HIGH COURT OF AUSTRALIA

                                           Stock Motor Ploughs Limited

                                                           Vs.

                                                        Forsyth

                        (Gavan Duffy C.J., Starke, Dixon, Evatt and McTiernan JJ.)

                                                   15 August 1932

Gavan Duffy C.J.

On the pleadings in this case it appears that the plaintiff as payee is suing the defendant as maker of
two promissory notes given by the defendant to the plaintiff as collateral security for two
instalments payable under a hire-purchase agreement within the meaning of the Moratorium Act
1930-1931. The plaintiff commenced the action after the first day of September 1931 and without
the leave of the Court prescribed by sec. 20 of the Act. The first question for determination is
whether the plaintiff's claim is obnoxious to the provisions of the Act. I think it is, because what he
claims is, in fact, payment of the sums payable as instalments under the hire-purchase agreement.
The next question which arises is this: If the Moratorium Act extends to such a claim, is it, to that
extent, inconsistent with the provisions of the Federal Bills of Exchange Act 1909? In my opinion it
is not. The Federal Act prescribes the form of a promissory note, and the obligations which arise
between the parties when that form is adopted, but it leaves it open to the parties to alter those
obligations by agreement between themselves, and it leaves it open to the State legislatures to
determine the circumstances in which, and the extent to which, negotiable instruments shall have
effect in matters under the control of those legislatures. Such a legislature may direct that a
promissory note given to secure a payment unenforceable under the State law, shall itself be
unenforceable, or it may impose a condition precedent to its enforcement.

In my opinion the appeal should be dismissed.

Starke J.

The appellant brought an action in the Supreme Court of New South Wales upon two promissory
notes given by the respondent to it. The respondent by his plea alleged that the promissory notes
were given as collateral security for two instalments payable under a hire-purchase agreement made
between the appellant and himself, and that the action was commenced without leave of the Court,
contrary to the provisions of the Moratorium Act 1930-1931 of New South Wales. This Act in effect
prohibits, without leave of the Court mentioned in the Act, calling up or demanding or bringing
action to recover hire-purchase money or any instalments thereof (secs. 4, 11 (1) and 20). The
Supreme Court resolved that this was a good plea, and reversed an order striking it out. From this
decision an appeal was brought to this Court, which also granted leave to appeal.

The decision, it was contended, was wrong for two reasons--one that the provisions of the
Moratorium Act did not extend to obligations on collateral securities, the other that the provisions of
the Moratorium Act were inconsistent with a law of the Commonwealth, namely, the Bills of
Exchange Act 1909-1912, and to the extent of the inconsistency were invalid (Constitution, sec.
109).

In my opinion, the former reason was completely and satisfactorily disposed of in the Supreme
Court by Harvey C.J. in Eq. The hire-purchase agreement and the promissory notes secured the
same hire-purchase money; it was one debt or sum of money secured by two separate or collateral
promises, the performance of either of which fulfilled or satisfied the other. In short, the
commencement of the action on the note is a demand for payment of the purchase-moneys or
instalments due and payable under the hire-purchase agreement.

The latter reason raises a more difficult question, but I agree with the conclusion reached by the
Supreme Court that there is no inconsistency between the provisions of the Moratorium Act and the
Bills of Exchange Act. It should not be forgotten that the enactment of a moratorium for New South
Wales is within the constitutional power of that State. The only question is whether there is an
inconsistency, a contrariety, or an opposition between the State law--or the provisions of that law
relevant to the case in hand--and the Federal law.

Sometimes such inconsistency is found because the Federal power has set up a uniform and
exclusive rule or code relating to a subject matter within its jurisdiction and no room is left for the
operation of State law. But that is not the case here, for the Bills of Exchange Act does not provide a
complete and exclusive code in relation to bills of exchange and promissory notes. It is only
necessary to refer to sec. 5 preserving the rules of common law; to the provisions as to capacity and
authority of parties (Part II., Div. 2) and as to the consideration of the bill (Part II., Div. 3); and to
the absence of any provisions as to property in bills, as to equitable rights, limitations, and so forth.
All these subjects must be governed by the laws of the States within their several territorial limits,
for the Federal power has not been exercised upon them in relation to bills of exchange and
promissory notes.

Is there any inconsistency between the Moratorium Act and any particular provision of the Federal
Act? The only material provisions are, I think, those contained in secs. 43, 62, 94 and 95. The effect
of these provisions is that the maker of a promissory note engages that he will pay it according to its
tenor, and that the holder may sue on the note in his own name and recover the amount thereof and
interest thereon. The sections set forth the obligations arising ex contractu on the making of an
instrument within the definition of a promissory note (sec. 89). But the statement and enactment of
those obligations does not prescribe, define, or deal with the time within which they may be
exercised, or how and in what manner they may be suspended. Such matters rest upon the
agreement of the parties or the action of a competent legislature. Where the Federal power has not
acted, the competent legislatures are necessarily the States, within their territorial limits.

The appeal ought, in my opinion, to be dismissed.

Dixon J.

