Lithgow Enterprises Pty Ltd v Sparrow
[2005] FMCA 26
•18 January 2005
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| LITHGOW ENTERPRISES PTY LTD v SPARROW | [2005] FMCA 26 |
| BANKRUPTCY – Preliminary issue – application for review of registrar’s decision – whether reference to rules of Supreme Court sufficient reference to ‘provision’ for the purpose of Note 2 of Prescribed Bankruptcy Notice – whether notice is invalid for failure to refer to relevant statutory authority. |
Bankruptcy Act 1966
Supreme Court Rules 1987, Rules 84.14, 84.19
Enforcement of Judgments Act 1991 (SA), s.7
Adams v Lambert (2004) FCAFC 322 (9 December 2004)
Australian Central Credit Union Ltd v Annette Marsha Laing (2001) FCA 1154 (21 August 2001).
Australian Steel (Operations) Pty Ltd v Lewis (2000) 109 FCR 33
McDowell v Fox [2002] FMCA 254
General Motors Acceptance Corporation v Marshall (2002) FCA 1006
| Applicant: | LITHGOW ENTERPRISES PTY LTD (ACN 080 275 136) |
| Respondent: | ROBYN JESSICA MARGARET SPARROW |
| File No: | ADG142 of 2003 |
| Delivered on: | 18 January 2005 |
| Delivered at: | Adelaide |
| Hearing Date: | 17 January 2005 |
| Judgment of: | McInnis FM |
REPRESENTATION
| Counsel for the Applicant: | Mr M Sykes |
| Solicitors for the Applicant: | Sykes Bidstrup |
| Counsel for the Respondent: | Ms H Pertsinidis |
| Solicitors for the Respondent: | Andersons Solicitors |
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT ADELAIDE |
ADG142 of 2003
| LITHGOW ENTERPRISES PTY LTD (ACN 080 275 136) |
Applicant
And
| ROBYN JESSICA MARGARET SPARROW |
Respondent
REASONS FOR JUDGMENT
This is an application for review of a decision of a Registrar made on 12 October 2003 whereby the Registrar had dismissed a creditor’s petition and made no order as to costs.
The application for review filed on 28 November 2003 had previously been heard by a differently constituted Court on 9 March 2004. Due to illness of that presiding Federal Magistrate I have been directed by the Chief Federal Magistrate to re-hear the application for review.
Although the application for review of a creditors petition is a hearing de novo, it was made clear both in the written submissions previously relied upon by the parties and transcript of the previous hearing that a narrow issue had been the focus of attention. The narrow issue relates to the question of whether there has been a failure to correctly identify the relevant provision concerning interest and whether that amounts to a fatal defect in the Bankruptcy Notice relied upon by the petitioning creditor. In the circumstances I indicated to the parties that it is desirable for a decision to be made on this matter which I regard as a preliminary issue. Given the application for review is a hearing de novo, then in the event that I decide that the Registrar was incorrect on this issue then I should give both parties the opportunity to be further heard on any other issues concerning the Bankruptcy Notice and the petition which were previously agitated in written submissions before the Registrar and the subject of the affidavit material. Obviously updated material would need to be provided by the petitioning creditor in any event to comply with the provisions of the Bankruptcy Act 1966 (the Act) before proceeding to any sequestration order. The issue concerning the relevant provision under which interest was claimed was not raised by the debtor in the Notice of Intention to Oppose the Application filed on 4 August 2003 and it is common ground that the issue first arose during the course of the hearing before the Registrar. Hence it effectively became a threshold or preliminary issue to be considered by the learned Registrar and was ultimately the subject of the decision to which I have referred earlier together with the Registrar’s helpful written reasons for decision.
Note 2(a) of the prescribed Bankruptcy Notice in the Bankruptcy Regulations provides as follows:-
“If interest is being claimed in this Bankruptcy Notice, details of the calculation of the amount of interest claimed are to be ser out in a document attached to the Bankruptcy Notice. The document must state:
(a)The provision under which the interest is being claimed;
…”
In the present case the Bankruptcy Notice sought an amount of $1,627.50 upon a judgment of $198,000 obtained by order of the Supreme Court of South Australia on 31 March 2003. In the Bankruptcy Notice the following appears at page 10 under the heading “Calculation of Interest”:-
Per Supreme Court Rule 84.19, interest on judgments is calculated at rate proscribed in the Third Schedule.
