Provident Capital Ltd v Mollinger & Anor
[2009] FMCA 525
•18 June 2009
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| PROVIDENT CAPITAL LTD v MOLLINGER & ANOR | [2009] FMCA 525 |
| BANKRUPTCY – Creditor’s Petition – respondent debtor’s opposition to Creditor’s Petition – considerations relevant to review – question in respect of calculation of interest. |
| Bankruptcy Act 1966 (Cth), ss.33, 34A, 52, 306, 41(5), 43 Bankruptcy Regulations 1996 (Cth), reg.16.01(1)(c) Evidence Act 1995 (Cth), s.171 Federal Court Rules (Cth), O.13 Federal Magistrates Court Rules 2001 (Cth) Civil Procedure Act 2005 (NSW), ss.101, 136 Uniform Civil Procedure Rules2005 (NSW), Schedule 5 |
| Joseph Richard Bryant v Commonwealth Bank of Australia [1995] FCA 971 Matthews v Collett [2000] FCA 224 McDonald v Official Trustee in Bankruptcy [2001] FCA 140 Re Clubb; ex parte Clubb v Westpac Banking Corporation (1990) 93 ALR 123 Re Emerson; Ex parte Wreckair Pty Ltd (1991) 101 ALR 315 Re Greenhill; ex parte Myer (NSW) Ltd (1984) 5 FCR 84 Re Small; ex parte Westminster Bank v Trustees [1934] Ch 541 Re Wilhelmsen; ex parte Gould (1986) 11 FCR 107 Seovic Civil Engineering Pty Ltd v Groeneveld (1999) 161 ALR 543 Thai v Deputy Commissioner of Taxation (1994) 53 FCR 252 |
| Applicant: | PROVIDENT CAPTIAL LTD |
| First Respondent: | HANS PETER MOLLINGER |
| Second Respondent: | JILLIAN MAY MOLLINGER |
| File Numbers: | SYG 1491 of 2008 & SYG 1493 of 2008 |
| Judgment of: | Lloyd-Jones FM |
| Hearing date: | 3 October 2008 |
| Delivered at: | Sydney |
| Delivered on: | 18 June 2009 |
REPRESENTATION
| Counsel for the Applicant: | Ms B K Nolan |
| Solicitors for the Applicant: | Tiernan & Associates |
| The Respondents: | The respondents appeared as self-represented litigants |
ORDERS
The parties are 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’ submissions are to address whether these payments or credits should be taken into account in the calculation of interest.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 1491 of 2008 & SYG 1493 of 2008
| PROVIDENT CAPITAL LTD |
Applicant
And
| HANS PETER MOLLINGER |
First Respondent
| JILLIAN MAY MOLLINGER |
Second Respondent
REASONS FOR JUDGMENT
The proceedings
These are two separate applications for review filed by Hans Peter Mollinger and Jillian May Mollinger respectively being the respondent debtors opposing the applicant’s creditor’s petition filed on 11 June 2008. A Notice Stating Grounds of Opposition to the Petition was filed on 12 September 2008. The listing for hearing of the creditor’s petition was initially 11 July 2008 however the petitioning creditor sought three consecutive adjournments on 11 July, 1 August and 26 August 2008 to allow time in which to prepare and present their evidence.
On 26 August 2008 I made the following orders for the further administration of this matter.
1. The applicant file and serve any evidence on which it relies in support of the petition on or before 29 August 2008.
2. The respondent file and serve any evidence in reply upon which [he/she] relies on or before 12 September 2008.
3. The parties have liberty to apply on three days’ notice.
4. The matter be listed for hearing on 3 October 2008 at 10.15am in Court 6C, John Maddison Tower, 88 Goulburn Street, Sydney.
The Ceditor’s Petition was filed in these proceedings on 11 June 2008. Provident Capital Ltd ACN 082 735 573 (“Provident”), the applicant creditor, applied to the Court for a sequestration order under s.43 of the Bankruptcy Act 1966 (Cth) (“the Act”) against the estates of Hans Peter Mollinger and Jillian May Mollinger respectively.