The question in this appeal is whether, notwithstanding the Moratorium Act 1930-1931 of New
South Wales, the payee of a promissory note, given before 19th December 1930 as a collateral
security for an instalment payable under a hire-purchase agreement, may, without the leave of a
District Court or a Court of Petty Sessions, maintain an action against the maker to enforce payment
of the note. The bailee or hirer of the chattels, besides contracting under the hire-purchase
agreement to pay to the bailor or owner the instalments of hire or rent, made in his favour as payee a
promissory note for the amount of each instalment and delivered the note to him as a collateral
security for the payment of the instalment. The legal consequence was to bring into existence two
independent obligations to pay the same sum of money. Each obligation requires the same person to
do the same act so that by performing one he performs the other. He must make, in respect of each
instalment, a single not a double payment, but he incurs a double obligation to make it. The
obligations are collateral in the sense that they are separate, concurrent, secure the same sum, rank
equally and are enforceable in any order. The total amount of instalments, each of which is secured
by two such obligations, answers the description contained in sec. 11 (4) of the Moratorium Act "the
amount of rent upon payment of which ... the goods would under the agreement become the
property of the hirer." Sec. 11 (1) and sec. 4 (1) (a) operate in combination to forbid the owner to
call up or demand payment from the hirer of sums answering that description. It appears to me that
he is forbidden to do so whether he relies upon the obligation expressed in the hire-purchase
agreement or upon a separate obligation to make the same payment. Further, sec. 20 (2) provides
that, without the leave of a District Court or Court of Petty Sessions, the person to whom an
instalment is by the terms of the hire-purchase agreement due shall not take action to recover the
same. Again the prohibition depends not upon the nature of the obligation relied upon to obtain
payment, but upon the description of the sum of money for the recovery of which the action is
brought. That sum of money is an instalment due by the terms of a hire-purchase agreement, and
sec. 20 (2) means that it shall not be sued for whether the cause of action arises from a promise
contained in the agreement or from an obligation created by some other instrument. For these
reasons I think that the Moratorium Act construed, not artificially to avoid inconsistency with
Federal law, but according to its natural meaning, intends to restrain proceedings to enforce
promissory notes given as collateral security for the payment of hire or rent under hire-purchase
agreements. The matter, therefore, depends upon the effect of the Federal Bills of Exchange Act
1909. The question is whether a State law operating to prevent recovery upon a promissory note,
which, at the time of its enactment, was valid and subsisting, is inconsistent with the
Commonwealth statute. A provision which prevents or suspends the enforcement of an accrued right
cannot do otherwise than impair the enjoyment of that right. In this Court an interpretation of sec.
109 of the Constitution has been adopted which invalidates a law of a State in so far as it would
vary, detract from, or impair the operation of a law of the Commonwealth. Further, when the
Parliament appears to have intended that the Federal law shall be a complete statement of the law
governing a particular relation or thing, it is considered that the operation of the Federal law would
be impaired if the State law were allowed to affect the matter at all (Clyde Engineering Co. v.
Cowburn[1]; H. V. McKay Pty. Ltd. v. Hunt[2]; Hume v. Palmer[3]; Ex parte McLean[4]). Such an
interpretation requires the consequence that, except in so far as the law of the Commonwealth
appears otherwise to intend, enjoyment of a right arising under it may not be directly impaired by
State law. The nature of the Bills of Exchange Act 1909 makes the application of such a rule
somewhat difficult and uncertain. It is in the main a transcript of the English Act of 1882. It is not a
statutory expression of any design or plan conceived or policy devised by the legislature. It is an
attempt to convert a part of the lex non scripta into lex scripta. It has been said that it does not
purport to be a scientific code dealing with the whole law relating to bills of exchange but is more in
the nature of a digest of the law on the subject (per Walton J., Embericos v. Anglo-Austrian
Bank[5]).

When from the general body of the law rules governing a special kind of instrument were selected
for formulation in a statutory shape, it was inevitable that what was stated should, not only for its
proper understanding but for its practical application, continue to depend upon the whole content of
the law of which it formed a coherent part. The subject could not be isolated. Bills of exchange and
promissory notes have very special characteristics, but they are not and could not be removed from
the operation of the general law of status, of obligation, and of remedies. Further, heads of law
which deal with particular relations, with transactions of a special nature and with general
conceptions of property must continue to include bills and notes within their operation. For the most
part, the rules of common law and the doctrines of equity cover this ground but statute plays its part.
The capacity of lunatics is not, but that of married women and infants is, materially affected by
legislation. The validity and effect of a transaction between solicitor and client is not, but between
money-lender and client is, dealt with by statute. Again, since 31 Geo. III. c. 25, at least, bills and
notes have been considered proper subjects for the revenue, and most Stamp Acts have made non-
compliance with their requirements a ground of invalidity. Under a unitary system all this occasions
no difficulty because the one legislature can deal as it chooses with every department of law,
common law and statute. But under a Federal system where, except for such special subjects as bills
of exchange and promissory notes, the law of civil rights is under the authority of the State, but
upon these subjects the Federal law is paramount, it becomes no easy task to determine how far
State law has been permitted to affect the operation of the Federal. On the one hand, some of the
provisions of the Bills of Exchange Act 1909, particularly those which deal with the special
properties and peculiar characteristics of negotiable instruments, appear to be intended to be
exhaustive. On the other hand, a number of considerations makes it clear that the force and effect of
bills and notes must in many respects depend upon the law under the authority of the State,
including State legislation. It is an obvious but most important consideration that the very nature of
the statute as a partial code or digest of rules of law militates against any interpretation which would
render inoperative or inapplicable rules of law or statutory provisions which theretofore had gone to
the determination of rights and liabilities in connection with such instruments. For instance, it is not
conceivable that the Federal statute meant to displace the operation of State enactments which
require that bills and cheques shall be deemed to have been given for an illegal consideration when
the issue or transfer has been in consideration of money won at gaming or lent for gaming, or State
enactments which allow the seizure and sale of negotiable securities under writs of execution,
although rights which would arise under the Federal law in the former case are nullified, and in the
latter case are transferred in a manner not authorized by its provisions. Again, it must not be
forgotten that bills, notes and cheques are instruments in a double sense. Not only do they serve to
express and record in formal shape a promise or agreement, but in most cases they are tools or
implements which afford the subsidiary means of carrying out a principal transaction. More often
than not the very purpose of a bill of exchange demands that its efficacy shall depend upon the legal
fate of a main transaction. A further consideration strongly supporting the conclusion that a large
field of operation is allowed to State legislation appears from the express provisions of the Bills of
Exchange Act. That consideration is that the Act contains many express provisions referring, or
deferring, to that law written and unwritten over which the State legislature retains authority as the
law governing particular matters by which the rights and obligations arising from bills and notes are
determined. Apart from secs. 27 and 97 (2) which involve the State law as to capacity of natural or
artificial persons as well as the mode of authenticating corporate acts, and sec. 32 which imports the
law upon the doctrine of consideration, and sec. 25 (1) and (4) which recognize the stamp laws of
the States, secs. 34 (2), 35 (2), 41 (2) and (5) and 43 (1) (b) will be found on examination to remit
to the operation of the general law over which the State retains control some of the most important
elements in the validity of or title to bills and notes. The references to "unlawful means" and
"illegality" and "defects of title" as well as to "personal defences" necessarily involve the
proposition that it is by this general law that the rights arising under bills and notes must be
ascertained. How far State legislation may and does affect the acquisition of rights under these
instruments is illustrated by a mere reference to enactments relating to money-lending, gaming,
gold-buying and supplying liquor on credit. Finally, it is not possible to neglect the argument of
expressio unius exclusio alterius which arises from the express and particular annulment contained
in sec. 7 of the specified State legislation. These considerations establish that, although Federal law
undertakes the definition of what shall be bills of exchange, promissory notes and cheques, the
statement of what special properties they shall possess, and the description of some of the
consequences which ensue from their use, yet it leaves generally to State law authority to prescribe
when and under what conditions, by what persons and subject to what qualifications they may be
employed. Further, in matters of procedure, and perhaps in some matters of substantive law, sec. 79
of the Judiciary Act 1903-1927 adopts in the case of causes of action arising under Federal as well
as State law the rules and provisions of State law so far as they are applicable. It is this provision
that, in my opinion, operates to apply the appropriate State law relating to the limitation of actions
when proceedings to enforce bills, cheques or notes are brought in Federal jurisdiction. (See
Federated Sawmill, Timberyard and General Woodworkers' Employees' Association (Adelaide
Branch) v. Alexander[6] and the United States cases there cited; cf. Cohen v. Cohen[7].)

