Autron Pty Ltd v Benk

Case [2011] FCAFC 93

FEDERAL COURT OF AUSTRALIA

Autron Pty Ltd v Benk [2011] FCAFC 93

Citation: Autron Pty Ltd v Benk [2011] FCAFC 93
Appeal from: Autron Pty Ltd v Benk [2010] FMCA 784
Parties: AUTRON PTY LTD (ACN 007 324 110) v MICHAEL GARY BENK
File number: VID 892 of 2010
Judges: LANDER, TRACEY, YATES JJ
Date of judgment: 28 July 2011
Catchwords: BANKRUPTCY AND INSOLVENCY – bankruptcy notice – validity – whether post-judgment interest included in a bankruptcy notice can be a component of the prescribed statutory minimum for which a bankruptcy notice can be issued – consideration of the meaning of “final judgment” and “final order”
Legislation: Bankruptcy Act 1924 (Cth) s 52(j)
Bankruptcy Act 1966 (Cth) ss 40(1)(g), 40(3), 41(1), 41(2), 41(3), 43(1), 44(1), 52(1)
Bankruptcy Regulations 1996 (Cth) reg 4.02(1); Sch 1
Judgment Debt Recovery Act 1984 (Vic) s 3
Magistrates’ Court Act 1989 (Vic) s 100(7)
Penalty Interest Rates Act 1983 (Vic) s 2
Cases cited: Abigroup Limited v Abignano (1992) 39 FCR 74
Cahill v Howe [1986] VR 630
Clyne v Deputy Commissioner of Taxation (NSW) (1983) 48 ALR 545
Emerson v Wreckair Pty Limited (1992) 33 FCR 581
Herbert Berry Associates Ltd v Inland Revenue Commissioners [1977] 1 WLR 1437
In re Chinery; Ex parte Chinery (1884) 12 QBD 342
In re Henry Wilson (1877) 3 VLR 95
Kleinwort Benson Australia Limited v Crowl (1988) 165 CLR 71
Master Education Services Pty Limited v Ketchell (2008) 236 CLR 101
Re A Bankruptcy Notice; Ex parte The Official Receiver [1895] 1 QB 609
Re Black; Ex parte Jeffery (1932) 4 ABC 157
Re Manion; Ex parte Deputy Commissioner of Taxation (1979) 23 ALR 270
Re Merrington; Ex parte Monds & Affleck Limited (1929) 2 ABC 154
Re Munson; Ex parte Deputy Commissioner of Taxation (1977) 29 FLR 479
Re Pannowitz; Ex parte Wilson (1975) 6 ALR 287
Re Smith; Ex parte Chesson (1992) 106 ALR 359
The Great Fingall Consolidated Limited v Sheehan (1905) 3 CLR 176
Webster v McIntosh (1980) 32 ALR 603
Date of hearing: 10 May 2011
Place: Melbourne
Division: GENERAL DIVISION
Category: Catchwords
Number of paragraphs: 40
Counsel for the Appellant: Mr K Baker
Solicitor for the Appellant: Macpherson + Kelley
Counsel for the Amicus Curiae: Mr P Fary
Solicitor for the Amicus Curiae: Piper Alderman

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

GENERAL DIVISION

VID 892 of 2010
ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA
BETWEEN:

AUTRON PTY LTD ( ACN 007 324 110)
Appellant
AND:

MICHAEL GARY BENK
Respondent

JUDGES:

LANDER, TRACEY, YATES JJ

DATE OF ORDER:

28 JULY 2011

WHERE MADE:

MELBOURNE

THE COURT ORDERS THAT:

1.The appeal be dismissed.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court’s website.


IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

GENERAL DIVISION

VID 892 of 2010
ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF…

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Autron Pty Ltd v Benk [2011] FCAFC 93
Case
[2011] FCAFC 93
Decision Date

CaseChat Overview and Summary

Autron Pty Ltd sought to have Benk declared bankrupt on the basis of a bankruptcy notice, which included accrued post-judgment interest in the calculation of the debt claimed. Benk challenged the validity of the bankruptcy notice, arguing that the post-judgment interest was not part of the "final judgment" or "final order" as required by s 41(1) of the Bankruptcy Act. The Court of Appeal was tasked with determining whether post-judgment interest could be included in the statutory minimum amount for which a bankruptcy notice can be issued.

