PCL Holdings Pty Ltd v Hans Peter Mollinger
[2010] FMCA 216
•31 March 2010
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| PCL HOLDINGS PTY LTD v HANS PETER MOLLINGER | [2010] FMCA 216 |
| BANKRUPTCY – Appropriate application of interest in a Bankruptcy Notice. |
| Bankruptcy Act 1966, s.41 Bankruptcy Regulations 1996 (Cth), rr.4.02, sch. 1 Civil Procedure Act 2005 (NSW), ss.101, 136 Uniform Civil Procedure Rules 2005 (NSW), r.36.7 |
| Bank of WA Ltd v Loiterton [2006] FMCA 361 Provident Capital Ltd v Mollinger & Anor [2009] FMCA 525 Provident Capital Ltd v Mollinger [2009] FMCA 536 Re Mangan Ex parte Andrew (1983) 123 ALR 633 |
| Applicant: | PCL HOLDINGS PTY LTD |
| Respondent: | HANS PETER MOLLINGER |
| File Number: | SYG 1491 of 2008 |
| Judgment of: | Lloyd-Jones FM |
| Hearing date: | 18 June 2009 |
| Date of Last Submission: | 2 July 2009 |
| Delivered at: | Sydney |
| Delivered on: | 31 March 2010 |
REPRESENTATION
| Counsel for the Applicant: | Ms Nolan |
| Solicitors for the Applicant: | Tiernan & Associates |
| The Respondent: | The respondent appeared as a self-represented litigant. |
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 1491 of 2008
| PCL HOLDINGS PTY LTD |
Applicant
And
| HANS PETER MOLLINGER |
Respondent
REASONS FOR JUDGMENT
Background
This judgment addresses the issue left unresolved in Provident Capital Ltd v Mollinger [2009] FMCA 525. The remaining issue to be addressed in this judgment is equally applicable to the judgments in respect of each of the Mollinger Respondents, being: Beau Joshua Mollinger in proceedings Provident Capital Ltd v Mollinger [2009] FMCA 536; Hans Peter Mollinger and Jillian May Mollinger (heard together) in proceedings Provident Capital Ltd v Mollinger [2009] FMCA 525. By way of background to the original proceedings, paragraph [1] –[2] of the judgment Provident Capital Ltd v Mollinger [2009] FMCA 536 provides:
This application for review was filed by Beau Joshua Mollinger, the respondent debtor, opposing a Creditor’s Petition filed on 11 June 2008. Similar applications were filed by his father, Hans Peter Mollinger, and his mother, Jillian May Mollinger. All three were parties to Supreme Court of New South Wales proceedings 1319 of 2004 which resulted in consent orders being made on 31 January 2005. Separate Bankruptcy Notices were issued against all three individuals. The failure to satisfy those Notices led to the issue of separate Creditors Petitions to each debtor which is the issue in these proceedings. Hearings of the Creditor’s Petitions were heard concurrently and I also delivered/deliver a judgment in relation to Hans Peter and Jillian May Mollinger (Provident Capital Ltd v Mollinger & Anor [2009] FMCA 525) and this separate judgment in respect of Beau Joshua Mollinger.
A Notice Stating Grounds of Opposition to the Petition was filed on 8 July 2008. The hearing of the Creditor’s Petition was initially set down for 11 July 2008, however the petitioning creditor sought three consecutive adjournments on 11 July, 1 August and 26 August 2008 to allow time to prepare and present its evidence. The Duty Registrar transferred the matter to this Court for hearing on 26 August 2008.
In the earlier judgment, I had requested the parties to provide written submissions, supported by authorities, clarifying the correct method of the calculation of interest claimed on the judgment debt, taking into consideration post-judgment repayments. Relevantly at [51]:
In the circumstances, I believe that the parties should be provided with the opportunity to prepare written submissions, supported by authorities, clarifying the calculation of interest claimed on the judgment debt when subsequent repayments are made after the date of judgment or orders. The parties should address whether these payments and credits should be taken into account in the calculation of interest.
As I have allowed the Notice of Motion seeking to amend the Creditor’s Petition in this earlier judgment, the issue that remains for this judgment is based upon the parties’ submissions as to the correct calculation of interest on the judgment debt, taking into consideration subsequent repayments.
The parties have provided the Court with written submissions pertaining to the question of whether the Creditor’s Petitions were misleading as I found that the significant repayment from the sale of the secured properties in East Ballina were not reflected in the reduction of interest calculations and this may have affected the position of the insolvency of the debtors.
As the substantive issues in this matter have already been dealt with in the earlier judgment, I do not consider it appropriate to revise my earlier judgment in relation to the validity of the Bankruptcy Notice. I should also note that despite the most recent submissions of the Respondent on this issue, at the relevant time for consideration, no formal application was before the Court in this regard. I consequently do not consider it appropriate to review this issue in the present judgment.
