Gacic v Banov - [2008] FMCA 354

FEDERAL MAGISTRATES COURT OF AUSTRALIA

GACIC & ANOR v BANOV

[2008] FMCA 354

BANKRUPTCY – Application to set aside bankruptcy notice – inclusion of interest in judgment debt – inclusion of interest after judgment – no inclusion of prohibited interest on interest – validity of bankruptcy notice upheld – extension of time for compliance during pendency of appeal – stay on execution granted by appeal court – appropriate to extend time.

Civil Procedure Act 2005 (NSW), ss.100, 100(3), 101, 101(6)

Banov v Ciric [2008] FMCA 353
Burns v AMP Finance Limited [2004] FCA 1094
Liew v JNS Technologies (M) Sdn Bhd [1999] FCA 1428
Wren v Mahony (1972) 126 CLR 212

First Applicant:

ALEKSANDRA GACIC

Second Applicant:

LJILJANA GACIC

Respondent:

DANA BANOV

File Number:

SYG2100 of 2007

Judgment of:

Smith FM

Hearing date:

11 March 2008

Delivered at:

Sydney

Delivered on:

11 March 2008

REPRESENTATION

Counsel for the Applicants:

Mr P Beazley

Solicitors for the Applicants:

Beazley Singleton, Lawyers

Counsel for the Respondent:

Respondent in person

ORDERS

Time for compliance with Bankruptcy Notice NN2442/2007 issued on 14 June 2007 is extended until 21 days after the determination of the appeal number 40365 of 2007 filed in the New South Wales Court of Appeal against the decision of His Honour Judge Nield DCJ dated 11 May 2007.
No order as to costs of this application.
Each party has liberty to apply to discharge or vary these orders, by application allowing 5 clear days notice to the other parties.
The applicants must provide a copy of this order to the Official Receiver within 2 days.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
SYDNEY

SYG2100 of 2007

ALEKSANDRA GACIC

First Applicant

LJILJANA GACIC

Second Applicant

And

DANA BANOV

Respondent

REASONS FOR JUDGMENT

(revised from transcript)