The primary legal issue was the interpretation of s 41(1) of the Bankruptcy Act and whether accrued post-judgment interest could be included in the "final judgment" or "final order" to satisfy the statutory minimum amount required for a bankruptcy notice. The court examined the distinction between the terms "final judgment" and "final order" as used in s 40(1)(g) and s 41(1), and whether the plain meaning of the statute allowed for the inclusion of post-judgment interest in these terms.

The court found that the expressions "final judgment" and "final order" in s 40(1)(g) and s 41(1) of the Bankruptcy Act were intended to have their generally understood meanings in bankruptcy law, as interpreted judicially. The court concluded that s 41(1) should be construed literally, meaning that a bankruptcy notice can only be issued if the creditor has obtained a "final judgment" or "final order" for at least the statutory minimum amount. The court rejected the argument that accrued post-judgment interest could be included in this amount, holding that the legislature intended to condition the issue of a bankruptcy notice on the amount of the "final judgment" or "final order" and not on the total debt after allowing for payments and credits. The court held that to construe s 41(1) otherwise would alter the plain meaning of the statute chosen by the legislature.

ORDER:

The appeal was dismissed.

Orders

Orders of the court

1. The appeal be dismissed.

Note:

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Finally, the appellant’s position is not advanced by reliance on cases that hold that account can be taken of accrued post-judgment interest to support the presentation of a petition under s 44(1) of the Bankruptcy Act: see In re Henry Wilson (1877) 3 VLR 95 at 96; Re Merrington; Ex parte Monds & Affleck Limited (1929) 2 ABC 154. The requirements of s 44(1) of the Bankruptcy Act are clearly distinct from the requirements of s 41(1) in that the statutory minimum amount for the purposes of s 44(1) is in respect of the “debt” owing by the debtor to the petitioning creditor, not the “final judgment” or “final order” on which a bankruptcy notice is required to be based. It is trite that the “debt” relied on to support a creditor’s petition need not be one arising from a judgment or order; nor is there any requirement that a creditor, who petitions for a sequestration order based upon an act of bankruptcy for which s 40(1)(g) provides, rely upon the debt claimed in the bankruptcy notice giving rise to the act of bankruptcy: Emerson v Wreckair Pty Limited (1992) 33 FCR 581 at 588. Indeed, the relevant act of bankruptcy can arise from any of the circumstances set out in s 40(1). Thus the operation of s 41(1) is independent of the operation of s 44(1) of the Bankruptcy Act. Each section should be seen as imposing statutory minimum amounts in respect of two conceptually different conditions, one for the issue of a bankruptcy notice and the other for the presentation of a creditor’s petition.CONCLUSION There is no reason to doubt that the expressions “final judgment” and “final order” as used in s 40(1)(g) and s 41(1) of the Bankruptcy Act were intended by the legislature to have their generally understood meanings as judicially interpreted in Australian bankruptcy law, extended only by recourse to s 40(3), which operates on those generally understood meanings. There is no reason why s 41(1) should not then have the plain meaning that its words bear: subject to the further limitations imposed by s 41(3), a bankruptcy notice should only issue where the creditor seeking its issue has obtained a “final judgment” or “final order” for, at least, the statutory minimum amount, or two or more such judgments or orders that, taken together, are for, at least, that amount. The use of the word “for” in this context does not really admit debate. It means the amount, in monetary terms, of the “final judgment” or “final order”, or of the two or more such judgments or orders taken together, obtained by the creditor. In the course of submissions counsel appearing as amicus curiae sought to argue that s 41(1) should not be construed literally, but given a meaning or operation that would accommodate payments made by the debtor or credits allowed by the creditor. Counsel submitted that “it is unlikely that Parliament intended that a creditor may issue a bankruptcy notice in respect of a judgment debt of $2,000 in circumstances where it had been paid $1,999”. However, to so construe s 41(1) would be to radically alter the words chosen by the legislature. Expressed in its simplest terms, the legislature has chosen to condition the issue of a bankruptcy notice on the amount of the “final judgment” or “final order”, not on the amount of the total debt (after allowing for payments and credits) for which the creditor seeks to have the notice issued. No doubt, as a matter of policy, the legislature could have chosen to adopt the latter course. The plain words of s 41(1) show that that was not its intention.

