KD Morris & Sons Pty Ltd (In Liq) v Bank of Queensland Ltd [1980] HCA 20

High Court of Australia Stephen, Mason, Murphy, Aickin and Wilson JJ. KD Morris & Sons Pty Ltd (In Liq) v Bank of Queensland Ltd [1980] HCA 20

ORDER Appeal allowed with costs. Order that the judgment of the Full Court of the Supreme Court of Queensland be set aside and in lieu thereof it be ordered that the appeal to that Court be dismissed with costs.

The following written judgments were delivered:—

1980, July 24 Stephen and Wilson JJ.

In 1973 the Keith Morris Construction Ltd. group was Queensland's biggest building contractor. One of its operating subsidiaries, K. D. Morris & Sons Pty. Ltd. ("the Company"), stood in need of some $2 million of funds with which to finance various projects which it had in hand and the merchant banker, Tricontinental Corporation Ltd., was applied to accordingly. Tricontinental approached a trading bank, the Bank of Queensland Ltd., and the upshot was that that Bank and Tricontinental each agreed to provide the Company with separate commercial bill acceptance facilities, each of a maximum of $1 million. It is with the facility provided by the Bank that this appeal is concerned.

The Bank's facility gave to the Company for the next five years assured access to funds of up to $1 million. This was to be provided by the Bank's acceptance of accommodation bills of some 180 days' currency which the Company could immediately discount with Tricontinental, thus providing the Company with cash to the value of the bills, less discount. Every 180 days the bills would be "rolled over", new bills taking the place of those retired on maturity, thus providing continuity of finance to the Company so long as the facility continued to be provided by the Bank.

The process of rolling over was, in outline, that shortly before the maturity date of bills the Bank would accept new bills drawn by the Company for a further term of 180 days. These Tricontinental would immediately discount, the proceeds being credited to the Company's account with the Bank. When, on maturity, the Bank paid to their holders the face value of the bills it had accepted, the proceeds of discounting, credited to the Company's account, would go towards reimbursing the Bank, the difference between proceeds and face value of the retired bills being made good by the Company. The result for the Company was that it effectively retained the use of the funds, less only the amounts successively lost with each discounting. Those amounts, together with the Bank's charges for the facility and for each roll over operation, represented the cost to the Company of procuring the funds of which it stood in need.