This is an application filed on 6 July 2007, in which the applicants seek orders:
1.That Bankruptcy Notice No. NN2442/07, which was served on me on Tuesday, 19 June 2007 be set aside.
2.In the alternative, that the time for compliance with the Bankruptcy Notice be extended up to and including twenty‑one (21) days after the determination of the appeal number 40365 of 2007 filed in the New South Wales Court of Appeal against the decision of His Honour Judge Nield DCJ dated 30 April 2007.
The bankruptcy notice names the two applicants, “the Gacic sisters”, as “the debtor”. Ljiljana Gacic is incorrectly named as “Lilliana Gacic”, as she was in the certificate of the District Court judgment which is relied upon. However, this error is an obvious irregularity, and a ground of objection which was raised in the application based on the error was not pressed in argument before me today.
In paragraph 1 of the bankruptcy notice, Ms Banov claims that the Gacic sisters owe “the creditor a debt of $223,699.71, as shown in the schedule”. The schedule identifies the amount of the judgments or orders as being $220,644.41, an amount of legal costs of $1000, and an amount of $2,055.30 as “interest accrued since the date of judgments or orders”, making up the total debt claimed. The interest is explained in the required attachment to the bankruptcy notice, which shows that it is calculated according to the rate under s.101 of the Civil Procedure Act 2005 (NSW) on the amount of $220,644.41 from the date of judgment, being 11 May 2007, until 14 June 2007, at a daily rate of $60.45.
The certificate of judgment attached to the bankruptcy notice is certified by the Registrar of the District Court as follows:
1.In this action the Plaintiff recovered Judgment against the Defendant on 11/05/2007, in the sum of $220,644.41 and his costs, $0.00.
The certificate also certifies that nothing has been paid in respect of the judgment, and that interest is accruing on the judgment debt under s.101 of the Civil Procedure Act.
Prima facie, therefore, the bankruptcy notice properly identifies the amount of the judgment, and an additional amount of interest accruing since the date of that judgment. No challenge is now made to the calculation of the amount as shown.
However, the argument presented in support of paragraph 1 of the present application, in effect, is that the amount of interest which is being claimed in item 3 of the schedule is in fact not payable to the creditor under s.101 of the Civil Procedure Act. The applicants argue that it is by reason of s.101(6), which says:
101(6)This section does not authorise the giving of interest on any interest payable under this section.
In support of this argument, I was taken to the reasons for the District Court judgment, given by Nield DCJ on 11 May 2007. His Honour’s judgment explains his findings upon a controversy in relation to the existence of the debt, after a trial lasting many days. His Honour said at the end of his reasons:
59.I am satisfied that the plaintiff is entitled to a verdict against the second and third defendants for the amount of the loan, that is $150,000, together with interest thereon from 24 June 2003, which is fourteen days after the last payment of interest, which payment was made on 10 June 2003 as per the deposit slip part of exhibit G.
60.I consider that the plaintiff is entitled to interest from 24 June 2003 to 3 March 2004 at the rate of $1,503 per fortnight and from 4 March 2004 to 31 December 2006 at the rate of 9 percent per annum and from 1 January 2007 to today 11 May 2007 at the rate of 10 percent per annum, those rates being the rates referred to in schedule 5 to the Uniform Civil Procedure Rules.
61.I calculate interest on $150,000 as follows:
(i)From 24 June 2003 to 3 March 2004 at $1,503 per fortnight to be $27,054.
(ii)From 4 March 2004 to 31 December 2006 at the rate of 9 percent per annum to be $38,206.85.
(iii)From 1 January 2007 to today 11 May 2007 at the rate of 10 percent per annum to be $5,383.56.
Accordingly, I calculate interest to total $70,644.41.
62.In the result I find a verdict for the plaintiff for the amount of the loan, that is $150,000 together with interest thereon of $70,644.41, making a total of $220,644.41 against the second and third defendants. I order that judgment be entered for the plaintiff against [the] second and third defendants for the amount of $220,644.41. I order that the second and third defendants pay the plaintiff’s costs of the claim, such costs to commence from the filing of the plaintiff’s Amended Statement of Claim, such costs to be agreed or if not agreed, assessed. I order that the exhibits remain in the Court’s registry and that, if a Notice of Appeal is not filed within thirty days of today, they be returned to the party which tendered them. …
In my opinion, it is plain from his Honour’s reasons that the total amount of the judgment which was ultimately entered, and which was certified in the certificate attached to the bankruptcy notice, did not include any amount of interest referrable to a period subsequent to the date of judgment. The amount of interest now claimed in item 3 of the schedule therefore does not include any interest calculated, or having the effect of being, “interest on any interest payable under this section”, since s.101 concerns, and authorises, only interest payable on a judgment for a period after the date of judgment. In short, the amount of the judgment entered on the order of Nield DCJ did not include any amount of interest “payable under” s.101, so that the interest claimed in the bankruptcy notice did not claim interest under s.101 on an amount of interest payable under that section.
Contrary to the applicants’ submissions, s.101(6) does not contain any prohibition upon interest becoming payable under s.101 upon a part of a judgment which was calculated as interest for a period prior to judgment. Rather, in my opinion, s.101 authorises the charging of simple interest on that component, in the same manner as any other component included in the judgment. There is nothing unfair or surprising about giving s.101 such an effect.