Third Schedule at paragraph (21) states that from 23 May 2001 Interest is calculated at 6% Per Annum.
Judgment is $198,000.00
198,000.00 = 1980 X 6 = $11,880 (Interest p/a)
100
$11,880 = 32.55 X 50 days (31 March – 20 May 2003)
365
It is useful to set out Rule 84.19 of the Supreme Court Rules 1987 (SA) which provides as follows:-
“Interest on judgments
84.19A judgment debt shall carry interest at such rate as is prescribed by any Statute or Rule or by the judgment of the Court. If no rate is prescribed the rate shall be set out in the third schedule.”
It is also appropriate to set out s.114(1) of the Supreme Court Act 1935 (SA) (the Supreme Court Act) which provides that:-
“(1)All money, including costs, payable under any judgment or order shall bear interest at the rate from time to time prescribes by the rules of the court.”
Both parties were given the opportunity to present any further submissions considered appropriate in this matter since the date of the hearing in March 2004. Both brought to the attention of the Court the decision of the Full Court of the Federal Court of Australia in Adams v Lambert (2004) FCAFC 322 (9 December 2004) (Adams). Counsel for the petitioning creditor also drew to the Court’s attention a decision which had been forwarded to the Court as previously constituted namely the decision of Mansfield J in Australian Central Credit Union Ltd v Annette Marsha Laing (2001) FCA 1154 (21 August 2001).
It is to be noted that the Full Court of the Federal Court in Adams was invited according to the Court to distinguish or else to disapprove the decision of the third judge majority of the five member bench of the Federal Court in Australian Steel (Operations) Pty Ltd v Lewis (2000) 109 FCR 33 (Australian Steel).
It is useful to set out the reasons for judgment in the Adams decision of the Full Court of the Federal Court the following paragraphs:
“1.The grounds of appeal in these two matters which have been heard together are scarcely arguable in this Court, though not so in another place. They invite us contrivedly to distinguish, or else to disapprove, the decision of the three judge majority of a five member bench of this Court in Australian Steel Co (Operations) Pty Ltd v Lewis (2000) 109 FCR 33. The Court in that case was constituted to provide an authoritative determination on a question upon which divergent opinions have been expressed in earlier Full Court decisions. That question related to when an error in, or omission from, a bankruptcy notice could be said to relate to a matter that was an essential requirement of a bankruptcy notice such that the error or omission would invalidate the notice.
2.In these appeals, as in Australian Steel, the bankruptcy notices upon which the appellant grounds his respective creditor’s petitions suffer from the identical vice of misdescribing the provision under which the specified amount of post-judgment interest was claimed. Here the error lay in ascribing the interest claim to s.83A of the District Court Act 1974 (NSW) (which dealt with pre-judgment interest), rather than to s.85 of that Act (which dealt with post-judgment interest). In Australian Steel the error was that the claim was made under the wrong Act. Both in that case and in the present case, there was no error in the actual amount claimed.
3.The majority in Australian Steel held that the error so made invalidated the bankruptcy notice with the consequence that the creditor’s petition founded on the debtor’s non-compliance with that notice had to be dismissed. In the present matter Gyles J considered himself obliged to follow Australian Steel, notwithstanding his distaste for the effect of the majority decision. His Honour held invalid the two bankruptcy notices.
4.The two issues this appeal raises, as already noted, are (i) is Australian Steel properly distinguishable? And (ii) was it incorrectly decided?”
Those extracts indicate that the error of ascribing interest was one whereby an incorrect provision had been referred to in the District Court Act 1974 (NSW) which dealt with pre-judgment interest rather than s.85 of that relevant Act which dealt with post judgment interest. In Australian Steel as noted by the Full Court the error was that the claim was made under the wrong Act and it is perhaps of interest to note that there was no error in the actual amount claimed.
In dismissing the appeal in Adams the Court noted the contentions on behalf of the appellant that Australian Steel was distinguishable and that the Trial Judge had erred in declining to distinguish it. The distinguishing feature being that reference had been made to the correct statute but there had been a misdescription of the appropriate and relevant section.
