Practitioners dealing with assignments of debts owed by agents to principals should note that once sale proceeds are received by the agent, the resulting obligation to the principal is not a 'book debt' requiring registration under the Book Debts Act.
Shackell Plaintiff, Appellant; and Howe, Thornton & Palmer Defendants, Respondents.
H C of A
On appeal from the Supreme Court of Victoria.
2 April 1909
Griffith C.J., O'Connor and Isaacs JJ.
Starke, for the appellant.
Duffy K.C. (with him Sanderson), for the respondents.
Starke, in reply.
Griffith C.J.
I think this appeal must fail, but not for the reasons assigned by the Judges of the Supreme Court. The sum in question was a sum which was to be received by the New Zealand Loan and Mercantile Agency Company as agents for Dillon from a person who was Dillon's debtor in respect of wool sold to that person.
The Book Debts Act 1896 provides by sec. 3 that:—"No assignment or transfer, made after the commencement of this Act, of book debts due or to become due to any person, whether such assignment or transfer be absolute or conditional, shall have any validity in law or in equity until such assignment or transfer has been registered by the Registrar-General." "Book debts" are defined as meaning "any debt due or to become due at some future time to any person on account of or in connection with any profession trade or business carried on by such person whether entered in any book or not." The Judges of the Supreme Court were of opinion that the money in question, which was owed by the company to Dillon, was payable to him in connection with and on account of his business, but thought it was not a debt within the meaning of the Act. I confess I am unable to entertain any doubt that the relation of debtor and creditor existed between the company and Dillon, but whether the amount was due "on account of or in connection with his business" is another question. The purpose of the Act is apparent on its face. It is entitled "An Act relating to the assignment or transfer of book debts." "Book debts" is a term well known in commercial use, and its meaning is sufficiently discussed in Tailby v. Official Receiver[1]. In Prideaux's Precedents in Conveyancing, 5th ed., vol. i., p. 344, I find a form of what is called "An assignment of the goodwill and property of a business," and in it is included an assignment of "all the book and other debts now due and owing to him" (the vendor) "on account of the said trade or business." I think that this money when it was received by the company was no longer a "book debt" within the meaning of the Act, and it is only with the assignment of "book debts" that the Act deals.
I express no opinion upon the question whether an order given to a particular customer to pay to some one else a debt owing by the customer is an assignment of a book debt within the meaning of the Act. It may operate at law or in equity as an assignment in favour of the person to whom it is given, but I reserve my opinion upon the question whether it is within sec. 3.
O'Connor J.
I am of the same opinion. The Act as it seems to me was never intended to apply to a debt of this kind. There is no doubt that in one sense a debt to a pastoralist principal from his agent who is carrying on a different business, viz., that of selling wool, is a debt in connection with the trade or business of the principal. The usual way in which the pastoralist's business is conducted is that his wool should be sold through agents of that kind. But I do not think that is the kind of debt which is aimed at by the Act. The Act deals with a certain well known class of debts, viz., "book debts."
Whether that phrase may be described as having acquired a technical meaning or not, it has certainly acquired a well known meaning in trade which is recognized in Statutes and in law in Australia. I think the generality of the definition must be controlled by the objects of the Act itself. In the operative section, sec. 3, the expression is used in the plural—"book debts due or to become due to any person." I think it is quite clear that refers to the well known class of debts which are ordinarily described as "book debts." This debt, I think, was only a book debt until the purchase money for the wool was paid to the agents by the person who bought it. After it had been paid over, when the money came to the hands of the agent—at which time the assignment began to operate—it was no longer a book debt within the meaning of the Act, though certainly a debt in another sense.
Isaacs J.
I agree. I think this was a debt owing by the company to Dillon. I think Harsant v. Blaine, Macdonald & Co.[2] is an authority amongst others that money received by one person to the use of another is a debt. The question then is whether this was a debt "on account of or in connection with" Dillon's business. Perhaps in a remote sense it was. But I am clear in my mind that is not the sense in which the words were used in the Act. The trade or business of Dillon was that of selling wool, and when his wool was sold and the purchaser paid for it, that business transaction was ended. Then the company carried on a totally distinct business, including that of agents for persons carrying on the trade of selling wool, and it was a totally different kind of business, a different vocation, with a different sort of contract. When they received this money from Dillon's purchaser the obligation that they were under to Dillon did not arise out of his trade but rather out of theirs, and it was an obligation which then existed independently of Dillon's carrying on his business of wool seller, but rested on the personal relation between the two of them. If, for instance, a solicitor who had done work for his client were paid by the client paying the money to the solicitor's managing clerk, it would hardly be said that the obligation of the managing clerk to pay the money over to the solicitor would be a book debt of the solicitor. Certainly it would not be so within the meaning of this Act. For that reason I think the appeal should be dismissed.
Appeal dismissed with costs.
Solicitors, for the appellant, Nunn, Smith & Jeffreson.
Solicitors, for the respondents, Blake & Riggall.