Nor, in my opinion, did Nield DCJ’s statement of reasons for his judgment indicate that the judgment which was ordered to be entered by his Honour, and which is certified in the certificate attached to the bankruptcy notice, contravened the provisions of s.100 of the Civil Procedure Act, as was also submitted on behalf of the present applicants. That section empowers the making of an award of interest for a period prior to the date of judgment. It provides in s.100(3):
100(3)This section:
(a)does not authorise the giving of interest on any interest awarded under this section, and
(b)does not authorise the giving of interest on a debt in respect of any period for which interest is payable as of right, whether by virtue of an agreement or otherwise, and
(c)does not authorise the giving of interest in any proceedings for the recovery of money in which the amount claimed is less than such amount as may be prescribed by the uniform rules, and
(d)does not affect the damages recoverable for the dishonour of a bill of exchange.
It is therefore clear from s.100(3) that an award of interest up to judgment under that section may not include compounding interest calculated under that section, nor interest calculated under the section for any period in which interest was payable according to a contractual right. However, I do not read his Honour’s judgment as infringing either of those prohibitions.
If the present application invites me to go behind the certificate of judgment, to argue that it contained an impermissible amount of interest awarded under s.100, I would not be satisfied that there was any justification for doubting the correctness of the judgment debt in that respect (cf. Wren v Mahony (1972) 126 CLR 212 at 224).
In my opinion, the present bankruptcy notice does not suffer from any defect in relation to its statement of either the amount of the judgment or order relied upon, nor the amount of interest after judgment which is identified in item 3 of the schedule and is explained in the interest calculation. I therefore consider that the ground upon which the Court is invited to set aside the bankruptcy notice must fail.
In relation to the applicants’ application to extend the time for compliance with the bankruptcy notice, so as to allow the Gacic sisters further time to pay the debt or to show that it is not owing, the evidence before me is that a notice of appeal has been filed from Nield DCJ’s judgment, and that there have been steps taken in the Court of Appeal in relation to its progress, including by the bringing of an application for a stay on that judgment.
The present evidence is that the stay application was granted in the Court of Appeal on 6 August 2007, “upon the undertaking by Aleksandra Gacic and Liljiana Gacic to pay into Court the judgment debt owing to Dana Banov from any defamation award should they be successful in the defamation proceedings”. The reference to “the defamation proceedings” is to a defamation proceedings in which the Gacic sisters are plaintiffs with the de facto partner of one of them, Mr Branislav Ciric. As I have explained in another judgment I have given today (see Banov v Ciric [2008] FMCA 353), he also is liable to Ms Banov in relation to the loaned amount which was found by Nield DCJ also to be owed by the present two debtors. It would appear, therefore, that the Court of Appeal when granting the stay has been satisfied that it was appropriate to secure payment of the judgment debt, by accepting this undertaking as a sufficient basis for allowing the appeal to proceed with the benefit of a stay on execution.
Much of the circumstances surrounding the defamation proceedings, the proceedings before Nield DCJ, and the proceedings in the Court of Appeal are obscure to me on the present evidence presented by both parties. However, I am satisfied by the evidence, which includes his Honour’s reasons and a draft notice of appeal, that there is currently on foot an appeal from Nield DCJ’s judgment, and that it may be characterised as a “genuine and arguable” appeal. I am satisfied that it is being diligently prosecuted, since the evidence suggests that it is proceeding according to the normal procedures in the Court of Appeal. Certainly no evidence has been led by Ms Banov to disprove this, nor to show that she has taken any steps in the Court of Appeal as a result of any default by the present applicants in pursuing their appeal. I cannot find any substance in her general allegations that the appeal is an abuse of court or without merit. I am also satisfied that the appeal is currently supported by a stay on execution of the judgment debt.
I have considered authorities in relation to the extending of time for compliance with a bankruptcy notice in circumstances where appeals are on foot, such as Burns v AMP Finance Limited [2004] FCA 1094 and Liew v JNS Technologies (M) Sdn Bhd [1999] FCA 1428. In the present case, I am satisfied that it would be consistent with those authorities to extend time for compliance with the bankruptcy notice, at least for so long as the stay given by the Court of Appeal is operative. In the event that the appeal is not being properly prosecuted, Ms Banov will have her remedies, both in the Court of Appeal to lift the stay, and in this Court to varying my present order. I shall reserve liberty to Ms Banov to apply to do this.
In relation to costs, I have decided that it is appropriate to make no order as to the costs of the application. The applicants have lost their contentions that the bankruptcy notice should be set aside, and their application for time to comply with the bankruptcy notice might be regarded as seeking an indulgence from the Court and the creditor. In all the circumstances, I consider that they should not be awarded any costs in relation to their application.

I certify that the preceding eighteen (18) paragraphs are a true copy of the reasons for judgment of Smith FM

Associate: Lilian Khaw

Date: 25 March 2008