Westpac Banking Corporation and Ors v The Commissioner of Inland Revenue

JurisdictionNew Zealand
CourtSupreme Court
JudgeMcGrath J
Judgment Date07 April 2011
Neutral Citation[2011] NZSC 36
Date07 April 2011
Docket NumberSC 83/2009

[2011] NZSC 36

IN THE SUPREME COURT OF NEW ZEALAND

Court:

Elias CJ, Blanchard, Tipping, McGrath and Anderson JJ

SC 83/2009

Between
Westpac Banking Corporation
First Appellant

And

Bank of New Zealand
Second Appellant

And

ANZ National Bank Limited
Third Appellant
and
The Commissioner of Inland Revenue
Respondent
Counsel:

J S Kós QC, J D Every-Palmer and A A O'Rourke for Appellants

D J Goddard QC and H L Dempster for Respondent

Appeal against decision of the Court of Appeal that unpaid moneys in relation to foreign currency drafts and bank cheques were unclaimed money under Unclaimed Money Act 1971 and were payable to respondent — meaning of “unclaimed money” under s4(1)(e) Unclaimed Money Act 1971 — whether money was owing and payable by the bank — whether a contingent liability to pay money can be defined as “money”.

The issue on appeal was whether the moneys represented by drafts and bank cheques that remained unpresented after six years from their purchase became unclaimed money in terms of s4(1)(e) UMA (owing by any holder for the period of 6 years immediately following the date on which the money has become payable); and whether money was “owing” and “payable” by the bank within the meaning of s4(1)(e) UMA from the time of purchase by customers of the instruments concerned.

Held: Unclaimed money was defined under s4 UMA (unclaimed money) in terms that it was confined to unclaimed money situated in New Zealand. The word “payable” in relation to a sum of money was capable of having a narrow or broad meaning. It could mean due, or unpaid when due. The meaning had to be assessed in the light of the purpose of the UMA, that being money unclaimed by the owner was not to be retained and treated as the holder's revenue. The context of the UMA did not point to a particular meaning of “payable” in relation to whether a present obligation had arisen. It was possible that the word could mean that, but also equally possible that it meant payable on demand being made. Adopting a technical rule of when liability arose, under which there would have to be a present obligation to pay, would defeat the purpose of the UMA.

The money in issue had been paid by customers to purchaser drafts and bank cheques. It had been provided to the banks to take up the facility they offered for making payments. A third party was expected to draw the funds. That met the ordinary meaning of the language of s4(1)(e) UMA as long as “payable” was given the meaning of “payable if an when demand for the money was made”. To read “payable” as having effect in its application to money payable under foreign currency drafts and bank cheques only if a demand was made, would introduce a self-defeating element to the meaning of the definition that Parliament would not have contemplated. Nor could money be defined as only investment funds or deposits, as this would be contrary to the breadth of the opening words of s4(1)(e).

The concerns over the consequences of treating conditional liabilities to pay money as money that is payable under the 1971 Act were dealt with by the fact that the decision addressed the particular instruments involved, where the only precondition to liability to pay was making demand for or claiming, the money. While the Act remained in its present form, the significance of other conditions would have to be addressed having regard to the general principles that the court had identified for interpretation of the term “unclaimed money” under the 1971 Act.

Appeal dismissed.

JUDGMENT OF THE COURT
  • A The appeal is dismissed.

  • B The appellants are ordered to pay the respondent costs of $15,000 together with reasonable disbursements to be fixed if necessary by the Registrar.

REASONS

(Given by McGrath J)

Introduction
1

The question in this appeal is whether the provisions of the Unclaimed Money Act 1971 apply to sums of money that are to be paid under certain financial instruments issued by the three appellant banks. The financial instruments concerned are foreign currency drafts and bank cheques which have not been presented for payment by payees within six years of their purchase. If the provisions of the 1971 Act apply, the appellants are required by the Act to record particulars of the unclaimed money arising over the past 12 months on a register and, if owners do not claim it, pay the money to the Commissioner of Inland Revenue.

2

In 2004, in Commissioner of Inland Revenue v Thomas Cook (New Zealand) Ltd, 1 the Privy Council held that the appellant company was liable to the Commissioner of Inland Revenue under the 1971 Act in respect of similar instruments, in that case referred to as “international cheques”. The appellants acknowledge that, in order to succeed in the present appeal, they have to persuade this Court that the Privy Council's reasoning was wrong and that the different reasons given in the judgment of the Court of Appeal in Thomas Cook2 should be preferred.

