Yango Pastoral Co Pty Ltd v First Chicago Australia Ltd PDF

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Summary

illegality, important aspect of contract law and determining whether they are valid or not...

Description

Yango Pastoral Co Pty Ltd v First Chicago Australia Ltd Implied Statutory Illegality Name of Case Citation and Court

Yango Pastoral Co Pty Ltd v First Chicago Australia Ltd

Material Facts

Yango Pastoral borrowed $132 600 from First Chicago on the security of a mortgage over property. It later defaulted on the loan. Pursuant to s 8 of the Banking Act 1959 (Cth), a body corporate could not carry on and banking business in Australia unless it was in possession of an authority for that purpose. First Chicago did not have the requisite authority to carry on banking business in accordance with the Act. In proceedings brought by First Chicago, Yango Pastoral argued that First Chicago’s commercial activities were tantamount (equivalent to; more or less) to those of a bank, with the result that the loan was illegal and unenforceable.

Legal Issue

Whether the statutory requirements of s 8 of the Banking Act prohibited the making or performance of the loan contract.

Relevant Law

Section 8 of the Act reads as follows: Subject to this Act, a body corporate shall not carry on banking business in Australia unless the body corporate is in possession of an authority under the next succeeding section to carry on banking business. Penalty: $10 000 for each day which the contravention continues 4 ways in which the enforceability of a contract may be affected by a statutory provision which renders particular conduct unlawful: (1) the contract may be made in order to do something which the statute forbids; (2) the contract may be one which the statute expressly or impliedly prohibits; (3) the contract, although lawful on its face, may be made in order to effect a purpose which the statute renders unlawful; or (4) the contract, although lawful according to its own terms, may be performed in a manner which the statute prohibits. Where a statute imposes a penalty, it is a question of construction – whether the statute intends to render a contract void and unenforceable or only that the penalty shall be inflicted if the contract is made/performed. The determining factor is the true effect and meaning of the statute

Application of Law to the Facts

Gibbs ACJ: As s 8 gives a penalty, this indicates that Parliament did not intend to prohibit each contract made in the course of the business, but only to penalise the carrying on of the business without authority. Also, it cannot be said that the contract was performed for any illegal purpose.

Conclusion

Held that the Act did not invalidate the contract

Yango Pastoral Co Pty Ltd v First Chicago Australia Ltd (1978) 139 CLR 410 High Court of Australia...