Ansett Australia Limited (subject to a deed of company arrangement) v Travel Software Solutions Pty Ltd (No 2)
[2007] VSC 401
•16 October 2007
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL LIST
F6008
No. 2062 of 2006
| ANSETT AUSTRALIA LTD (SUBJECT TO A DEED OF COMPANY ARRANGEMENT) (ACN 004 209 410) | Plaintiff |
| v | |
| TRAVEL SOFTWARE SOLUTIONS PTY LTD (ACN 005 407 465) | Defendant |
---
JUDGE: | HARGRAVE J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 12 October 2007 | |
DATE OF JUDGMENT: | 16 October 2007 | |
CASE MAY BE CITED AS: | Ansett v Travel Software Solutions (No 2) | |
MEDIUM NEUTRAL CITATION: | [2007] VSC 401 | |
---
Corporations – Dividends – Whether statutory interest payable on accrued dividend debt – Interest held payable – Period during which interest should be awarded - Supreme Court Act 1986 (Vic), s 58(1) .
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr M Garner | Holding Redlich |
| For the Defendant | Mr G Bigmore QC and Mr P Fary | Blake Dawson Waldron |
---
HIS HONOUR:
The plaintiff (“Ansett”) has been successful in its claim against the defendant (“TSS”) for recovery of a dividend debt of $4 million. Ansett is entitled to judgment for that amount. The only issue which remains before judgment is finally pronounced is whether, and if so to what extent, Ansett is entitled to judgment for interest on the amount of the dividend debt.
Ansett contends that it is entitled to interest under s 58(1) of the Supreme Court Act 1986 (Vic), which provides:
(1)If in a proceeding a debt or sum certain is recovered, the Court must on application, unless good cause is shown to the contrary, allow interest to the creditor on the debt or sum at a rate not exceeding the rate for the time being fixed under section 2 of the Penalty Interest Rates Act 1983 … from the time when the debt or sum was payable (if payable by virtue of some written instrument and at a date or time certain) or, if payable otherwise, then from the time when demand of payment was made.
In my principal reasons for judgment,[1] I found that the dividend debt accrued on 22 December 2005. Ansett contends that it is entitled to interest from this date at the rate fixed under s 2 of the Penalty Interest Rates Act 1983 (Vic). There is no dispute that if Ansett is entitled to judgment for interest on the dividend debt, that the fixed penalty rate should be adopted for the calculation. However, TSS contends that interest should not be payable for the period prior to the issue of the writ on 24 August 2006.
[1]Ansett v Travel Software Solutions [2007] VSC 326.
TSS accepts that the effect of the Court’s decision in the proceeding is that the dividend debt is one which is “payable by virtue of some written instrument” (the resolution to pay it), and that the dividend debt is payable “at a date or time certain” (22 December 2005). Accordingly, TSS accepts that it must establish “good cause to the contrary” if the Court is to depart from the prima facie rule expressed in s 58(1) of the Supreme Court Act.[2]
[2]As to which, see Clarke v Foodland Stores Pty Ltd [1993] 2 VR 382, 389.
Before considering each of the grounds relied upon by TSS to establish good cause to depart from the prima facie rule expressed in s 58(1), it is necessary to refer to Article 128 of the TSS articles of association, which provides: “No dividend shall bear interest against the Company”.
It was common ground that Article 128 should be interpreted in the light of the distinction between a dividend and a dividend debt. Accordingly, Article 128 provides that interest is not payable until the time for payment of the dividend arrives, whether a final or interim dividend. For example, if on 1 September 2007 the directors of TSS declared a final dividend payable on 1 December 2007, no interest would be payable by TSS on the amount of the dividend in the period between 1 September and 1 December, notwithstanding that a dividend debt due on 1 December was incurred on 1 September. Similarly, if the directors resolved on 1 September to pay an interim dividend on 1 December, and did not revoke that resolution before 1 December, no interest would apply in the interim. However, when the time for payment arrives on 1 December, TSS would incur an ordinary debt in the amount of the dividend. That debt may carry interest under s 58 of the Supreme Court Act.
