Blacker & Blacker v NAB Ltd (1)
[2001] FMCA 7
•1 March 2001
FEDERAL MAGISTRATES COURT OF AUSTRALIA
Peter Raymond Blacker and Christine Blacker v National Australia Bank Limited [2001] FMCA 7
PRACTICE AND PROCEDURE – extension of time for compliance with the Bankruptcy Notice – refusal to exercise discretion in favour of applicant – late service of notice under s.41(5) of Bankruptcy Act – extension of time for compliance pending result of appeal – refusal to grant in absence of sound reasons – no application for stay of execution
BANKRUPTCY – Bankruptcy Notice – calculation of interest – effect of leap year – definition of “yearly” or “per annum” in relation to interest on judgment debts
CASES REFERRED TO Re Wilhelmsen; Ex parte Gould & Ors (1986) 11 FCR 107, reClubb: ex-parte Clubb v Westpac Banking Corporation (1990) 93ALR 123, Byron Southern Star Group Pty Limited (1997) 73 FCR 264, Peter Raymond Blacker & Anor v National Australia Bank FCA unreported Katz J, 23 February 2001.
ApplicantsPeter Raymond Blacker and
Christine Blacker
Respondent: National Australia Bank Limited
CAN 004 044 937
File No:SZ 176 of 2000
Delivered on: 1 March 2001
Delivered at: Sydney
Hearing Date: 27 February 2001
Judgment of:
REPRESENTATION:
Counsel for the Applicant: LJ Aitken
Solicitors for the Applicant: Commins Hendriks
Counsel for the Respondent: J E Thomson
Solicitors for the Respondent: Dibbs Crowther & Osborne
ORDERS: 1 Application dismissed
2 Applicants to pay respondent’s costs.
IN THE FEDERAL MAGISTRATES COURT OF AUSTRALIA
REGISTRY
No SZ 176 of 2000
PETER RAYMOND BLACKER & CHRISTINE BLACKER
Applicants
and
NATIONAL AUSTRALIA BANK LIMITED
CAN 004 044 937
Respondent
REASONS FOR JUDGMENT
On 27 February 2001 there came before me an application purporting to be an application under s.41(6A) of the Bankruptcy Act 1966. Details of the claim are as follows:
(a)An order that Bankruptcy Notice No. 6422/00 which was served on the applicants on 13 December 2000 be set aside. A copy of that Bankruptcy Notice accompanies this application. (O.77r.13(2)).
(b)That the time for compliance with the requirements of the Bankruptcy Notice No. 6422/00 dated 11 December 2000 and issued on 11 December 2000 against the applicants be extended until 21 days after the date of judgment in Federal Court proceedings No N723 of 2000.
The bankruptcy notice which the applicants sought to set aside was based upon a judgment debt that arose out of a judgment of Katz J of the Federal Court made on 8 June 2000. It is agreed that although that judgment required the applicants to pay to the respondents a sum in excess of $1,551,475.68 (less $153,968.15 in respect of which the applicants had obtained judgment against the respondent) no application for a stay of execution had been made either to Justice Katz or to the Full Bench of the Federal Court which has now heard but not yet determined an appeal against his Honour’s judgment.
On 23 February 2001 Justice Katz handed down judgment on an application made by today’s respondent, the effect of which was that his Honour’s original judgment took effect on 8 June 2000 and the right to interest commenced on that day.
In paragraph 27 of his Honour’s judgment he states:
“In short, the question whether the judgment debt of $1,551,475.68 carries interest beginning on 9 June 2000 is not one to be resolved by an exercise of the court’s power under Order 35, SubR 7(3) of the Rules, but is rather to be one resolved by the resolution of the question what the word “from” in SubS 52(1) of the Act means. That question will no doubt be resolved, if it becomes necessary to do so, by the Federal Magistrates Court, before which court the Blacker’s application to set aside the NAB’s bankruptcy notice is to be heard.”
When the matter came before this court it was argued as if the parties had accepted that the right to interest commenced on 8 June 2000 and it is on that basis that this judgment is given.
Mr Aitken and Mr Thomson of Counsel who appeared for the applicants and respondent respectively gave the court the considerable assistance which could be expected from their experience in these matters. Mr Aitken explained that the basis upon which he sought order 1 was that there had been a miscalculation of the amount of interest claimed under the bankruptcy notice because the year in which the bankruptcy occurred was a leap year containing 366 days. Mr Aitken argued that when an amount of interest has to be calculated within a leap year the divisor from which the daily rate should be calculated is 366 and not 365. The result in this year would be that the amount of money owed by the applicant by way of interest would have been reduced by $203.00 approximately and the bankruptcy notice would have been invalid because of the over statement.
The applicants rely on the authority of reClubb: ex-parte Clubb v Westpac Banking Corporation (93ALR 123) in which Burchett J posed the question:
“…whether, in calculating a proportionate amount for a part of a year, of interest due at a yearly rate, the year in question being a leap year, it is permissible to convert the yearly sum to a daily rate by dividing by 365, or whether it is essential to include the intercalary day, thus making the divisor 366.”
The period in which interest was to be calculated in re Clubb extended over four years from 4 May 1985 to 10 August 1989 and that period included the leap year of 1988. His Honour came to the conclusion that:
“The Bank’s calculation of its claim for interest by breaking a bissextile year of 366 days into groups of day which add up to 366 and then calculating amounts of interest, proportionate to the appropriate yearly rates, on a basis which assumes a year of 365 days only”
was incorrect.