The issue addressed in the submissions of both parties in relation to whether or not it is open for this Court to find that the Bankruptcy Notice and subsequent Creditor’s Petitions were misleading, is an issue that has already been dealt with at [44] – [49]:
The issue of verification has been considered above, leaving the question of whether the Bankruptcy Notice and subsequent Creditor’s Petitions are misleading. The Bankruptcy Notice issued to Mr Mollinger and his parents is based on a consent judgment issued in the Supreme Court of New South Wales, number 13129 of 2004. The judgment was for the amount of $1,904,009.75 and for costs of $2,509.00. Both figures are accurately recorded in the schedule to the Bankruptcy Notice.
The calculation of interest is set out in Annexure B to the Bankruptcy Notice and calculated at 9% for the period of 31 January 2005 to 31 December 2006 (being 700 days) and at 10% for the period 1 January 2007 to 3 April 2008 (being 459 days). Both interest rates are in accordance with Schedule 5 of the Uniform Civil Procedure Rules. The result of that calculation is interest totalling $568,073.05, which again has been accurately recorded in the Schedule to the Bankruptcy Notice.
Item 5 of the Schedule records payments made and/or credits allowed since the date of judgment, totalling $1,636,942.65. It is noted that the Mollingers’ principal private residence at 18 Henderson Drive, Lennox Head, was sold with the sale completed on 26 July 2005. An amount of $444,976.24 was received by Provident (Exhibit “R3”, Annexure 8). Sale of the property known as 1/9 Seaview St, East Ballina was settled on 28 February 2006 and resulted in a payment of $513,933.03 to Provident (Exhibit “R3”, Annexure 9). Similarly, the property known as 2/9 Seaview St, East Ballina, was sold on 12 April 2007 and $438,140.52 being paid to Provident (Exhibit “R3”, Annexure 10).
These capital repayments are not reflected to reduce the interest calculations in the Schedule to the Bankruptcy Notice. No evidence was led, nor submissions made, in respect of a reduction in the principle amount using the interest calculations set out in Annexure B to the Notice. Indeed, those reductions would have resulted in a substantial reduction in the amount of interest claimed.
Unfortunately, the Mollingers, through oversight or ignorance, did not dispute the validity of the Bankruptcy Notice in accordance with s.41(5) of the Act. A review of the authorities supports the view that such a notice in accordance with s.41(5) invalidates a Bankruptcy Notice whether or not the overstatement could reasonably mislead the debtor: Re Greenhill; ex parte Myer (NSW) Ltd (1984) 5 FCR 84; Re Emerson; Ex parte Wreckair Pty Ltd (1991) 101 ALR 315; Seovic Civil Engineering Pty Ltd v Groeneveld (1999) 161 ALR 543.
The time prescribed by s.41(5) of the Act may be extended by the Court under the s.33(1)(c) of the Act: Re Wilhelmsen; ex parte Gould (1986) 11 FCR 107; Re Clubb; ex parte Clubb v Westpac Banking Corporation (1990) 93 ALR 123. Again, no application has been made in respect of this issue. I note that doubt was expressed as to whether such an order could be made after the act of bankruptcy which was 18 May 2008.
Since I have already allowed the Notice of Motion for the Creditor’s Petition to be amended, the remaining issue to be dealt with here relates to the correct methodology for the calculation of interest for the amended Petition, taking into consideration the repayments made after judgment in the Supreme Court of New South Wales, number 13129 of 2004.
In the circumstances and based on the written submissions of the parties, the determination of the correct methodology in interest calculations will be examined under the framework of the relevant legislative provisions.
Requirements of section 41 of the Bankruptcy Act 1966 (Cth)
Section 41(2) of the Bankruptcy Act 1966 (Cth) (“the Act”) provides that a Bankruptcy Notice:
(2)…must be in accordance with the form prescribed in the regulations.
The Applicant submits all that s.41(2) of the Act makes essential to the validity of a Bankruptcy Notice the compliance with reg. 4.02 and Form 1 of the Bankruptcy Regulations 1996 (Cth) as the form prescribed therein.
Relevantly, reg. 4.02 provides:
(1)For the purposes of subsection 41(2) of the Act, the form of Bankruptcy Notice set out in Form 1 is prescribed.
(2)A Bankruptcy Notice must follow Form 1 in respect of its format (for example, bold or italic typeface, underlining and notes).
(3)Subregulation (2) is not taken as expressing an intention contrary to section 25C of the Acts Interpretation Act 1901.
Note Under section 25C of the Acts Interpretation Act 1901 , where an Act prescribes a form, then, unless the contrary intention appears, strict compliance with the form is not required and substantial compliance is sufficient; see also paragraph 46 (1) (a) of that Act for the application of that Act to legislative instruments other than Acts.