It is perhaps further relevant to note that when invited to re-consider the decision of the Full Court in Australian Steel, the Court in Adams states the following:-
“17.To the extent that the grounds of appeal call into question the correctness of the decisions both in Australian Steel and in Marshall, they serve the purpose of preserving the appellant’s position should this matter go further. However, given both the purpose for which the court was specially constituted in Australian Steel and the course subsequently taken in Marshall in relation to the majority decision, it would be quite inappropriate for this court now to entertain any questioning of Australian Steel. If such is to occur, it ought be before the High Court.
18.As is apparent from the reasons of the judgment below and from our reasons, the respondent’s case is without substantive merit. There is no dispute that the respondent is indebted to the appellant for the judgment debt of $54,000 and for the accrued interest thereon stated in the bankruptcy notice at that stage merely of $66.85. Interest has in reality been accruing in favour of the appellant since the judgment at the daily rate of $13.32, and is by now relatively sizable in quantification. Had the appellant omitted any reference at all to the interest component, there would have been no answer to the appellant’s petition for bankruptcy, since doubtless there would have been no reference to s.83A of the District Court Act. The respondent does not of course suggest that he was actually misled by anything appearing in the bankruptcy notice, including that mistaken reference. The matter requires legislative attention.”
In the present case it cannot be claimed that there has been an incorrect reference to either rules or legislation of another Court. A central issue however is the question of whether or not reference to a rule is a reference to a “provision” for the purposes of notation 2 in the prescribed Bankruptcy Notice form.
It is submitted on behalf of the petitioning creditor that the reference to Rule 84.14 of the Supreme Court Rules is a reference to the appropriate provision. In considering the issue of “provision” reliance was placed upon the dictionary definition of that word and for the present purposes it is sufficient to refer to the Oxford Concise Australian dictionary Third Edition (1997) which provides the following definition:
“provision … the act or an instance of providing (made no provision for his future) something provided … 2 … 3 a. a legal or formal statement providing for something b. a clause of this …”
It was further submitted upon re-hearing of this matter on behalf of the petitioning creditor that Rule 84.19 is a provision and indeed an enforceable provision which draws its power from s.72 of the Supreme Court Act. Reference was made to the Government Gazette dated 18 September 1986 promulgating the South Australian Supreme Court Rules 1987 in which Rule 84.19 first took effect. Further reliance was placed upon the power of the court on application to issue a warrant for sale authorising seizure or sale of a judgment debtor’s real or personal property or both to satisfy monetary judgment pursuant to s.7 of the Enforcement of Judgments Act 1991 (SA). It was noted that the form of warrant pursuant to Rule 88 of the Supreme Court Rules provides that a warrant of sale under s.7 of the Enforcement of Judgments Act shall be in Form 26. Form 26 provides a direction to the Sheriff of South Australia in the following terms:-
“To sell such of the personal or real property of the (name of party/parties), [name] as are within the State of South Australia in order to satisfy the unsatisfied judgment interest and costs and further interest accruing under Rule 84.19 after the date of this warrant until you receive payment of the moneys which are the subject of this warrant and all of your expenses and fees relating to its execution.” (emphasis added)
It was submitted that Form 26 arising as it does from the Rules made in relation to the Enforcement of Judgments Act provides a clear example of recognition by the Supreme Court of South Australia that Rule 84.19 is a provision upon which a warrant can be executed. It was argued by the petitioning creditor that if that rule can be relied upon for the execution of a warrant for the seizure and sale of property then likewise this Court should regard reference to Rule 84.19 as being a relevant provision sufficient to comply with the requirements of Note 2 in the prescribed Bankruptcy Notice under the Bankruptcy Regulations.
The Respondent debtor invited the Court to apply the principles of the Full Court of the Federal Court in Australian Steel to which reference has already been made. It was noted and I accept that a Bankruptcy Notice must be read strictly because the action may be regarded as the very least quasi criminal in nature. It was submitted that the failure to identify the section from the appropriate legislation is fatal to the enforcement of Bankruptcy Notice. As I understand the submissions for and on behalf of respondent debtor, reference should have been made to s.114 of the Supreme Court Act so that the recipient of the Bankruptcy Notice would be aware of the legislative provision which provides the statutory basis upon which interest may be payable under any judgment or order. The notice is fatal in its failure to identify the provision or even the relevant Act under which interest is being claimed. It is argued that failure of this kind is not curable under s.306(1) of the Act.