But large as is the area within which the laws of a State may operate to affect the acquisition and
transfer of rights by means of these negotiable instruments, the peculiar nature of the Moratorium
Act appears to me to raise special difficulties in admitting it within that area. This legislation does
not operate to affect or control the acquisition or transfer of rights by the use of bills and notes. It is
not concerned with conditions attending a transaction in which such instruments may be employed
as are, for instance, the enactments relating to money-lending, or with the policy of allowing them
to be given effectually for some particular consideration, as are the provisions relating to gaming
founded on 5 & 6 Wm. IV. c. 41, sec. 1, or with the possession of them as assets available in
execution, as are those based on 1 & 2 Vict. c. 110, sec. 12, or with matters governing the fairness
and propriety of transactions in the course of which bills and notes may be given, as, for instance,
do secs. 25B to 25E of the South Australian Land Agents Act 1925 and 1927. The Moratorium Act
does not affect instruments at their inception, and does not provide in advance how and under what
limitations and qualifications rights may accrue or disabilities may be incurred. It is concerned with
accrued rights. It seeks to suspend, subject to a discretionary relaxation of the suspension, the
enforcement of existing liabilities incurred unconditionally with the full allowance of the State law
and it includes liabilities upon bills and notes. That a right is given by the Federal statute to the
holder of an undischarged instrument validly and regularly made, and issued for lawful
consideration, by persons of full capacity, to enforce it when he is subject to no personal defence
seems undeniable (see secs. 43 (1) (b), 62 (a) and 64 (2) (a)). It is true that the statute does no more
than express and imply what the common law itself accomplished. But, by so doing, it has
transformed rules of law which the State Legislature might vary or detract from as it chose into
Federal statute law over the operation of which the State has no authority. It is true, also, that the
rights so enforceable flow from agreement. But agreement gives rise only to those consequences
which the law affixes to it, and it is the Federal statute which contains that law. In my opinion, that
statute exhibits no intention that State law might extinguish or impair accrued rights arising under
its provisions. No doubt it contemplates the provisions of sec. 79 of the Judiciary Act 1903-1927
and the retention by the States of authority over the general law of remedies including the limitation
of actions. But, in my opinion, the Bills of Exchange Act 1909 does not contemplate the legislative
extinguishment of suspension of a right to enforce payment which has been obtained under Federal
law.

In the present case, the promissory notes were given before the Moratorium Act came into operation
and it is unnecessary to consider whether a distinction exists in the case of notes given after its
commencement.
In my opinion, so far as the Moratorium Act would otherwise operate to preclude the holder from
suing upon a bill, cheque or note, at least if given before 19th December 1930, it is inconsistent with
the Bills of Exchange Act 1909 and is to that extent invalid.

I think the appeal should be allowed.

Evatt J.

The respondent was the maker of two promissory notes which he gave to the appellant as collateral
security for two instalments payable under an agreement. By the pleadings, the agreement is
admitted to be a hire-purchase agreement within the meaning of the New South Wales Moratorium
Act 1930-1931. The notes were not paid to the appellant on their due date, and he brought an action
against the respondent in the Supreme Court of New South Wales for their amount.

The answer of the respondent is (1) that sec. 20 of the New South Wales Act requires the leave of a
New South Wales District Court or Court of Petty Sessions before action can be brought and that
such leave has not been obtained, and (2) that the appellant has not complied with sec. 4 (1) (a) of
the Act.

The case for the appellant is based upon the proposition that the Federal Bills of Exchange Act gave
it, as payee of the promissory notes, the right to sue for and recover in any Court of competent
jurisdiction the amount promised to be paid, that the New South Wales Moratorium Act does not
deny such right, but, if it does, it is inconsistent with the Federal Act, and void by reason of sec. 109
of the Commonwealth Constitution.