Form 1 provides for a schedule calculating the outstanding debt in the following terms (“the Schedule”):
Column 1 Column 2
1. Amount of judgments or orders plus 2. Legal costs if ordered to be paid and a specific amount was not included in the judgments or orders (see Note 1 , below) plus 3. If claimed in this Bankruptcy Notice, interest accrued since the date of judgments or orders (see Note 2 , below) 4. Subtotal less 5. Payments made and/or credits allowed since date of judgments or orders
6. Total debt owing
For the information of creditors, three notes follow the Schedule. Relevantly, Note 2 provides:
Note 2: Interest accrued (item 3 of the Schedule)
If interest is being claimed in this Bankruptcy Notice, details of the calculation of the amount of interest claimed are to be set out in a document attached to this Bankruptcy Notice. The document must state:
(a) the provision under which the interest is being claimed; and
(b) the principal sum on which, the period for which, and the interest rate or rates at which, the interest is being claimed.
(NB: If different rates are claimed for different periods, full details must be shown)
Calculation of post-judgment interest
Section 101 of the Civil Procedure Act 2005 (NSW) (“Civil Procedure Act”) is the source of the entitlement to post-judgment interest on judgments in New South Wales courts, including for these purposes, the Supreme Court of New South Wales. Relevantly, it states as follows:
(1) Unless the court orders otherwise, interest is payable on so much of the amount of a judgment (exclusive of any order for costs) as is from time to time unpaid.
(2) Interest under subsection (1) is to be calculated, at the prescribed rate or at such other rate as the court may order, as from:
(a) the date on which the judgment takes effect, or
(b) such later date as the court may order.
(3) Despite subsection (1), interest is not payable on the amount of a judgment if the amount is paid in full within 28 days after the date on which the judgment takes effect, unless the court orders to the contrary.
(4) The court may order that interest is to be paid on any amount payable under an order for the payment of costs.
(5) Interest under subsection (4) is to be calculated, at the prescribed rate or at such other rate as the court may order, as from:
(a) the date or dates on which the costs concerned were
paid, or
(b) such later date as the court may order.
(6) This section does not authorise the giving of interest on any interest payable under this section.
(7) In this section, a reference to the "prescribed rate" of interest is a reference to the rate of interest prescribed by the uniform rules for the purposes of this section.
Under r.36.7 of the Uniform Civil Procedure Rules 2005 (NSW) (“Uniform Civil Procedure Rules”) the prescribed rates at which interest is payable under s.101 of the Civil Procedure Act are set out in Schedule 5 of the Rules (see supra s.101(7) of the Act).
The Applicant provides a table of the relevant interest rates according to Schedule 5 of the Uniform Civil Procedure Rules:
Column 1
Column 2
Period
Interest rate (per cent per year)
the beginning of March 2002 to the end of 31 December 2006
9
the beginning of 1 January 2007 to the end of 5 March 2009
10
after 5 March 2009
9
I am satisfied that these are the relevant rates of interest to be applied to the debt, over the relevant periods.
In their written submissions the Applicant Creditor concedes:
that the repayments for the sale of secured properties in East Ballina is not reflected to reduce the interest calculations in the Schedule to the Bankruptcy Notice. It would appear that s.101(1) would require this to be done.
The Respondent submits that there has been a consistent failure by the applicant creditor “…to apply the relevant jurisdiction and calculation of interest pursuant to s.101 of the Civil Procedure Act 2005 (NSW)”. The Respondent does not, however, substantiate this submission with any particular example of such a failure.
The Applicant further submits that:
Section 101(1) provides that the interest is payable on so much of the amount of the judgment as is from time to time unpaid; this interest is simple interest… s101(6) of the Civil Procedure Act.
It is noted that s.101 of the Civil Procedure Act by notation refers to s.136 of the Civil Procedure Act as to how monies are to be appropriated…
I note that it is the applicability of the priority identified in s.136 of the Civil Procedure Act that provides the basis of the substantive argument in the attribution of payments.
Section 136 of the Civil Procedure Act 2005 (NSW)
Section 136 of the Civil Procedure Act provides:
Unless the court otherwise orders, any payment made on account of a judgment debt is to be appropriated:
(a) firstly, towards such part of the judgment debt as comprises interest payable under section 101, and
(b) secondly, towards the balance of the judgment debt.
The Applicant submits that, in relation to the applicability of s.136:
…there is no legislative intention, that the operation of s.136 of the Civil Procedure Act be permitted to intrude into bankruptcy proceedings because the provision falls in Part 8 of the Civil Procedure Act which deals with the “Enforcement of Judgments and Orders” which provides for methods of enforcement of judgments and orders not including bankruptcy. However, it may be that s.136 of the Civil Procedure Act, as forming part of the way in which payments are to be appropriated to judgment debts in NSW, is a law of the jurisdiction from which the debt derives and applicable in the proceeding for bankruptcy.
