 18s. 2d., he did, incurring a debt or liability, obtain credit by means of fraud, and this Court doth further adjudge that the said insolvent hath been guilty of an offence under the provisions of sec. 235 of the said Act, namely, that he the said insolvent appropriated to his own use cartridges the property of Dalgety & Co. Ltd. of which he the said insolvent had at the time charge or disposition as agent, factor or broker only and not in any other capacity, and doth order that the certificate of the said insolvent be and the same is hereby refused, and that the said insolvent be imprisoned in His Majesty's gaol at Melbourne for the period of one year with hard labour.

Appeal allowed. Order appealed from discharged and order of Court of Insolvency varied as above mentioned.

Solicitor for the appellant, J. W. McComas.

Solicitors for the respondents, Blake & Riggall.