In the first place, I think it is reasonably clear that the State Act applies to the present action
although in form it is merely an action for the recovery of the payments specified in the notes. For
although the promissory notes were given collaterally to the agreement, the plaintiff is really
seeking to recover instalments due under a hire-purchase agreement, despite sec. 20 of the Act. And
there has also been a non-compliance with sec. 4 (1) (a) of the Act, which prevents a mortgagee,
without leave of the Court, from calling up or demanding payment from any mortgagor of the
whole or any part of the principal sum secured by the mortgage. (See secs. 11 (1) and (4).) With the
opinions of Harvey C.J. in Eq., James and Davidson JJ. on this part of the case, I agree. They are in
accordance with the judgment of Cussen J. in Levick v. Trevascus[8] and of Stout C.J. in Hoare v.
Farrow[9].

Turning to the constitutional point, it should be noted that the New South Wales Act is not directed
to the subject of promissory notes as such, but deals with them only as incidents of a special
personal relationship between maker and payee.

The mere possession by B of a promissory note made in B's favour by A and duly delivered to B,
affords little or no guide in ascertaining what was the transaction between A and B. By making the
note A promises to pay it according to its tenor (Bills of Exchange Act, sec. 94 (a)). And it is true
that promissory notes may be valid and binding, even although other securities collaterally to which
they are made, are void (Monetary Advance Co. v. Cater[10]). But the agreement between A and B
may give A a perfect defence to any action by B on the note, and A may even be able, by equitable
process, to restrain B's action at law altogether. B's possession as payee of A's note is therefore quite
consistent with the existence of many personal defences to any action by B, although, if B proceeds
to negotiate the note, such defences may be no longer available to A.
Now it is conceivable that the Federal Legislature might have passed a law upon the subject of
promissory notes, so that, when an instrument answering the described form came into existence,
any action upon the note by the payee against the maker should not be defeated or restrained
because of any personal relationship between those parties. In that event, a question would have
arisen whether the law was a "properly framed" law with respect to the subject matter of "bills of
exchange and promissory notes." For sec. 51 of the Constitution gives no general power to the
Federal Parliament to pass laws with respect to contracts, other than those specified in sec. 51
(XX.), and it would be contended that the Federal authority had trespassed beyond the true domain
of negotiable instruments because it set at nought the transactions in which they were given.

A perusal of the existing Commonwealth Act indicates that it was not intended to place restrictions
upon the contractual freedom of the two original parties to a promissory note. Personal defences
may be availed of by the maker against the payee (sec. 43 (1) (b)). Yet it does not follow from the
availability of personal defences to makers against payees, that the State Parliament could pass a
law depriving every payee of a promissory note of the right of suing the maker in the Courts of the
State. And such a law is best attacked, not because sec. 43 (1) (a) of the Federal Act enables the
holder of a bill to sue in his name, for, as Harvey C.J. in Eq. points out[11], the essence of that
provision "is not in giving the holder a right to sue, but a right to use his own name as a plaintiff,"
but because "inconsistency" within the meaning of sec. 109 of the Constitution may exist between
State and Federal laws even although it is possible to obey both laws. For the Federal Bills of
Exchange Act, although leaving a limited number of questions in relation to negotiable instruments
to be measured and ascertained by reference to the laws of the States, may well be regarded as
intending to exclude from any operation whatsoever State laws which are, in substance, laws with
respect to promissory notes. A State law of the character suggested above could hardly be regarded
as a law establishing a personal defence. But it would be correctly described as a law upon the sole
topic of promissory notes.

But in my opinion the situation is different when a State Parliament passes, let us suppose, a general
law upon the subject matter of usury or interest or upon the subject matter of mortgages or hire-
purchase agreements. The State Act would be addressed to transactions of the character described,
and may regulate, and, by regulating, qualify, limit or even destroy, existing contractual rights.
Usury may be made less profitable, interest rates may be reduced, the rights and remedies of parties
to mortgage or hire-purchase transactions may be altered. Now it is obvious that there will often be
promissory notes made and delivered in relation to, and as an integral part of, the transactions which
the State Legislature is assumed to be regulating. But, in the first place, no such regulation could be
described as one merely with respect to "promissory notes"; secondly, there is no express
contradiction to the Federal Bills of Exchange Act discernible in laws of such a general character.

For sake of clearness, let me repeat two sentences from the judgment of Harvey C.J. in Eq.[12]
which express his view of the present problem:--(a) "The general scheme of the" Federal "Act
appears to me to leave questions arising between the maker and payee of the note to the general law
of contract." (b) "As between the immediate parties to the note, any equities may arise by contract
or conduct, and the mutual rights of the immediate contracting parties are, in my opinion, left to be
decided by State law."

The first of these two propositions is based upon a construction of the Federal Act. The second
expresses the learned Chief Judge's conclusion as to the present dispute. The difficulties I feel about
a general adherence to the two propositions is implicit in what I have already said. I doubt whether a
State enactment, denying payees of a promissory note the right of seeking to recover the amount
thereof in its Courts, could be upheld though the enactment dealt solely with the "mutual rights of
the immediate contracting parties" to the note.

But the New South Wales Moratorium Act restricts the rights of parties to mortgage and hire-
purchase transactions, and it is only as an incident of the regulated transactions that one party has
become the payee and the other the maker of a promissory note. With such mortgage and hire-
purchase transactions, the Commonwealth Parliament has no general constitutional power to deal
and the State Parliament has exclusive authority. In my opinion State legislation upon those general
topics is not invalidated although, as part of its scheme, it restricts the rights and remedies of payees
of promissory notes against the makers thereof. The case is of great importance, and I shall
elaborate my reasons for reaching this opinion.

It should not be forgotten that the State legislatures are not, by the Constitution, deprived of all
authority to deal with the subject matter of promissory notes, as they are with respect to the subjects
mentioned in sec. 52 of the Constitution. Indeed, the very question raised in this case, of
inconsistency under sec. 109 between Commonwealth and State legislation, assumes that the State
law is competent to the State legislature and would, but for sec. 109, be fully operative.

