Bank of WA Ltd v Loiterton - [2006] FMCA 361

FEDERAL MAGISTRATES COURT OF AUSTRALIA

BANK OF WA LTD & ANOR v LOITERTON

[2006] FMCA 361

BANKRUPTCY – Bankruptcy notice – debt including interest on judgment – correct reference to interest provision – interest on judgment before commencement of NSW Civil Procedure Act – bankruptcy notice issued after commencement – transitional provisions of Civil Procedure Act - concurrent old and new provisions providing for interest on judgments – bankruptcy notice not erroneous due to reference to repealed provision.

Bankruptcy Act 1966 (Cth), ss.41, 41(2), 52, 52(1), 52(2), 52(2)(a), 52(2)(b), 306
Civil Procedure Act 2005 (NSW), ss.2, 2(1), 3, 6, 6(1), 101, 136, Sch.4 [23], Sch.6 cll.5, 10, Sch.7 r.36.7
District Court Act 1973 (NSW), s.85

Interpretation Act 1987 (NSW), ss.23, 23(1)(b), 24, 30, 30(1)(b)
Supreme Court Act 1970 (NSW), s.95, 95(1)
Supreme Court Rules1970 (NSW), Pt.40 r.7, Sch.J
Uniform Civil Procedure Rules2005 (NSW) Sch.7 r.36.7, Sch.5

Adams v Lambert [2006] HCATrans 38
The Australian Steel Company (Operations) Pty Ltd v Lewis (2000) 109 FCR 33
Laws of Australia [7.5.32]
Marshall v General Motors Acceptance Corporation (2003) 127 FCR 453
O’Farrell v Network Entertainment Pty Ltd [2005] FMCA 1936
Re Mangan; Ex parte Andrew (1983) 123 ALR 633

First Applicant:

BANK OF WESTERN AUSTRALIA LTD
ACN 050 494 454

Second Applicant:

LEASEBANK (AUSTRALIA) PTY LTD
ACN 078 312 302

Respondent:

PHILLIP RONALD LOITERTON

File No:

SYG 2955 of 2005

Delivered on:

17 March 2006

Delivered at:

Sydney

Hearing date:

9 March 2006

Judgment of:

Smith FM

REPRESENTATION

Counsel for the Applicants:

Mr B J Skinner

Solicitors for the Applicants:

Jones King Lawyers

Counsel for the Respondent:

Mr J T Johnson

Solicitors for the Respondent:

Dennis & Co Solicitors

ORDERS

A date for resuming the hearing of the petition will be appointed.
Costs in relation to the hearing on 9 March 2006 are reserved.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
SYDNEY

