Condon v Vanessa Two Pty Ltd (No 2)

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FEDERAL COURT OF AUSTRALIA

Condon v Vanessa Two Pty Ltd (No 2) [2018] FCA 1153

File number(s): NSD 144 of 2017
Judge(s): FARRELL J
Date of judgment: 3 August 2018
Catchwords: PRACTICE AND PROCEDURE – Application for pre-judgment interest pursuant to s 51A(1) of the Federal Court of Australia Act 1976 (Cth) – whether application was required before judgment was delivered – the time from which interest should be payable – application granted
Legislation:

Bankruptcy Act 1966 (Cth) s 121

Customs Act 1901 (Cth) s 269N

Federal Court of Australia Act 1976 (Cth) ss 51A, 52

Federal Court Rules 2011 (Cth) rr 39.05

Cases cited:

Commonwealth of Australia v SCI Operations Pty Ltd (1998) 192 CLR 285; [1998] HCA 20

Condon v Vanessa Two Pty Ltd [2018] FCA 947

Hanave Pty Ltd v LFOT Pty Ltd (2004) 136 FCR 566; [2004] FCAFC 180

SCI Operations Pty Ltd v Commonwealth (1996) 69 FCR 346
Date of hearing: 19 June 2017
Date of last submissions: 20 July 2018
Registry: New South Wales
Division: General Division
National Practice Area: Commercial and Corporations
Sub-area: General and Personal Insolvency
Category: Catchwords
Number of paragraphs: 24
Counsel for the Applicant: Mr D C Eardley
Solicitor for the Applicant: Hammond Nguyen Turnbull
Counsel for the Respondents: Mr D P O’Connor
Solicitor for the Respondents: Collins & Thompson

ORDERS

NSD 144 of 2017
BETWEEN:

SCHON CONDON, AS TRUSTEE OF THE BANKRUPT ESTATE OF STEPHEN BARRY CHARLES GRIBBLE

Applicant
AND:

VANESSA TWO PTY LTD AS TRUSTEE FOR THE GRIBBLE FAMILY TRUST

First Respondent

VANESSA GRIBBLE

Second Respondent

ROBYN LEAHY

Third Respondent

JUDGE:

FARRELL J

DATE OF ORDER:

3 AUGUST 2018

THE COURT ORDERS THAT:

1.In accordance with Order 1 made on 21 June 2018, the first respondent (Vanessa Two) must pay $201,135.57 to the applicant by 4 pm on Friday, 28 September 2018.

2.Vanessa Two must pay to the applicant interest before judgment in the amount of $34,923.20 pursuant to s 51A(1) of the Federal Court of Australia Act 1976 (Cth) by 4 pm on Friday, 28 September 2018.

3.The third respondent (Mrs Leahy) must allow the applicant access to collect the Southwind boat bearing registration ADM950N (boat).

4.If the applicant has given Mrs Leahy at least 48 hours written notice of his intention to collect the boat and Mrs Leahy fails to give unobstructed access for that purpose, the parties have liberty to apply to the Court for ancillary orders to give effect to Order 3.

5.If Vanessa Two fails to comply with either or both of Orders 1 or 2 by 4 pm on Friday, 28 September 2018, then the applicant has liberty to apply to the Court for a person or persons who consent to such appointment to be appointed as a receiver or other external administrator of Vanessa Two for the purpose of giving effect to Orders 1 and 2.

6.Order 3 made on 21 June 2018 is quantified in a lump sum amount of $20,000 and…

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Details
Case
[2018] FCA 1153
Decision Date

CaseChat Overview and Summary

Condon v Vanessa Two Pty Ltd (No 2) involved an application for pre-judgment interest under section 51A(1) of the Federal Court of Australia Act 1976 (Cth). Mr Condon sought interest on the amount of $201,135.57 from 12 March 2013 to 21 June 2018, and alternatively, from 11 June 2015, the date a sequestration order was made, to 21 June 2018. The respondents opposed the application on the grounds that the judgment did not provide for it and that the order could not be characterised as an ancillary or other order required to give effect to the orders made on 21 June 2018.