The tendency of the earlier decisions of this Court was to deny any "inconsistency" between the
laws of Federal and State legislatures, if it was possible for both laws to operate without
contradiction, so that obedience could be rendered to both sets of commands. Of recent years,
however, a more extended meaning has sometimes been accorded to the word "inconsistency." Thus,
in Cowburn's Case[13], part of a New South Wales Act, by which additional obligations to their
employees were cast upon employers, was under consideration. Both employers and employees
were subject to the operation of a Commonwealth industrial award which had the force of a
Commonwealth statute, but it was possible for the employers to obey both Commonwealth award
and State statute. For instance, the Commonwealth award fixed a maximum working week of 48
hours, but the employer bound by it was able to obey it, as well as the State statute fixing the hours
at a maximum of 44, by working his employees the lower number, 44. But this Court held the State
statute to be "inconsistent" with the Federal law contained in the award, because the statute dealt
with and sought to control the very matters and relationships which were already regulated and fully
dealt with by the Commonwealth authority. Such a conclusion was capable of statement in two
different ways:--(1) The Federal award, prescribing a maximum week of 48 hours without payment
of overtime, was also ordaining that employers need not pay overtime until 48 hours had been
worked. In this sense there was actual contradiction between the Federal and State commands. (2)
The Federal award completely "covered the relevant field," which was the regulation of the
industrial relationship of described employees and described employers, because it laid down an
exhaustive code upon the subject and left no room for the operation of the State Act. Each statement
of the conclusion affirms "inconsistency" but the second statement indicates that, despite the mere
possibility of obedience to commands issuing from the two law-making authorities of Australia,
there may be an inconsistency which nullifies the State command.

Two other classes of case may be referred to. In Hume v. Palmer[14] this Court held that State
navigation regulations for preventing collisions at sea, identical in every respect with
Commonwealth navigation regulations of vessels engaged in inter-State and foreign trade and
commerce, were "inconsistent" with the latter so far as they related to such trade and commerce.
Obedience to both sets of rules was of course involved in obeying either. But the Commonwealth
rules were regarded as "covering the relevant field," and as necessarily shutting out the application
of those promulgated by the State. Again, each set of commands was addressed to the very same
subject matter and the very same aspect of it. The case of Union Steamship Co. of New Zealand v.
The Commonwealth[15] treated from very much the same angle of approach the question of
"repugnancy" between an Imperial merchant shipping enactment and Commonwealth navigation
legislation, both enactments dealing with the method of the engagement and discharge of seamen.

The other class of case is represented by Ex parte McLean[16]. A State Act prescribed a certain
method of punishment for employees found guilty of specified conduct towards their employers.
But a Federal award dealt with exactly the same conduct by employees, and imposed a somewhat
different sanction. It was held that the Federal award exhibited an intention of imposing its duty and
its sanction as the complete set of rules to govern this aspect of the industrial relationship between
specified employers and employees, and that, consequently, the State Act did not apply to any
employees bound to observe the duties laid down by the Federal award.

It is now established, therefore, that State and Federal laws may be inconsistent, although obedience
to both laws is possible. There may even be inconsistency although each law imposes the very same
duty of obedience. These conclusions have, in the main, been reached, by ascribing "inconsistency"
to a State law, not because the Federal law directly invalidates or conflicts with it, but because the
Federal law is said to "cover the field." This is a very ambiguous phrase, because subject matters of
legislation bear little resemblance to geographical areas. It is no more than a cliché for expressing
the fact that, by reason of the subject matter dealt with, and the method of dealing with it, and the
nature and multiplicity of the regulations prescribed, the Federal authority has adopted a plan or
scheme which will be hindered and obstructed if any additional regulations whatever are prescribed
upon the subject by any other authority; if, in other words, the subject is either touched or trenched
upon by State authority.

Now, in a general way, it is true to say that some of the subjects mentioned in sec. 51, as to all of
which the Commonwealth Parliament has power, but not exclusive power, to make laws, may be so
dealt with by the Commonwealth Parliament that the concurrent power of the State Parliament to
deal with those subjects, will, for all practical purposes, be terminated. For any law passed by the
State Parliament on the specified subject matter may be, or become, "inconsistent" with a Federal
law which "covers the relevant field."

But it is also clear that, owing to the very nature of some of the subjects specified in sec. 51, it will
seldom, if ever, be possible for the Commonwealth Parliament to pass a law, which will not only be
a valid law with respect to the specified subject, but will also be one "covering the field" so as to
render inconsistent and void any State law which deals with or operates upon the same subject.
Take, for instance, the subject of aliens, mentioned in sec. 51 (XIX.). A Commonwealth statute
might validly impose prescribed duties upon aliens, but it is difficult to see how a Commonwealth
law could be passed upon the subject of aliens which would render inconsistent with it State laws
imposing separate and additional duties, even upon aliens alone. With other subject matters, the
position is more difficult of general statement. Could a Commonwealth law with respect to taxation
ever render void as inconsistent with it, a State law imposing direct taxation, unless compliance with
the Commonwealth imposition made it impossible to obey that of the State?

In other words, does not the subject matter of "aliens" indicate a class of persons who may enter into
an innumerable number of relations with the States and their citizens, and that of "taxation" indicate
a process or system of extraction which, as exercised by the Commonwealth authority, implies the
payment of taxes to the Commonwealth itself, and is not directly related to what the States may
demand as taxes from the same citizens, so long as Commonwealth requirements are met? (Cf. The
Federalist, Essay XXXIII.)

These two subject matters of legislative power may well be contrasted with that of conciliation and
arbitration for the prevention or settlement of certain industrial disputes. Once admit that the
Commonwealth Parliament may give the sanction of Commonwealth law to an arbitrator's award
settling such disputes, and that such award may prescribe a complete industrial code for the
government of the disputants, there is little or no room left for any action by other persons or
authorities having the effect of adding to, much less altering, the duties laid down in the
Commonwealth code. Much the same position arises in relation to the regulation by the
Commonwealth of portions of inter-State trade and commerce such as navigation rules, the contents
of contracts of affreightment and the like. Selection by the Commonwealth of small portions of a
subject upon which it may legislate, especially where such subjects, if systematically regulated at
all, cannot admit of more systems than one, readily results in the avoidance of State legislation
which, though capable of being simultaneously obeyed, deals with the same small portion of the
given subject.