Notice Stating Grounds of Opposition to Petition
An Amended Notice Stating Grounds of Opposition to the Petition was filed on 12 September 2008 listing the following grounds:
1. There is a serious error in the amount of debt claimed in the creditor’s petition against the respondent and the court should invalidate the creditor’s petition.
2. The creditor’s petition claims for the interest accrued and unpaid judgment amounts, are not correct, in relation to matter 13129 of 2004, consent judgment, of the Supreme Court of New South Wales, dated 31st January 2005.
3. The creditor’s petition claim on the amount of secured and unsecured debt as unpaid is a serious error of calculation and misrepresents the evidence of payments that have been received by the applicant.
4. Additional grounds of opposition to the creditor’s petition as sworn in my new affidavit, of the 10th of September 2008, in reply, by order of the court, to the applicant’s affidavit of evidence sworn by Michael O’Sullivan on 29th August 2008.
Evidence in respect of Hans Peter Mollinger
Ms Nolan, counsel for the applicant creditor, moved on the Creditor’s Petition that was presented on 11 June 2008. The date of the act of bankruptcy was 18 May 2008. It is submitted that a Bankruptcy Notice was issued on 8 April 2008 in the correct form with a debt over $2,000.00. It gave an address for payment in Australia with a final judgment not more than six years old (being 31 January 2005) and attached a certified copy of final judgment and interest calculations with reference to Schedule 5 of the Uniform Civil Procedure Rules 2005 (Cth).
An affidavit of service of the Bankruptcy Notice was sworn by John David Morrelly on 27 April 2008, which was within six months from the date of issue of the Notice. The mode of service was personal.
The affidavit of service indicates that the Creditor’s Petition was presented on 11 June 2008. The date of the act of bankruptcy was 18 May 2008, being 21 days after the date of service. It is submitted that it is in the correct form and opposes the debt. The Petition was signed by the creditor and correctly shows the date and time of the hearing as being 11 July 2008. Affidavit of service of the Creditor’s Petition was sworn by John David Morrelly on 22 June 2008. The Petition is verified in respect of paragraphs 1, 2, 3 and 4.
However on 29 August 2008, Michael O’Sullivan swore an affidavit seeking to correct a procedural error in that the original Petition, failing to take into account relevant payments made in reduction of the debt. The further affidavit seeks to correct that discrepancy. Leave of the Court is sought for the Petition to be amended pursuant to the debt outstanding. An affidavit of final debt was sworn by Mr O’Sullivan on 3 September 2008 and an affidavit of current search was sworn by Jessica Lay on 3 October 2008. On 29 August 2008, Ms Lay swore an affidavit of service whereby Ms Lay deposes to having served an affidavit of service of the Bankruptcy Notice, an affidavit of service of the Creditor’s Petition and an affidavit of final search.
The following material was admitted into evidence:
a)Creditor’s Petition – Provident, the applicant creditor, applied to the Court for a sequestration order against the estate of Hans Peter Mollinger.
b)Affidavit of Theresa O’Hare sworn on 6 June 2008 – Ms O’Hare, head of credit and lending on behalf of Provident, verifies that no application had been made to set aside the Bankruptcy Notice NN1170/08 served on Hans Peter Mollinger.
c)Affidavit of service of John David Morelly sworn on 27 April 2008 – Mr Morelly’s affidavit of service on Hans Peter Mollinger states:
I, John David Morelly, a Licensed Process Server of 11 Adam Street, Casino NSW 2470 make oath and say: -
1. On Sunday the 27th of April, 2008 at 5.25 o’clock in the afternoon I did duly serve HANS PETER MOLLINGER with the Bankruptcy Notice herein by delivering a true copy thereof, signed and dated by the Official Receiver, to HANS PETER MOLLINGER personally at 10 SILKWOOD DRIVE, LENNOX HEAD 2478.
2. At the time of service I identified the person I served as the said HANS PETER MOLLINGER by asking the person to be served ‘Are you HANS PETER MOLLINGER, the person referred to in this Bankruptcy Notice?, to which the person then replied ‘Yes’.
