Coulter v P. Aker Flowerbulbs Pty Ltd
[2004] FMCA 297
•11 May 2004
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| COULTER v P. AKER FLOWERBULBS PTY LTD | [2004] FMCA 297 |
| BANKRUPTCY – Interest on judgment debt – whether interest accrues when judgment debt payment stayed for period of time – inclusion of interest on bankruptcy notice – invalid bankruptcy notice – definition of “arrangement”. |
Bankruptcy Act 1966 (Cth)
County Court Act 1958 (Vic)
Penalty Interest Rates Act 1983 (Vic)
Sussman v Johncorp Industries Pty Ltd [2002] FMCA 58
| Applicant: | DAVID COULTER |
| Respondent: | P. AKER FLOWERBULBS PTY LTD |
| File No: | MZ 1351 of 2003 |
| Delivered on: | 11 May 2004 |
| Delivered at: | Melbourne |
| Hearing date: | 3 May 2004 |
| Judgment of: | Connolly FM |
REPRESENTATION
| Counsel for the Applicant: | Mr Duggan |
| Solicitors for the Applicant: | McNab McNab and Starke |
| Counsel for the Respondent: | Mr T J Donaghey |
| Solicitors for the Respondent: | Lewis Holdway |
ORDERS
The bankruptcy notice be set aside.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MZ 1351 of 2003
| DAVID COULTER |
Applicant
And
| P. AKER FLOWERBULBS PTY LTD |
Respondent
REASONS FOR JUDGMENT
The proceedings
These proceedings consist of an application to set aside a bankruptcy notice served the bankrupt on or about the 7 December 2003 pursuant to the Bankruptcy Act 1966 (Cth).
The background
The history pertinent to this application is conveniently and accurately set out in the respondent’s Outline of Argument:
2.The background facts of this application are:
(a)The Respondent is engaged in the business of importing flower bulbs;
(b)During 2001, the Respondent provided to the Applicant on account flower bulbs to the value of approximately $77,000. When that account was not paid, the Respondent issued a proceeding against Mr Coulter in the County Court of Victoria. Mr Coulter also counterclaimed;
(c)On 8 May 2003, the Honourable Judge Holt of the County Court:
(i) entered judgment on the Respondent’s claim, in the sum of $68,553.59; and
(ii) dismissed Mr Coulter’s counterclaim;
(d)On 23 September 2003 a telephone conversation (“23 September conversation”) occurred between Mr Coulter and Mr Aker, a director of the Respondent;
(e)On about 30 October 2003, the Respondent applied for a bankruptcy notice to be issued in accordance with section 41 of the Act;
(f)On 9 November 2003 the Respondent served a bankruptcy notice upon Mr Coulter. On the last day for compliance with the bankruptcy notice, Mr Coulter made this application to set aside the bankruptcy notice, relying upon the 23 September conversation;
(g)On 11 December 2003, the first return of Mr Coulter’s application, it was apparent to the Respondent that evidence relating to Mr Coulter’s claims would be required. Directions were made by the Court; and
(h)On about 19 February 2004, the Respondent filed and served an affidavit of Mr Petrus (referred to in the Coulter affidavit as “Peter”) Aker, a director of the Respondent, pursuant to the directions.
What Mr Coulter says
3. Mr Coulter’s affidavit (“Coutler affd”) has four key elements. The first of these is that the 23 September conversation was held with Mr Aker.
4. The second is the substance of the conversation. Mr Coulter states (at para 8, Coulter affd) that he “was willing to resolve the mater on the basis that I would replace and return to him [Aker] flower bulbs of an equivalent number to that with which he has supplied me”.
5. Third, Mr Coulter deposes that he would accept consignment notes “as evidence of the supply of flower bulbs, and would replace an equivalent quantity of bulbs” (para 8).
6. The fourth element of the affidavit is that “Mr Aker advised me during the course of our conversation that my proposal was acceptable to him”. It is this last element with which the Respondent takes issue.
What the Respondent says
7. The Respondent’s affidavit (“Aker affd”) states a materially different version of the same conversation:
(a)In the 23 September conversation, Mr Coulter stated that replacing the flower bulbs was [the Respondent’s] “only opportunity” to get money; and that if not accepted, them Mr Coulter “would go broke” or would get instalments of $100 per month (para 9 of the Aker affd);
(b)The director of the Respondent felt pressured “to make a decision” (para 10). The director of the Respondent stated that he would discuss the matter with the Melbourne manager of the Respondent; and
(c)
The director of the Respondent did not say words or words like
“I accept”, and did not say that he was “willing to resolve the matter on the basis of [Mr Coulter’s] offer to supply bulbs”. By contrast, the conversation concluded without arrangement being reached: see in particular paragraphs 14-15 of the Aker affidavit. The conclusion in paragraphs 15 “I would like to speak to Mr Blom”, without anything further means, leaves the question of settlement open, without the acceptance of the offer made in the conversation.