But this doctrine of "inconsistency" is very difficult of application to a subject like "promissory
notes," so far as it is concerned with the respective rights and duties of the maker and payee of the
note. In some cases, as has already been indicated, the promissory note may represent a principal
transaction, but it is very often a minor aspect of the transaction between maker and payee. The
transactions in the course of which a note may be given are infinite in number and variety. No
Commonwealth law could deal with them all. A State law which deals with such promissory notes
only so far as it is regulating the duties of persons who have come into other relationships where
some of those persons have chanced to make, deliver or receive notes of hand, can seldom, if ever,
be regarded as setting up any additional or conflicting scheme relating to promissory notes, although
incidentally the rights and remedies of payee and maker are affected.

Clearly, the Federal Bills of Exchange Act has not attempted to confer any statutory "right of
continuous recourse" upon the maker as against the payee of a note, irrespective of the relationship
between those parties and of all provisions of State law governing that relationship or adding to or
subtracting from its existing rights and duties. There is certainly no inconsistency or contradiction in
the narrower sense of "direct collision" referred to by Higgins J. in Union Steamship Co. of New
Zealand v. The Commonwealth[17]. And there is no ground, in my opinion, for applying the
extended doctrine of "inconsistency" to the restriction which the New South Wales Moratorium Act
places upon the remedies of certain payees against makers. That Act is in no sense an embodiment
of any plan or system or code relating to promissory notes. It deals with a limited number of
transactions and with persons who have entered into certain relationships. With those relationships,
as relationships, the Commonwealth Parliament cannot, and the State Parliament alone can, deal.
Exercising this exclusive authority, the State Parliament has touched only incidentally upon the
subject of promissory notes, a subject with which it is not debarred from dealing. If, merely because
negotiable instruments have been brought into existence by members of the class consisting of
mortgagors, the State is debarred from according relief to the members of that class, this can only be
because the Federal Act has brought about that result. If it had done so, it would have been
undesignedly, but the question would then arise whether the power of the Commonwealth
Parliament to deal with promissory notes has not, also undesignedly, been exceeded. But as it is, no
such question of Commonwealth power arises. There is no inconsistency between the Moratorium
Act's restriction of the remedies of the mortgagee, when he is pursuing them by means of a
promissory note made in his favour by the mortgagor, and anything contained or implied in the
Federal Bills of Exchange Act.
In the present case the plaintiff's rights have been suspended, not because he is the payee and not in
his capacity as payee of the defendant's note, but because he and the defendant are parties to a hire-
purchase transaction. The plaintiff's rights as payee are affected, not because the State Parliament is
concerning itself with the subject of promissory notes, but only because the note was made and
given as part of a larger and more important transaction. That transaction with all its minor
incidents, the Parliament of the State of New South Wales has seen fit to regulate in the interests of
its citizens, and its method of regulating the transaction is not contradictory to anything expressed or
implied in the Federal Bills of Exchange Act.

In my opinion this appeal fails, and it should be dismissed.

McTiernan J.

Sec. 20 of the Moratorium Act of New South Wales prohibits a person to whom an instalment is due
under the terms of a hire-purchase agreement from taking action to recover the same except with the
leave of the Court granted under sec. 4 of of that Act. The Court means a District Court or a Court
of Petty Sessions of New South Wales. The Moratorium Act is expressed to be "an Act to make
provision for a moratorium: to restrict temporarily certain of the rights possessed by mortgagees,
vendors and others: and for purposes connected therewith." The appellant and the respondent are the
payee and the maker respectively of two several promissory notes. The appellant having sued on the
notes after they became due, the respondent pleaded that they were made by the respondent and
given to the appellant as collateral security for two respective instalments payable under an
agreement, which is a hire-purchase agreement within the meaning of the Moratorium Act, and the
appellant commenced the action without leave of the Court, contrary to the provisions of sec. 20 of
the Act. The Supreme Court held that the commencement of the action on the notes is a demand for
payment within the meaning of sec. 4; that the appellant is a mortgagee within the meaning of that
section, and that the moneys sued for are instalments of purchase-money due to the appellant by the
terms of a hire-purchase agreement. In that view I concur. The defendant's plea, in my opinion, does
allege that the sums of money for which the appellant is suing are instalments of purchase-money
within the meaning of sec. 20 (Counsell v. London and Westminster Loan and Discount Co.[18];
Levick v. Trevascus[19]; Hoare v. Farrow[20]). In this view of the operation of secs. 20 and 4, the
payee of any such note may not sue the maker without the leave of the Court. Should he apply for
leave the Act authorizes the Court to refuse the application. If the application be refused, the right of
the payee to recover the debt may be indefinitely postponed. The Court is also authorized to grant
leave subject to conditions, or it may postpone the date for the payment of the instalment which is
due by the terms of the agreement. In Gould v. Robson[21], which was a case in which time was
given by the holder to the acceptor of a bill of exchange, Lord Ellenborough said[22]: "How can a
man be said not to be injured if his means of suing be abridged by the act of another?" It is obvious
that these sections of the Moratorium Act restrict the right of a person to recover money expressed
to be due by the terms of a promissory note, which is given as security for an instalment due in the
manner mentioned in sec. 20.