The legal issues the court needed to address were whether the application was required before judgment was delivered, and if so, the time from which interest should be payable. Mr Condon argued that the cause of action notionally arose on 12 March 2013, and relied on a passage from SCI Operations Pty Ltd v Commonwealth (1996) 69 FCR 346 to support his position. However, the High Court later held that the cause of action arose on the date the relevant order was made. The court needed to determine whether the same analysis applied to transactions that were void against a trustee under section 121(1) of the Bankruptcy Act 1966 (Cth).

The court concluded that the cause of action arose on 11 June 2015, the date the sequestration order was made and the trustee was appointed. The court ordered that the respondents must pay interest before judgment of $34,923.20, calculated from 11 June 2015 to 21 June 2018, in addition to the amount of $201,135.57. The court also ordered that payment must be made by 4 pm on Friday, 28 September 2018, slightly more than 90 days after judgment was delivered. If payment was not made by the due date, the applicant had the liberty to apply to the Court for a receiver or other external administrator of Vanessa Two to be appointed to give effect to the orders.

In summary, the court granted the application for pre-judgment interest and ordered that the respondents must pay interest before judgment of $34,923.20, calculated from 11 June 2015 to 21 June 2018, in addition to the amount of $201,135.57. The court also ordered that payment must be made by 4 pm on Friday, 28 September 2018, and that if payment was not made by the due date, the applicant had the liberty to apply to the Court for a receiver or other external administrator of Vanessa Two to be appointed to give effect to the orders.

Orders

Orders of the court

1. In accordance with Order 1 made on 21 June 2018, the first respondent (Vanessa Two) must pay $201,135.57 to the applicant by 4 pm on Friday, 28 September 2018.

2. Vanessa Two must pay to the applicant interest before judgment in the amount of $34,923.20 pursuant to s 51A(1) of the Federal Court of Australia Act 1976 (Cth) by 4 pm on Friday, 28 September 2018.

3. The third respondent (Mrs Leahy) must allow the applicant access to collect the Southwind boat bearing registration ADM950N (boat).

4. If the applicant has given Mrs Leahy at least 48 hours written notice of his intention to collect the boat and Mrs Leahy fails to give unobstructed access for that purpose, the parties have liberty to apply to the Court for ancillary orders to give effect to Order 3.

5. If Vanessa Two fails to comply with either or both of Orders 1 or 2 by 4 pm on Friday, 28 September 2018, then the applicant has liberty to apply to the Court for a person or persons who consent to such appointment to be appointed as a receiver or other external administrator of Vanessa Two for the purpose of giving effect to Orders 1 and 2.

6. Order 3 made on 21 June 2018 is quantified in a lump sum amount of $20,000 and by agreement between the parties, the respondents must pay that amount to the applicant by 31 August 2018.

7. The respondents must pay the applicant’s costs incurred since 21 June 2018 in a lump sum amount of $800 (exclusive of GST) by 31 August 2018.

8. Liberty be granted to the parties to seek such ancillary or other orders as may be required to give effect to the foregoing orders.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

