Doman v Leadenhall Australia Pty Ltd - [2023] SASC 97

SUPREME COURT OF SOUTH AUSTRALIA
(Magistrates Appeal: Civil)
DOMAN & ANOR v LEADENHALL AUSTRALIA PTY LTD
[2023] SASC 97
Judgment of the Honourable Justice McDonald
23 June 2023
BANKRUPTCY - ADMINISTRATION OF PROPERTY - PROOF OF DEBTS
MAGISTRATES - APPEAL AND REVIEW - SOUTH AUSTRALIA - APPEAL TO SUPREME COURT
BANKRUPTCY - ADMINISTRATION OF PROPERTY - PROOF OF DEBTS - WHAT DEBTS PROVABLE - INTEREST
BANKRUPTCY - ADMINISTRATION OF PROPERTY - DISTRIBUTION OF PROPERTY - SURPLUS - RIGHT OF CREDITOR TO INTEREST ACCRUING AFTER SEQUESTRATION
This is an appeal against a decision of a Magistrate to grant summary judgment in favour of the respondent in the amount of $100,000 on 6 October 2021. The decision related to a debt recovery claim based on a statutory right to interest on a judgment debt pursuant to s 40 of the District Court Act 1991 (SA).
Essentially there had been an order for judgment in favour of the respondent in the District Court of South Australia (‘the District Court’) in the sum of $706,019.40 (‘the judgment debt’). That amount was subject to a statutory right to interest by operation of s 40 of the District Court Act. Subsequent to the delivery of that judgment the appellants entered into bankruptcy. The respondent then commenced proceedings in the Magistrates Court against the appellants for post-bankruptcy interest on the damages awarded in the District Court. The $100,000 that was the subject of the judgment in the Magistrates Court was the interest calculated as due and accruing on the judgment debt from the date of the appellants’ bankruptcy, capped at the jurisdictional limit in that court.
The notice contains seven grounds of appeal. These are:
1.      The Magistrate erred as a matter of law in failing to follow the decision of the Full Court of the Supreme Court of Tasmania in Edwards v Stocks [2008] TASSC 12 at [41] and the principle that interest on a prebankruptcy debt is only payable out of the surplus (of the bankrupt estate) if and when there is a surplus and if there is no surplus, interest after bankruptcy cannot be claimed from the debtor, either from the bankrupt estate, or independently by a separate and new action outside of the bankruptcy.
2.      The Magistrate erred as a matter of law in following the decision of a District Court Master in White v Spithas [2015] DCSA 54 in so far as the Master found that interest on a pre-bankruptcy debt, accruing after the date of bankruptcy, could be claimed by a creditor outside of the bankruptcy, as an independent debt for which a right of action or chose in action, existed, outside of the bankruptcy and which could be pursued by way of a Magistrates Court action.
3.      The Magistrate erred as a matter of law in failing to correctly apply Coventry v Charter Pacific Corporation Limited [2005] HCA 67 (Coventry) and Foots v Southern Cross Mine Management Pty Ltd & Ors [2007] HCA 56 (Foots) in relation to the treatment of post-bankruptcy interest on debts forming part of the bankrupt estate and failing to distinguish any claim in relation to post-bankruptcy interest from a chose in action arising by reason of the Courts exercise of its discretion on costs.
4. The Magistrate erred as a matter of law in failing to identify that the interest the subject of the claim was interest which would only arise by reason of the judgment obtained prior to the bankruptcy and for which the bankrupt would have had an obligation to pay, but for the bankruptcy and codified exclusion of liability introduced by s 82(3B), which section does not give it the status of a chose in action accruing post-bankruptcy.
5. The Magistrate erred as a matter of fact and law in concluding that s 58(3) was not engaged, nor that any other provision in the Bankruptcy Act precluded the Respondent from bringing and pursuing the action at the stage and time at which it was brought and in concluding that s 58(3) did not require the Applicant to seek leave of the Federal Court prior to commencing a claim for post-bankruptcy interest ‘in respect of’ and calculated upon a primary debt provable in the bankruptcy.
6.      The Magistrate erred as a matter of fact and law in finding that there was an identifiable proper claim against the Appellant which there was no reasonable prospects of defending and in concluding that the Respondent was entitled to summary judgment for the amount of $100,000.
7.      The Magistrate erred as a matter of fact and law in finding that there was no basis under either the Bankruptcy Act or the Uniform Civil Rules 2020 (SA) for staying the action brought by the Appellant.
Notwithstanding the fact that there are seven grounds of appeal, they all relate to the Magistrate’s interpretation of the relevant provisions of the Bankruptcy Act 1966 (Cth) and the findings in relation to the post-bankruptcy interest debt.
It was the respondents position that regardless of the history of Bankruptcy Law, the Common Law has been overtaken by statute and that s 82(3B) has the consequence of rendering post-bankruptcy interest not provable in bankruptcy, and that the prohibition on enforcing debts found in s 58(3) of the Bankruptcy Act applies only in respect of provable debts. It was the respondent’s position that it then follows that there is no bar to proceedings being pursued in the Magistrate’s Court with respect to post-bankruptcy interest on the existing judgment debt, and an entitlement remained to litigate for the payment of post-bankruptcy interest outside of the bankruptcy proceedings.
Held:
1.      The appeal is allowed.
2.      The judgment and orders of 6 October 2021 be set aside.
3.      The respondent pay the appellant’s costs of the appeal and the proceedings in the Magistrates Court.
Acts Interpretation Act 1987 (NSW) s 33, s 34; Acts Interpretation Act 1901 (Cth) s 15AA, s 15AB; Bankruptcy Act 1966 (Cth) s 58, s 82, s 107, s 153, s 153A; Bankruptcy Act 1924-1933 (Cth) s 81; Corporate Law Reform Bill 1992 (Cth); Corporations Act 2001 (Cth) s 1317G; De Facto Relationships Act 1996 (SA); Education and Other Legislation Amendment (Vet Student Loan Debt Separation) Act 2018 (Cth); Higher Education Support (Transitional Provisions and Consequential Amendments) Act (Cth); Labour 2013-14 Budget Savings (Measures No 2) Act 2015 (Cth); Magistrates Court Act 1991 (SA) s 8 ; Trade (Support Loans Consequential Amendments) Act 2014 (Cth); Uniform Civil Rules 2020 (SA) r 85.1, r 144.2, r 217.10, referred to.
Leadenhall Australia Pty Ltd v Doman [2021] SAMC 129; Westpac Banking Corporation v Morton (1988) 79 ALR 206; Edwards v Stocks (2008) 17 Tas R 408; Re McMaster; Ex-parte McMaster (1991) 33 FCR 70; Clyne v Deputy Commissioner of Taxation (No 3) (1984) 154 CLR 589 ; Bromley v Goodere (1743) 26 ER 49; Koch, Ex Parte Lincoln’s Inn Hall (1813) 35 ER 134; Re Humber Ironworks & Shipbuilding Company (1869) LR 4 Ch App 643; Re Hyman; Ex Parte Law (1930) 3 ABC 61; Mackenzie v Rees (1941) 65 CLR 1; Re Kallak (1906) 147 Fed Rep 276; White v Knox (1884) 111 US 784; Johnson v Norris (1911) 190 Fed Rep 459; Commissioner of Australian Federal Police v Curran (1984) 3 FCR 240; NAQF v Minister for Immigration and Multicultural and Indigenous Affairs [2003] 130 FCR 456; Saraswati v The Queen (1991) 172 CLR 1 ; Potter v Minahan (1908) 7 CLR 277; Balog v Independent Commission Against Corruption (1990) 169 CLR 625; Midland Montagu Australia Ltd v Harkness (1994) 35 NSWLR 150 ; Re Paul & Gray Ltd (1933) 33 SR(NSW) 295; Re Scott [2006] FCA 718; Hungerfords v Walker (1989) 171 CLR 125; Hill v Zuda Pty Ltd (2022) 96 ALJR 540; Coventry v Charted Pacific Corporation (2005) 227 CLR 234; Foots v Southern Cross Mine Management (2007) 234 CLR 52; Storey v Lane (1981) 147 CLR 549; Re Richard; Ex Parte Lloyd (Official Receiver) WC Angliss Co (Australia) Pty Ltd (1935) 8 ABC 37; White v Spithas [2015] DCSA 54; Hudson v Sigalla (2015) 235 FCR 122; Mango Media Pty Ltd v Velingos (2008) 216 FLR 176; Technical Products Pty Ltd v State Government Insurance Office (QLD) (1989) 167 CLR 45; Baker v Paul [2012] NSWSC 392; Green v Schneller [2001] NSWSC 897; Fraser v Commissioner of Taxation and Anr (1996) 69 FCR 99, considered.

DOMAN & ANOR v LEADENHALL AUSTRALIA PTY LTD
[2023] SASC 97
Magistrates Appeal: Civil
McDONALD J.