SYG 2955 of 2005

BANK OF WESTERN AUSTRALIA LTD

First Applicant

LEASEBANK (AUSTRALIA) PTY LTD

Second Applicant

And

PHILLIP RONALD LOITERTON

Respondent

REASONS FOR JUDGMENT

This is a creditor’s petition filed on 14 October 2005, which seeks a sequestration order against the debtor based upon his failure to comply with the requirements of a bankruptcy notice issued on 17 August 2005 and requiring compliance on or before 26 September 2005.
The hearing of the petition was adjourned several times, before being referred to me by the Registrar on 7 March 2006. Due to the unavailability of time, I adjourned it for hearing on 9 March 2006.
On that day, I received the petitioner’s evidence in support of the petition, and heard argument as to whether I could be satisfied that the debtor committed the act of bankruptcy alleged, and as to the other matters required to be proved under s.52(1) of the Bankruptcy Act 1966 (Cth). Subject to the issue which I shall address below, I was so satisfied upon the affidavits read to the Court. My ability to reach that satisfaction was not contested by counsel for the debtor.
At the request of the debtor and with the consent of the petitioner, I adjourned the further hearing on the petition to a date to be appointed. It was agreed by both counsel that I should deliver a judgment giving my opinion on the live issue arising under s.52(1), but should refrain from making a sequestration order so as to allow the debtor a further opportunity to present his evidence and submissions in support of issues raised by his notice of opposition filed on 23 November 2005. This did not challenge proof of any matter going to the Court’s power to make a sequestration order, but invoked the Court’s discretion to dismiss the petition under s.52(2)(a) or (b).
The only live issue between the parties in relation to the Court’s power to make a sequestration order, is whether the bankruptcy notice suffered from a formal defect resulting in its invalidity. The debtor contends that it was invalid due to an erroneous statement in the attached ‘interest calculation’ document as to “the provision under which the interest is being claimed” in accordance with the form prescribed for the purposes of s.41(2) of the Bankruptcy Act. Upon well known Full Court authority any such error, even if insignificant, will amount to a failure to meet a requirement “made essential by the Act” so that the ameliorative provision of s.306 of the Bankruptcy Act is unavailable (see Marshall v General Motors Acceptance Corporation (2003) 127 FCR 453 per Cooper and North JJ, applying The Australian Steel Company (Operations) Pty Ltd v Lewis (2000) 109 FCR 33). There would be such a failure if the ‘interest calculation’ failed to specify a statutory provision which was a “source of entitlement” for the interest claimed (c.f. Marshall (supra) per Cooper J at [51]-[54], and North J at [83]-[84]).
It is unnecessary for me to explain the legislation and authorities supporting the above propositions, since they were not contested by either counsel. Counsel for the petitioner principally argued that no erroneous statement was made in the present document. Alternatively, he submitted that any error could be overlooked under s.306 as a “formal defect or irregularity” which did not cause “substantial injustice”. He accepted that his alternative argument could only succeed if the High Court overruled Australian Steel and Marshall when it delivered its judgment in Adams v Lambert, which was reserved at the time of the hearing before me - the appeal having been argued on 9 February 2006 (see [2006] HCATrans 38).
The relevant facts in relation to the bankruptcy notice in the present case can be identified with brevity. It relied upon a judgment debt in the District Court of NSW comprising an amount of $94,789.78 recovered on 5 April 2005, together with $3,085.21 interest accrued since the date of judgment. It attached a “certificate of judgment” issued on 20 April 2005 as “a copy of the judgments or orders relied upon by the creditor”. It was not argued that this did not meet the requirements of paragraph 2 of the prescribed form of bankruptcy notice. The certificate attached a document headed: “S.85 INTEREST SCHEDULE” which set out the prescribed rates of interest at the time of the certificate. It certified:
1. In this action the Plaintiff recovered Judgment against the Defendant on 05/04/2005, in the sum of $92,807.18 and his costs $1,982.60.
2. I am informed by the Judgment Creditor that the amount of $0.00 has been paid in respect of the Judgment.