The respondent does not cavill with the finding in re Clubb. Its opposition to the application has two bases. The first basis is that the applicant only notified the respondent that it was making this claim by way of a letter dated 26 February 2001 which stated:
“We are instructed to formally put you on notice pursuant to Section 41(5) of the Bankruptcy Act that the sum specified in the bankruptcy notice issued by your client to our clients dated 11 December 2000 exceeds the amount in fact due and our clients therefore dispute the validity of that bankruptcy notice on the ground of a misstatement. The overstatement is the interest calculated by your client without taking into account the extra day for the leap year which occurred in the year 2000.”
In Clubb Burchett J following Re Wilhelmsen; Ex parte Gould & Ors (1986) 11 FCR 107 held that the court had power to extend time for compliance with s.41(5) of the Act but the respondent in this case argues that the court should not exercise its discretion because, inter alia, the application has been made very late and certainly many months after the final date for payment contained in the bankruptcy notice. This bankruptcy notice had been extended by the Registrar until todays date but it was not argued that the extension had the effect of bringing the s.41(5) notice within time.
I would not be inclined to exercise my discretion in the applicants’ favour in respect of this late giving of notice. The alleged overstatement of the interest due was made when the notice was issued in December and could then have been the subject of a notice. The other reasons which bring me to that decision are identical with the reasons for which I would dismiss the applicants’ claim No 2 and which I deal with later in this judgment.
Even if it were found that I had wrongly exercised my discretion and that I should have allowed the applicant to pursue this application I would have dismissed the application as misconceived.
Interest on a judgment debt is calculated yearly from the date of the debt. If the debt is paid within the year then the amount of interest is calculated on the basis of a number of days over which the debt was outstanding times the interest payable, divided by 365. This would only change in a year when the debt was outstanding over a period during which a 29th of February occurred. Between 8 June 2000 and 7 June 2001 or 9 June 2000 and 8 June 2001 there are 365 days. The fact that between 1 January 2001 and 31 December 2000 there are 366 days is irrelevant. Interest rates are not fixed from calendar year to calendar year, they are fixed from one determined time or date to the next determined time or date. An example in respect of the interest rates utilised by the Supreme Court of New South Wales can be seen in the Judgment of Burchett J in Clubb. In the present case the calculation utilising a divisor of 365 in order to calculate a daily rate was the correct method of proceeding given that the ordinary meaning of yearly or per annum is, in my respectful opinion, a period of 365 days (or 366 in a leap year) from the date upon which interest is first to be paid.
My dismissal of ground 1 of the application still leaves open ground 2. The applicants’ claim that they should be allowed a further extension of time to comply with the bankruptcy notice until after the determination of the appeal against the original judgment of Katz J. They say that the appeal has recently been heard and an early decision can be expected. Of this I have little doubt. In a matter where extensions have already been granted and the result of an appeal is shortly to be known it might not be too difficult to convince a court to exercise its discretion in favour of such an applicant. However, there must still be sound reasons and a court might well expect some evidence that there would be little harm done to the respondent by its waiting. In this case the applicants could only point to an agreement by the respondents not to proceed to an application for a sequestration order pending the determination of the appeal. The applicants did not refute the suggestion that there might be some payments made within the last six months which could be classed as preferential which an extension might lose for the benefit of the creditors. Most importantly, the applicants had not sought either from the Judge at first instance or the Full Bench a stay of execution.
This was a matter which was considered by his Honour Lehane J in v Byron Southern Star Group Pty Limited (1997) 73 FCR 264. In that case his Honour considered the conflicting cases of re Baker ex-parte Baker v Staples (unreported), Federal Court Kiefel J, 4 September 1995 and re Geard, ex-parte Reid (unreported), Federal Court, Sheppard J, 11 February 1994; re Smith (unreported), Federal Court, Whitlam J, 4 May 1994; Agrillo v Codisposto (unreported), Federal Court, Sackville J, 16 December 1994. Lehane J follows the views of Sheppard J in Geard and sets out in extenso a passage from that Judgment which indicates that the discretion of the court should not usually be exercised where a party has not made an application for a stay. Sheppard J pointed out the difference between a bankruptcy notice and a bankruptcy petition. He reminded his readers that:
“The refusal of the application will not affect the status of the debtor but will mean that he, in all probability, will commit an act of bankruptcy. That act of bankruptcy will be available for the petitioning creditors or to any other creditor upon which to base a bankruptcy petition at any time in the period of six months after the act of bankruptcy has been committed. Otherwise the debtor’s position will remain unaffected by what the court does.”
Lehane J notes:
“The commission of an act of bankruptcy is, undoubtedly a serious matter; it is, however, of a different order of gravity from the change of status brought about by the making of a sequestration order; and there is also to be taken into account the interest of both the judgment creditor and other creditors of the judgment debtor in ensuring that, if ultimately a sequestration order is made, the relevant act of bankruptcy occurs earlier rather than later.”
In this case the amended grounds of appeal which were considered by the Full Court do not seek to set aside the order under which the debtors were due to pay to the creditor the sum of $1,500,000.00 odd but to set aside those findings of his Honour which restricted the amount of the debtors’ cross-claims. Even if the debtors were entirely successfully it is submitted by the creditors that there would still be a substantial sum in excess of $500,000.00 owed to the respondent bank. This argument was not resisted by the applicants and perusal of the amended grounds of appeal would appear to confirm its accuracy.
Taking all these considerations into account I am not persuaded that the agreement of the bank in relation to a bankruptcy application or even the, hopefully, short period before which the Full Bench hands down its judgment, are sufficient reasons in the absence of other compelling evidence to depart from the views of the Federal Court which were adumbrated so effectively by Lehane J in Byron v Southern Star Group Pty Limited.
I dismiss the application. I order the applicant to pay the respondent’s costs.
I certify that the preceding nineteen (19) paragraphs are a true copy of the reasons for judgment of Raphael FM.
Associate
Dated 1 March 2001
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