…
There is an absence of judicial consideration of the operation of s136 of the Civil Procedure Act in the context of bankruptcy proceedings other than a short discussion by Smith FM in Bank of WA v Loiterton [2006] FMCA 36, a matter concerning the provision under which liability for interest should be claimed.
Both parties identify the decision of His Honour Smith FM in Bank of WA Ltd v Loiterton [2006] FMCA 361 as relevant to the discussion of s.136. Of this, His Honour makes the following observation at [22]-[23]:
The only provision of the Civil Procedure Act, which was pointed to by counsel for the debtor in aid of his submission that s 101 was intended to be the exclusive source of liability for interest on pre-commencement judgments, was s 136. This provides:
136 Appropriation of payments towards judgment debt
Unless the court otherwise orders, any payment made on account of a judgment debt is to be appropriated:
(a) firstly, towards such part of the judgment debt as comprises interest payable under s 101, and
(b) secondly, towards the balance of the judgment debt.
[23] In its terms s 136 does not show the intention which is now argued, but counsel for the debtor argued that it was not a provision previously found in the District Court Act, and therefore showed that s 101 was part of a novel scheme in relation to interest on judgments which implicitly was intended to supersede and exclude any concurrent operation of the old interest provision. He did not refer me to any extrinsic material or authorities which provide background to s 136. However, in my opinion, the provision did no more than codify a long established presumption of common law (see Re Mangan; Ex parte Andrew (1983) 123 ALR 633 at 639–640, and Laws of Australia [7.5.32]). Even if s 136 introduced some novelty when s 101 is invoked, I am not persuaded that this would show an intention to exclude the continuing operation of s 85 as a source of accrued liability to interest on pre-commencement judgments.
In Re Mangan Ex parte Andrew(1983) 123 ALR 633, His Honour Beaumont J considers at p.639- p.640:
Where the debtor claims to be discharged by reason of payments which were not specially made in respect of either the principal or the interest of the mortgage, the rule is that a general payment shall be applied in the first place to sink the interest, before any part of the principal is discharged: see Fisher & Lightwood's Law of Mortgage, 9th ed p 543. In Falk v Haugh (1935) 53 CLR 163, Rich, Dixon, Evatt and McTiernan JJ said (at 173):
It has long been a rule that when payments are received generally on account of a debt, which is in part interest and in part principal, they are treated as applicable to interest in priority to principal. In Crisp v Bluck (1673) Rep Temp Finch 89 ; 23 ER 48,
123 ALR 633 at 640
a bond creditor received some payments, and afterwards recovered judgment. It was decreed that the payments ought to go in discharge of the interest first. The rule was again enunciated by Lord Keeper Wright in Chase v Box (1702) Freem Ch 261 ; 22 ER 1197. It has, however, been little discussed. The most recent statement of the rule is contained in Venkatadri Appa Row v Parthasarthi Appa Row (1921) LR 48 Ind App 150. There Lord Buckmaster said at 153:
``There is a debt due that carries interest. There are moneys that are received without a definite appropriation on the one side or the other, and the rule which is well established in ordinary cases is that in those circumstances the money is first applied in payment of interest and then when that is satisfied in payment of capital. That rule is referred to by Rigby LJ in the case of Parr's Banking Co v Yates (1898) 2 QB 460 at 466 in these words: `The defendant's counsel relied on the old rule that does, no doubt, apply to many cases, namely, that, where both principal and interest are due, the sums paid on account must be applied first to interest. That rule, where it is applicable, is only common justice. To apply the sums paid to principal where interest has accrued upon the debt, and is not paid, would be depriving the creditor of the benefit to which he is entitled under his contract.' '’
Ms Nolan submits that there is a lack of judicial authority in bankruptcy matters pertaining to s.136 of the Civil Procedure Act despite the obiter comments of Smith FM in Bank of WA Ltd v Loiteron [2006] FMCA 361. There is support in her submissions however, for the rule in Re Mangan (supra) to be followed, which gives rise to appropriation in the same priority.
…there is no apparent legislative intention that the rule in Re Mangan cannot be applied in a bankruptcy context with regard to the calculation of the debt owing on a Bankruptcy Notice or a creditor’s petition in so long as it does not serve to capitalise the interest. That is, the interest calculation is a simple interest calculation with interest behind paid first and principle second.
I am inclined to agree with this reasoning. I am therefore satisfied that the principle in Re Mangan (supra), which incidentally is reflected by the wording of s.136 of the Civil Procedure Act, should be applied to the revised calculations.
I certify that the preceding twenty-six (26) paragraphs are a true copy of the reasons for judgment of Lloyd-Jones FM
Associate:
Date: 31 March 2010
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