Thus a question of considerable difficulty arises, namely, whether these provisions of the
Moratorium Act are inconsistent with the Bills of Exchange Act 1909, so that the latter prevails, and
the former are, to the extent of their inconsistency, invalid. The principle which should be applied to
determine whether there is inconsistency under sec. 109 of the Constitution between a law of the
Commonwealth and a State was stated by Dixon J. in Ex parte McLean[23], in these terms:--"When
the Parliament of the Commonwealth and the Parliament of a State each legislate upon the same
subject and prescribe what the rule of conduct shall be, they make laws which are inconsistent,
notwithstanding that the rule of conduct is identical which each prescribes, and sec. 109 applies.
That this is so is settled, at least when the sanctions they impose are diverse (Hume v.
Palmer1(1926) [1926] HCA 50[1926] HCA 50; ; 38 C.L.R. 441.). But the reason is that, by
prescribing the rule to be observed, the Federal statute shows an intention to cover the subject
matter and provide what the law upon it shall be. If it appeared that the Federal law was intended to
be supplementary to or cumulative upon State law, then no inconsistency would be exhibited in
imposing the same duties or in inflicting different penalties. The inconsistency does not lie in the
mere co-existence of two laws which are susceptible of simultaneous obedience. It depends upon the
intention of the paramount Legislature to express by its enactment, completely, exhaustively, or
exclusively what shall be the law governing the particular conduct or matter to which its attention is
directed. When a Federal statute discloses such an intention, it is inconsistent with it for the law of a
State to govern the same conduct or matter." It becomes material therefore to inquire whether the
provisions of the Moratorium Act above mentioned, are, to the extent and in the degree that they
abridge the means of the payee to recover moneys which the maker has by the terms of a
promissory note, engaged to pay him, legislation with respect to "a particular matter or conduct" on
which the Parliament of the Commonwealth intended by the Bills of Exchange Act to express
completely or exhaustively or exclusively what shall be the law governing that matter or conduct.
The Parliament has stated that the Bills of Exchange Act is "an Act relating to bills of exchange,
cheques and promissory notes." In Embericos v. Anglo-Austrian Bank[25] Walton J. said,
concerning the English Bills of Exchange Act 1882, from which the Australian Act is copied, that it
"does not purport to be a scientific code dealing with the whole law relating to bills of exchange, but
it is more in the nature of a digest of the law on the subject, and it contains, like many similar
statutes, a general saving clause (sec. 97, sub-sec. 2) ..." The decision in that case was affirmed on
appeal (Embiricos v. Anglo-Austrian Bank[26]). Sec. 5 (2) of the Australian Bills of Exchange Act,
except for a minor textual difference, is a copy of sec. 97 (2) of the original English Act. The
instruments to which the Act relates are commonly known as negotiable instruments. They have
also been described as "instruments of commerce" (Nathan v. State of Louisiana[27]), "circulating
medium" (Byles on Bills, 16th ed. (1899), p. xiii.), and "circulating credit" (Story, Commentaries on
the Law of Promissory Notes, 5th ed. (1859), p. 3). They are contracts possessing special advantages
and privileges, in virtue of which they perform the functions implied in the above-mentioned
descriptions. "The particular conduct or matter" to which the Parliament of the Commonwealth
directed its attention in passing the Bills of Exchange Act, was, in my opinion, the characteristics or
attributes which distinguished these contracts as a class apart from other contracts. Viewed as
"negotiable instruments" or "instruments of commerce" or "circulating credit" they fulfil after a
fashion a function of currency, and in that character are matters of general and national importance.
Speaking of the attributes of negotiability, which in the course of legal development became
attached to a promissory note, Story, in his Commentaries on the Law of Promissory Notes, 5th ed.,
at p. 3, writes "yet it is the latter quality which gives it its principal importance and value in modern
times, and makes it circulating credit, so extensively useful and so generally resorted to in the
commerce of the world." The language of Parliament is the guide to its intention. However, it would
probably not be a false assumption, and it is not, in my opinion, inconsistent with the language of
the Act, to say that the motive of public policy and convenience which led to the enactment of this
Act by the National Legislature was to obtain uniformity throughout Australia in the rules of law to
which these instruments owe their utility in commerce. In summarizing the characteristics of these
instruments the learned author of Halsbury's Laws of England, 1st ed., vol. ii., p. 461, writes the
following statement concerning the nature of the original English Act: "The outstanding
characteristics common to bills, cheques and notes which found expression in the cases before 1882,
and are embodied in the codifying statute, are--(1) that in the case of such instruments a valuable
consideration is presumed, so that there is no necessity to state it; (2) that such instruments may be
transferred from one person to another by indorsement or by delivery, so as to enable the transferee
to sue thereon in his own name; (3) that the transferee who takes such an instrument in good faith
and for value obtains a good title in spite of any defect of title in the transferor. The codifying
statute is based upon these broad principles, and, even in its details, for the most part crystallizes in
permanent form the effect of the many judicial decisions which preceded it. But exceptions are to be
found where the law has been deliberately altered by it." The Australian Act is based upon the same
principles as the English Act. The gist of its provisions is that it defines the nature of the
instruments to which it relates, prescribes the requisites of such instruments respectively and,
generally, with some variation, gives statutory effect to a set of rules which effected and regulated
their complete operation as negotiable instruments and gave them special advantages and privileges
over other classes of contracts. Within the Act itself there is full recognition of the existing law on
matters with respect to which the Parliament of a State may have legislated or could legislate in
exercise of the powers reserved to it by the Constitution. By the operation of the Bills of Exchange
Act a promissory note reduces a debt to certainty, renders it transferable, and the maker is provided
with credit while the payee is afforded the means of obtaining ready money by discount. But the Act
recognizes that the transaction out of which the debt arises may be governed by the law of a State.
The Federal Act is a special system of law erected upon a foundation of which State law forms part
for resolving debts into negotiable paper. If debts were not contracted, the instruments to which the
Act relates would not come into existence. Any law of a State which purported to set up a rule with
respect to the operation of a bill of exchange, cheque or promissory note, as a negotiable instrument
would be with respect to a "particular matter or conduct" to which the Parliament of the
Commonwealth has directed its attention to the extent and in the degree described in the passage
which has been quoted from the judgment of Dixon J. in Ex parte McLean[28]. The provisions of
the Moratorium Act, which are in question in this case, do not, in my opinion, assume to enact any
rule with respect to the operation of a promissory note as a negotiable instrument. If these
provisions are effective, failure to observe them is of course a good ground of defence to the maker
of a promissory note in an action brought by the payee to recover moneys due on a note which
evidences the debt which has its origin in the hire-purchase agreement, to which the maker and
payee are parties. This defence is additional to other defences which he may have under rules of law
not defined by the Bills of Exchange Act. It is true that the right of the maker to sue is thereby
restricted. But the Bills of Exchange Act expressly recognizes that there may be personal defences to
the action, and it neither defines nor limits the number of such defences. Instances of statutes under
which defences may be set up are the Gaming and Betting Act 1912 N.S.W., the Money-lenders and
Infants Loans Act 1905 N.S.W. and the Statute of Limitations. As the source of a defence which is
available to the maker in an action by the payee against him, the provisions of the Moratorium Act
may, in my opinion, be classed with such statutes. The effect of the Moratorium Act is that the
maker may plead that the suspension of the payee's rights under the hire-purchase agreement which
the Act imposes, has not been raised pursuant to its provisions. Considering these provisions of the
Moratorium Act from this point of view, it cannot, in my opinion, be excluded from the class of
statutes, not regarded as inconsistent with the Bills of Exchange Act, under which the maker of a
note may resist the payee's claim to be paid according to its tenor. An Act in this class may destroy
the claim at its root by the provision made in it with respect to the transaction to which the note
relates or the effect of such an Act may be, inter alia, to modify or extinguish the liability, arising
under the transaction, in the person who is the maker of the note. For example, under sec. 1 of the
Money-lenders and Infants Loans Act of New South Wales the debt due to a money-lender may be
reduced or extinguished. If the legislature of a State came to view certain transactions hitherto
legitimate as mischievous and by statute declared them to be void ab initio, whether made before or
after the Act, such a statute would afford a good defence to an action on a promissory note made
before the Act to carry into effect any such transaction. So also the Moratorium Act, which suspends
the rights of persons to sue for the recovery of moneys agreed to be paid in connection with certain
transactions in relation to which the State Parliament has legislated, does, in my opinion, afford a
good defence to the maker of a note, should the payee in disregard of such provisions sue on a note
given for the purpose of securing the right of the payee to receive payment of such moneys.

