Perkes, R.D. v McIntyre, I.B

[1992] FCA 888

Re: RAYMOND DAVID PERKES
And: ITALA BELINDA McINTYRE
No. N X79 of 1985
FED No. 888
Number of pages - 8
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA

BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES
GENERAL DIVISION
Beaumont J.(1)

CATCHWORDS

Bankruptcy - Part X - whether monies owing under judgment debt payable to creditor or Trustee of composition - whether interest payable on principal owing - rate to be applied.

Bankruptcy Act and Rules 1966 (Cth)

Federal Court of Australia Act 1976 (Cth)

HEARING

SYDNEY

#DATE 6:11:1992

Counsel and Solicitors for Mr V. Gray instructed
Mr R. Perkes: by Gye Perkes and Stone.

Solicitor for Mrs I. McIntyre: Mr K. Garling of Price Bent.

Mr Andrew, Trustee, in person.

ORDER

THE COURT:

1. Declares that the balance of the amount due by Mrs McIntyre pursuant to s. 86 of the Bankruptcy Act, and after the taking of any set-off, is payable to the Trustee of Mr Perkes' composition.

2. Orders that Mrs McIntyre pay to Mr Andrew, as Trustee of Mr Perkes' composition, the sum of $132,507.74, which includes a sum of $58,339.66 by way of principal.

3. Orders that there be no order as to costs in this matter.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

BEAUMONT J. A further issue has now been argued in the context of another question relating to interest. The calculations contained in the document MFI 1 dated today (annexure A to these reasons) show that the amount of the judgment debt in favour of Mrs McIntyre as at 3 April 1985 was $317,496.20. From this amount a total of $44,505.46 received in three payments is to be deducted: viz $15,000 on 22 November 1985, $20,179.60 on 23 December 1985 and $9325.86 on 15 November 1987. This leaves a balance of $272,990.74 owing to Mrs McIntyre.

1. The judgment debt in favour of Mr Gye against Mrs McIntyre, as at 3 April 1985 (the date of Mr Gye's composition), was $165,854.37. The balance due in favour of Mrs McIntyre after the set-off of Mr Gye's debt was $107,136.37. Interest on the balance from 3 April 1985 until 27 June 1985 (the date of Mr Perkes' composition was 28 June 1985), allowed at the rate of 13.5 per cent for 85 days, is the sum of $3617.69.

2. The balance available to Mrs McIntyre to set-off against Mr Perkes' debt was $110,754.06. The judgment debt in favour of Mr Perkes against Mrs McIntyre as at 28 June 1985 was $169,093.72. Thus, if one ignores for the moment the possibility of interest being allowed on the payments she received totalling $44,505.46 (already referred to), the balance payable by Mrs McIntyre by way of principal to Mr Perkes or his Trustee as at 28 June 1985, was $58,339.66.

3. The issue which has arisen by way of a preliminary point is whether this amount is payable to Mr Perkes, or to Mr Andrew, the Trustee under Mr Perkes' composition.

4. Under Mr Perkes' composition, he undertook to pay the Trustee a certain amount of cash by instalments. Mr Perkes also assigned to the Trustee certain amounts due to him on the dissolution and winding-up of the partnership described in paragraph 4 of the composition. Mr Perkes further assigned to the Trustee any amounts recovered by him as a result of legal action seeking contribution against other members of the partnership. However it was not a term or condition of the composition that there be assigned to the Trustee any amount owed by Mrs McIntyre, whether by way of set-off or otherwise, and it is common ground that there is no provision in the composition to that effect.

5. In the appeal in this Court from Hill J. at first instance (McIntyre v. Gye and Perkes (1990) 22 FCR 260) the Full Court declared:
   

"... pursuant to the Bankruptcy Act (Mrs McIntyre) is entitled to have set-off moneys due to her by (Messrs Gye and Perkes) under (the 1982) judgment ... against moneys due by her to (Messrs Gye and Perkes) under (the 1988) judgment."

1. This declaration looks at the matter from the point of view of Mrs McIntyre's entitlement. In the case of Mr Gye, her claim was larger than the claim he had against her. However, in the case of Mr Perkes the balance tilts in the other direction. That is to say, so far as principal is concerned, Mrs McIntyre owed the sum of $58,339.66.

2. One of the matters argued both in the Full Court and on the appeal in the High Court (see (1990-91) 171 CLR 609), was whether there could be mutuality for the purpose of s. 86 of the Bankruptcy Act ("the Act") in the absence of any provision in the composition by which claims by Mr Perkes against Mrs McIntyre were assigned to the Trustee. The matter is dealt with in the reasons of the full High Court (at 627):
   

"... the real question raised by this submission is, upon analysis, a somewhat different one to that which was directly addressed in argument. It is whether, in the case of a composition under Part X, there can be no set-off between a claim provable in the composition and a claim by the debtor which is not assigned to the trustee under the composition, notwithstanding that there would have been a set-off in bankruptcy between those claims as claims in respect of mutual dealings if, in the words of s.243, 'a sequestration order had been made against the debtor on the day on which the special resolution ... was passed.' As a matter of the ordinary meaning of the words of s.243, the answer to that question is in the negative, that is to say, to the effect that a set-off is not precluded in those circumstances. A negative answer to the question is also supported by considerations of 'substantial justice' and policy."

