Morris v Musterford

[2004] QSC 245

SUPREME COURT OF QUEENSLAND

CITATION:	Morris & Anor v Musterford [2004] QSC 245
PARTIES:	IN THE MATTER OF MUSTERFORD PTY LTD (In liquidation)
FILE NO/S:	174 of 2003
DIVISION:	Trial
PROCEEDING:
ORIGINATING COURT:
DELIVERED ON:	25 June 2004
DELIVERED AT:	Cairns
HEARING DATE:
JUDGE:	Jones J
ORDER:
CATCHWORDS:
COUNSEL:
SOLICITORS:

1. The applicants, Peter John Morris and Todd William Kelly are the liquidators of Musterford Pty Ltd (hereinafter “the company”) having been appointed as such on 7 March 2003. 

1. The assets of the company have been realised and the amount so raised has exceeded the quantum of the proven debts.  The question which has now arisen (albeit by a circuitous route) for the court’s consideration is whether interest is payable on the proven debts.

1. Initially, the creditors’ entitlement to interest was challenged by persons interested in the surplus funds.  At the hearing, however, that challenge was withdrawn and the legal representatives of those parties neither consented to nor opposed the directions sought by the liquidators that interest is to be paid on the admitted claims.

1. The payment of interest in the circumstances which have arisen is governed by s 563B of the Corporations Act 2000.  Subsection (1) provides that where “the liquidator pays an amount in respect of an admitted debt or claim, there is also payable to the debtor or claimant, as a debt payable in the winding up, interest, at the prescribed rate, on the amount of payment in respect of the period starting on the relevant date and ending on the day in which the payment is made.”  Subsection (2) provides that the payment of interest “is to be postponed until all other debts and claims in the winding up have been satisfied, other than the debts owed to members of the company as members of the company..”

1. The prescribed rate of interest referred to in subsection (1) is 8% by virtue of reg 5.6.70A of the Corporations Regulations 2001.

1. The effect of the section was considered by Barrett J in two cases – Anderson v Palmer[1].  The enactment of s 563B in 1992 changed the previous rule that interest would be paid only if it was part of the contractual arrangements between the claimant and the company in liquidation.  The earlier rule created a distinction between creditors which was felt to be unfair.  Section 563B was enacted to redress the situation providing a statutory rate of interest for all creditors’ claim once the admitted debts had been paid.  Barrett J construed the section to mean “that the right to interest conferred by the section is absolute”[2].  The payment of interest thus seems to require firstly that the proven claims have been satisfied in full and that the surplus funds remain after payment of all other debts and claims.

   [1](2002) NSWSC 192

   [2]Ibid at para 34

1. The construction referred to above has been adopted by learned authors in Ford’s Principles of Corporations Law at [27,440] and in McPherson – The Law of Company Liquidation at p 537.

1. In circumstances where no argument is advanced challenging the applicability of s 563B and where as the court has been informed that all proven debts and claims have been paid in full then the claimants appear to have a clear entitlement to interest on those payments in accordance with the section.

1. I give directions accordingly.