This is an appeal against a decision of a Magistrate to grant summary judgment in favour of the respondent in the amount of $100,000 on 6 October 2021. The decision related to a debt recovery claim based on a statutory right to interest on a judgment debt pursuant to s 40 of the District Court Act 1991 (SA) (‘the District Court Act’).
Essentially there had been an order for judgment in favour of the respondent in the District Court of South Australia (‘the District Court’) in the sum of $706,019.40 (‘the judgment debt’). That amount was subject to a statutory right to interest by operation of s 40 of the District Court Act. Subsequent to the delivery of that judgment the appellants entered into bankruptcy. The respondent subsequently commenced proceedings in the Magistrates Court against the appellants for post‑bankruptcy interest on the damages awarded in the District Court. The $100,000 that was the subject of the judgment in the Magistrates Court was the interest calculated as due and accruing on the judgment debt from the date of the appellants’ bankruptcy, capped at the jurisdictional limit in that court.[1]
[1] Magistrates Court Act 1991 (SA) s 8.
Central to the decision of the Magistrate and the resolution of the issues on this appeal is the statutory interpretation of a number of interconnected provisions of the Bankruptcy Act 1966 (Cth) (‘the Bankruptcy Act’) that impact on the entitlement of a creditor to post‑bankruptcy interest.
Background
The background to this matter is not contentious. On 18 May 2016 the respondent commenced proceedings against the appellants in the District Court.[2]
[2] Action number DCCIV-16-672.
On 30 November 2018 judgment was delivered in favour of the respondent in the sum of $706,019.40. On 2 January 2019 the second appellant entered into bankruptcy. The first appellant likewise followed into bankruptcy on 4 January 2019. A trustee in bankruptcy was appointed for the appellants, who at the time of the Magistrates Court proceedings, remained undischarged bankrupts.[3]
[3] Since then the appellants have been discharged from bankruptcy.
There was no dispute that the judgment debt and post‑judgment interest which had accrued up to the date of bankruptcy was a debt or liability provable in the bankruptcy. The respondent had lodged proofs of debt in respect of those amounts but had not at the time of the Magistrates Court proceedings received any distribution from the bankrupt estates.
On 23 March 2021 the respondent commenced an action against the appellants for payment of post‑bankruptcy interest on the judgment debt.[4] On 22 April 2021 a defence was filed by the appellants. The appellants denied that the respondent had standing to bring the claim. They contended that the action was not competent by operation of ss 58(3) and 82 of the Bankruptcy Act because the action was commenced without the permission of the Federal Court and the claim for interest had been subsumed within the bankrupt estates of the appellants which was being administered by the trustee in bankruptcy.
[4] Action number CIV-21-002675.
On 23 April 2021, the respondent filed an interlocutory application seeking to strike out the defence under r 85.1(c) of the Uniform Civil Rules 2020 (SA) (‘UCR’) and for summary judgment under UCR 144.2(1).
On 27 May 2021 the appellants filed an interlocutory application seeking judgment dismissing the action under UCR 143.2 on the ground that the action was frivolous, vexatious or an abuse of the Court’s processes. In the alternative, the appellants sought a stay of proceedings pursuant to UCR 12.1(2)(o).
Both applications were heard together on 22 June 2021. On 6 October 2021 the Magistrate delivered her judgment.[5] Having heard the arguments, the Magistrate arrived at the view that the appellants had no real prospects of successfully defending the respondent’s claim. Her Honour provided the following reasons for arriving at that position:[6]
·The overarching feature of the Bankruptcy Act is the concept of a provable debt in bankruptcy.
·Those debts which are provable are spelled out by s 82 of the Bankruptcy Act: matters falling outside those categories are not provable.
·The scope and operation of s 58(3) of the Bankruptcy Act turns on the proper interpretation of s 82 and the concept of provable debt.
·Similarly, the discharge provided by s 153 of the Bankruptcy Act is expressly dependent upon the status of the debt or liability as a provable debt.
·The language in s 82(3B) and its application is clear: the post-bankruptcy interest on a provable debt (ie. Running Interest) is not a provable debt.
[5] Leadenhall Australia Pty Ltd v Doman [2021] SAMC 129 (‘Magistrate’s Judgment’).
[6] Magistrate’s Judgment at [47].
On that basis the Magistrate concluded:[7]
It follows that a debt consisting of the Running Interest is not discharged after bankruptcy under s 153(1) which only operates to release the bankrupt from all debts provable in the bankruptcy. Likewise, s 58(3) is not engaged, nor is there any other provision in the Bankruptcy Act that precludes the applicant from commencing this action for the Running Interest from the respondents at this stage.
[7] Magistrate’s Judgment at [48].
As a consequence, the Magistrate granted the respondent’s application for summary judgment and dismissed the appellants’ application. This had the result of creating an entitlement in the respondent to the full amount awarded in circumstances in which those creditors (including the respondent) had yet to enter into a debt agreement.
The Appeal
On 26 October 2021 the appellants filed a notice of appeal challenging the Magistrates orders.
As this is an appeal to a single judge of the Supreme Court against a judgment made in the Civil Division of the Magistrates Court, the appeal is of right pursuant to s 40(1) of the Magistrates Court Act 1991 (SA).
Pursuant to UCR 217.10 this appeal is by way of rehearing. Given that the disposition of the matter turns on statutory interpretation and the application of legal principles, this Court is in just as good a position as the Magistrate to make an assessment of the competing arguments. This is not a situation in which the Magistrate has an advantage in having heard the initial proceedings and witnesses at trial.
The notice contains seven grounds of appeal. These are:
1.The Magistrate erred as a matter of law in failing to follow the decision of the Full Court of the Supreme Court of Tasmania in Edwards v Stocks [2008] TASSC 12 at [41] and the principle that interest on a prebankruptcy debt is only payable out of the surplus (of the bankrupt estate) if and when there is a surplus and if there is no surplus, interest after bankruptcy cannot be claimed from the debtor, either from the bankrupt estate, or independently by a separate and new action outside of the bankruptcy.
2.The Magistrate erred as a matter of law in following the decision of a District Court Master in White v Spithas [2015] DCSA 54 in so far as the Master found that interest on a pre-bankruptcy debt, accruing after the date of bankruptcy, could be claimed by a creditor outside of the bankruptcy, as an independent debt for which a right of action or chose in action, existed, outside of the bankruptcy and which could be pursued by way of a Magistrates Court action.
3.The Magistrate erred as a matter of law in failing to correctly apply Coventry v charter Pacific Corporation Limited [2005] HCA 67 (Coventry) and Foots v Southern Cross Mine Management Pty Ltd & Ors [2007] HCA 56 (Foots) in relation to the treatment of post-bankruptcy interest on debts forming part of the bankrupt estate and failing to distinguish any claim in relation to post-bankruptcy interest from a chose in action arising by reason of the Courts exercise of its discretion on costs.
4.The Magistrate erred as a matter of law in failing to identify that the interest the subject of the claim was interest which would only arise by reason of the judgment obtained prior to the bankruptcy and for which the bankrupt would have had an obligation to pay, but for the bankruptcy and codified exclusion of liability introduced by s 82(3B), which section does not give it the status of a chose in action accruing post-bankruptcy.
5.The Magistrate erred as a matter of fact and law in concluding that s 58(3) was not engaged, nor that any other provision in the Bankruptcy Act precluded the Respondent from bringing and pursuing the action at the stage and time at which it was brought and in concluding that s 58(3) did not require the Applicant to seek leave of the Federal Court prior to commencing a claim for post-bankruptcy interest ‘in respect of’ and calculated upon a primary debt provable in the bankruptcy.
6.The Magistrate erred as a matter of fact and law in finding that there was an identifiable proper claim against the Appellant which there was no reasonable prospects of defending and in concluding that the Respondent was entitled to summary judgment for the amount of $100,000.
7.The Magistrate erred as a matter of fact and law in finding that there was no basis under either the Bankruptcy Act or the Uniform Civil Rules 2020 for staying the action brought by the Appellant.
Although there are seven separate grounds, they all relate to the Magistrate’s interpretation of the provisions of the Bankruptcy Act and her findings about the status of a post‑bankruptcy interest debt.
Counsel for the appellants encapsulated the substance of the grounds in the following terms:[8]
The Appellants raise seven grounds of appeal against the decision. Each ground is rooted in a principal and prevailing error by the Magistrate, namely that her Honour erroneously accepted a construction of s 82(3B) of the Bankruptcy Act 1966 (Cth) (the Act) to permit a creditor of a bankrupt with a debt provable in the bankruptcy that bears interest to claim interest accruing after the date of bankruptcy as a separate and continuing debt outside of bankruptcy, capable of being sued for. That construction is contrary to the proper construction of the Act, centuries of bankruptcy law and practice, and Appellate Court decisions interpreting the relevant section.[9]
[8] Written Submissions of the Appellants (FDN 22) at [3].
[9] Westpac Banking Corporation v Morton (1988) 79 ALR 206 at 218-219; Edwards v Stocks (2008) 17 Tas R 408; (2008) ANZ ConvR 8-023; [2008] TASSC 12.
The relevant statutory framework
In order to understand and assess the competing arguments, it is necessary to have an appreciation of the relevant provisions of the Bankruptcy Act.
The first Commonwealth Bankruptcy Act came into force in 1928 and the present Act, the Bankruptcy Act 1966, came into effect on 4 March 1968. Bankruptcy remains: [10]
a proceeding by which the State takes possession of the property of a debtor by an officer appointed for the purpose, and such property is realised and, subject to certain priorities, distributed rateably amongst the persons to whom the debtor owes money or has incurred pecuniary liabilities. In such proceedings the debtor obtains protection from suits by the persons to whom he has incurred debts or liabilities…he can obtain a discharge from his debts and liabilities, subject also to certain defined exceptions.
[10] Halsbury’s Law of England 4^th ed, vol 3 [463].