1. In my view, the High Court there concluded that an assumption should be made that a sequestration order had been made in the present case. Earlier, the High Court pointed out that generally, if a sequestration order had been made, all the assets, including a chose in action such as the debt owed by Mrs McIntyre to Mr Perkes, would be vested in the Trustee. That being so, it must follow, that for present purposes the amount owing by Mrs McIntyre is to be taken to be owed to the Trustee. This conclusion is reinforced by the language of s. 86 of the Act. Section 86(1)(c) provides that where there is mutuality, only the balance of the account may be claimed in the bankruptcy or is payable to the Trustee-in-Bankruptcy, as the case may be.

2. Against this, it is submitted on behalf of Mr Perkes that sub-s. 243(4) of the Act requires a different result. That provision provides that, if after taking into account the prescribed modifications referred to in sub-ss. 243(1) and (2), a provision specified in sub-s. 243(1) or sub-s. (3) is incapable of application in relation to a composition or the Trustee of a composition, or is inconsistent with that Part of the Act, then that provision does not have application.

3. Although it is not expressly provided in the composition that a debt such as that owed by Mrs McIntyre to Mr Perkes has been assigned to the Trustee, s. 86(1)(c) is not incapable of application in relation to a composition in the sense described in sub-s. 243(4). That is my view, but in any event I think the point is foreclosed by the reasoning of the High Court to which I have referred.

4. It follows that I determine this preliminary point in accordance with the submissions put to me by counsel for Mrs McIntyre. I therefore declare that the balance of the amount due by Mrs McIntyre, pursuant to the provisions of s. 86 of the Act and after the taking of the set-off there provided, is payable to the Trustee of Mr Perkes' composition.

5. The second point that arises is the entitlement, if any, to interest on the amount of principal owed by Mrs McIntyre to Mr Perkes' Trustee. It may be noted in this connection that counsel for Mr Perkes has now abandoned any claim for interest in respect of the payments already received.

6. Section 51A(1) of the Federal Court of Australia Act 1976 provides that:
   

"In any proceedings for the recovery of any money ... the Court or a Judge shall, upon application, unless good cause is shown to the contrary, either -

(a) order that there be included in the sum for which judgment is given interest at such rate as the Court or the Judge, as the case may be, thinks fit on the whole or any part of the money for the whole or any part of the period between the date when the cause of action arose and the date as of which judgment is entered; or

(b) without proceeding to calculate interest in accordance with paragraph (a), order that there be included in the sum for which judgment is given a lump sum in lieu of any such interest."

1. Prima facie, the provisions of s. 51A should be applied in the present case. Upon the taking of accounts and after the set-off is taken into account, the sum of $58,339.66 has been due since 28 June 1985. As I have held, Mr Perkes' Trustee has been held out of this money since that date and, on the face of things, should be compensated for the loss of the use of that money in the ordinary way.

2. Against this, it is submitted by counsel for Mrs McIntyre that the matter is complex and it has only recently been ascertained what exact amount is due by Mrs McIntyre after the set-off is taken into account. Counsel also notes that the assets of Mrs McIntyre were subject to a Mareva injunction granted by the Supreme Court.

3. With respect to the latter matter, it should be noted that it was always open to Mrs McIntyre to seek a variation of the Mareva injunction to permit the amount the subject of the present proceedings to be paid. No such application was made and I therefore put that issue to one side. I accept that the present case is complex. I further accept, as counsel points out, that Brownie J's judgment was not given until 1988. Nonetheless, the policy of s. 51A recognises that, although the outcome of litigation is very often uncertain, once it is established by a judgment that money is owed in respect of a cause of action, there should be some scope for compensation of the moving party for the loss of use of the money from the accrual of the cause of action up to the date of judgment. Litigation in this court is frequently (one could say usually) complex. It must be assumed that s. 51A was enacted against this background. In these circumstances, I am not persuaded that I should exercise my discretion under s. 51A other than I usually would in a case of complexity.

4. I therefore order that interest be paid in accordance with an appropriate rate over the period in question. The rules of the Federal Court do not themselves provide a rate for pre-judgment interest, but in New South Wales it is the practice of this Court to have regard to the rate prescribed under s. 94 of the New South Wales Supreme Court Act 1970. In my opinion, that is an appropriate rate to be adopted in this case.

5. The parties have prepared a document (MFI '2') which sets out the rates of interest in accordance with the Supreme Court Practice Notes issued under s. 94 of the Supreme Court Act, and calculations based on those figures are not now disputed. I therefore order that Mrs McIntyre pay Mr Andrew as Trustee of the estate of Mr Perkes the total sum of $132,507.74 which includes the sum of $58,339.66 by way of principal.