Ratio Decidendi

Legal Principle Established

The appellant’s contention that accrued post-judgment interest can be included as a component of the minimum amount specified in s 41(1)(b)(ii) of the Bankruptcy Act was developed by an argument which had the following elements:·The prescribed form of bankruptcy notice provides for the inclusion of interest that has accrued on the amount of the judgment debt or final order in calculating the amount of the total debt claimed in the bankruptcy notice.·Neither the Bankruptcy Act nor the prescribed form of bankruptcy notice states that accrued interest cannot be added to the amount of the judgment debts or final orders to achieve the statutory minimum amount prescribed by s 41(1)(b)(ii) of the Bankruptcy Act.·A direct consequence of legislation that provides for interest on judgment debts or final orders for monetary amounts is that interest so accrued “constitutes part of every final judgment or order”. This position is supported by the definition of “judgment debt” as used in the Judgment Debt Recovery Act 1984 (Vic), which is wide enough to include accrued post-judgment interest: see s 3.·The use, in the concluding paragraph of s 40(1)(g) of the Bankruptcy Act, of the words “… the amount of the judgment debt or sum payable under the final order, as the case may be …” “shows that a final judgment or order includes a judgment debt or sum payable under that final judgment or order” (emphasis added).·The construction of s 41(1)(b)(ii) of the Bankruptcy Act for which the appellant contends is supported by the observations of Riley J in Re Munson; Ex parte Deputy Commissioner of Taxation (1977) 29 FLR 479 at 482 and of Lockhart J in Re Manion; Ex parte Deputy Commissioner of Taxation (1979) 23 ALR 270 at 273.·This construction is also supported by the cases that hold that accrued interest on a judgment debt can be used to support the statutory minimum amount of the debt for which a petition can be presented, as prescribed by s 44(1) of the Bankruptcy Act.CONSIDERATION The issue on appeal is resolved by determining the proper construction of s 41(1) of the Bankruptcy Act and, specifically, s 41(1)(b)(ii), given that two final judgments or final orders were relied upon for the issue of the bankruptcy notice in the present case. In this connection the relevant provision posits three requirements:·the judgments or orders must be final judgments or final orders;·those final judgments or final orders must be of the kind described in s 40(1)(g); and·taken together those final judgments or final orders must be “for an amount of at least $2,000”. The Bankruptcy Act does not define the expressions “final judgment” and “final order” as used in s 40(1)(g) and s 41(1). Historically, in bankruptcy law, a rigid distinction has been drawn between a “final judgment” and a “final order”. In context, a “final judgment” is strictly construed to mean a final judgment “obtained in an action”. Thus, in Clyne v Deputy Commissioner of Taxation (NSW) (1983) 48 ALR 545 at 547-548 Gibbs CJ (with whom the other members of the High Court agreed) said: A final judgment within the meaning of the provisions of the Bankruptcy Act has been held to mean a judgment obtained in an action by which the question whether there was a pre-existing right of the plaintiff against the defendant is ascertained or established: Opie v Opie (1951) 84 CLR 362 at 372. In other words it is a judgment which finally disposes of the rights of the parties: see Licul v Corney (1976) 8 ALR 437 ; 50 ALJR 439 at 444. The fact that a judgment is subject to appeal or that it may later be set aside or become inoperative does not mean that it is not final: Re Hanby; Ex parte Flemington Central Spares Pty Ltd (1967) 10 FLR 378.