3. Interest is payable per annum on so much of the judgment debt (including costs) as is from time to time unpaid – see attached schedule.
4. The Judgment Creditor has incurred costs of attempting to enforce the judgment, recoverable against the judgment debtor, in the amount of $0.00
The bankruptcy notice also attached an ‘interest calculation’ document as required by Note 2(a) in the prescribed form of bankruptcy notice. This said: “Interest is claimed pursuant to section 85 of the District Court Act 1973 (NSW)” for 132 days from 6 April 2005 to 15 August 2005. It was conceded by counsel for the petitioner that this claim included an amount of interest accruing in respect of 15 August 2005. The bankruptcy notice was issued by the Official Receiver on 17 August 2005.
I must now decide what was the effect on the validity of the bankruptcy notice of the fact that s.85 was “omitted” from the District Court Act upon the commencement of the Civil Procedure Act 2005 (NSW) (see s.6(1) and Sch.4 [23]). The new legislation contained a provision in s.101 of the Civil Procedure Act which, when read with the definition of “judgment” in s.3 and the Uniform Civil Procedure Rules proposed by Sch.7 r.36.7, had the same effect as the omitted s.85. The table of interest rates proposed in Sch.5 to the Uniform Rules exactly replicated the table previously prescribed for the purposes of section 95(1) of the Supreme Court Act 1970 (NSW), and which contained interest rates from “the beginning of 1 July 1972” until “after 28 February 2002” (see former Supreme Court Rules 1970 (NSW), Pt.40 r.7 and Sch.J).
When introducing the Civil Procedure Bill, the Attorney-General said:
The working party’s aim was to consolidate provisions about civil proceedings into a single bill and develop a common set of rules, simplified where possible but without radical changes in substance or form. The bill and rules largely reflect existing provisions and continue to use phrases that have a settled legal meaning. Where there is change, much of it can be attributed to the fact that drafting styles have changed over the past 30 years. Parties should not be arguing that a rule has changed because a modern drafting style has been adopted if the substance of the rule remains the same. This approach is designed to minimise unnecessary litigation about the meaning of a clause or rule. …
Part 7 of the bill deals with judgments and orders. It incorporates provisions from the Supreme Court Act, the District Court Act and the Local Courts (Civil Claims) Act and the Supreme Court Rules. … Clauses 100 and 101 carry over provisions dealing with the payment of interest up to and after judgment. …
When they commence, the bill and rules will apply to all civil proceedings. This will save parties having to deal with two sets of rules for existing and new proceedings. Important safeguards have been included in the savings and transitional provisions in schedule 6. … [see NSW Legislative Assembly Hansard, 6 April 2005, page 15115]
A nice point was raised in the course of argument before me, as to whether s.85 of the District Court Act was repealed at the beginning or at the end of 15 August 2005. Section 2(1) of the Civil Procedure Act provided, in relation to its provisions relevant to the present issue, that: “This Act commences on a day or days to be appointed by proclamation …”. A proclamation made on 10 August 2005, stated that the Governor “do, by this my Proclamation, appoint 15 August 2005 as the day on which the Act commences …”. Section 23(1)(b) of the Interpretation Act 1987 (NSW) provides that “An Act shall commence … if the Act provides for its commencement, whether by proclamation under the Act or otherwise – on the day or days specified in, or ascertained in accordance with, that provision”. Section 24 provides: “if an Act … provides that it shall commence … on a particular day, it shall commence, or be deemed to have commenced, at the beginning of that day.” I accept the submission of counsel for the debtor, that these provisions had the effect that the repeal of s.85 took effect at the beginning of 15 August 2005.
Before it was “omitted”, s.85 provided:
85 Interest on judgment debt
(1) Unless the Court orders in any particular case that interest be not payable, interest shall, subject to subsection (3), be payable on so much of the amount of a judgment debt as is from time to time unpaid.
(2) Interest payable under subsection (1) in respect of a judgment debt shall:
(a) subject to subsection (3), be calculated as from the date when the judgment debt came into being or from such later date as the Court in any particular case fixes,