Upon the bankruptcy of a debtor the rights of creditors are converted into rights to prove their debts in the administration of the bankrupt’s estate and they lose their rights to pursue other remedies for unsatisfied debts. The effect on the debtor is that he: [11]
is no longer obliged to pay his creditors; indeed he is disabled from doing so. If he offered payment they could not safely accept it; their right is a right of proof against the estate.
[11] Clyne v Deputy Commissioner of Taxation (No 3) (1984) 154 CLR 589 at 594-595.
In Re McMaster; Ex‑parte McMaster, Hill J succinctly summarised the purpose of bankruptcy proceedings:[12]
The modern bankruptcy law serves three purposes. The first is to ensure that the assets of the bankrupt are distributed rateably among creditors. The second, which is interrelated with the first, is to ensure that one creditor does not obtain an undue advantage over other creditors. The third is to bring about the discharge of the debtor from future liability for his existing debts, so that the debtor may start afresh: …
[12] Re McMaster (1991) 33 FCR 70 at 72-73.
When a debtor becomes a bankrupt his or her real and personal property at the date of the commencement of the bankruptcy “vests” in the trustee of the bankrupt estate. This is set out in s 58 of the Bankruptcy Act:
58Vesting of property upon bankruptcy—general rule
(1)Subject to this Act, where a debtor becomes a bankrupt:
(a) the property of the bankrupt, not being after acquired property, vests forthwith in the Official Trustee or, if, at the time when the debtor becomes a bankrupt, a registered trustee becomes the trustee of the estate of the bankrupt by virtue of section 156A, in that registered trustee; and
(b) after acquired property of the bankrupt vests, as soon as it is acquired by, or devolves on, the bankrupt, in the Official Trustee or, if a registered trustee is the trustee of the estate of the bankrupt, in that registered trustee.
(Notes omitted)
Of particular relevance to the issues central to this appeal is s 58(3):
(3)Except as provided by this Act, after a debtor has become a bankrupt, it is not competent for a creditor:
(a) to enforce any remedy against the person or the property of the bankrupt in respect of a provable debt; or
(b) except with the leave of the Court and on such terms as the Court thinks fit, to commence any legal proceeding in respect of a provable debt or take any fresh step in such a proceeding.
The relevant Court for the purpose of this section is the Federal Court.
The scope and operation of this provision turns on the interpretation of s 82 of the Bankruptcy Act and the concept of a provable debt. A ‘provable debt’ is defined in s 5 to mean “a debt or liability that is, under this Act, provable in bankruptcy”.
Section 82 of the Bankruptcy Act sets out the debts that are provable in bankruptcy. Provable is to be understood as those debts that can be claimed by a creditor against the bankrupt estate as part of the proof and adjudication process. This section of the Bankruptcy Act and its definition of a debt that is provable in bankruptcy is central to the resolution of the issues on this appeal. It is upon the concept of a provable debt that the other sections that the parties rely upon all hinge. Given the importance of this section to the issues on this appeal, I set it out in full:
82 Debts provable in bankruptcy
(1)Subject to this Division, all debts and liabilities, present or future, certain or contingent, to which a bankrupt was subject at the date of the bankruptcy, or to which he or she may become subject before his or her discharge by reason of an obligation incurred before the date of the bankruptcy, are provable in his or her bankruptcy.
(1A)Without limiting subsection (1), debts referred to in that subsection include a debt consisting of all or part of a sum that became payable by the bankrupt under a maintenance agreement or maintenance order before the date of the bankruptcy.
(2)Demands in the nature of unliquidated damages arising otherwise than by reason of a contract, promise or breach of trust are not provable in bankruptcy.
(3)Penalties or fines imposed by a court in respect of an offence against a law, whether a law of the Commonwealth or not, are not provable in bankruptcy.
(3AA)An amount payable under an order made under section 1317G of the Corporations Act 2001 is not provable in bankruptcy.
(3AB)A debt incurred under any of the following is not provable in bankruptcy:
(a)Part 4 1 of the Higher Education Support Act 2003 (HELP debts);
(aaa)Part 3A of the VET Student Loans Act 2016 (VETSL debts);
(aa)Part 2AA.3 of the Social Security Act 1991 (student start up loan debts);
(ab)Division 3 or 4 of Part 2 of the Student Assistance Act 1973 (ABSTUDY student start up loan debts);
(b)Part 3.1 of the Trade Support Loans Act 2014 (trade support loan debts).
(3A)An amount payable under an order made under a proceeds of crime law is not provable in bankruptcy.
(3B)A debt is not provable in a bankruptcy in so far as the debt consists of interest accruing, in respect of a period commencing on or after the date of the bankruptcy, on a debt that is provable in the bankruptcy.
(4)The trustee shall make an estimate of the value of a debt or liability provable in the bankruptcy which, by reason of its being subject to a contingency, or for any other reason, does not bear a certain value.
(5)A person aggrieved by an estimate so made may appeal to the Court not later than 28 days after the day on which the person is notified of the estimate.
(6)If the Court finds that the value of the debt or liability cannot be fairly estimated, the debt or liability shall be deemed not to be provable in the bankruptcy.
(7)If the Court finds that the value of the debt or liability can be fairly estimated, the Court shall assess the value in such manner as it thinks proper.
(8)In this section, liability includes:
(a)compensation for work or labour done;
(b)an obligation or possible obligation to pay money or money’s worth on the breach of an express or implied covenant, contract, agreement or undertaking, whether or not the breach occurs, is likely to occur or is capable of occurring, before the discharge of the bankrupt; and
(c)an express or implied engagement, agreement or undertaking, to pay, or capable of resulting in the payment of, money or money’s worth, whether the payment is:
(i)in respect of amount—fixed or unliquidated;
(ii)in respect of time—present or future, or certain or dependent on a contingency; or
(iii)in respect of the manner of valuation—capable of being ascertained by fixed rules or only as matter of opinion.
I will return to the detail of this section in due course however, at this stage I make two general observations. The first is that the category of provable debts created by s 82 is very broad, deliberately so. The second is that even though the definition is broad, not all of a debtor’s debts and liabilities are provable in bankruptcy. Section 82 limits provable debts both by the subject matter, in that they must answer the statutory descriptions, and temporally in that they must arise before and not after the bankruptcy.
Section 107 of the Bankruptcy Act caps the amount that a creditor can receive. It reads:
107 Creditor not to receive more than the amount of his or her debt and interest
Subject to the operation of the provisions of section 91, a creditor is not entitled to receive, in respect of a provable debt, more than the amount of the debt and any interest payable to him or her under this Act.
(Emphasis added)
Section 153 deals with the consequences of a bankrupt being discharged from a bankruptcy, and in particular identifies those debts from which they are released:
153    Effect of discharge
(1)Subject to this section, where a bankrupt is discharged from a bankruptcy, the discharge operates to release him or her from all debts (including secured debts) provable in the bankruptcy, whether or not, in the case of a secured debt, the secured creditor has surrendered his or her security for the benefit of creditors generally.
Note: The operation of this section in relation to accumulated HEC debts and semester debts under the Higher Education Funding Act 1988 is affected by section 106YA of that Act.
(2)The discharge of a bankrupt from a bankruptcy does not:
(a)     release the bankrupt from:
(i)a debt on a recognizance; or
(ii)a debt with which the bankrupt is chargeable at the suit of the sheriff or other public officer on a bail bond entered into for the appearance of a person prosecuted for an offence against a law of the Commonwealth or of a State or Territory; or
(aa)   release the bankrupt from liability to pay an amount to the trustee under subsection 139ZG(1); or
(b)     release the bankrupt from a debt incurred by means of fraud or a fraudulent breach of trust to which he or she was a party or a debt of which he or she has obtained forbearance by fraud; or
(c)     subject to any order of the Court made under subsection (2A), release the bankrupt from any liability under a maintenance agreement or maintenance order;
Note: A discharged bankrupt remains liable under any pecuniary penalty order because such liabilities are not provable in bankruptcy, see subsection 82(3A).
(2A)The Court may order that the discharge of a bankrupt from bankruptcy shall operate to release the bankrupt, to such extent and subject to such conditions as the Court thinks fit, from liability to pay arrears due under a maintenance agreement or maintenance order.
(3)The discharge of a bankrupt from a bankruptcy does not affect the right of a secured creditor, or any person claiming through or under him or her, to realize or otherwise deal with his or her security:
(a)     if the secured creditor has not proved in the bankruptcy for any part of the secured debt—for the purpose of obtaining payment of the secured debt; or
(b)     if the secured creditor has proved in the bankruptcy for part of the secured debt—for the purpose of obtaining payment of the part of the secured debt for which he or she has not proved in the bankruptcy;
and, for the purposes of enabling the secured creditor or a person claiming through or under him or her so to realize or deal with his or her security, but not otherwise, the secured debt, or the part of the secured debt, as the case may be, shall be deemed not to have been released by the discharge of the bankrupt.
(4)The discharge of a bankrupt from a bankruptcy does not release from any liability a person who, at the date on which the bankrupt became a bankrupt:
(a)     was a partner or a co trustee with the bankrupt or was jointly bound or had made a joint contract with the bankrupt; or
(b)     was surety or in the nature of a surety for the bankrupt.
(5)Where a bankrupt has been discharged from a bankruptcy, all proceedings taken in or in respect of the bankruptcy shall be deemed to have been validly taken.
The final section of the Bankruptcy Act relied on as relevant to the issues on this appeal is s 153A. That section sets out the obligations of a trustee in the event that the debts are paid in full. It relevantly provides:
153A Annulment on payment of debts
(1)If the trustee is satisfied that all the bankrupt’s debts have been paid in full, the bankruptcy is annulled, by force of this subsection, on the date on which the last such payment was made.
(1A)In determining whether there has been full payment of a debt that bears interest, the interest must be reckoned up to and including the date on which the debt (including interest) is paid.
…
The Common Law position
The development of the law of bankruptcy in relation to interest on debts traces backs over two centuries. It was the appellants’ submission that an understanding of that history is critical to an understanding of s 82(3B) and the scope and purpose of the Bankruptcy Act more broadly. It is consequently necessary to canvass some of that history, albeit that the history of the development of the common law in relation to bankruptcy proceedings does not generally appear to be in dispute.
In his submissions counsel for the appellants, Mr Adams, undertook a careful and detailed analysis of the common law in respect to bankruptcy to lay the foundation for the submission that the structure of the Bankruptcy Act “is composite, complete, and consistent with the common law”.[13]
[13] T17.
The appellants’ analysis commenced with Bromley v Goodere,[14] in which the Court of Chancery identified the principle that in circumstances in which it was determined that a bankrupt’s estate is sufficient to pay all creditors, with a surplus left over, creditors whose debt carried interest should be allowed interest for their respective debts from the time the computation of it was stopped by the Commissioners. That is, that interest is stopped by the act of bankruptcy but could be obtained for the intervening period in the event that there was a surplus. It was submitted that this case embodies the originating principle that interest is deferred on and from the date that a person becomes bankrupt.
[14] (1743) 26 ER 49.
In the subsequent decision of Koch, Ex parte Lincoln’s Inn Hall,[15] the Court of Chancery confirmed that whilst interest did not apply to debts following the date of bankruptcy, in the event of a surplus, funds would be paid subsequent to the discharge of all debts provable in the bankruptcy.
[15] (1813) 35 ER 134; (1813) 1 V & B 342.
In Re Humber Ironworks & Shipbuilding Company (Humber Ironworks),[16] the Court, in the context of considering the payment of outstanding debts during the winding up of a company, provided an explanation for the reasoning behind the principle that interest on debts is deferred as at the date of the bankruptcy. The difficulty identified in that case was a practical one, namely that the very process of winding up a company (or as in this case the administration of bankruptcy) takes time. Selwyn LJ expressed the view that no creditor should be prejudiced by the delay that is likely to be involved in realising the assets and that in the case of an insolvent estate, all the money being realised should be applied equally and rateably in payment of the debts as they existed at the date of winding up and that nothing should be allowed for interest after that date. His Lordship summarised the position in the following terms:[17]
I think the tree must lie as it falls; that it must be ascertained what are the debts as they exist at the date of the winding‑up, and that all dividends in the case of an insolvent estate must be declared in respect of the debts so ascertained.
[16] (1869) LR 4 Ch App 643.
[17] Ibid at 646-647.
Humber Ironworks attempts to address the inequity that would occur if all debts were not crystalised at the same point in time resulting in some creditors having their principal reduced, if they had no contractual or statutory right to interest, while others over the period of bankruptcy would see their pro‑rata apportionment grow as interest continued to accumulate. It is clear that such an approach would create an inherent unfairness as between creditors.
In Re Hyman; Ex parte Law,[18] Lukin J, a member of the Federal Court of Bankruptcy,[19] gave consideration as to whether in proving his debt in bankruptcy a debtor was limited in his claim to interest to date. At that time, the bankruptcy proceedings fell under the Bankruptcy Act 1924-1930 (Cth).At the outset of his judgment, Lukin J set out a number of well established common law principles. These were:[20]
There is a general rule in bankruptcy – whether a right and a reasonable rule or not – that there is to be no proof in bankruptcy for interest subsequent to the bankruptcy …
It has long been a settled rule in bankruptcy that interest accruing after adjudication is not admitted to proof.” This is not a positive enactment, but a rule of convenience: …
… the right to interest is not thereby cancelled but only postponed until after payment to all creditors of the amounts provable in bankruptcy.
The debt due to a creditor is not necessarily that only for which he may prove in bankruptcy, ...
[18] (1930) 3 ABC 61.
[19] The Federal Court of Bankruptcy was established in 1930 for the purpose of exercising Federal bankruptcy jurisdiction and continued until the introduction of the Federal Court of Australia Act 1976 (Cth), creating the Federal Court of Australia.
[20] Re Hyman & Anor; Ex parte Law (1930) 3 ABC 61 at 62.
Lukin J went on to consider whether the common law authorities that established these principles were affected by the provisions of the Bankruptcy Act. Having considered the relevant provisions of the Bankruptcy Act, Lukin J concluded:[21]
I am of opinion that the claim for this interest, though not a debt provable in bankruptcy as that expression is used in the Act, is payable as a debt of the bankrupt from which he cannot be released by the order of discharge, and the bankrupt cannot be paid any amount as surplus which does not allow for the payment of this debt.
[21] Ibid at 64-65.
A seminal High Court authority to deal with the principle of post‑bankruptcy interest bearing debt is MacKenzie v Rees (‘MacKenzie’).[22] In MacKenzie the Court was required to consider whether, in circumstances in which an estate produced surplus over the amounts of the proved debts, creditors holding promissory notes should receive interest upon the amount of their debts calculated with respect to the period between the time when the deed of arrangement took effect and the time when the final dividend was paid. At that time the Bankruptcy Act 1924-1933 (Cth) was still in effect. Section 81 was the predecessor to the current s 82. It relevantly read:
[22] (1941) 65 CLR 1.
Section 81(1)
All debts and liabilities, present or future, certain or contingent, to which the bankrupt is subject at the date of the sequestration order, or to which he may become subject before his discharge by reason of any obligation incurred before the date of the sequestration order, shall be deemed to be debts provable in bankruptcy:
Provided however that demands in the nature of unliquidated damages arising otherwise than by reason of a contract, promise, or breach of trust, shall not be provable in bankruptcy.
Section 118 dealt specifically with circumstances in which a surplus remained after the provable debts had been paid out:
Section 118
The bankrupt shall be entitled to any surplus remaining after payment in full of his creditors, and of the costs, charges, and expenses of the bankruptcy.
In the leading judgment in MacKenzie, Dixon J made the following observation:[23]
It has been a principle of English bankruptcy law, since the time at all events of Lord King, that no proof should be allowed for interest accruing after the commencement of the bankruptcy, even upon interest-bearing debts. … But if there were a surplus then intermediate interest might be allowed as against the debtor. If, according to the tenor of the obligation, a debt bore interest, the debtor could not obtain the surplus until interest accruing after the commencement of the bankruptcy had been met thereout …
(Footnotes omitted)
Dixon J went on to consider the genesis of the principle:[24]
The rule and the qualification had their origin in the fact that the earlier bankruptcy laws excluded future debts alike from proof against the assets and from the relief those laws gave the debtor by the discharge of the debtor’s accrued debts. Future interest not accrued at the act of bankruptcy or other commencement of the bankruptcy was not a debt provable, and therefore interest stopped at that event for the purposes of proof. Correspondingly, the debtor was not discharged from his liability to such interest, and it was therefore equitable that it should be deducted from the surplus before it was paid over to him: Cf. Ex parte Mills, Lord Loughborough.
(Footnotes omitted)
His Honour observed that subsequent to this, changes had been made to the relevant statutory provisions and the reasons for the rules about interest were based on different grounds.
[23] MacKenzie v Rees (1941) 65 CLR 1 at 8.
[24] Ibid at 9.

