Promissory Notes

Troy Dimitrov made this Freedom of Information request to Department of the Treasury

The request was successful.

From: Troy Dimitrov

Delivered

Dear Department of the Treasury,

Are banks legally bound to take my promissory note?

What is the treasuries position on using promissory notes?

Lord denning stated
"We have repeatedly said in this court that a bill of exchange or a Promissory Note is to be treated as cash. It is to be honoured unless there is some good reason to the contrary" (see per Lord Denning M.R. in Fielding & Platt Ltd v Selim Najjar [1969] 1 W.L.R. 357 at 361; [1969] 2 All E.R. 150 at 152, CA)
Another of Lord denning’s rulings stated that a bill of exchange once tendered has to be treated as cash.
The principle is that a bill, cheque or note is given and taken in payment as so much cash, and not as merely given a right of action for the creditor to litigate a counterclaim (see Jackson v Murphy [1887] 4 T.L.R. 92).
First of all it is important to remember that the Bills of Exchange Act 1882 (and many Statutes subsequently) consider a Promissory Note to be the same thing as "cash".

Is this somehow not enforced in Australia?

Yours faithfully,

Troy Dimitrov

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Locutus Sum left an annotation ()

This request mentions two interesting cases about which I previously did not know; yet, the request will be refused.

The basis for refusal will undoubtedly be that it is not a valid FOI request. A valid FOI request must be for a document, or alternatively (s 17) for information that the agency has in a computer that is not in discrete form but which could be compiled into a discrete form using a computer. This request is for answers to some interesting questions but not for a document; therefore it will lead to a refusal.

It is interesting to speculate what the outcome would be if the request represented a valid FOI request. In this circumstance, I think it would also be refused on the grounds of s 42. It is not usually the role of an agency to give legal advice to citizens and if the agency had a document in its possession that answered the applicants's questions, that document would with high probability exempt because if was subject to legal privilege:
Section 42(1) says that "A document is an [absolutely] exempt document if it is of such a nature that it would be privileged from production in legal proceedings on the ground of legal professional privilege."

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From: Department
Department of the Treasury

Dear Mr Dimitrov,

Thank you for your email of 2 January 2017.

In Australia, promissory notes in general are governed by the Bills of Exchange Act 1909. You should note that the Bills of Exchange Act does not authorise a person to unilaterally create an instrument that a third party is obliged to accept as payment for a debt owed to it or which unilaterally obliges a person to pay a sum of money to another person.

You may wish to seek independent legal advice in relation to these matters. However, Treasury cannot provide you with legal advice.

Regards
Parliamentary and Legal Servcices Division

show quoted sections

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Locutus Sum left an annotation ()

The response is more informative and helpful than I expected and it mentions some of the important legal points.

I don't know whether the applicant has read the whole of the judgment in Fielding & Platt Ltd v Selim Najjar [1969] 1 W.L.R. 357 (http://swarb.co.uk/fielding-platt-ltd-v-... ), which he mentions in his application to the Department of the Treasury but the judgment does not say quite what many non-lawyers think that it does. To explain what the quoted sentence of Lord Denning does mean would take our story too far away from the main part of the request on this page. It is better to talk about what Lord Denning's comment does not mean. It does not, for example, imply that when I have a debt of $1000, I can write out a promissory note for $1000 in full settlement of the debt and make this the end of the matter. Yet it is this silly idea that some people apparently believe or have tried to get other people to believe; and they all quote the words of Denning in the Fielding case. Also, it is an idea that is promoted by some websites such as https://www.getoutofdebtfree.org/Promiss... .

There are several cases in Australia, New Zealand, and the United Kingdom to show that some people have thought that they could pay their mortgage (for example) by writing a promissory note and sending this promisory note to the bank! You can see an example of this in Fallon v NSW Government Office of State Revenue State Debt Recovery Office [2013] FCA 270 and another example in Deputy Commissioner of Taxation v Sproule [2012] FMCA 1188. You can find more cases by searching on AustLii in the database of Commonwealth cases law for
"promissory note" AND "taken as cash".

There are two mistakes with the idea that I can pay all my debts without having to work hard. The first mistake is to believe something that the Department of the Treasury has pointed out is false; this is to think that a person can unilaterally decide that a promissory note can be used to pay a debt. It cannot. The second mistake is to think that the promissory note is worth something by its very existence. It does not. A promissory note is worth something because on presentation of the note to the payer's agent, the payee will collect the money that is promised. If there is no possibility of the agent paying, then the promissory note is not "worth the paper it is written on". You can see an example of the twisted ways in which people misunderstand Lord Denning in the case of Deputy Commissioner of Taxation v Sproule [2012] FMCA 1188. After considering the facts, the Federal Magistrate says, "On the structure of the documentation before the Court, Mr Sproule has prepared a bill of exchange with a face value of $1 AUD and forwarded that to the ATO seeking acceptance as settlement for an outstanding debt of $436,472.14. Logic as to why the DCT would accept that document is completely unexplained"!! A similar idea is described in the New Zealand Banking Ombudsman case number 47343 (https://bankomb.org.nz/news-and-publicat... ). In this case, the plaintiff wants to pay her credit card debt with a promissory note denominated in "Res" and drawn on the pretend "WeRe Bank". You must read the case to understand the humour of this idea.

There is much more that I could write about other similar cases but I think it is maybe more interesting to mention a very similar request on a brother-website of Right to Know; it is the website http://www.whatdotheyknow.com and the request is called "Legal Tender" (http://www.whatdotheyknow.com/request/le... )

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Glenn Horton left an annotation ()

I noticed that the Treasury stated that we can not give out legal advise, so here is an answer for that reply.
if this link doesn't work it says: Courts have a wide variety of roles, including enforcing the criminal law, resolving civil disputes, upholding the rights of individual, ensuring that government agencies stay within the law, and explaining the law.
The supreme court in New Zealand final court of appeal with the role of maintaining coherence in the legal system.
Ministry of justice New Zealand 29/01/16.
To make this easier this is the law and they are obligated to explain the law

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Locutus Sum left an annotation ()

Whatever is the role of the courts in New Zealand and the United Kingdom and also in Australia, it is not the same role as the role of the Treasury. The Treasury is a department of the executive government in the tripartite system of government that exists in Australia (executive, parliament, judiciary). It is also well established in Australia that (a) the Freedom of Information Act (Cth) provides a method for a person to obtain access to documents and (b) that a department is not obliged to answer general questions. Although I cannot find any particular judicial decision, it is difficult to imagine that a department of executive government is obliged to provide general advice about the law.

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Andrew Last left an annotation ()

Take a look at any bank note, legal tender it has two signatures, it has a denomination or value and a serial number making it unique, it is therefore a promissory note
The original promise was to exchange it for gold or silver to the value of,
these days you cannot go to a bank and exchange you note for gold or silver
The real value is your time and effort you exert and the land and property you own with that time and effort.

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steven left an annotation ()

So how do the Rothschild's get away with continually printing money , they have so much money circulating and they continue to print more which has them in a position where they basically own the world , so why am I not allowed to be my own bank and print my own currency and use it , I should be permitted to print up to what my net worth is as an Australian citizen and I can only be permitted to print more than my net worth if other citizens agree to use my currency , isn't that the only reason the Rothschild's needed to print so much money , the fact that everyone in the world has agreed and is actually using there monetary system is what keeps them in the position they are in , if everyone in the world suddenly refused to be a part of the Rothschild system overnight the Rothschild fortune would crumble back to the real amount and that would be the total amount of gold and assets in there possession and the paper money would become toilet paper.

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