Ferrier, Ian Douglas v Civil Aviation Authority

[1995] FCA 1135

IN THE FEDERAL COURT OF AUSTRALIA )

)No. NG.3136 of 1995

NEW SOUTH WALES DISTRICT REGISTRY )
  )
GENERAL DIVISION                 )

BETWEEN:IAN DOUGLAS FERRIER and DESMOND WILLIAM KNIGHT (as liquidators of Compass Airlines Pty Ltd (in liquidation))

Applicant

AND:CIVIL AVIATION AUTHORITY

Respondent

CORAM:WILCOX, HILL AND WHITLAM JJ

PLACE:    SYDNEY
DATE:     27 NOVEMBER 1995

EXTEMPORE REASONS FOR JUDGMENT

WILCOX J:   A notice of motion has been filed by the Civil Aviation Authority, the respondent to an appeal taken to the Full Court by Ian Douglas Ferrier and Desmond William Knight in respect of a claim that certain moneys received by the Civil Aviation Authority constituted a preference.  On 15 February 1995, a Full Court consisting of Beaumont, Gummow and Lindgren JJ allowed the appeal and ordered the respondent authority to pay to the appellants the sum of $10,351, 523.90, together with interest from 30 July 1992 to 15 February 1995 at various stipulated rates.

It is not necessary to detail those rates because they are not presently in issue.  The Full Court said nothing about interest after the day of the order.  It was apparently assumed by everybody concerned that order 35, rule 8 would apply.  That rule provides:

"A judgment debt carries interest at the rate of 10 per cent per annum unless, in a particular case, the court determines that justice requires that a lower rate should be applicable."

The Civil Aviation Authority sought leave to appeal to the High Court of Australia from the decision of the Full Court.  Leave was granted on 22 June 1995.  The appeal itself was recently heard.  The High Court has reserved its decision and it is not known when judgment is likely to be given.  The Civil Aviation Authority is concerned at the interest that will accrue against it pursuant to order 35, rule 8 during the period from the Full Court judgment until the judgment of the High Court, in the event that the appeal is dismissed. Accordingly, application has been made by notice of motion filed on 8 September 1995 for an order that the rate of interest accruing on the judgment debt pursuant to order 35, rule 8 be lowered. 

In written submissions handed up today, counsel for the authority has suggested that, if the court is minded to accede to the application, the Court should order that the judgment bear interest at the rate applicable to 90 day bank accepted bills as published in the Reserve Bank of Australia Bulletin each month, such interest to compound every 90 days.       The effect of such an order at current interest rates, as I follow the material that has been put before us, is that the judgment would have been accruing, and will (until there is some change in the level of interest rates) continue to accrue, interest at the rate of something like 7.5 per cent per annum. 

In support of the application, Mr Gleeson has pointed out that no application or request has been made by the liquidators for payment of the judgment sum in advance of the disposal of the High Court appeal.  He says the obvious reason for this is that a stay of proceedings would be granted, given the fact that the liquidators would regard it as their duty to distribute to creditors any moneys received.  In practical terms, it would be impossible for the authority to recover moneys from the creditors if a distribution was made but the appeal subsequently allowed.  It seems also to be common ground that, if the money was handed over to the liquidators upon the basis that they would keep it on deposit, it would not earn interest at anything like 10 per cent.  Probably, the interest rate earned would be some 2 or 3 per cent below that rate.  Accordingly, Mr Gleeson says, it is unfair to allow the judgment to accrue interest at the rate of 10 per cent when the Commonwealth has no practical ability to terminate the interest running against it - other than, I suppose, by discontinuing the appeal - and the liquidators themselves could not earn interest at this rate.

There is force in those submissions; but it is also necessary to consider the other side of the question.  Mr Thomson, on behalf of the liquidators, has pointed out that the people ultimately entitled to the money, if the appeal fails, are creditors of the failed company, Compass.  These people consist of numerous ex-employees, who are entitled to some preferential payments, and various commercial creditors.  He says the Court should assume that the creditors include people who are, themselves, paying interest at rates exceeding 10 per cent.  If, for example, the money could be used by a creditor to reduce a housing loan, then the salient interest would almost certainly exceed 10 per cent.  Similarly, if a commercial creditor was able to reduce the amount of a bank overdraft, then the saving would almost certainly exceed 10 per cent. 

I think there is force in this submission also.  It may be that some creditors would use any dividend for a purpose which did not yield 10 per cent, but there would be many who would be able to gain a greater benefit than 10 per cent if the money was presently available.  It must be remembered that the only reason for the delay in making the distribution is the fact that the Civil Aviation Authority has chosen to appeal and the subject is only one of practical importance if it turns out that the appeal was misconceived; in other words it is ultimately dismissed.

The rule envisages that 10 per cent should be the
standard rate and provides an exception in a particular case where the Court determines that justice so requires.  Although I see the force of what has been said to us on behalf of the applicant, I am not persuaded that this is a case where there are such special facts that the Court should fix a lower rate.  As was pointed out during the course of discussion, there are many cases where people are delayed in receiving the proceeds of a verdict because of an appeal.  It would seem to me unfortunate if the Court were confronted with a series of applications for different rates.  A strong case is required before the general rule should be departed from.  I think that the application should be refused with costs.

HILL J:   I agree.  When all the submissions are ultimately distilled, it is difficult to see why the interests of justice in this case require the setting of a lower rate.  Really only three things distinguish this from any other case; the first is that the respondent to the appeal is a liquidator; the second is that no application for stay has, in fact, been made; the third is that the payer of the interest is the Commonwealth.  Neither of the first two matters seem to me to really add much.  It is only the third that merits consideration.  Whereas in the ordinary case an appellant may need to borrow money to pay the judgment and, therefore, might ordinarily expect to borrow at a high rate of interest, here the appellant is the Commonwealth with access to funds at a much lower rate.  But the mere fact that the appellant is the Commonwealth does not seem to me to provide a satisfactory
reason for the Court to reduce the rate of interest.

Historically, the rule as it now stands arose because, in David Securities Pty Ltd v Commonwealth Bank of Australia (unreported 6 June 1989), in the circumstances of that case where the principal of moneys borrowed was repayable in foreign currency, a rate of interest of the amount stipulated in the Rules but relevant to the borrowing of Australian dollars was regarded as being clearly inappropriate.  Of course, that particular historical background should not in any way be treated as delimiting the circumstances in which the section should operate.  It does, however point to the fact that ordinarily it will be in a case where there are particular circumstances over and above the borrowing capacity of a party which will lead to the conclusion that a lower than stipulated rate should be adopted.  I therefore agree with the orders proposed by Wilcox J.

WHITLAM J:   One of the happy advantages of being the junior member in a Court comprised by my colleagues is that so often one finds oneself in agreement with them as I do.  Everything that can be said, I think, has been said by both Wilcox J and Hill J and I agree with everything that my colleagues have said.  In the circumstances, I do not think that justice requires that a lower rate than that prescribed by the rules of Court be fixed in the present case.  I agree with the order proposed also.

WILCOX J:   The order of the Court will be that the application be refused and that the applicant pay the respondent's costs.

I certify that this and the preceding six (6) pages are a true copy of the Reasons for Judgment of the Court.

Associate:

Dated:     27 November 1995

APPEARANCES

Counsel for the Applicant:     J E Thomson

Solicitor for the Applicant:        Blake Dawson & Waldron

Counsel for the Respondent:         J Gleeson

Solicitor for the Respondent:       Mallesons Stephen Jaques

Date of hearing:  27 November 1995