The practice came to be considered as a rule of convenience. Dixon J described the shift in the following terms:[25]
The principal rule, namely, that excluding intermediate interest from proof, came to be regarded as a rule of convenience in administration, as a practice of the Court of Bankruptcy designed to secure equality and justice among creditors where there was a deficiency. Thus, in Ex parte Kensington; Re Lancaster, Sir George Rose says : “The rule that interest stops at the bankruptcy is not a rule of law nor of equity; it is the practice in bankruptcy, adopted for convenience, as any other course might lead to many difficulties.” In Re Browne & Wingrove; Ex parte Ador, Lindley L. J. says : “The rule which prevents proof for future interest is not a positive enactment, it is rather a rule of convenience.”
(Footnotes omitted)
[25] Ibid.
Dixon J observed that this principle is accepted in the United States of America and referred to Re Kallak,[26] in which the Court set out the reasoning underpinning the principle:[27]
There are two reasons why ordinary claims of creditors are not permitted to draw interest subsequent to the adjudication: First, it is important that the proportionate interest of the several creditors in the estate be ascertained and fixed. If interest were to accrue, however, after the adjudication, the amount of the several claims would vary from time to time, according to their respective rates of interest and the proportionate share of the several creditors would be subject to constant readjustment. The second reason is the convenience of administration. If, at the declaration of every dividend, a new basis of apportionment were required, depending on varying rates of interest, the administration of the estate would be seriously complicated.
[26] (1906) 147 Fed Rep 276.
[27] MacKenzie v Rees (1941) 65 CLR 1 at 9 citing Re Kallak (1906) 147 Fed Rep 276 at 277-278.
Dixon J cited with approval two further American authorities; White v Knox,[28] and Johnson v Norris,[29] and said the following:[30]
In the latter case the court discusses an objection that the subsequently accruing interest should not be paid, because it has never been proved as a debt. “We do not think this objection is sound. The proof of an interest-bearing claim is proof of the interest collectible on such claim. Interest is an incident of, or a part of, the debt, and no separate proof of it is required.” The principle which stops interest upon debts for the purposes of proof upon assets, so that the rights of creditors may be equitably adjusted, but allows it to run on as a claim upon a surplus, has been applied in the winding up of companies: See Warrant Finance Co.’s Case.[31]
(Emphasis added)
[28] (1884) 111 US 784 [28 Law Ed 603].
[29] (1911) 190 Fed Rep 459.
[30] (1941) 65 CLR 1 at 10
[31] (1869) 4 Ch app 643.
Dixon J observed that whilst this principle had long received statutory recognition and, to some extent, expression under comparable legislation under the then current Commonwealth Bankruptcy Act, there were no analogous provisions. His Honour however went on to express the following view:[32]
…some difficulty may be felt in reconciling the operation of the principle as part of our law of bankruptcy with the express language of some provisions of the Act. But it is possible, I think, to give effect both to the principle and to the form in which the legislation is cast by treating the principle as one determining the order in which debts are to be discharged in the course of administration; that is, by accepting the more modern view that the rule is one of justice and convenience, as opposed to the earlier view that it depended upon the exclusion of future interest from proof and also from the release or discharge given to the debtor. Thus the wide language of sec. 81 (1) may be taken as covering intermediate interest, so that it is not altogether excluded as a claim against the assets and, at the other end, sec. 118 may be regarded as conferring upon the debtor a right to the surplus only after intermediate interest has been paid. The principle then may be considered as operating between these two termini, so to speak, and as requiring that, for the purpose of adjusting the rights of creditors, interest accruing after sequestration shall be put out of consideration in the first instance, and shall be allowed only if and when a surplus is ascertained.
[32] (1941) 65 CLR 1 at 10-11.
Dixon J summarised the position in the following terms:[33]
…a bankruptcy under the Federal Act is governed by the principle of administration which allows no proof for interest accruing or to accrue after sequestration unless and until a surplus is found to exist, and then allows creditors to claim upon the surplus for interest accruing since sequestration upon interest-bearing debts.
Amendments to the Bankruptcy Act 1966
[33] MacKenzie v Rees (1941) 65 CLR 1 at 12.
Section 81 of the 1924 Bankruptcy Act was replaced with s 82 of the 1966 Bankruptcy Act. When initially introduced, s 82 contained only ss 82(1)-(3). The other subsections were later introduced by various legislative amendments as set out below:

· s 82(3AA)

An amount payable under an order made under section 1317G of the Corporations Act 2001 is not provable in bankruptcy

Inserted by: Corporate Law Reform Act 1992

· s 82(3AB)

Part 4‑1 of the Higher Education Support Act 2003 (HELP debts)
Inserted by: Higher Education Support (Transitional Provisions and Consequential Amendments) Act 2003

· s 82(3AB)(aaa)

Part 3A of the VET Student Loans Act 2016 (VETSL debts)
Inserted by: Education and Other Legislation Amendment (Vet Student Loan Debt Separation) Act 2018

· s 82(3AB)(aa)

Part 2AA.3 of the Social Security Act 1991 (student start‑up loan debts)
Inserted by: Labor 2013-14 Budget Savings (Measures No. 2) Act 2015

· s 82(3AB)(ab)

Division 3 or 4 of Part 2 of the Student Assistance Act 1973 (ABSTUDY student start‑up loan debts)
Inserted by: Labor 2013-14 Budget Savings (Measures No. 2) Act 2015

· s 82(3AB)

Part 3.1 of the Trade Support Loans Act 2014 (trade support loan debts)
Inserted by: Trade Support Loans (Consequential Amendments) Act 2014
Sch 1

· s 82(3A)

An amount payable under an order made under a proceeds of crime law is not provable in bankruptcy
Inserted by: Proceeds of Crime (Consequential Amendments and Transitional Provisions) Act 2002

· s 82(3B)

A debt is not provable in a bankruptcy in so far as the debt consists of interest accruing, in respect of a period commencing on or after the date of the bankruptcy, on a debt that is provable in the bankruptcy

