Mottershead Investments Pty Ltd v Aircraft Support Industries Engineering Pty Ltd (in Liquidation) and Ors (No.3)
[2020] FCCA 699
•27 March 2020
FEDERAL CIRCUIT COURT OF AUSTRALIA
| MOTTERSHEAD INVESTMENTS PTY LTD v AIRCRAFT SUPPORT INDUSTRIES ENGINEERING PTY LTD (IN LIQUIDATION) & ORS (No.3) | [2020] FCCA 699 |
| Catchwords: CONSUMER LAW – Interest – interest up to judgment – resolution of dispute as to the date from which interest should accrue – observations on the appropriate rate of interest. |
| Legislation: Federal Circuit Court Rules 2001 (Cth), s.76 |
| Cases cited: Mottershead Investments Pty Ltd v Aircraft Support Industries Engineering Pty Ltd (in Liquidation) & Ors [2019] FCCA 1375 |
| Applicant: | MOTTERSHEAD INVESTMENTS PTY LTD (ACN 119 740 304) |
| First Respondent: | AIRCRAFT SUPPORT INDUSTRIES ENGINEERING PTY LTD (IN LIQUIDATION) (ACN 151 103 552) |
| Second Respondent: | MARK CALVIN LANGBEIN |
| Third Respondent: | ANDREW BILL ANGELO PSALTI |
| Fourth Respondent: | SV PARTNERS ADVISORY (NSW) PTY LTD (ACN 108 727 975) |
| File Number: | SYG 1248 of 2018 |
| Judgment of: | Judge Driver |
| Hearing date: | Decided without oral hearing |
| Date of Last Submission: | 24 March 2020 |
| Delivered at: | Sydney |
| Delivered on: | 27 March 2020 |
REPRESENTATION
| Solicitors for the Applicant: | Mr P Terrett of Terrett Lawyers |
| Counsel for the Second Respondent: | Mr J T Johnson |
| Solicitors for the Second Respondents: | JT Law |
ORDERS
Order 2 made on 2 July 2019 is vacated under rule.16.05(2)(h) of the Federal Circuit Court Rules 2001 (Cth).
The second respondent is to pay interest at the rate of 5.5% on the sum of $209,000 up to judgment from 31 July 2017, being the sum of $22,108.19, under s.76(3)(c) of the Federal Circuit Court of Australia Act 1999 (Cth).
There is to be no order as to costs of the Application in a Case filed on 2 March 2020.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 1248 of 2018
| MOTTERSHEAD INVESTMENTS PTY LTD (ACN 119 740 304) |
Applicant
And
| AIRCRAFT SUPPORT INDUSTRIES ENGINEERING PTY LTD (IN LIQUIDATION) (ACN 151 103 552) |
First Respondent
| MARK CALVIN LANGBEIN |
Second Respondent
ANDREW BILL ANGELO PSALTI
Third Respondent
SV PARTNERS ADVISORY (NSW) PTY LTD
(ACN 108 727 975)
Fourth Respondent
REASONS FOR JUDGMENT
Introduction and background
On 2 July 2019 I gave judgment in the principal proceedings in this matter.[1]
[1] Mottershead Investments Pty Ltd v Aircraft Support Industries Engineering Pty Ltd (in Liquidation) & Ors [2019] FCCA 1375
Relevantly, I ordered the second respondent (Mr Langbein) to pay the applicant (Mottershead) the sum of $209,000 within 14 days and, in addition, I made the following order in relation to interest up to judgment:
The second respondent is to pay interest on that amount up to judgment in accordance with s.76 of the Federal Circuit Court of Australia Act 1999 (Cth) at the rate prescribed in the Federal Court Rules 2011 (Cth).
Section 76 of the Federal Circuit Court of Australia Act 1999 (Cth) (Federal Circuit Court Act) is in the following terms:
(1)This section does not apply to family law or child support proceedings.
Note: See section 117B of the Family Law Act 1975 in relation to family law or child support proceedings.
Application for interest order
(2) A party to proceedings that are:
(a) in the Federal Circuit Court of Australia; and
(b) for the recovery of any money (including any debt or damages or the value of any goods) in respect of a particular cause of action;
may apply to the Federal Circuit Court of Australia or a Judge for an order under subsection (3).
Interest order
(3) If:
(a) an application is made under subsection (2); and
(b) the Federal Circuit Court of Australia or the Judge is not satisfied that good cause has been shown for not making an order under this subsection;
the Federal Circuit Court of Australia or the Judge must either:
(c)order that there be included in the sum for which judgment is given interest at such rate as the Federal Circuit Court of Australia or the Judge thinks fit on the whole or any part of the money for the whole or any part of the period between:
(i) the date when the cause of action arose; and
(ii) the date as of which judgment is entered; or
(d) without proceeding to calculate interest in accordance with paragraph (c), order that there be included in the sum for which judgment is given a lump sum in lieu of any such interest.