(b) be calculated at the rate prescribed for the purposes of section 95 (1) of the Supreme Court Act 1970 , and
(c) form part of the judgment debt, but not so as to require the payment of interest upon interest.
(3) Despite subsection (1) or (2), where:
(a) the amount of a judgment debt (excluding the amount of costs to be assessed) is paid in full within 21 days after the judgment debt becomes payable, or
(b) the amount of costs assessed is paid in full within 21 days after that amount is assessed,
interest is not payable on the amount so paid, unless the Court otherwise orders.
(4) If an order is made for the payment of costs, the Court may order that interest is to be paid on the amount so ordered from the date or dates when the amount in respect of costs was duly paid.
Plainly, prior to 15 August 2005, this provided the “source” of a liability for interest as a component of a District Court judgment debt, and until that date it may have been the only “source” which would have satisfied the requirement of the prescribed form of bankruptcy notice as interpreted in Australian Steel and Marshall.
I consider that two issues arise from the above circumstances, when considering the validity of the present bankruptcy notice issued on 17 August 2005:
i)Did the commencement of s.101 on 15 August 2005 have the effect that s.85 could no longer be identified as a source of the debtor’s liability to interest for the period from 6 April 2005 to 14 August 2005? This requires me to interpret s.101 to discover whether it was intended to provide a source of liability to interest which was both retrospective and exclusive in relation to interest accruing to a judgment debt before 15 August 2005. In my opinion, this question may be better focused by asking whether the enactment of s.101 revealed an intention to exclude the presumption raised by s.30(1)(c) of the Interpretation Act 1987 (NSW) that “the amendment or repeal of an Act … does not … affect any … liability acquired, accrued or incurred under the Act”.
ii)Even if the answer to the above question is “no”, an issue remains as to the correctness of the claim to interest “pursuant to s.85” in relation to the one day after its repeal: 15 August 2005. Presumptions against retrospectivity may not assist that claim, and it is necessary to consider whether there is an express savings provision which accompanied the repeal of s.85, and which allowed the repeal to be disregarded when identifying a source of liability to interest accruing after the commencement of s.101 upon a prior judgment.
There was no transitional provision in the Civil Procedure Act which specifically addressed how the source of a liability to interest on a pre‑commencement judgment was to be identified after commencement, whether in relation to periods before or after the commencement of s.101. Neither counsel referred me to extrinsic materials which would illuminate this issue. The second reading speech, which I have extracted above, provides only indirect assistance. I therefore have addressed the issues of interpretation by considering the general transitional provisions of the Act in the light of the provisions of s.101 and the other definitions and Rules which it invokes.
In my opinion, the key to understanding the transitional scheme in relation to interest on pre-commencement judgments is to note that the new legislation effectively replicated the previous provisions. From this, and from the general characteristics of the Civil Procedure Act which are referred to in the second reading speech, and from the transitional provisions which I shall discuss below, it can be inferred that a “seamless” continuation of processes allowing the recovery of interest on pre-commencement judgments was intended, and that it was intended that this would be not troubled by debate about the source of liability in relation to any period in time. This intention could be best given effect by both allowing the previous liability provisions to have a continuing effect in relation to interest accruing on pre-commencement judgments, and also allowing identical liabilities to be sourced under s.101 of the new legislation. If the draftspersons considered the significance under Bankruptcy law of identifying a particular source of liability to interest on pre-commencement judgments, in my opinion, they have dealt with the issue by allowing both the new and the old provisions to be characterised as a source of liability for interest on pre-commencement judgments.