Inserted by: Bankruptcy Amendment Act 1987

As is apparent from the above table, the most relevant amendment, s 82(3B), was introduced by s 39(1) of the Bankruptcy Amendment Act 1987. That Bill introduced a large number of amendments to the Bankruptcy Act and was accompanied by a detailed and lengthy explanatory memorandum.
In that explanatory memorandum, two clauses provide an explanation for why s 82(3B) was introduced. These read:[34]
Clause 39 — Debts provable in bankruptcy
235 Section 82 provides that all debts are provable in bankruptcy subject to certain exceptions specified in the section and elsewhere in Division 1 of Part VI of the Act. Subclause 39(1) proposes the insertion of a new subsection 82(3B) which in fact states an existing principle of law enunciated by the High Court in Mackenzie v Rees (1941) 65 C.L.R.1. That principle is that a creditor cannot prove for interest on an interest bearing debt for any period subsequent to the bankruptcy. It is proposed to insert the principle into the Act because creditors preparing proofs of debt are frequently unaware of the requirement to exclude post—bankruptcy interest. A clear statement of the principle in the Act will assist creditors in an understanding of the principles to be observed in preparing a proof of debt.
236 Subclause 39(2) is a transitional provision and provides that the amendment applies only in relation to bankruptcies occurring after commencement. In relation to bankruptcies which occurred before commencement the common law rule laid down in Mackenzie v Rees will continue to apply.
…
Clause 107 — Some amendments made for avoidance of doubt
506 Some of amendments proposed by the Bill do not change the substantive law, but are intended to codify the common law or to remove doubt. Thus clause 39 amends section 82 (‘Debts provable in bankruptcy’) by giving statutory standing to the rule in Mackenzie v Rees. Clause 107 serves to ensure that the changes made to the Act in this way are not interpreted in a manner which could result in a change to the substantive law.
[34] The Parliament of the Commonwealth of Australia, The House of Representatives, Bankruptcy Amendment Bill 1987, Explanatory Memorandum, clause 91, 177.
Principles governing reference to parliamentary and executive materials
Section 15AA of the Acts Interpretation Act 1901 (Cth) (the ‘AI’ Act) provides:
15AA Interpretation best achieving Act’s purpose or object
In interpreting a provision of an Act, the interpretation that would best achieve the purpose or object of the Act (whether or not that purpose or object is expressly stated in the Act) is to be preferred to each other interpretation.
This provision is mandatory and does not depend for its operation on the existence of some obscurity or ambiguity in the language used in the relevant act.
Section 15AB of the AI Act expressly deals with the use of extrinsic materials such as an explanatory memorandum in aid of statutory interpretation.[35]
[35] Acts Interpretation Act 1901 (Cth).
Section 2 of the Acts Interpretation Amendment Act 1984 (Cth) makes s 15AB applicable to all acts whether passed before or after the commencement of the Act. Section 15AB relevantly provides:
15AB Use of extrinsic material in the interpretation of an Act
(1)Subject to subsection (3), in the interpretation of a provision of an Act, if any material not forming part of the Act is capable of assisting in the ascertainment of the meaning of the provision, consideration may be given to that material:
(a)     to confirm that the meaning of the provision is the ordinary meaning conveyed by the text of the provision taking into account its context in the Act and the purpose or object underlying the Act; or
(b)     to determine the meaning of the provision when:
(i)the provision is ambiguous or obscure; or
(ii)the ordinary meaning conveyed by the text of the provision taking into account its context in the Act and the purpose or object underlying the Act leads to a result that is manifestly absurd or is unreasonable.
(2)Without limiting the generality of subsection (1), the material that may be considered in accordance with that subsection in the interpretation of a provision of an Act includes:
….
(e)     any explanatory memorandum relating to the Bill containing the provision, or any other relevant document, that was laid before, or furnished to the members of, either House of the Parliament by a Minister before the time when the provision was enacted;
…
(3)In determining whether consideration should be given to any material in accordance with subsection (1), or in considering the weight to be given to any such material, regard shall be had, in addition to any other relevant matters, to:
(a)     the desirability of persons being able to rely on the ordinary meaning conveyed by the text of the provision taking into account its context in the Act and the purpose or object underlying the Act; and
(b)     the need to avoid prolonging legal or other proceedings without compensating advantage.
Under s 15AB any material outside the Act (including those materials listed in s 15AB(2)) may be used to discover the underlying purpose or object of the relevant provision and then to confirm that the ordinary meaning was intended. In other words, extrinsic aids may be taken into account even when the provision is “clear on its face”.[36]
[36] Commissioner of Australian Federal Police v Curran (1984) 3 FCR 240 at 249-250.
Under this section, in order that a reference to extrinsic materials may have the potential to change an interpretation of legislation which would otherwise have been arrived at, it is necessary for a court to determine that one of the criteria in s 15AB(1)(b)(i) or (ii) has been met.
In NAQF v Minister for Immigration and Multicultural and Indigenous Affairs,[37] Lindgren J suggested the approach to be adopted in circumstances that attracted both s 15AA and s 15AB:
Where the circumstances attract 15AA, the first task is to attempt to identify “the ordinary meaning conveyed by the text of the provision taking into account its context in the Act and the purpose or objective underlying the Act (s 15AB(1)(a)). But in any case where the provision is ambiguous or uncertain, or in a case where the ordinary meaning conveyed as described “leads to a result in manifestly absurd or is unreasonable”, extrinsic materials may be considered to ascertain the true meaning of the provision (s 15AB(1)(b)). Even absent ambiguity or obscurity or manifest absurdity or unreasonableness of result, extrinsic materials may be considered in order to “confirm” that the ordinary meaning so conveyed as described is the true meaning of the provision (s 15AB(1)(a)).
[37] [2003] 130 FCR 456 at [69].
In Saraswati v The Queen,[38] McHugh J gave consideration to the combined effect of s 33 and s 34 of the Interpretation Act 1987 (NSW) (the NSW equivalent of s 15AA and s 15AB). His Honour explained:[39]
Section 33 of the Interpretation Act directs a court in interpreting a provision in an Act to give preference to a construction “that would promote the purpose or object underlying the Act” over a construction “that would not promote that purpose or object”: cf. Chugg v. Pacific Dunlop Ltd. Moreover, the terms of s 34 of that Act, which provides for the use of extrinsic material, make it plain that “the ordinary meaning conveyed by the text of the provision” is the meaning conveyed by that provision after “taking into account its context in the Act or statutory rule and the purpose or object underlying the Act or statutory rule”. Hence, it is always necessary in determining “the ordinary meaning” of a provision such as s. 61E(2) to have regard to the purpose of the legislation and the context of the provision as well as the literal meaning of the provision. Sometimes the purpose of the legislation is expressly stated; sometimes it can be discerned only by inference after an examination of the legislation as a whole; and sometimes it can be discerned only by reference to the history of the legislation and the state of the law when it was enacted. It need hardly be said that a particular Act may have many purposes.
In many cases, the grammatical or literal meaning of a statutory provision will give effect to the purpose of the legislation. Consequently, it will constitute the “ordinary meaning” to be applied. If, however, the literal or grammatical meaning of a provision does not give effect to that purpose, that meaning cannot be regarded as “the ordinary meaning” and cannot prevail. It must give way to the construction which will promote the underlying purpose or object of an Act: Interpretation Act, s. 33. In Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation, Mason and Wilson JJ. said:
“when the judge labels the operation of the statute as ‘absurd’, ‘extraordinary’, ‘capricious’, ‘irrational’ or ‘obscure’ he [or she] assigns a ground for concluding that the legislature could not have intended such an operation and that an alternative interpretation must be preferred. But the propriety of departing from the literal interpretation is not confined to situations described by these labels. It extends to any situation in which for good reason the operation of the statute on a literal reading does not conform to the legislative intent as ascertained from the provisions of the statute, including the policy which may be discerned from those provisions.”
Moreover, once a court concludes that the literal or grammatical meaning of a provision does not conform to the legislative purpose as ascertained from the statute as a whole including the policy which may be discerned from its provisions, it is entitled to give effect to that purpose by addition to, omission from, or clarification of, the particular provision: see Kammins Ballrooms Co Ltd v Zenith Investments (Torquay) Ltd; Jones v. Wrotham Park Settled Estates; Cooper Brookes; In re Lockwood.
(Footnotes omitted)
[38] (1991) 172 CLR 1 at 21.
[39] Ibid at 21-22.
In my view taking into account the purpose and objects of the Bankruptcy Act as well as its broader common law context the meaning of the words in s 82(3B) are ambiguous. For reasons that I will come to, to read the words in the manner contended by the respondent would lead to a result that if not manifestly absurd is at the very least unreasonable.
The explanatory memorandum makes it plain that Parliament’s intention was to preserve the common law position as laid down in Mackenzie v Rees.
Summary of appellants’ argument
It is the appellants’ submissions that the Magistrate: [40]
erroneously accepted a construction of s 82(3B) of the Bankruptcy Act 1966 (Cth) (the Act) to permit a creditor of a bankrupt with a debt provable in the bankruptcy that bears interest to claim interest accruing after the date of bankruptcy as a separate and continuing debt outside of bankruptcy, capable of being sued for.
[40] Written Submissions of the Appellants (FDN 22) at [3].
The appellants contended that the proper construction of s 82(3B) is not to the effect that post-bankruptcy interest survives bankruptcy as a standalone cause of action, but rather it is the clear intention of Parliament that interest is postponed in bankruptcy pending a surplus, at which time it is paid, or in the absence of a surplus, the interest is released and discharged. In the event that there is a surplus s 153A allows for full payment of interest that has accrued on a debt.
It was submitted that the effect of adopting the construction advocated for by the respondent results in a perverse outcome.[41]
[It] creates a situation where a bankrupt can be endlessly tipped back into bankruptcy, and the whole point of this scheme - this regime - the point in terms of its genesis in equity of the laws of bankruptcy developed back in the UK - was to address that very thing, and the dreadful consequences of that Dickensian situation where you had the Debtors’ Prison, and people were imprisoned endlessly, never able to get going again, because they were in prison and could never do - that’s where those principles of equity came about to develop a system to address this very thing. This is reverting back to a Dickensian period of the Debtors’ Prison, where the aggrieved creditor can forever tip the bankrupt back into bankruptcy.
[41] T26.
Counsel for the appellants went so far as to submit to the Court:[42]
[I]t is not an overstatement to contend that the construction arrived at by the Magistrate alters bankruptcy law and practice in such a way as to affect each and every bankruptcy in which provable debts attract interest. The consequences extend far beyond the case at bar and cannot have been in her Honour’s contemplation at the time of her decision.
[42] Written Submissions of the Appellants (FDN 22) at [71].
Presumption against alteration of common law doctrines
It was submitted by the appellants that the purpose and effect of s 82(3B) should be considered against the common law development of bankruptcy law. The appellants relied upon the principle of statutory interpretation that legislation is presumed to not alter common law doctrines and not invade common law rights unless the words of the statute expressly or necessarily require that result. Both presumptions are underpinned by the same philosophy: that it is the responsibility of the courts to protect the individual from the excesses of the state.[43] It is assumed that this protection is best afforded by common law principles.
[43] D Pearce, Statutory Interpretation in Australia (Lexis Nexis Australia, 9^th ed, 2019) at 237.