Conclusions and findings
The applicant’s first claim was that there was an overstatement of interest in the bankruptcy notice. The applicant subsequently issued a notice under section 41(5) of the Bankruptcy Act 1966 (Cth) in the form of a faxed letter dated 30 April 2004 (there is no prescribed form under the section). There was no issue that the notice was not given in the time allowed for payment as that time had been extended as part of the interlocutory management of the matter.
The essence of the argument is whether there was an overstatement of interest in bankruptcy notice which invalidates it. The judgment on which the notice is based is that of His Honour Judge Holt of the County Court made on 8 May 2003. A copy of the judgment is attached to the bankruptcy notice; pursuant to paragraph 1 the judgment is for the sum of $68, 553.59 with no exclusive order for interest. However paragraph 4 provides:
“The payment of the sum referred to in paragraph 1 hereof and the payment of the costs referred to in paragraph 3 hereof, be stayed for one month from today’s date.”
The bankruptcy notice is for the sum of $72,249.37 which includes interest from 8 May 2003 in accordance with section 73(4) of the County Court Act 1958 (Vic) which states as follows:
Every judgment debt shall carry interest at the rate for the time being fixed under section 2 of the Penalty Interest Rates Act 1983 (Vic) from the time the judgment is entered for the order made or, in the case of costs to be assessed, from the assessment of those costs or such other day as the court orders, and the amount of the interest shall be stated in the body of and may be seized under a warrant of execution on such judgment.
The applicant argues that as a consequence of the stay of payment of the debt there was no debt payable on 8 May 2003, or indeed for the following month, and that as a consequence there was no interest payable for that period. The respondent on the other hand contends that pursuant to section 73(4) of the County Court Act 1958 the interest flows on a judgment debt once it is entered and that the statute makes this mandatory.
In my view the entitlement to interest pursuant to the statute from the date of judgment is not absolute. The section clearly provides that every judgment debt shall carry interest at the rate of the time being fixed under section 2 of the Penalty Interest Act 1983 (Vic) from the time the judgment is entered or order made, or such other day as the court orders. I accept the respondent’s submission that it would be a somewhat absurd situation where interest accrues on a judgment debt which is not payable. I am satisfied that in all the circumstances the stay of payment must mean the stay of any interest entitlement connected with that payment. Until the judgment debt is payable there can be no interest accruing on it in accord with section 73(4) of the County Court Act1958.
Accordingly it follows that there has been an overstatement of interest which in my view invalidates the bankruptcy notice in the same way as Federal Magistrate Driver found in Sussman v Johncorp Industries Pty Ltd [2002] FMCA 58 (26 March 2002). In all the circumstances I am satisfied that I have no alternative but to set aside the bankruptcy notice.
Alternatively, the applicant submitted that there was an arrangement to the creditors satisfaction for settlement of the debt within the meaning of the bankruptcy notice (as set out in Regulation 4.02 under the Act). Whilst it is not necessary to determine that issue given my finding with respect to the bankruptcy notice, it appears to me that the applicant has some real difficulties with the argument advanced. Counsel for the applicant appropriately accepted the view of the law as set out in the Outline of Argument prepared by the respondent’s Counsel, which is set out as follows:
The minority decision of Aickin J has been applied to bankruptcy cases in the context of Regulation 4.02: see Cantanese, below. His Honour stated at CLR 463 (ALR 541):
The word “arrangement” has several meanings and each reflects a broad and imprecise conception. At least one may be put aside immediately. The word may in some circumstances mean no more than a plan drawn up by and to be implemented by one person alone. In the present context, it cannot have that meaning, because of the presence of the words “entered into”. The most appropriate meaning for the present context would seem to be an agreed “disposition of measures for a particular purpose”, or an “arranged condition or order of things”. If as the context requires, the arrangement must be “entered into” it is hard to see how it can be distinguished from an agreement and, in the present section it seems likely that it does no more than widen the content of the word “agreement” so as to include dealings which are less precise than the word agreement alone might suggest, and perhaps to emphasise that it is not to be confied to binding or enforceable agreements.
In their joint judgment, Gibbs and Mason JJ observed in Lutovi:
It is, however, necessary that an arrangement should be consensual, and that there should be some adoption of it. But in our view it is not essential that the parties are committed to it or are bound to support it. An arrangement may be as informal as well as unenforceable and the parties may be free to withdraw from it or to act inconsistently with it, notwithstanding their adoption of it.
On the face of it, and in summary, the conversation between Mr Aker and Mr Coulter seems to me to have reached a point where Mr Aker had indicated that he would consider what Mr Coulter had said or proposed. However it went no further than that; there was no consensus or mutuality about it and in my view it was appropriate for the respondent to issue the bankruptcy notice indicating that he had considered the proposal and rejected it.
I order that the bankruptcy notice be set aside.
I certify that the preceding eleven (11) paragraphs are a true copy of the reasons for judgment of Connolly FM
Associate: N. Lane
Date: 14 May 2004