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

The parties were asked to provide draft orders to address these issues. There are a few matters on which the parties could not agree.Interest up to judgment In Mr Condon’s amended application, he claimed “interest” as well as “costs”. Mr Condon agitated the question of costs in written submissions filed before the hearing of his application but no submissions were made in support of orders for interest up to judgment. The matter of interest up to judgment was not addressed in the judgment rendered on 21 June 2018. Mr Condon claims interest of $64,889.64 under s 51A(1) of the Federal Court of Australia Act 1976 (Cth) in respect of the amount of $201,135.57 for the period from 12 March 2013 (the date of the transaction) to 21 June 2018. Mr Condon did not cite any authority in which orders were made under s 121 of the Bankruptcy Act for the selection of this period as the basis for the calculation. At [17] of the submissions sent to chambers on 6 July 2018, Mr Eardley, counsel for Mr Condon, made his only submission on the principles to be applied in this matter as follows:A majority of the Full Federal Court (Beaumont and Einfeld JJ, Sackville J dissenting) held that interest should be awarded under s 51A(1): see SCI Operations Pty Ltd v Commonwealth (1996) 69 FCR 346. Beaumont and Einfeld JJ said at 365-366: In our view, s 51A(1)(a) should be treated as picking up the date when, by the operation of the relevant legal processes, the cause of action, notionally, or in truth, arose. In other words, it is possible here, given the retrospective operation of s 269N, to construe s 51A(1)(a) as referring to a cause of action arising, retrospectively, in September 1987, rather than on 3 June 1994. A retrospective perspective for the purposes of s 51A(1)(a) would accord with the intent of the scheme of the customs legislation. That is to say, s 51A(1)(a) should be interpreted so as to refer to the date when the cause of action arose, or should be treated as having arisen. Such a minor gloss upon the provision is, we think, permissible as reflecting the intention of the legislation, given its remedial character. (emphasis added) Alternatively, Mr Condon claims interest of $34,923.20, calculated from 11 June 2015, the date the sequestration order was made, to 21 June 2018. The respondents oppose interest up to judgment being ordered on the basis that the judgment delivered on 21 June 2018 made no provision for it. They submit that:(1)Although Vanessa Two was the recipient of $201,135.57 which Mr Gribble received from his mother’s estate, there “is no question about the avoidability of that payment until such time as the Declaration was made by Her Honour and therefore [Vanessa Two] should not be penalised further”;(2)The judgment delivered on 21 June 2018 was a final judgment and nothing in r 39.05 of the Federal Court Rules 2011 (Cth) would authorise that judgment to be varied; and(3)An order for pre-judgment interest cannot properly be characterised as an “ancillary or other order as be required to give effect” to the other orders made on 21 June 2018 so as to fall within the liberty granted in Order 6 made on that day.

Ratio Decidendi

Legal Principle Established

There then arises the question of how the interest should be calculated. When did the “cause of action” arise? Although Mr Condon’s submissions did not say so explicitly, I take his reliance on the quoted passage from SCI Operations Pty Ltd v Commonwealth (1996) 69 FCR 346 at 365-366 to mean that the cause of action “notionally, or in truth, arose” on 12 March 2013, even though any such claim could not have been made until a sequestration order was made against Mr Gribble’s estate on 11 June 2015 and a trustee in bankruptcy was appointed. An appeal from the decision of the majority in SCI Operations Pty Ltd was allowed by the High Court: see Commonwealth of Australia v SCI Operations Pty Ltd (1998) 192 CLR 285; [1998] HCA 20. It is unfortunate that the High Court’s decision was not addressed in Mr Condon’s submissions. SCI Operations Pty Ltd involved a claim by SCI Operations Pty Ltd for prejudgment interest in circumstances where, on 3 June 1994, the day it received a refund of customs duty which had been levied on the importation of PET resin from 1 September 1987, it commenced proceedings in which the claim for interest before judgment was made. The High Court found that the effect of s 269N of the Customs Act 1901 (Cth) was that the refund was payable upon the making of a Commercial Tariff Concession Order (a CTCO) for which application had to be made. Where certain conditions were satisfied, a CTCO order would be made which had the effect of reducing the rate of duty for the period from 1 September 1987 resulting in a refund. McHugh and Gummow JJ in their joint judgment and Brennan CJ found that s 269N of the Customs Act did not render the CTCO retrospective. Rather, on 3 June 1994, when the CTCO was issued, there were brought into existence fresh rights or liabilities in respect of matters or transactions which had occurred on or after 1 September 1987 and therefore there was no entitlement to interest before judgment in respect of the period before 3 June 1994. The cause of action arose on 3 June 1994 and since the refunds were made on that day there was no occasion for interest before judgment. The same analysis applies in relation to transactions which are void against a trustee under s 121(1). Unless and until a trustee is appointed, the transactions are not void against anyone, and the date on which the sequestration order was made and the trustee was appointed is the date on which the cause of action arose. Accordingly, I will order that, in addition to the amount of $201,135.57, the respondents must pay interest before judgment of $34,923.20, calculated from 11 June 2015 to 21 June 2018.What should be the date for payment of $201,135.57 plus $34,923.20 interest before judgment? The respondents proposed a period of 90 days and Mr Condon proposed a period of 60 days. When judgment was delivered, the Court advised the parties, and in particular, the respondents, that for this purpose, time would be calculated from the date that judgment was rendered. Having regard to that factor, I will order that payment must be made by 4 pm on Friday, 28 September 2018, slightly more than 90 days after judgment was delivered. What happens if payment is not made by 4 pm on 28 September 2018?