Under the terms of s.85(2)(c), interest accrued from day to day and formed “part of the judgment debt”. Thus, as at the date of the repeal of s.85 and commencement of s.101, a judgment debtor had incurred liability for a total judgment debt which included amounts already accrued under s.85. It is clear that the liability for that total debt would be preserved by force of s.30 of the Interpretation Act, unless a contrary intention were discovered in the repealing legislation. Since I can find no provision which reveals an intention after 15 August 2005 to remove s.85 as a continuing source of liability for pre-commencement amounts of interest, the new legislation must be given effect so as to conform to the presumption against such an intention.
In O’Farrell v Network Entertainment Pty Ltd [2005] FMCA 1936, Raphael FM considered the validity of a bankruptcy notice issued after 15 August 2005 which claimed interest for a period overlapping that date, and which described the source of liability for all that interest as being s.101 without any reference to s.85. He referred to two transitional provisions in Sch.6 of the Civil Procedure Act (see s.6) as having possible relevance:
5 Pending proceedings
(1) Subject to subclause (2), this Act and the uniform rules apply to proceedings commenced before the commencement of this Act in the same way as they apply to proceedings commenced on or after that commencement.
(2) A court before which proceedings have been commenced before the commencement of this Act may make such orders dispensing with the requirements of the uniform rules in relation to the proceedings, and such consequential orders (including orders as to costs), as are appropriate in the circumstances.
…
10 General saving
Subject to this Schedule and the regulations:
(a) anything begun before the commencement of this Act under a provision of the old legislation for which there is a corresponding provision in this Act or the uniform rules may be continued and completed under the old legislation as if this Act had not been enacted, and
(b) subject to paragraph (a), anything done under a provision of the old legislation for which there is a corresponding provision in this Act or the uniform rules (including anything arising under paragraph (a)) is taken to have been done under the corresponding provision of this Act or the uniform rules, as the case requires.
Raphael FM said:
4. … I do not think that regulation 5 [sic: Sch.6 cl.5 of the Civil Procedure Act] has any relevance to this case. As Mr Di Francesco says, the proceedings that were begun have now concluded. They were concluded in the District Court by the judgment that I have referred to and that judgment was affirmed by the Court of Appeal of New South Wales. There are no further proceedings to be carried out under the District Court Act. On the other hand, the "general saving 10(b)" would appear to me to save the situation for the creditor. All that has happened is that the District Court, in its certificate of judgment, has referred to a provision in the new Act for which there was a provision in the old Act and the bankruptcy notice has done no more than follow the form of the judgment in order to indicate to the debtor the basis upon which the interest is claimed.
5. As Mr Parker pointed out, schedule 5 to the new Uniform Rules is the interest rate schedule and that commences on 1 July 1972. So there must have been an intention in the drafters of this legislation that a successful party in proceedings could claim interest under s.101 of the Act for a period well before the commencement of the Uniform Rules and Procedures. To adopt a purposive approach which is that preferred by the Acts Interpretation Act and the High Court, it seems this legislation was intended to smooth the path of transfer between three separate Acts, those of the Supreme, District and Local Courts into one and I am satisfied that “general saving 10” achieves the object of ensuring that the description of the basis upon which the interest is calculated and the calculation thereof is not misdescribed in the notice.
With respect to Raphael FM, I am not confident that cl.5 could have no operation once a final judgment in a District Court action was pronounced or upheld on appeal. It may be possible to regard the proceeding as still continuing in relation to enforcement procedures, and I am inclined to think that cl.5 would be a source of authority to initiate such procedures under the new uniform procedures in relation to pre-commencement judgments. However, I respectfully agree with Raphael FM, that cl.10 is of more immediate relevance to the identification of the source or sources of liability for interest accruing on a pre-commencement judgment.

