I refer to your memorandum of 14th November, 1945, asking for advice as to the legal position in regard to certain transactions between prisoners of war in Malaya.

The legal aspects of the matter appear to be –

1. The question whether cheques and promissory notes given in respect of the transactions can be enforced in Australia; and
2. If the answer to (1) is in the affirmative, whether the Commonwealth can modify or cancel the obligations, and in what manner.

With regard to the first question, the following considerations appear to be relevant.

It appears that the form of a cheque or promissory note is sufficient for the purpose of enforcing payment if it complies with the requirements either of the law of the place of issue or with the law of Australia. A bill or note issued out of Australia is not invalid by reason only that it is not stamped in accordance with the law of the place of issue. (Bills of Exchange Act 1909–1936, s. 77).

It is difficult to say what law should be regarded as having been in force in the camps in Malaya, but probably the cheques and notes given were, as regards form, in accordance with the Commonwealth Act.

As regards the possible illegality of the cheques and notes, it appears that a cheque or note is not enforceable if the giving of the cheque or note is illegal either by the law of the place where it was given or by the law of the place where it is payable. (Dicey’s Conflict on Laws,¹ Fifth Edition, Rule 160).

Possible grounds of illegality appear to be –

1. duress or undue influence. There does not appear to be anything in the circumstances which would make the contracts illegal on this ground under the law of any Australian State. The mere fact that the borrower may have been in extremely necessitous circumstances would not appear to be material;
2. the charging of excessive interest. Here again there would appear to be no conflict with Australian law. I have not made a detailed examination of the laws of the States regarding usury, but my impression is that those laws relate only to persons carrying on the business of money lending;
3. gaming or wagering. It seems probable that such of the cheques or notes as were given to cover gaming losses would not be enforceable in Australia—at any rate by the original holder;
4. conflict with military law. Reference may be made to paragraph 322A of the Australian Military Regulations and Orders which is as follows:
   

   322A. A member is forbidden to borrow money from a subordinate in rank.

This Order formerly applied only to borrowing by a Warrant Officer or Non-Commissioned Officer from a Private soldier. In any case the Order would probably not affect the civil obligation arising from a borrowing by a superior from a subordinate. In the press cutting forwarded with your memorandum it is stated that, when word of the practice of borrowing against cheques reached the ears of ‘the administration’ there was published an order warning all men that ‘this was an improper practice and not to be indulged in’. I am not clear as to whether the Order referred to was issued by the Japanese authorities or by Australian officers.

I have no information as to the law in force in Malaya regarding these various possible causes of illegality.

To sum up, it would appear that different cheques and promissory notes may be subject to different considerations. Complicated questions may arise in determining their enforceability in Australia, and these questions can only be satisfactorily determined by the Courts. But it seems quite possible, and even probable, that some of the cheques at least may be enforceable in Australia.

With regard to the second legal aspect, namely, whether the Commonwealth can modify or cancel the obligations and in what manner, in my opinion the obligations could validly be modified or set aside by National Security Regulations. Any such regulation would, however, only be effective to restrict the rights of persons under the cheques and notes so long as the National Security Act continues in force. If individual cases are to be submitted to a Committee, care would have to be taken to see that judicial power was not conferred on the Committee. It may also be mentioned that the Commonwealth Parliament has power to make laws with respect to bills of exchange and promissory notes.

[Vol. 37, p. 24]

¹ The citation should read Dicey’s Conflict of Laws.