3. Annexed to this affidavit and marked with the letter ‘A’ is a true copy of the said Bankruptcy Notice signed and dated by the Official Receiver.
4. I have attained the age of sixteen (16) years.
d)Affidavit of Michael O’Sullivan sworn on 29 August 2008 – Ms Nolan submits that this affidavit seeks to correct a procedural error which failed to take into account the relevant payments made in the reduction of the debt.
e)Affidavit of Michael O’Sullivan sworn on 22 September 2008 verifying the final debt.
f)Affidavit of final search of Jessica Lay sworn on 3 October 2008.
Mr Mollinger tendered the following evidentiary material in support of his application.
a)Affidavit of Hans Peter Mollinger sworn on 2 July 2008 (first affidavit of Mr Mollinger) – only para.7 was read as paras.1 to 6 were put in submissions.
b)Exhibit “R1” – a copy of an email from the Mollingers to Provident.
c)Affidavit of Hans Peter Mollinger sworn on 21 July 2008 (second affidavit of Mr Mollinger).
d)Affidavit of Hans Peter Mollinger sworn on 10 September 2008 (third affidavit of Mr Mollinger). Only paras.1 and 2 were admitted and the balance of the affidavit was treated as submissions.
e)Exhibit “R2” – Annexures A1-A3 to the first affidavit of Mr Mollinger.
f)Exhibit “R3” – Annexures A1-A11 to the second affidavit of Mr Mollinger.
g)Exhibit “R4” – Annexure 1 to the third affidavit of Mr Mollinger.
Evidence in respect of Jillian May Mollinger
Ms Nolan moved on the Creditor’s Petition presented on 11 June 2008. A Bankruptcy Notice was issued on 8 April 2008 in the correct form. It was for a debt more than $2,000, gave the address of payment in Australia and was based on a final judgment dated 31 January 2005. The Notice attached a certificate and sealed copy of the judgment and a schedule of interest in accordance with Schedule 5 of the Uniform Civil Procedure Rules. An affidavit of service of the Bankruptcy Notice was sworn by John David Morrelly on 27 April 2008, which was within six months from the date of issue of the Notice. The mode of service was personal.
The affidavit of service indicates that the Creditor’s Petition was presented on 11 June 2008. The date of the act of bankruptcy was 18 May 2008, being 21 days after the date of service. It is submitted that it is in the correct form and opposes the debt. The Petition was signed by the creditor and correctly shows the date and time of the hearing as being 11 July 2008. Affidavit of service of the Creditor’s Petition was sworn by John David Morrelly on 22 June 2008. The Petition is verified in respect of paragraphs 1, 2, 3 and 4.
The affidavits verifying the final debt and the final search were also tendered. Ms Nolan read the affidavit of service of Ms Lay sworn on 29 August 2008, the affidavit of service of the Creditor’s Petition and the affidavit of final search.
Mr Mollinger, on behalf of his wife, indicated that she relied upon the affidavits of Jillian May Mollinger sworn on 2 July 2008 and 10 September 2008 and the supplementary affidavits of 25 July 2008 and 12 September 2008. I indicated that I would treat the supplementary affidavits on the same terms as those of Mr Mollinger and mark them Exhibits “R5”, “R6” and “R7” respectively.
The following material was admitted into evidence:
a)Creditor’s Petition – Provident, the applicant creditor, applied to the Court for a sequestration order against the estate of Jillian May Mollinger.
b)Affidavit of Theresa O’Hare sworn on 6 June 2008 – Ms O’Hare, head of credit and lending on behalf of Provident, verifies that no application had been made to set aside the Bankruptcy Notice NN1172 of 2008 served on Jillian May Mollinger.
c)Affidavit of service of John David Morelly on Jillian May Mollinger sworn on 27 April 2008 states:
I, John David Morrelly, a Licensed Process Server of 11 Adam Street, Casino NSW 2470 make oath and say: -
1. On Sunday the 27th of April, 2008 at 5.40 o’clock in the afternoon I did duly serve JILIAN MAY MOLLINGER with the Bankruptcy Notice herein by delivering a true copy thereof, signed and dated by the Official Receiver, to JILLIAN MAY MOLLINGER personally at 10 SILKWOOD DRIVE, LENNOX HEAD 2478.