It was submitted by counsel for the debtor that Raphael FM’s judgment in O’Farrell was authority for the proposition that a bankruptcy notice was invalid if it identified s.85 as the source of a pre-commencement period of liability for interest on a pre-commencement judgment. However, his Honour did not give that opinion, but only that it was open to a creditor to claim that interest was provided for under s.101 in relation to periods spanning the commencement date. I do not read his Honour’s judgment as holding that s.101 was the exclusive source of a creditor’s rights to interest in relation to pre-commencement judgments. It was not necessary for him to do so, and I do not consider that his judgment stands as authority inconsistent with my opinion that s.101 provided an additional source of liability for pre-commencement periods of interest which was not retrospectively exclusive of the liability under s.85 which was preserved by the Interpretation Act.
The only provision of the Civil Procedure Act, which was pointed to by counsel for the debtor in aid of his submission that s.101 was intended to be the exclusive source of liability for interest on pre-commencement judgments, was s.136. This provides:
136 Appropriation of payments towards judgment debt
Unless the court otherwise orders, any payment made on account of a judgment debt is to be appropriated:
(a) firstly, towards such part of the judgment debt as comprises interest payable under section 101, and
(b) secondly, towards the balance of the judgment debt.
In its terms s.136 does not show the intention which is now argued, but counsel for the debtor argued that it was not a provision previously found in the District Court Act, and therefore showed that s.101 was part of a novel scheme in relation to interest on judgments which implicitly was intended to supersede and exclude any concurrent operation of the old interest provision. He did not refer me to any extrinsic material or authorities which provide background to s.136. However, in my opinion, the provision did no more than codify a long established presumption of common law (see Re Mangan; Ex parte Andrew (1983) 123 ALR 633 at 639-640, and Laws of Australia [7.5.32]). Even if s.136 introduced some novelty when s.101 is invoked, I am not persuaded that this would show an intention to exclude the continuing operation of s.85 as a source of accrued liability to interest on pre-commencement judgments.
My above reasoning explains why I consider that the present ‘interest calculation’ document did not reveal any error by identifying s.85 as a source of liability to the interest which augmented the judgment debt over the period of its existence prior to 15 August 2005. However, that reasoning may not give s.85 a continuing operation in relation to periods of interest after 15 August 2005 on pre-commencement judgments. On my findings above as to the time when s.85 was repealed, the petitioner needs to establish that s.85 had a continuing operation so as to avoid error being found in the attribution of s.85 as the source of a right to interest for the last day of its claimed period: 15 August 2005.
Neither counsel referred me to authority on whether an on-going right to interest under s.85 for a post-commencement period could be preserved by s.30 of the Interpretation Act, or by equivalent presumptions against giving retrospective effects to repeals. However, I have decided that I would not need to invoke a presumption. This is because, in my opinion, it is possible to identify an expressed “savings” provision in the new legislation which, in relation to pre-commencement judgments, has given s.85 a continuing effect after its repeal.
I accept the submission of counsel for the petitioner that such a provision can be identified in Sch.6 cl.10(a), which is set out above. It expressly allows the repeal of a provision of the former legislation to be disregarded, so as to allow the continuation of events by reference to the repealed provision. To apply this so as to continue the operation of s.85 for periods after 15 August 2005 requires identifying the continued accruing of interest on a pre-commencement judgment as “continuing and completing” “anything begun before the commencement of this Act” under a provision duplicated in the new legislation. As I have found above, there is such duplication between s.85 and s.101 and their related provisions. In my opinion, cl.10(a) is of such breadth of language and intent as to allow s.85 to be treated as a continuing source of liability for interest on pre-commencement judgments in relation to periods after 15 August 2005.
To give cl.10(a) this effect does not, as I have explained above, give rise to any inconsistency with a concurrent operation of s.101, and would acknowledge an intent to allow a “seamless” transition. This intent can be found in the “mirror” quality of cl.10(a) and (b). Their combined purpose was to seek to make irrelevant any debate upon whether a repealed provision or a duplicate new provision should be identified as a relevant legislative source of “anything”. They achieved this by deeming both provisions to have concurrent operation in relation to transitional procedures, rights and liabilities including, in my opinion, those relating to judgment debts originating prior to 15 August 2005. I therefore regard as consistent with my interpretation, the approach of Raphael FM in identifying cl.10(b) as “saving the situation for the creditor” who identified s.101 as the source of a continuing right to interest.
My interpretation of the transitional provisions accompanying the commencement of s.101 of the Civil Procedure Act produces a sensible outcome. It means that ‘interest calculation’ documents attached to bankruptcy notices will not reveal error by identifying either s.85 or s.101 or both of them as the source of the continuing right to interest accruing both before and after 15 August 2005 on a judgment recorded prior to that date. A reference to any of these variants would be legally correct, due to the “seamless” intentions of the transitional arrangements. I do not consider this flexibility could give rise to any material confusion on the part of a debtor who has incurred a pre-commencement judgment debt.
I therefore reject the debtor’s argument which relies upon Australian Steel and Marshall, and it is unnecessary for me to await the High Court’s judgment in Adams v Lambert.
For the above reasons, I am satisfied as to the validity of the bankruptcy notice in the present matter. I am satisfied that the creditor is entitled to a sequestration order, and that I should make such an order unless the debtor can persuade me to exercise my discretion under s.52(2) of the Bankruptcy Act.
I shall give directions appointing a hearing of the debtor’s notice of opposition which seeks to do this. I note that it will be necessary for the petitioner on that occasion again to satisfy the Court as to search and debt under Bankruptcy Rule 4.06.
I shall reserve the question of costs in relation to the hearing on 9 March 2006.

I certify that the preceding thirty-two (32) paragraphs are a true copy of the reasons for judgment of Smith FM

Associate: Iliya Marovich-Old

Date: 17 March 2006