Secs. 43 (1), 62 and 94 (a) were cited as particular provisions of the Bills of Exchange Act with
which secs. 20 and 4 of the Moratorium Act are in conflict. I agree with the opinion of Harvey C.J.
in Eq. with respect to sec. 43 (1). His Honor said[29]:--"In my opinion, the gist of that provision is
not in giving the holder a right to sue, but a right to use his own name as a plaintiff. In other words,
it might be paraphrased thus: Any holder of a bill, who has a right to sue, may sue in his own
name." The sub-section gives statutory recognition to that outstanding feature of a negotiable
instrument by the law merchant, namely, that the holder could use his own name in any proceeding
taken on the bill, although he was not a party to the original contract. Similarly as to secs. 62 and 94
(a), of the Bills of Exchange Act, a State Act affecting a transaction carried out by a promissory
note, would not be overborne by those sections if the Act prohibited the transaction or prescribed
conditions precedent to its enforcement. The State Act would afford a ground of defence to the
maker of the note. Those sections of the Bills of Exchange Act do not entitle the payee to judgment
as of course against the maker of a promissory note. In my opinion the provisions of the
Moratorium Act, to the extent to which they apply to an action on a promissory note, brought by the
payee against the maker to recover money due to the payee under the terms of a hirepurchase
agreement, do not conflict with the Bills of Exchange Act.

The appeal should be dismissed.

Appeal dismissed with costs.

Solicitors for the appellant, Frank A. Davenport & Mant.

Solicitors for the respondent, Cater & Atkins, Leeton, by J. M. Rossell.

[1] [1926] HCA 6; (1926) 37 C.L.R. 466.

[2] [1926] HCA 36; (1926) 38 C.L.R. 308.

[3] [1926] HCA 50; (1926) 38 C.L.R. 441.

[4] [1930] HCA 12; (1930) 43 C.L.R. 472.

[5] (1904) 2 K.B. 870, at p. 876.

[6] [1912] HCA 42; (1912) 15 C.L.R. 308, at p. 321, per Isaacs J.

[7] [1929] HCA 15; (1929) 42 C.L.R. 91, at p. 99.

[8] (1919) V.L.R. 118; 40 A.L.T. 124.

[9] (1917) Gaz. L.R. (N.Z.) 19.
[10] (1888) 20 Q.B.D. 785.
[11] (1932) 32 S.R. (N.S.W.), at p. 262.
[12] (1932) 32 S.R. (N.S.W.), at pp. 262, 263.
[13] [1926] HCA 6; (1926) 37 C.L.R. 466.
[14] [1926] HCA 50; (1926) 38 C.L.R. 441.
[15] [1925] HCA 23; (1925) 36 C.L.R. 130.
[16] [1930] HCA 12; (1930) 43 C.L.R. 472.
[17] (1925) 36 C.L.R., at p. 156.
[18] (1887) 19 Q.B.D. 512.
[19] (1919) V.L.R. 118; 40 A.L.T. 124.
[20] (1917) Gaz. L.R. (N.Z.) 19.
[21] (1807) 8 East 576; 103 E.R. 463.
[22] (1807) 8 East, at p. 579; 103 E.R., at p. 465.
[23] (1930) 43 C.L.R. at p. 483.
[24] [1926] HCA 50; (1926) 38 C.L.R. 441.
[25] (1904) 2 K.B., at p. 876.
[26] (1905) 1 K.B. 677.
[27] (1849) 8 How. 73, at p. 81; 17 Curtis 505, at p. 507.
[28] (1930) 43 C.L.R., at p. 483.
[29] (1932) 32 S.R. (N.S.W.), at p. 262.

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