2. At the time of service I identified the person I served as the said JILLIAN MAY MOLLINGER by asking the person to be served ‘Are you JILLIAN MAY MOLLINGER, the person referred to in this Bankruptcy Notice?’ to which the person then replied ‘Yes’.
3. Annexed to this affidavit and marked with the letter ‘A’ is a true copy of the said Bankruptcy Notice signed and dated by the Official Receiver.
4. I have attained the age of sixteen (16) years.
d)Affidavit of Michael O’Sullivan sworn on 29 August 2008.
e)Affidavit of Michael O’Sullivan verifying the final debt sworn on 22 September 2008.
f)Affidavit of final search of Jessica Lay sworn on 3 October 2008.
Mrs Mollinger tendered the following evidentiary material in support of her application:
a)Affidavit of Jillian May Mollinger sworn on 2 July 2008 (first affidavit of Mrs Mollinger) – only para.7 was read as paras.1 to 6 were put in submissions.
b)Exhibit “R1” – a copy of an email from the Mollingers to Provident.
c)Affidavit of Jillian May Mollinger sworn on 21 July 2008 (second affidavit of Mrs Mollinger).
d)Affidavit of Jillian May Mollinger sworn on 10 September 2008 (third affidavit of Mrs Mollinger). Only paras.1 and 2 were admitted and the balance of the affidavit was treated as submissions.
e)Exhibit “R2” – Annexures A1-A3 to the first affidavit of Mrs Mollinger.
f)Exhibit “R3” – Annexures A1-A11 to the second affidavit of Mrs Mollinger.
g)Exhibit “R4” – Annexure 1 to the third affidavit of Mrs Mollinger.
Submissions by Mr Mollinger
Mr Mollinger referred the Court to the ground of opposition based on a serious error in the debt claimed and the prejudice suffered by the respondents. He submits that the Creditor’s Petition claims for interest accrued and unpaid judgment amounts which are incorrect in respect of the consent judgment filed on 31 January 2005 in the Supreme Court proceedings. The Creditor’s Petition claims for unpaid secured and unsecured debts and contains a serious error in calculation. It also misrepresents various payments made to Provident.
Mr Mollinger submits that Provident has failed to substantiate the amount claimed in the Creditor’s Petition for $506,422.33 and that the evidence in the affidavit of Mr O’Sullivan dated 29 August 2008 claims a revised debt amount of $1,500,461.21, being the secured amount of their claim. The unsecured amount is $600,000.00. It is submitted that Provident has failed to present any independent documentary evidence as to the verification of the debt calculation. Further the affidavit of Mr O’Sullivan does not contain any supporting evidence to verify the amount claimed as payment of the alleged debt.
Mr Mollinger submits that on numerous occasions, he was given vastly different figures by Provident as to the amount of the debt.
Mr Mollinger submits that the affidavit of Mr O’Sullivan (sworn on 29 August 2008) invalidates any previous claim against himself and his wife in this matter. He believes that Provident misrepresented the payments and failed to provide supporting documentary evidence of payments made by himself, his wife and his son. He claims that the judgment debt as at January 2005 was for $1,900,000.00, however, they had made numerous payments since that date. Mr Mollinger believes that the calculation of interest claimed by Provident is manifestly incorrect and confirms the uncertainty of Provident’s claim against the Mollingers. He further claims that Provident could adduce evidence from an independent third party accountant to verify the correct amount of the alleged debt outstanding. The affidavit of Mr O’Sullivan sworn on 29 August 2008 claims payment of the reduced debt totalling $1,475,193.45.
Mr Mollinger then referred to the affidavit of Uldouz Van Eenoo, solicitor, sworn on 8 April 2008 in application of issue of the Bankruptcy Notice. This affidavit indicated that there were payments by the Mollingers amounting to $1,636,942.65. This contradicted the repayment of $1,475,193.45 set out in Mr O’Sullivan’s affidavit.