Exceptions
(4) Subsection (3) does not:
(a) authorise the giving of interest upon interest or of a sum in lieu of such interest; or
(b) apply in relation to any debt upon which interest is payable as of right, whether by virtue of an agreement or otherwise; or
(c) affect the damages recoverable for the dishonour of a bill of exchange; or
(d) limit the operation of any enactment or rule of law which, apart from this section, provides for the award of interest; or
(e) authorise the giving of interest, or a sum in lieu of interest, otherwise than by consent, upon any sum for which judgment is given by consent.
(5) If:
(a) the sum for which judgment is given (the relevant sum ) includes; or
(b) the Federal Circuit Court of Australia in its absolute discretion, or a Judge in that Judge's absolute discretion, determines that the relevant sum includes;
any amount for:
(c) compensation in respect of liabilities incurred which do not carry interest as against the person claiming interest or claiming a sum in lieu of interest; or
(d) compensation for loss or damage to be incurred or suffered after the date on which judgment is given; or
(e) exemplary or punitive damages;
interest, or a sum in lieu of interest, must not be given under subsection (3) in respect of:
(f) any such amount; or
(g) so much of the relevant sum as, in the opinion of the Federal Circuit Court of Australia or the Judge, represents any such amount.
(6) Subsection (5) does not preclude:
(a) interest; or
(b) a sum in lieu of interest;
being given, under this section, upon compensation in respect of a liability of the kind referred to in paragraph (5)(c), where that liability has been met by the applicant, as from the date upon which that liability was so met.
It is apparent from subsection 76(3) that an order for interest up to judgment must either be an order for interest at a specified rate for the period of time between the date when the cause of action arose and the date of entering judgment, or a lump sum order. The order I made was defective in that it concluded with the words “at the rate prescribed in the Federal Court Rules 2011 (Cth)” when in fact no such rate is prescribed under those Rules. Neither did I specify the date when the cause of action arose.
It is unsurprising in the circumstances, that the parties have not reached agreement on the question of interest up to judgment. I attempted to resolve the matter in correspondence to the parties which, while well intentioned, was probably not particularly helpful. This led to an Application in a Case being filed on 2 March 2020[2] which I heard on 18 March 2020. At that time the parties agreed to me resolving the question of interest up to judgment on the papers on the basis of submissions made on that day and post hearing submissions made by the parties. Both Mottershead and Mr Langbein took the opportunity to file post hearing submissions on the issue.
[2] lodged on 28 February 2020
Consideration
There is no dispute that Order 2 made on 2 July 2019 contains a slip or error which requires correction. The issue between the parties is how the order should be amended. There was at last initially disagreement both as to the appropriate rate of interest and the date when the cause of action arose.
Mottershead relies upon the Federal Court Practice Note concerning interest on judgments.[3] I accept that that Practice Note deals not only with interest on judgments but also interest awarded up to judgment for the purposes of s.51A of the Federal Court Act 1976 (Cth).
[3] Federal Court Practice Note “Interest on Judgment Practice Note (GPN-INT)”
Section 2 of the Practice Note provides that the pre-judgment interest rate:
a)for the period from 1 January to 30 June in any year is to be calculated at a rate which is 4 per cent above the cash rate last published by the Reserve Bank of Australia before that period; and
b)for the period from 1 July to 31 December in any year is to be calculated at a rate which is 4 per cent above the cash rate last published by the Reserve Bank of Australia before that period.
The interest rates claimed by Mottershead in the Application in a Case are calculated at the rates prescribed by section 2 of the Practice Note.[4]
[4] See page 7 Schedule 2 in the Affidavit of PA Terrett sworn and filed on 28/02/2020
The applicable Reserve Bank cash rates and resulting pre-judgment interest rates applied by the Federal Court of Australia are set out in the Federal Court’s document “Pre-judgment and Post-judgment Interest Rates”.[5]
[5] rates
There now appears to be no dispute between the parties, based on the post hearing submissions, that the appropriate rate of interest is 4 per cent above the cash rate published for the relevant period by the Reserve Bank of Australia. There is also no dispute as to the end date of the period, namely the date of my judgment on 2 July 2019. The remaining dispute between the parties is as to the commencement date, ie the date when the cause of action arose.
On that, Mottershead submits as follows:
The 2/07/2019 Judgment of the Court in this proceeding substantially answers both of these issues. In the 2/07/2019 Judgment his Honour made the following findings with respect to the Applicant’s cause of action:
87. There was no payment to either SVP or MI by ASI or any other entity, save as to $11,000.
[para 87, Reasons for Judgment, Driver J, 2/07/2019].