In Potter v Minahan,[44] O’Connor J discussed the rationale behind this presumption:
It is in the last degree improbable that the legislature would overthrow fundamental principles, infringe rights, or depart from the general system of law, without expressing its intention with irresistible clearness; and to give any such effect to general words, simply because they have that meaning in their widest, or usual, or natural sense, would be to give them a meaning in which they were not really used.
[44] (1908) 7 CLR 277 at 304.
In Balog v Independent Commission Against Corruption,[45] the High Court observed that where two alternative constructions of legislation are open, that which is consonant with the common law is to be preferred.
[45] (1990) 169 CLR 625 at 635-636.
Explanatory memorandum
It was the appellants’ submission that above and beyond this presumption, the explanatory memorandum could not make it plainer that the legislative intent behind the introduction of s 82(3B) was to codify the longstanding common law position. It was submitted that the clear exposition of the purpose of the enactment in the explanatory memorandum should of itself be sufficient for the appeal to be allowed.
Recent authorities in support of the appellants’ position
The appellants relied on a number of relatively recent authorities in support for their preferred interpretation of the relevant provisions of the Bankruptcy Act. One of those was Midland Montagu Australia Ltd v Harkness,[46] That case dealt with the payment of creditors by two companies, one of which was being wound up and the other was under a scheme of arrangement. In that context and having considered a number of the common law authorities McLelland CJ in Eq made the following observations about s 82(3B) of the Bankruptcy Act:
One of the premises upon which this rule is based is the proposition that neither bankruptcy nor winding up, as such, effects a discharge of a debtor’s liability for future interest, although each limits the means by which, and the assets against which, such a liability may be enforced. That proposition, as a matter of general law, is overwhelmingly supported by the authorities from Bromley v Goodere onwards, including, in Australia, Re Paul & Gray Ltd (1933) 33 SR (NSW) 295 and Mackenzie v Rees (1941) 65 CLR 1, especially per Dixon J at 8-12. This proposition is not affected by s 82(3B) of the Bankruptcy Act 1966 (Cth), which provides: “A debt is not provable in a bankruptcy in so far as the debt consists of interest accruing, in respect of a period commencing on or after the date of the bankruptcy, on a debt that is provable in the bankruptcy.” That subsection does no more than enact in statutory form a principle as to the proof of liabilities carrying interest which has been part of the general law of bankruptcy since 1729: see Mackenzie v Rees (at 8). That no change to the law was intended is confirmed by the Explanatory Memorandum presented to each House by the respective ministers moving the second reading of the Bankruptcy Amendment Bill 1987, by cl 39 of which, when enacted, subs (3B) was inserted in s 82 (Commonwealth of Australia Parliamentary Debates, Senate, 15 September 1987 at 91: House of Representatives, 7 December 1987 at 2885). …
[46] (1994) 35 NSWLR 150 at 164.
Mansfield J made a similar observation in Re Scott.[47] In the context of considering whether to pay post-bankruptcy interest to a creditor in circumstances in which there was a surplus of funds in the bankrupt estate, Mansfield J said the following:[48]
Interest accruing on a debt post-bankruptcy is not itself a provable debt: s 82(3B) of the Act. That section reflects what was previously a rule of ‘justice and convenience’: see per Dixon J in Mackenzie v Rees (1941) 65 CLR 1 at 8-11. In the case of a surplus after payment to the creditors from the bankrupt estate, Mackenzie v Rees (in the passage referred to) also lays down that, if admitted debts bore interest to the bankruptcy, the creditors are also entitled to participate in the surplus by way of interest accruing on them after the bankruptcy, and before the debtor may obtain the surplus. …
[47] [2006] FCA 718.
[48] Ibid [8].
Consequently, Mansfield J determined that the creditor be paid post-bankruptcy interest out of the surplus describing the making of the order as “a straightforward application of the law”.[49]
[49] Ibid [10].
It is however the decision of the Full Court of the Supreme Court of Tasmania in Edwards v Stocks,[50] upon which the appellants relies most heavily. It was submitted that this judgment is directly on point with the issues before this Court and provides the clearest articulation of the relevant legal position. The matter under consideration in that case was whether there was an entitlement to an award of Hungerfords v Walker,[51] damages in respect of prejudgment interest surviving the plaintiff’s bankruptcy.
[50] (2008) 17 Tas R 408.
[51] (1989) 171 CLR 125.
The appellants relied in particular on the following passage of the judgment of Crawford J:[52]
The statement that creditors had the right to prove interest at the relevant rates until payment was incorrect, and the statement that the creditors still had the right to recover interest due if there was property available for payment to the creditors, needs explanation. A creditor, upon whose debt interest is running at the time of bankruptcy, is not entitled to prove for the interest for the period after the date of bankruptcy. Bankruptcy Act, s82(3B). However, against the bankrupt, the creditor is entitled to receive, out of any surplus of the bankrupt estate, interest for the period from the date of the bankruptcy to the payment of the provable debt before any such surplus is payable to the bankrupt. Re Hyman; ex parte Law (1930) 3 ABC 61; Re Richards; ex parte Lloyd (1935) 8 ABC 37 at 46; Mackenzie v Rees (1941) 65 CLR 1. The interest is only payable out of a surplus and if there is no surplus, interest after bankruptcy cannot be claimed from the debtor. There is no suggestion of any such surplus in this case. Therefore, the respondents and their estates were not liable to pay any interest that may have fallen due after the date of the bankruptcy.
[52] Edwards v Stocks (2008) 17 Tas R 408 at [41].
Counsel for the appellants submitted that Edwards is relevant, on point and remains good law. Further, that Edwards is clearly supported by and derived from the decision of the High Court in MacKenzie and is consistent with authorities decided post the commencement of s 82(3B). It was submitted that as the decision of another intermediate appellate court on the interpretation of Commonwealth legislation, this Court should not depart from it unless convinced that the interpretation is plainly wrong or there is a compelling reason to do so.[53]
[53] Hill v Zuda Pty Ltd (2022) 96 ALJR 540; [2022] HCA 21.
One of the grounds of appeal is that the Magistrate erred in failing to follow this authority.
Summary of the respondent’s arguments
In essence it was the respondent’s submission that regardless of the history of Bankruptcy Law, the Common Law has been overtaken by statute. The introduction of s 82(3B) has the consequence that post-bankruptcy interest is not provable in bankruptcy and those words should be given their every day meaning. The prohibition on enforcing debts or taking a step-in proceedings, found in s 58(3) of the Bankruptcy Act, applies only to provable debts. It follows that there was and is no bar to the respondent pursuing proceedings in the Magistrate’s Court with respect to post-bankruptcy interest on its existing judgment debt. Finally in respect to s 82(3B) the respondent contended that there was nothing in the wording of the section to suggest that the ordinary statutory consequences following a debt “not being provable in a bankruptcy” were not to apply. It was submitted that in order to achieve that result a significant redrafting of the Bankruptcy Act would be required.
The respondent also relied on s 153 in support for their preferred interpretation of the Bankruptcy Act. In particular s153 reads that:
Section 153 ‑ Effect of discharge
… where a bankrupt is discharged from bankruptcy, the discharge operates to release him or her from all debts (including secured debts) provable in the bankruptcy …
On the respondent’s argument it follows that a bankrupt is only discharged from liability for provable debts and as a consequence there remains an entitlement to litigate for the payment of post-bankruptcy interest outside of bankruptcy proceedings.
Recent High Court Authorities
The respondent placed considerable weight on the decisions of the High Court in Coventry v Charted Pacific Corporation (‘Coventry’),[54] and Foots v Southern Cross Mine Management (‘Foots’).[55]
[54] Coventry v Charted Pacific Corporation (‘Coventry’) (2005) 227 CLR 234
[55] Ibid.
Both of these judgments dealt with s 82 of the Bankruptcy Act although in neither was s 82(3B) under consideration. It was the respondent’s submission that both Coventry and Foots provide support for the proposition that in circumstances in which a debt is not provable a bankrupt is not discharged from liability and consequently a claim may be pursued outside of the bankruptcy.[56] Particular reliance was placed on the following passage from the judgment of Gleeson CJ, Gummow, Hayne and Callinan JJ (‘the majority’) in Coventry:
If the claim for unliquidated damages made pursuant to the Corporations Law is a debt provable in that person's bankruptcy, discharge from bankruptcy operates to release that person from that claim. If it is not a debt provable in the bankruptcy, discharge from bankruptcy does not operate to release the bankrupt from the claim and, subject to any question of limitation of actions, the claim can be pursued against the former bankrupt after discharge. Moreover, s 58(3) of the Bankruptcy Act 1966 (Cth) does not prevent the claimant, during the bankruptcy, from commencing a legal proceeding in respect of the claim or enforcing any remedy against the person or the property of the bankrupt in respect of that claim. The subsection denies such competency to a creditor only in respect of “a provable debt”.[57]
(Footnotes omitted)
[56] Ibid at 239.
[57] Ibid at 238.
I will come back to Coventry and Foots when I come to consider the grounds of appeal.
The Explanatory Memorandum
It was the respondent’s submission that the explanatory memorandum did not go as so far as was contended by the appellant. It was suggested that the aspect of the “existing principle of law” which s 82(3B) sought to preserve was that a “creditor cannot prove for interest on an interest-bearing debt for any period subsequent to the bankruptcy.” Whilst the respondent conceded that there is no express reference to an intention to change the common law it was put that nor is there any indication that the purpose was to preserve the common law in its entirety. It was submitted that the only principle which was identified as being preserved was that creditors were not to include post-bankruptcy interest in a proof of debt.
The Real Contest
Although there are various nuances and permutations to the various arguments made by each party, the issue would appear to distil down to the question of whether s 82(3B) has completely rewritten the approach to be adopted in relation to post-bankruptcy interest on debts or is it the legislative enactment of the common law position. For the reasons that follow in my view it is the latter.
The starting point is that bankruptcy is a legal process for debtors to be legally declared as unable to meet their debt obligations and provide a route through that debt. As observed by Gibbs CJ in Storey v Lane:[58]
An essential feature of any modern system of bankruptcy law is that provision is made for the apportion of assets of the debtor and their equitable distribution amongst his creditors, and for the discharge of the debtor from future liability for existing debts. In Hill v East and West India Dock Co (1884) 9 App Cos 448, p 456 Earl Carnies cites with approval the following passage from the judgment of James LJ in Ex parte Walton; in Re Levy (1881) 17 Ch D 746, at p 752:
Now the bankruptcy law is a special law, having for its object the distribution of an insolvent’s assets equitably amongst his creditors and persons to whom he is under liability, and, upon his cessio bonorum, to release him under certain conditions from future liability in respect of his debts and obligations.
[58] (1981) 147 CLR 549 at 556-557.
The equitable distribution of the assets of the insolvent debtor to prevent one creditor obtaining an undue advantage over others is a fundamental purpose of bankruptcy law. The legislation as a whole is aimed at marshalling assets, ascertaining debts and claims and applying the former towards satisfaction of the latter. It is aimed at releasing a bankrupt from an ever-escalating cycle of debt. Whilst there is no doubt that there are debts and liabilities that will sit outside of the Bankruptcy Act where the legislation is reasonably open to more than one construction, a construction that would promote the purpose or object of the Act must be preferred to a construction that would not.[59]
[59] Acts Interpretation Act 1901 (Cth) s 15AA.
Interpretation of s 82 of the Bankruptcy Act
As set out previously s 82(3B) was not introduced as part of a package of legislative exceptions to debts that are provable in bankruptcy. To the contrary it was the only exception introduced at the time under the Bankruptcy Amendment Bill 1987. Under the original section the only two exceptions to debts and liabilities that were provable under s 82(2) were:
Section 82(2): unliquidated damages aiming otherwise than by reason of a contract, promise or breach of trust
and
Section 82(3): penalties or fines imposed by a court in respect of the offence against law.
The former was of course the subject of judicial consideration in Coventry. The public policy behind the latter is clear. It is not for creditors to bear the brunt of a pecuniary punishment imposed on a debtor for the commission of an offence.
The first amendment to the section occurred in 1987 with the introduction of s 82(3B). The purpose of that amendment could not have been made clearer in the accompanying detailed explanatory memorandum. It was to codify the common law or remove doubt to give ‘statutory standing’ to the rule in MacKenzie.
The next amendment to s 82 occurred in 1992 with the Corporate Law Reform Bill introducing s 82(3AA) which excluded an amount payable under an order made under s 1317G of the Corporations Act 2001 as a provable debt. This bill contained an extensive raft of amendment to the Corporations Law. The explanatory memorandum accompanying this Bill makes reference to s 82(3) excluding from provable debts “penalties or fines imposed by a court” and suggests that the same rationale applies in relation to s 82(3AA) that is that it would be difficult to justify penalising creditors for the wrongdoing of the company that had resulted in the imposition of the fine.
Ten years later, in 2002 s 82(3A) was introduced to exclude “an amount payable under an order made under a proceeds of crime law.” In the accompanying explanatory memorandum, the purpose of the amendment was described as “to ensure that bankruptcy is not used a means of thwarting confiscation of proceeds of crime by using them to satisfy creditors in bankruptcy proceedings”. Again there is an obvious public policy reason as to why assets that are the object of such orders should be completely removed from the provisions of the Bankruptcy Act.
In 2003 s 82(3AB)(a) was introduced by the Higher Education Support (Transitional Provisions and Consequential Amendments) Act. Between 2014 and 2018 s 82(3AB)(b) was introduced by the Trade (Support Loans Consequential Amendments) Act 2014, s 82(3AB)(aa) and s 82(3AB)(ab) by the Labour 2013-14 Budget Savings (Measures No 2) Act 201) and s 82(3AB)(aaa) by the Education and Other Legislation Amendment (Vet Student Loan Debt Separation) Act (2018). Although these amendments were not all introduced at the same time they fall into the same category. They are all debts owed to the Commonwealth as a consequence of the provision of money in the form of a loan for education or training. Each of these debts falls within legislation that provides a regime for the payback of the money. There is therefore a clear and logical basis upon which to place these debts outside a bankruptcy.
As is apparent from this brief overview of the history of the exceptions to provable debts falling under s 82, there are clear policy and practical considerations that explain why over time they were removed from the category of provable debts.
It is of note that s 82(3B) was the first amendment of the section subsequent to the enactment of the Bankruptcy Act and the next amendment did not occur until 5 years later. It is apparent that the parliamentary intent behind the introduction of this subsection was very different to that accompanying the other amending legislation.
To my mind it would be a perverse outcome to determine that the effect of this amendment is the opposite of what was expressly intended by Parliament that is to preserve the common law in relation to the post-bankruptcy interest.
This interpretation gains support from of the nature of the debt that is the subject of s 82(3B). Unlike the debts that have been the subject of the other amendments this debt is the product of an original debt that is in fact provable in the bankruptcy. Each of the other debts stands alone as part of a relevant legislative regime. In my view it would add to the absurdity of the result that a creditor could potentially receive only a very small percentage of the provable debt but subsequently be entitled to litigate for the full amount of the interest that became payable post-bankruptcy. It begs the question of when the liability for the interest will end.
Other relevant sections in the Bankruptcy Act
The appellants’ argument is further supported by s 153A – Annulment on payment of debts. This section relates to circumstances in which there are sufficient funds in the estate to pay the provable debts in full. This section adopts the position of the common law in relation to post-bankruptcy interest by stipulating that:
… [i]n determining whether there has been full payment of a debt that bears interest, the interest must be reckoned up to and including the date on which the debt (including interest) is paid.
(Emphasis added)
In other words as under the common law the bankrupt will not receive any surplus until such time that all outstanding interest is paid. This section reflects the unique historical context of post-bankruptcy interest and creates provision for its payment albeit only at a point in time that all other debts are paid. That is despite the fact that it is not provable in the bankruptcy. It is consistent with a fair approach to the distribution of assets between the creditors.
The respondent however relies on s 153 effect in support of their argument. That section relevantly reads:
Section 153(1) – Effect of discharge
Subject to this section, where a bankrupt is discharged from a bankruptcy, the discharge operates to release him or her from all debts (including secured debts) provable in the bankruptcy…
The respondent contends that this section makes it plain that the discharge is only from debts provable in the bankruptcy and it follows that liability for post-bankruptcy interest continues. This situation is further complicated however by virtue of s 153(2)-(4). These subsections identify particular debts above and beyond the general terms of s 153(1) that a bankrupt is not released from. Further s 153(2A) makes it plain that s 153(1) is not absolute in that it provides the Court with a discretion to release a bankrupt from liability to pay arrears due under a maintenance agreement or a maintenance order.