Mr Mollinger submits that Provident’s calculations, which are annexure 1 to the affidavit of Mr O’Sullivan sworn on 19 August 2008, are incorrect in respect of both interest and principal amounts paid to Provident. It is submitted that Provident has made various claims of interest and principal debt from the Mollingers, beginning with its claim dated 3 July 2007 (Annexure 5 to Exhibit “R3”). In the reconciled account statement of July 2007, Provident claimed an amount of $1,059,145.00 as owing. Mr Mollinger submits that this amount grossly overstates the interest due at a rate of 16.25%, which is well in excess of the Court-declared interest payable at that time.
Mr Mollinger submits that Provident continued with an inaccurate claim of arrears as at 28 February 2008 for $1,309,835.35 (Annexure A to Exhibit “R2”). This does not refer to, or consider, assets held in Provident’s possession at that time. Nor does it consider prior payments to Provident from the Mollingers from the sale of other assets and rental payments.
Mr Mollinger submits that prior to serving the Bankruptcy Notice, Provident presented a claim for arrears which was inadequate. Then it lodged a premature and prejudiced claim against the Mollingers with a Bankruptcy Notice for $837,659.15 on 8 April 2008 (Annexure 1 to Exhibit “R3”). That Notice did not refer to the assets or payments listed above.
Further Mr Mollinger submits that the Creditor’s Petition issued on 11 June 2008 claims an amount of $2,506,422.23. Again, this does not acknowledge any payments of the judgment debt by the Mollingers, fails to substantiate the value of the property held in possession by Provident and miscalculates the interest owing and outstanding. Mr Mollinger submits that Provident has continued to enrich its claim against his family by delaying action against them and inaccurately misrepresenting payments made by them from the date of the judgment debt on 31 January 2005 up to issue of the Petition.
Submissions for Provident
Ms Nolan, appearing for Provident, initially sought to clarify a number of representations made by Mr Mollinger in his submissions. The original affidavit verifying the Creditor’s Petition was sworn by Ms O’Hare who was duly authorised to on behalf of Provident. Ms O’Hare had left the firm and was not replaced at the time these proceedings were on foot. The only other person who was able to swear such an affidavit in accordance with the rules of evidence was Mr O’Sullivan. Mr O’Sullivan swore an affidavit on 21 August 2008 after he had regard to the company books. The affidavit deposes to an outstanding debt without accounting for any payments and contributions made and any security. Paragraph 4 of the affidavit states that the debt was $2,548,000. Ms Nolan submits having regard to the Creditor’s Petition and the period of time since it was prepared that the debt owing was $2,506,422.00 (paragraph 1). This represents a discrepancy of $48,000.
Ms Nolan further submits that Mr O’Sullivan deposes to an outstanding debt of $600,464.21 which Provident sought leave to amend. Mr O’Sullivan’s affidavit also set out the methodology which he used to calculate the principal and interest repayments made in accordance with the agreement. The total amount of payments and contributions reduced the debt to $1,050,000.00 with an estimated security of $450,000.00, giving a final figure of $600,464.21. Annexed to the affidavit is a facility of reconciliation which sets out the dates in which principal and interest repayments were made and the percentage calculation in accordance with the Uniform Civil Procedure Rules.
Ms Nolan submits that her instructing solicitors were not notified that Mr O’Sullivan was required for cross-examination. Consequently, his evidence is uncontested. She further submits that Mr Mollinger referred to a number of Court orders which Provident had put on as evidence in substantiation of the debt. However, orders in those terms were never made. Rather, orders were made for affidavits in support and, accordingly, Mr O’Sullivan’s affidavit was filed on 29 August 2008. Ms Nolan submits that Mr Mollinger was, as a respondent to the proceedings, in a position to issue a subpoena to Provident and put on his own expert evidence. He was also in a position to issue a Notice to Produce. However, none of these steps were taken and therefore there is no evidence before the Court as to how the debt ought to have been calculated with the exception of what appears in at Annexure A to Exhibit “R2” and at Annexure A1 to Exhibit “R3”.