88. I find that that is a breach of warranty or guarantee, which sounds in damages.
[para 88, Reasons for Judgment, Driver J, 2/07/2019].
89. The damage is the amount of the payment promised…
[para 89, Reasons for Judgment, Driver J, 2/07/2019].
It follows, for the purposes of s 76 (3) (c), that the Applicant’s cause of action, damages for breach of contractual warranty, arose on the first date that the promised payment was not made, 31 July 2017.
Plainly, 28/04/2018, the alleged date of assignment, is not the date on which the Applicant’s cause of action arose.
In his 2/07/2019 Judgment Driver J made it clear that the date of the assignment was not relevant to the Applicant’s cause of action. His Honour expressly held that:
73.In short, nothing of relevance to the claims turns on who the assignor was or the identity of the assignee.
[para 73, Reasons for Judgment, Driver J, 2/07/2019].
95.It is not central to the Motterhead’s case that Mr Langbein agrees that there was an assignment of the ASI debt…”
[para 95, Reasons for Judgment, Driver J, 2/07/2019].
It follows that the alleged 28 April 2018 date of assignment bears no relevance to the date on which the Applicant’s cause of action arose, as required by s 76 (3) (c) of the Act.
The promised $22,000 payment that was not made by 31 July 2017 was the first of ten (10) payments. A part of the first promised payment, $11,000 was paid at a later date. None of the other promised payments were ever made.
There is decided authority for the proposition that the cause of action arises when the first of a number of related payment obligations is not satisfied: [See: SCI Operations Pty Ltd and ACI Operations Pty Ltd v Commonwealth of Australia [1996] FCA 1739; and Ian Douglas Ferrier and Desmond William Knight (As Liquidators of Compass Airlines Pty Ltd (in Liquidation)) v Civil Aviation Authority [1994] FCA 1571].
At para 39 of SCI Operations the Court observed that the cause of action arose when the first of a number of related payment obligations was not made. At para 18 of the Ferrier decision the Court found that the payments in question formed part of a whole transaction and that the cause of action arose when the first payment of the “whole transaction” was not made. In the present proceeding, the first $22,000 payment which the Second Respondent failed to pay before the end of July 2017 was the first of ten (10) identical payments. It was as much a whole transaction as the Court was dealing with in Ferrier.
Mr Langbein relevantly submits as follows on this question:[6]
[6] at [19-[22] of his post hearing submissions
So far as the pleading of the assignment from SV Partners Advisory (NSW) Pty Ltd – the party responsible for the issue of the relevant Tax Invoices, it is pleaded in paragraph [3D] of the Amended Statement of Claim: ACB p 20. It is said by the Second Respondent that the relevant assignment is that dated 27 April 2018: paragraph [3D] particular (b), a copy of which is to be found at ACB p 377. Until that time the Applicant did not have any title to the identified Tax Invoices previously issued. It is therefore that date, namely 27 April 2018, which is the date upon which the relevant cause of action relied upon by the Applicant arose.
To the extent that interest is claimed from an earlier date it can only be reliant upon what occurred in respect of the so-called Separation Agreement: ACB p 20, Amended Statement of Claim paragraph [3D] particular (b). Conspicuously, there was no entitlement under the Separation Agreement on the part of the Applicant to commence and maintain the present proceeding as SV Partners Advisory (NSW) Pty Ltd was not a party to that document and none of the other parties to the document were in a position to effect an assignment.
There was no express provision in any contractual dealings between SV Partners Advisory (NSW) Pty Ltd and Mottershead Investments Pty Ltd entitling, it is submitted, the assignment of any statutory entitlement as to costs or interest.
It is submitted that interest as previously ordered ought be calculated from 28 April 2018.
I accept Mottershead’s submission that the cause of action of Mr Langbein’s creditor was complete when the first of the scheme of payment obligations was not satisfied, namely on 31 July 2017. In my principal judgment at [95]-[101] I dealt with the question of assignment of the debt. Mr Mottershead notified Mr Langbein in writing of the assignment by letter dated 28 July 2017. It follows, in my view, that Mottershead’s cause of action arose when the first payment due was not made on 31 July 2017.
I find that the appropriate rate of pre-judgment interest for the period between 31 July 2017 and 2 July 2019 is 5.5 per cent. I accept that Mr Mottershead’s calculation of pre-judgment interest in the sum of $22,108.19 is correct.
I will vacate Order 2 made on 2 July 2019 and substitute an order for pre-judgment interest in accordance with these reasons.
I will order that there be no order as to costs. The difficulty between the parties arose at least in part because of the error in the order made on 2 July 2019. There was also a legitimate dispute as to the commencement date for pre-judgment interest which has now been resolved.
I certify that the preceding seventeen (17) paragraphs are a true copy of the reasons for judgment of Judge Driver
Associate:
Date: 27 March 2020
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