It was the appellant’s submission that the fact that post-bankruptcy interest is not nominated under one of these latter subsections is support for the position that it falls outside s 153(1). That however cannot be the answer because none of the other exceptions to s 82 are nominated in s 153(2)-(4).
In my view s 153 must be read together with s 153A. The latter provides the means which post-bankruptcy interest should be dealt with which sits outside of the normal position in relation to the discharge of a bankrupt. In reading the two sections in this manner, results in a legislation framework which reflects and preserves the common law position.
The authorities relied upon
Central to the various grounds of appeal are the decisions of Edwards v Stock, Coventry and Foot.
Coventry
In Coventry the High Court gave consideration to the question of whether a statutory claim for unliquidated damages for misleading or deceptive conduct by a bankrupt which induced the claimant to make a contract with a third party is a demand in the nature of unliquidated damages arising otherwise by reason of a contract, promise or breach of trust: such that by virtue of s 82(2) of the Bankruptcy Act the debt was not provable in the bankruptcy. The central question that the appeal hinged on was the meaning of s 82(2) of the Bankruptcy Act and in particular what is meant by a demand in the nature of the unliquidated damages arising otherwise than by reason of contract or promise.
The Court reviewed the history of s 82 and its roots in earlier Australian and English legislation. It was observed that: [60]
The development of bankruptcy legislation in the United Kingdom, especially during the nineteenth century, reflected the shifting accommodation made from time to time between a number of competing considerations. What debtors could take advantage of the legislation? Was it to be available to traders or debtor more generally? Was there to be official control of the bankrupt’s estate or were creditors to have control? What kind of debts were to fall within the legislation? What was to be done about contingent obligations or unliquidated claims?
[60] Coventry at [24].
Unsurprisingly in conducting this historical analysis the focus of the Court was on contingent obligations and unliquidated claims against a bankrupt given the issue under consideration.
The Court also considered the earlier authorities to give context to and elucidate the meaning of s 82(2). As observed in Foots:[61]
In Coventry relevance of legislative history and prior case law lay in the exposition of the terms of the present legislation, not otherwise. The particular issue concerned the content of the phrase “arising otherwise than by reason of a contract.
Having undertaken that exercise, the majority made the following observation in Coventry:[62]
What is revealed by the analysis of decided cases recorded in the proceeding pages of these reasons is that s 82(2) and its legislative predecessors stopped short of providing that ‘the bankrupt is to be a freed man – freed not only from debts, but from contracts, liabilities, engagements and contingencies of every kind. Some claims stand outside of the reach of the statute.
[61] Foots at [62].
[62] Coventry [70].
The respondent relied heavily on this passage in support of their contention that post-bankruptcy interest has legislatively been taken outside of the reach of the statute. That does not necessary follow. In the context of considering the breadth of s 82(2) against the backdrop of its historical development the High Court was saying no more than it cannot be said that bankruptcy removes all financial liabilities and obligations. To my mind beyond that general proposition Coventry sheds little light on the issues under consideration on this appeal in circumstances in which the Court gave no consideration to s 82(3B) and its historical context.
Foots
Similarly in Foots, the focus of the High Court was on an issue unrelated to that under consideration on his appeal. Foots was concerned with a claim for costs arising on pre-bankruptcy proceedings, in circumstance in which the order for costs had not been made as at the date of bankruptcy. The order for costs was only made some months after the bankruptcy. In that matter the bankrupt debtor, Mr Foots attempted to bring his liability for costs into the statutory definition of a provable debt. As such the costs order would be absorbed into the bankruptcy proceedings and he would be free from his liability upon his discharge from bankruptcy. The appellant argued that the costs order was provable in the bankruptcy on two bases. The first was that the ‘obligation’ was said to arise from the monetary sum awarded against him which had occurred prior to bankruptcy. Alternatively, it was submitted that the phrase ‘all debts and liabilities’ in s 82 is broad enough to encompass an obligation that is incidental to a provable debt, even if the incidental obligation was not a necessary concomitant in law of the provable debt.
As in Coventry the majority made the observation that not all debtors debts and liabilities are provable in bankruptcy. Further that there is no express or implied textual support for the notion of a debt being provable if it is incidental to, or consequent upon, a debt which itself is provable.
Central to the determination of the issue in Foots was consideration of when the obligation to pay costs arose. The majority held that the costs order had not been a liability at the date of the bankruptcy, that whilst the respondent had a judgment against the appellant for damages, no determination as to costs had been made. No costs obligation arose until the cost order was made. Further that the risk was not a contingent liability within the sense of s 82(1) on the basis that…the order for costs itself is the source of the legal liability and there is no certainty that the court in question will decide to make an order. [63]
[63] Foots [36].
Because the order was made after bankruptcy, and was thus not a liability ‘to which bankruptcy was subject at the date of the bankruptcy’ and it was not a contingent liability, and was determined that the costs order was not provable in the bankruptcy.
Whilst Foots provides some support for the broader principle relied upon by the respondent, that is that not all debts are provable in bankruptcy the focus of the judgment is on the particular facts and circumstances under consideration in that case.
Edwards v Stocks
As previously mentioned, Edwards v Stocks is the principal authority relied upon by the respondent in support of their suggested interpretation of the Bankruptcy Act. In that case the Tasmanian Supreme Court dealt with the question of the effect of bankruptcy on the claim for damages by way of interest brought in the court below.[64] The respondent’s claimed damages including interest on the basis of negligent misrepresentations made in early 1988. Part of that claim was for interest. The respondents became bankrupt on 15 December 1988 and were discharged from bankruptcy on 15 December 1991. During the bankruptcy the official trustee retained the chose in action and assigned it back to the respondents on 30 August 1992. The action for negligent misrepresentations was commenced a few days later on 7 September 1992. In the first instance the trial judge awarded interest for the period leading up to bankruptcy and then for the period from 30 August 1992 until the date of judgment.
[64] Edwards v Stocks (2008) 17 Tas R 408.
It was found by Crawford J (Slicer and Blow JJ agreeing) that the trial judge was in error in awarding damages for the period post-bankruptcy.
It is the appellant’s submission that the decision in Edwards v Stocks is compelling authority in support of their argument. In addition, given that it is a decision of an intermediate appellate court on the interpretation of Commonwealth legislation I should not depart from this decision unless convinced that the interpretation is plainly wrong or, to use a different expression, unless there is a compelling reason to do so.[65]
[65] Hill v Zuda [2002] 96 ALJR 540 at [25].
The respondent however submits that the relevant passage in Edwards v Stocks should not be relied upon in that each of the three main authorities relied upon by the Court,[66] pre-date the enactment of s 82(3B) of the Bankruptcy Act; that is, they were decided at a time when interest on a judgment was not excluded from the statutory concept of a provable debt and the judgment evidences no awareness of that fact. The respondent contends that most strikingly no reference was made in Edwards v Stocks to the decisions of the High Court in Coventry or Foots in circumstances in which Edwards v Stocks is inconsistent with those authorities. It was submitted by the respondent that:[67]
Edwards cannot be accepted as good authority for a proposition that is contrary to considered dicta in the High Court in the most recent High Court case on the effect of the provisions of the Bankruptcy Act, is circumstances when no reference was made to those dicta, and the judgment displays no awareness of them (or even of the case more generally).
Consideration of the Grounds of appeal
[66] Re Hyman; Ex parte Law (1930) 3 ABC 61; Re Richards; Ex parte Lloyd (Official Receiver) WC Angliss Co (Australia) Pty Ltd (Respondent) (1935) 8 ABC 37 at 46; MacKenzie v Rees (1941) 65 CLR 1.
[67] Respondent’s written submissions [60].
Ground 1
The Magistrate erred as a matter of law in failing to follow the decision of the Full Court of the Supreme Court of Tasmania in Edwards v Stocks [2008] TASSC 12 at [41] and the principle that interest on a prebankruptcy debt is only payable out of the surplus (of the bankrupt estate) if and when there is a surplus and if there is no surplus, interest after bankruptcy cannot be claimed from the debtor, either from the bankrupt estate, or independently by a separate and new action outside of the bankruptcy.
In my view in Edwards v Stock the Tasmanian Full Court correctly applied the law albeit that no reference was made to Coventry or Foots. For reasons that I have already explained it was not necessary for the Court to give consideration to these decisions. It follows that the Magistrate erred in declining to follow this approach.
Ground 2
The Magistrate erred as a matter of law in following the decision of a District Court Master in White v Spithas,[68] in so far as the Master found that interest on a pre-bankruptcy debt, accruing after the date of bankruptcy, could be claimed by a creditor outside of the bankruptcy, as an independent debt for which a right of action or chose in action, existed, outside of the bankruptcy and which could be pursued by way of a Magistrates Court action.
[68] [2015] DCSA 54.
During submissions before the Magistrate counsel for the respondent referred to the judgment of a District Court Master in White v Spithas.[69] In that matter there had been a District Court order for the division of property under the De Facto Relationships Act 1996 (SA) resulting in an order that the defendant pay the respondent a lump sum and costs. Subsequent to this the defendant became bankrupt. The issue under consideration in that judgment was whether the plaintiff was entitled to interest on the amount owing commencing on or after the date of bankruptcy. It was accepted that the judgment debt itself as well as the interest that had accrued prior to bankruptcy were provable in the bankruptcy and consequently the plaintiff made no separate claim over that debt.
[69] Ibid.
In many respects the submission made before the Master mirrored those made before me.[70] In particular counsel for the plaintiff contented that the law in relation to post-bankruptcy interest had been directly and expressly changed with the introduction of s 82(3B) such that post-bankruptcy interest could be the subject of proceedings outside of the bankruptcy. Further, it was submitted that Edwards v Stock is plainly wrong and that Foots and Coventry were binding on the Court.
[70] Counsel appearing in White v Spithas appeared for the respondent before the Magistrate in this matter.
Curiously, although both counsel made submissions about the parliamentary intent behind the introduction of the sub-section, neither made any reference to the explanatory memorandum.
In arriving at his decision the Master accepted the plaintiff’s submission that the amendment to the legislation changed the law from what it had been at time of MacKenzie v Rees. He accepted that support for that position was to be found in Coventry and Foots and determined that he was bound by those authorities and found in favour of the plaintiff.
In the hearing before the Magistrate counsel for the respondent submitted that Her Honour was bound to follow White v Spithas on the basis that it was a decision of a Master of the District Court and was directly on point. Whilst the Magistrate correctly identified that she was not required to follow that decision she went on to say that based on her independent analysis of the that she had reached the same conclusion as to the meaning and effect of s 82(3B).[71] The Magistrate quoted at length from the judgment.
[71] Magistrate’s Judgment [37].
Whilst it is not correct to suggest that the Magistrate found that she was bound to follow the decision of White v Spithas, I find however she erred in adopting the same reasoning and interpretation of the relevant sections of the Bankruptcy Act.
Ground 3
The Magistrate erred as a matter of law in failing to correctly apply Coventry v Charter Pacific Corporation Limited [2005] HCA 67 (Coventry) and Foots v Southern Cross Mine Management Pty Ltd & Ors [2007] HCA 56 (Foots) in relation to the treatment of post-bankruptcy interest on debts forming part of the bankrupt estate and failing to distinguish any claim in relation to post-bankruptcy interest from a chose in action arising by reason of the Court’s exercise of its discretion on costs.
In her judgment the Magistrate made reference to the concept of a debt provable in bankruptcy as considered in Coventry and Foots. Although the Magistrate cited various passages from the judgments, she did not indicate what reliance she placed on them. Given the overall outcome of the appeal it is not necessary to determine this ground.
Ground 4
The Magistrate erred as a matter of law in failing to identify that the interest the subject of the claim was interest which would only arise by reason of the judgment obtained prior to the bankruptcy and for which the bankrupt would have had an obligation to pay, but for the bankruptcy and codified exclusion of liability introduced by s 82(3B), which section does not give it the status of a chose in action accruing post-bankruptcy.
Given the overall disposition of the appeal it is not necessary to address this ground separately.
Ground 5
The Magistrate erred as a matter of fact and law in concluding that s 58(3) was not engaged, nor that any other provision in the Bankruptcy Act precluded the respondent from bringing and pursuing the action at the stage and time at which it was brought and in concluding that s 58(3) did not require the Applicant to seek leave of the Federal Court prior to commencing a claim for post-bankruptcy interest ‘in respect of’ and calculated upon a primary debt provable in the bankruptcy.
Section 58(3) creates a prohibition against a creditor attempting to ‘enforce any remedy against the person or the property of the bankrupt in respect of a provable debt’ without the leave of the Federal Court.
The purpose of the requirement for leave to proceed under s 58(3) is:[72]
To assist in the orderly administration of the insolvent estate by protecting a bankrupt and the property of the erstwhile debtor (as now vested in the trustee), against the enforcement of remedies. This is done by enabling the court to supervise the handling of claims through the procedure of proof of debt (administered by the trustee or liquidator), by ensuring that the assets of the estate are not expended on costs in a multiplicity of litigation, and by ensuring that no one creditor gets an advantage over others.
[72] Hudson v Sigalla (2015) 235 FCR 122 at [25].
The policy behind s 58(3) was summarised by Justice Barrett in Mango Media Pty Ltd v Velingos. It is: [73]
To ensure that the bankrupt estate and the provable claims upon it remain under the control and supervision of the courts having a jurisdiction in bankruptcy. The legislation as a whole is aimed at marshalling assets, ascertaining debts and claims and applying the former towards the satisfaction of the latter. The procedures by which the process is to be conducted and the objective is to be achieved as set out in the Bankruptcy Act and administered by those courts to which exclusive jurisdiction in bankruptcy is given by Parliament. To the extent that an attempt is made to resort to any other process of dealing with debts and claims, particularly if resort is to be had to courts other than the bankruptcy courts, there must first be screening by the bankruptcy court.
[73] (2008) 216 FLR 176 at [13].
To determine that post-bankruptcy debt fell outside of s 58(3) would result in the very mischief at which the section is aimed namely to permit one creditor an advantage over others.
For a claim to fall within s 58(3) it must be ‘in respect of a provable debt. The words ‘in respect of’ have a wide meaning and are to take their colour from the context in which they are found.[74] The expression only requires ‘some discernible and rational link’ between the matters in question.[75] The width of the words in the context of this section has been the basis for the courts to conclude that the nexus between the proceedings and the relevant provable debt may even be indirect.[76]
[74] Technical Products Pty Ltd v State Government Insurance Office (QLD) (1989) 167 CLR 45 at [5].
[75] Mango Media Pty Ltd v Velingos (2008) 216 FLR 176 at [14].
[76] Baker v Paul [2012] NSWSC 392 at [58]; Green v Schenller [2001] NSWSC 897 at [12]-[19]; Fraser v Commissioner of Taxation and Anr (1996) 69 FCR 99 at 112.
Post-bankruptcy interest cannot be found to exist unless the original debt is in existence. It follows that it is ‘in the respect of’ a provable debt. The Magistrate erred in finding that s 58(3) of the Bankruptcy Act did not apply.
Ground 6 and 7
Ground 6
The Magistrate erred as a matter of fact and law in finding that there was an identifiable proper claim against the appellant which there was no reasonable prospects of defending and in concluding that the respondent was entitled to summary judgment for the amount of $100,000.
Ground 7
The Magistrate erred as a matter of fact and law in finding that there was no basis under either the Bankruptcy Act or the Uniform Civil Rules 2020 for staying the action brought by the appellant.
On the basis of my findings above I find that these grounds have been made out.[77]
[77] Although the Magistrate did not have power to stay the proceedings under the Bankruptcy Act there was broad powers to stay proceedings pursuant to r 121.1 of the Uniform Civil Rules (SA) 2020.
Orders
1.The appeal is allowed.
2.The judgment and orders of 6 October 2021 be set aside.
3..The respondent pay the appellant’s costs of the appeal and the proceedings in the Magistrates Court.