Ms Nolan also submits that in both of those documents Mr Mollinger has nominated a figure which represents the unsecured debt due to Provident as at 28 June 2008. Provident does not cavil with the discrepancy in the figure but submits that there is no evidence before the Court that the Mollingers are solvent or have the ability to meet that debt.
Ms Nolan submits on the evidence before the Court that Mr Mollinger acknowledges that a debt is owing and has nominated the amount. However he has not indicated that he is in a position to be able to meet that debt.
Submissions by Mrs Mollinger
Mrs Mollinger was asked if she wished to conduct her case separately from Mr Mollinger and make separate submissions. She informed the Court that she would rely upon her husband’s submissions.
When Mrs Mollinger was asked whether she wished to make additional submissions, she indicated that she wished for her husband to speak on her behalf. Mr Mollinger submitted that with regard to what they considered to be the enrichment by Provident of the total amount claimed, there were periods of obstruction marketing properties which were in Provident’s possession since the initial judgment was made. Of the properties that had been sold, Provident did not conduct valuations but relied on the supposed market value as estimated by a real estate agent.
Mr Mollinger stated that he and his family were not permitted to trespass on the properties to maintain them until a year after they were taken over by Provident. When the family home at 16 Henderson Drive, Lennox Head, was sold it was done so without valuation and at auction. Mr Mollinger states that his family was not invited to that auction as observers. Further when one of the apartments in the complex developed from the loan received from Provident was available for rent, any difference in interest accrued during that period was not used to reduce the debt.
In respect of the final property in Provident’s possession, there had been two proposed sales, one for $435,000 and the other for $438,000 but both were refused by Provident who requested an amount of $480,000 at the time. Mr Mollinger submits that Provident subsequently asserted that the property was worth $450,000.00 without valuation.
Mr Mollinger submits that with the added delays totalling about five months, those properties could have been sold but were not due to Provident. Mr Mollinger also indicated that he and his wife took issue with never receiving an account of what any residual payments were.
Submissions on behalf of Provident
On the understanding that Mrs Mollinger was content to rely on her husband’s submissions, Ms Nolan made identical submissions in respect of Mrs Mollinger.
Consideration
Application to amend Creditor’s Petition
This Court has the power to allow the amendment of a Creditor’s Petition: s.33(1)(b) of the Act; r.7.01 of the Rules; O.13 of the Federal Court Rules (Cth). However, the Court will only permit an amendment when it is satisfied that no injustice will be done to other parties: Re Small; ex parte Westminster Bank v Trustees [1934] Ch 541.
An application ought to be made by way of a Notice of Motion, but the Court has power to dispense with that requirement: O.19.2(2)(d) of the Federal Court Rules; Matthews v Collett [2000] FCA 224. In McDonald v Official Trustee in Bankruptcy [2001] FCA 140, the Full Court said:
There is extensive authority for the proposition that the power of amendment in s.33(1)(b) extends to authorising the amendment of petitions to cure omissions of allegations made mandatory by various provisions of the Bankruptcy Act and rules, ie, to cure what can be accepted to be more serious deficiencies in petitions than “formal defects or irregularities” within s.306.
A Petition amended under s.33 of the Act is not subject to the requirement of re-verification: Thai v Deputy Commissioner of Taxation (1994) 53 FCR 252; Joseph Richard Bryant v Commonwealth Bank of Australia [1995] FCA 971.
In these proceedings, no Motion seeking an amendment of the Creditor’s Petition has been filed. Ms Nolan seeks to rely on the affidavit of Mr O’Sullivan to correct a procedural error, being the failure to take into account the relevant payments made in reduction of the debt. Mr O’Sullivan’s affidavit seeks to correct that discrepancy. Ms Nolan sought leave for the Petition be amended pursuant to the outstanding debt.
The affidavit of Mr O’Sullivan states:
1. I am the Managing Director of the applicant creditor and as such have access to the books and records of the applicant creditor. I am duly authorised to swear this affidavit on behalf of the applicant.