In my view the reference to the word “provision” is broad enough to include both an appropriate rule of Court and/or an appropriate section of legislation. I do not read the word “provision” to require in the Bankruptcy Notice a reference only to the relevant statute upon which interest may be awarded in relation to any judgment or order. Whilst it is true that s.114(1) of the Supreme Court Act provides the statutory basis upon which money including costs payable under any judgment or orders shall bear interest, it is equally true that Rule 84.19 provides the source and mechanism by which that interest is to be calculated. Indeed, in my view the reference to the Rule is a more appropriate reference and a more relevant “provision” as it clearly provides the opportunity for the recipient of the Bankruptcy Notice to determine precisely how the interest is calculated. The legislative power to make rules is found in s.72 of the Supreme Court Act and the rules in my view are clearly rules which at the relevant time had been promulgated according to the appropriate procedures in the State of South Australia.
In my view rules of this kind which provide a clear indication of the source and method of calculation of the interest payable cannot possibly mislead the recipient and nor does the mere reference to the appropriate rule provide a fatal flaw to the Bankruptcy Notice. I do not read the requirement to provide a reference to the relevant “provision” as defined to be confined to a statutory provision. The reference to an appropriate rule in my view is sufficient. The reference to the rules in my view does not require the recipient of the Bankruptcy Notice to undertake research of a kind suggested by counsel for the debtor involving an analysis of the rules, the gazette or the section of the relevant legislation. It provides an adequate and appropriate source of information where the debtor can readily identify the basis upon which the calculation of interest has been undertaken and reference to that provision is sufficient in my view and consistent with the authorities to which reference has been made.
Indeed it may be argued that reference to the rule is more appropriate as it is the reference to the rule which provides the recipient of the Bankruptcy Notice with the opportunity to assess the method of calculation of interest which would be far easier than if reference were made simply to the general power set out in s.114 of the Supreme Court Act. Whilst I note reference has been made to other decisions including McDowell v Fox [2002] FMCA 254 and at first instance the decision of Gyles J in General Motors Acceptance Corporation v Marshall (2002) FCA 1006, in my view this is not a case where a choice has been made between competing sections of the relevant statute but rather a rule has been identified which can constitute a relevant provision, both in terms of it being a source and providing a method of calculation. A source of power does not only rest with a legislative power but in my view may also be properly represented by rules of court appropriately promulgated. I am conscious of the fact that the decision of Gyles J was successfully overturned by the Full Court and a stricter view adopted but I have been unable to identify any other case where a petitioning creditor has opted to include a reference to a rule of court as the relevant provision. In my view it is open to the petitioning creditor to do so in the present case.
I am further strengthened in my view that there is no invalidity in the Bankruptcy Notice by reason of a reference to the rule by the further submissions made for and on behalf of the petitioning creditor to the reliance upon the rules in the form of a warrant issued pursuant to s.7 of the Enforcement of Judgments Act (SA).
In my view this is not a case where an incorrect section has been referred to or an incorrect Act. The correct rule has been referred to as the basis upon which the calculation of interest has been provided. If reference had been made to the wrong provision, whether it be a rule or a section, then I would be satisfied that the notice may thereby be regarded as having a fatal defect of the kind referred to in Australian Steel. However that is not the case in the application before the Court. I am satisfied that in relation to the issue of the reference to the rule and interest that the Bankruptcy Notice is valid.
As indicated earlier in this judgment it remains for the parties to be given the opportunity to further raise any other issues upon the hearing de novo of the creditors petition before the Court decides whether to set aside the decision of the learned Registrar and/or to proceed to make a sequestration order.
I am otherwise satisfied that in relation to the issue of interest the essential requirements of the Act have been complied with and that the relevant Bankruptcy Notice is valid.
In considering the relevant provision it is my view that if the legislature intended to refer only to the relevant statutory provision and to exclude rules of court then it could have done so. The relevance of the provision is determined not by a distinction to be made between a source and rateable provision but rather whether it is a relevant provision for the purpose of calculating the appropriate interest on a judgment. The reference to the rules in my view satisfies this requirement of the provision.
I certify that the preceding twenty-six (26) paragraphs are a true copy of the reasons for judgment of McInnis FM
Associate:
Date: 18 January 2005
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