· s 82(3AA) An amount payable under an order made under section 1317G of the Corporations Act 2001 is not provable in bankruptcy	Inserted by: Corporate Law Reform Act 1992
· s 82(3AB) Part 4‑1 of the Higher Education Support Act 2003 (HELP debts)	Inserted by: Higher Education Support (Transitional Provisions and Consequential Amendments) Act 2003
· s 82(3AB)(aaa) Part 3A of the VET Student Loans Act 2016 (VETSL debts)	Inserted by: Education and Other Legislation Amendment (Vet Student Loan Debt Separation) Act 2018
· s 82(3AB)(aa) Part 2AA.3 of the Social Security Act 1991 (student start‑up loan debts)	Inserted by: Labor 2013-14 Budget Savings (Measures No. 2) Act 2015
· s 82(3AB)(ab) Division 3 or 4 of Part 2 of the Student Assistance Act 1973 (ABSTUDY student start‑up loan debts)	Inserted by: Labor 2013-14 Budget Savings (Measures No. 2) Act 2015
· s 82(3AB) Part 3.1 of the Trade Support Loans Act 2014 (trade support loan debts)	Inserted by: Trade Support Loans (Consequential Amendments) Act 2014 Sch 1
· s 82(3A) An amount payable under an order made under a proceeds of crime law is not provable in bankruptcy	Inserted by: Proceeds of Crime (Consequential Amendments and Transitional Provisions) Act 2002
· s 82(3B) A debt is not provable in a bankruptcy in so far as the debt consists of interest accruing, in respect of a period commencing on or after the date of the bankruptcy, on a debt that is provable in the bankruptcy	Inserted by: Bankruptcy Amendment Act 1987