2. I refer to the affidavit of Theresa O’Hare, former Head of Credit and Lending sworn 6 June 2008 in support of the Creditor’s Petition filed 11 June 2008 and say that the respondent debtor owes the applicant creditor the amount for an unpaid judgment of the Supreme Court of New South Wales entered on 31 January 2005 in relation to the matter 13129 of 2004. The judgment debt is the sum of $1,904,009.75 plus costs in the sum of $2,519.00. The interest on the judgment stands in the sum of $644,807.25, subject to the payments and contributions made since 31 January 2008 as set out at paragraph 5 below.
3. The applicant creditor continues to hold security over the property of the respondent debtor to the value of $450,000.00.
4. The outstanding debt, without accounting for the payments or contributions made since that date, without taking into account the security as set out at paragraph 3 above, is $2,548,817.00.
5. The current amount of the debt outstanding is $600,464.21. This figure has been arrived at using the following methodology. Since the date of judgment in this matter being 31 January 2005:
a. The Respondent Debtor has made principal repayments totalling $1,475,93.45.
b. The Respondent Debtor has made interest repayments totalling $23,159.34.
c. The total amount of payments and/or contributions as referred to in paragraph 5(a) and (b) above is $1,498,352.79, reducing the amount owing under the judgment debt to $1,050,464.21.
d. Taking into account the unrealised security referred to in paragraph 3 above, this leaves a total debt outstanding of $600,464.21.
6. This debt remains owing at the time of swearing this affidavit.
7. Annexed and marked “A” is a copy of a Microsoft Excel spreadsheet used to determine the debt outstanding.
The authorities make it clear that an amendment to a Creditor’s Petition under s.33 of the Act is not subject to verification, see Thai v Deputy Commissioner of Taxation at [104] per Lockhart, Beaumont and Whitlam JJ:
104. Counsel for Mr Thai submits that, if the appeal is allowed, it would be futile to order a retrial of the petition, as amended. This is said to be because, when the amended petition was filed on 28 April 1994, it was not accompanied by an affidavit verifying as required by s. 47(1)(b) of the Act. However, that requirement relates only to the creditor's petition when it is presented, which only occurs once. Rules 12, 13, 15 and 16 of the Bankruptcy Rules proceed on this correct construction of the Act. An amendment allowed under s. 33 of the Act is not subject to verification, which is the procedure laid down for the purposes of instituting a proceeding on a creditor's petition.
The other issue to determine in respect of the application to amend the Creditor’s Petition is whether any injustice will be done to other parties. Mr Mollinger has demonstrated by the filing of his third affidavit and his submissions that he is well aware that Provident was seeking to amend the Creditor’s Petition to the extent stated in Mr O’Sullivan’s affidavit. In the circumstances, I am satisfied that a Notice of Motion seeking to amend the Creditor’s Petition should be permitted.
Grounds of opposition
The grounds of opposition to the Petition as set out in the amended Notice which has been reproduced at [5] above.
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 at 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.
The Creditor’s Petition was presented on 11 June 2008 and the Notice stating Grounds of Opposition to the Creditor’s Petition was filed on 8 July 2008. Although Mr Mollinger does not specifically address the calculation of interest in his Grounds of Opposition, he does mention it ground four, albeit without particularisation. In other grounds, Mr Mollinger identifies the sale of properties since the Supreme Court judgment that have had a direct impact on the principal amount owing. Both parties made submissions in respect of the interpretation of the Uniform Civil Procedure legislation but did not specifically address a reduction in the principal amount and any impact that would have on calculation of interest. In a hypothetical situation a very substantial amount could have been paid towards the judgment debt, making a significant difference to the interest calculated. Depending on this difference in interest calculated, the question of Mr Mollinger’s solvency could significantly change. I believe this issue of a discrepancy in interest should be addressed properly prior to the resolution of this matter.
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 or credits should be taken into account in the calculation of interest.
I certify that the preceding fifty-two (52) paragraphs are a true copy of the reasons for judgment of Lloyd-Jones FM.
Associate:
Date: 18 June 2009
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