TSS relies upon a number of grounds to establish good cause to depart from the prima facie rule stated in s 58(1).
First, TSS contends that the circumstances of this case are akin to the position of a liquidator seeking to recover a preferential payment. Reliance was placed upon the following passage from the judgment of the Appeal Division in Clarke v Foodland Stores Pty Ltd:[3]
It is not irrelevant that this is a claim by the liquidator to recover a preference. In such a case, it is true that the defendant has had the use of the money in issue pending judgment, and that is a factor that must not be overlooked; it is at the heart of allowing interest. But his claim to the money is different from that of the ordinary debtor. Ordinarily, the defendant to a claim by a liquidator to recover a preference has simply received a payment due to him from the company now in liquidation and the payment is to be set aside, if at all, only because of the supervening liquidation of the payer. That was so here … The defendant may have had the money in the meantime, but it was the defendant’s own and to keep, subject only to the liquidator taking appropriate action.[4]
[3][1993] 2 VR 382.
[4]Ibid, 401 (emphasis added).
It was submitted that the dividend debt in this case is akin to a preferential payment because, on the face of the dividend resolution, the dividend debt was to be set-off against the loan debt due by Ansett to TSS. It was submitted that it was only if the administrators of Ansett took appropriate action to challenge the efficacy of that set-off that it could be set aside and that, in the interim, the set-off remained valid. I do not accept this submission. The dividend debt accrued on 22 December 2005 as an ordinary debt. That debt did not arise only upon the Court determining that the purported set-off was ineffective. Further, that debt did not arise only upon a supervening insolvency of Ansett. Ansett’s insolvency and administration occurred well prior to the dividend resolution.
Second, it was submitted on behalf of TSS that the Court should have regard to the fact that the resolution to pay the dividend occurred with notice to and in the presence of Ansett, and that the issue of the validity of the set-off was a complex one involving considerable delay before issue of the proceeding. During this period of delay, the solicitors for the parties debated the issues in a detailed and sophisticated fashion. It was submitted that it would be unjust to make TSS pay interest during this period, because the circumstances of this case are extraordinary and novel. Accordingly, it was submitted that TSS was entitled to a reasonable time to consider its position and should not be required to pay interest during the whole or part of the period of delay.
In this regard, it was submitted on behalf of TSS that it should not pay any interest for the period between the accrual of the dividend debt and the commencement of the proceeding or, as a fall back position, that it should only be required to pay interest from the time when Ansett first made a demand for payment of the dividend debt on 8 March 2006.
I do not accept these submissions. Although it is true that Ansett’s solicitor was present as an observer at the directors’ meeting when it was resolved to pay the dividend and to set-off that dividend against the loan debts of shareholders, no prior notice of the intention to specify set-off as a means of payment was given. At the meeting, Ansett’s solicitor asked how the dividend would be paid. She was informed that it would be set-off against shareholder loans. According to her file note of the meeting, Ansett’s solicitor responded: “I will need to check the circumstances of set-off given Ansett’s deed of administration.” This is exactly what happened. Having checked the circumstances, Ansett made a prompt demand for payment on 8 March 2006. This was followed by correspondence between the solicitors to which I have referred. When agreement could not be reached during the course of that correspondence, this proceeding was commenced.
In my view, Ansett has acted with reasonable promptitude at all relevant times. Further, TSS has had the benefit of the money which was due by it on 22 December 2005. In these circumstances, TSS has not demonstrated good cause for the Court to depart from the prima facie rule expressed in s 58(1) of the Supreme Court Act that the dividend debt should bear interest from the time it became payable.
For the above reasons, I will give judgment for Ansett for the amount of the dividend debt together with damages in the nature of interest at the rate specified in s 2 of the Penalty Interest Rates Act from 22 December 2005 until 16 October 2007.
---
0
1
0