Background facts
3

The appellants are banks. In the course of business, they issue foreign currency drafts (“drafts”) and bank cheques as a means for their customers to make payments. A draft is a direction by the drawer, a New Zealand bank, to the drawee, a foreign bank, to pay on presentment an amount denominated in a particular foreign currency. Payment must be made to the payee named in the draft, or in some circumstances its indorsee, on presentment. A draft is a bill of exchange in terms of the Bills of Exchange Act 1908. A bank cheque is a form of promissory note by which the drawer, a New Zealand bank, promises to pay a stipulated amount denominated in New Zealand dollars to the named payee, or its indorsee, on

presentment of the draft. The cheque is drawn by the bank against its own account. A bank cheque is not a bill of exchange. Under both instruments the named payee, in most cases, is not the customer of the bank who purchased the draft or bank cheque.
4

The typical procedure involves a customer requesting from a New Zealand bank a draft for a specified amount in a stipulated currency to effect payment for an overseas transaction. The New Zealand bank will draw a draft on a drawee bank at the place where payment is to be made and make the draft available to the customer on receipt of payment, in New Zealand currency, covering the face value of the draft plus fees. The drawee bank will be one with which the New Zealand bank has an account, or has made other arrangements to provide funds, from which the drawee makes payment of the draft.

5

Payees present drafts for payment to the drawee bank, normally using the services of payees' own banks to collect the money. In the great majority of cases, a draft will be presented and paid within a short time of issue. Drawees, in general, pay drafts whenever they are presented, regardless of their age. If they decline to do so on the grounds that the draft is stale the New Zealand bank will, on request, issue a new draft.

6

Arrangements in respect of bank cheques are broadly the same but none of the appellants will dishonour a bank cheque, if presented, solely on account of its age.

7

The evidence is that a very small minority of drafts and bank cheques are never presented for payment. It is these instruments that the respondent, the Commissioner of Inland Revenue, contends give rise to “unclaimed money” under the 1971 Act. The Commissioner argues that once they have remained unpresented for six years following the date of purchase, the provisions of the 1971 Act apply.

Unclaimed Money Act 1971
8

The 1971 Act applies to “unclaimed money held or owing” by stipulated holders. 3 Such holders include companies incorporated in New Zealand and companies and banks carrying on business in New Zealand. 4 It is common ground that the appellants are holders under the Act. Holders are required on 1 June of each year to enter on a register particulars of unclaimed money arising during the previous 12 months. 5 They are also obliged to notify owners of unclaimed money entered on the register, at their last known address, of the money they are holding and that it is unclaimed money. 6 If, within four months of entry on the register, the owners do not claim the unclaimed money, the holders must pay it to the Commissioner. 7

9

Central to the obligations of holders is the definition of the term “unclaimed money” in s 4 of the Act, which relevantly provides:

4 Unclaimed money

  • (1) Subject to this section, unclaimed money shall consist of-

    • (a) Money, including the interest or any amount in the nature of interest thereon, deposited with any holder so as to bear interest for a fixed term, which has been in the possession of the holder for the period of 6 years immediately following the date of expiry of the term:

    • (b) Money, including the interest or any amount in the nature of interest thereon, deposited with any holder so as to bear interest-

      • (i) Without limitation of time; or

      • (ii) For a fixed term where, on the expiry of the fixed term, the money, if it is not withdrawn by the customer, is to be treated as reinvested,-

      • where in either case the customer has not operated on the account for a period of 25 years, whether by deposit, or withdrawal, or instruction in writing:

    • (c) Money deposited upon current account or otherwise with any holder and not bearing interest, where-

      • (i) In any case where the holder is a savings bank, the customer has not operated on the account for a period of 25 years, whether by deposit, or withdrawal, or instruction in writing; and

      • (ii) In any other case, the customer has not operated on the account for a period of 6 years, whether by deposit, or withdrawal, or instruction in writing:

    • (d) Money payable or distributable on or in consequence of the maturity of a policy of life assurance, being money which has been in the possession of any holder for the period of 6 years immediately succeeding the...

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3 cases
  • Tan v Auckland Council
    • New Zealand
    • High Court
    • 18 December 2015
    ...Wellington 2015) at 221. 19 Shorter Oxford Dictionary (6th ed) at 353. 20 Westpac Banking Corporation v Commissioner of Inland Revenue [2011] NZSC 36 , [2011] 2 NZLR 726 at 21 See, for example, R v Clayton [1973] 2 NZLR 211 (CA) in which the Court held that a disqualified person in the pas......
  • Westpac Banking Corporation and ORS v The Commissioner of Inland
    • New Zealand
    • Supreme Court
    • 7 April 2011
    ...SUPREME COURT OF NEW ZEALAND SC 83/2009 [2011] NZSC 36 BETWEEN WESTPAC BANKING CORPORATION First Appellant AND BANK OF NEW ZEALAND Second Appellant AND ANZ NATIONAL BANK LIMITED Third Appellant AND THE COMMISSIONER OF INLAND REVENUE Respondent Hearing: 18 February 2011 Court: Elias CJ, Blan......
  • Tan v Auckland Council
    • New Zealand
    • High Court
    • 18 December 2015
    ...Wellington 2015) at 221. Shorter Oxford Dictionary (6th ed) at 353. Westpac Banking Corporation v Commissioner of Inland Revenue [2011] NZSC 36, [2011] NZLR 726 at [32]. See, for example, R v Clayton [1973] 2 NZLR 211 (CA) in which the Court held that a disqualified person in the passenger ......

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