Re Gergely Ex Parte Hammer
[1995] FCA 654
•25 JULY 1995
CATCHWORDS
BANKRUPTCY - Creditor's Petition - validity of Bankruptcy Notice - whether Bankruptcy Notice expressed an interest rate validly applying to the judgment debt - whether Bankruptcy Notice suffered from defect in wording reasonably capable of misleading or perplexing debtor - whether incorrect interest claim invalidates Bankruptcy Notice - whether creditor's petition should be stayed until appeal against judgment debt founding Bankruptcy Notice determined - whether creditor's petition should be dismissed because of cross-claim by debtor.
Bankruptcy Act 1966 - s 41(5), s 52(1), s 52(3)
Bankruptcy Rules - r 124(2)
Kleinwort Benson (Aust) Ltd v Crowl (1988) 165 CLR 71
RE GABOR GERGELY; EX PARTE ANDREW HAMMER, JOSEPH HAMMER AND JOLAN FULOP
No. NP 858 of 1995
FOSTER J
25 JULY 1995
SYDNEY
IN THE FEDERAL COURT OF AUSTRALIA )
)
NEW SOUTH WALES DISTRICT REGISTRY ) No. NP 858 of 1995
)
BANKRUPTCY DIVISION )
RE:GABOR GERGELY
Debtor
EX PARTE:ANDREW HAMMER, JOSEPH HAMMER AND JOLAN FULOP
Creditors
JUDGE MAKING ORDERS: FOSTER J
DATE: 25 JULY 1995
PLACE: SYDNEY
MINUTE OF ORDERS
THE COURT ORDERS THAT:
1.A sequestration order be made against the estate of the Debtor.
2.Costs, including reserved costs, be taxed and paid according to the Bankruptcy Act 1966.
3.Proceedings under the sequestration order be stayed for a period of 21 days from today's date in accordance with s 52(3) of the Bankruptcy Act 1966.
THE COURT DIRECTS THAT:
1.A draft of the sequestration order be delivered to the Registrar within 7 days in accordance with Rule 124(2) of the Bankruptcy Rules.
Note: Settlement and entry of orders is dealt with in Rule 124 of the Bankruptcy Rules.
IN THE FEDERAL COURT OF AUSTRALIA )
)
NEW SOUTH WALES DISTRICT REGISTRY ) No. NP 858 of 1995
)
BANKRUPTCY DIVISION )
RE:GABOR GERGELY
Debtor
EX PARTE:ANDREW HAMMER, JOSEPH HAMMER AND JOLAN FULOP
Creditors
CORAM: FOSTER J
DATE: 25 JULY 1995
PLACE: SYDNEY
REASONS FOR JUDGMENT
(Extempore)
HIS HONOUR: I have before me a Creditors' Petition brought against Mr Gabor Gergely as judgment debtor. The granting of the petition is opposed upon four grounds which are detailed in the Notice of Grounds of Opposition filed in these proceedings today. I will deal with each ground in turn.
The first ground of opposition challenges the validity of the Bankruptcy Notice on three bases. It is convenient to deal first with the basis numbered 1(c), where it is claimed that:
"The interest rate expressed in the Notice is not a rate that validly applies to the said judgment."
The interest rate expressed in the Bankruptcy Notice is 14.95 per cent per annum. The relevant judgment was obtained by the petitioning creditors against the debtor in the Commercial Division of the Supreme Court of New South Wales in proceedings numbered 50085 of 1994 heard by Rolfe J. Judgment was obtained for the sum of $1,803,767.99 and costs. His Honour further ordered that interest be paid on the sum of $1,803,767.99 at the rate of 14.95 per cent per annum from the date of the order until payment.
It was submitted by counsel of the debtor that 14.95 per cent per annum is higher that the rate which would ordinarily be applied to judgment debts in the Supreme Court of New South Wales. Although I have not had placed before me the rate of interest prescribed by the Supreme Court Rules, I accept, for the purposes of the submission, that the prescribed rate would have been lower. It is apparent, however, that the 14.95 per cent interest rate expressed in the Certificate of Judgment and in the Bankruptcy Notice arises from two deeds entered into by the debtor as a guarantor of the borrower's obligations to the petitioning creditors, which are at the basis of this case.
These deeds prescribe 14.95 per cent per annum as a "higher rate" payable to the lenders in the circumstances of default in payment of the principal and all other secured moneys, including interest, which have become due and payable.
Although I can find nothing in the judgment of Rolfe J which indicates precisely why the figure of 14.95 per cent per annum was taken as the appropriate interest rate to apply to the judgment debt, I am quite satisfied that what his Honour did was simply to apply the appropriate interest rate arising from the provisions of the deeds of loan. This is a perfectly normal approach in the Commercial Division of the Supreme Court of New South Wales. That being so, I can find no ground of invalidity in the basis numbered 1(c).
The basis numbered 1(a) reads as follows:
"The Notice claims interest until `payment' although a fixed sum has been claimed in paragraph (a) [of the Bankruptcy Notice]."
The relevant portions of the Bankruptcy Notice read as follows:
"Whereas Andrew Hammer, Joseph Hammer and Jolan Fulop ... have claimed that the sum of $1,803,767.99 together with interest thereon at the rate of 14.95 per cent per annum from the 11 October, 1994 until payment which, as at 28 November, 1994 amounts to $35,462.57 making a total of $1,839,230.56 is due by you to them under a final judgment..."
It was submitted by counsel for the debtor that the words "until payment" are capable of relevantly misleading or perplexing the debtor within the principle set out in well-known authorities such as Kleinwort Benson (Aust) Ltd v Crowl (1988) 165 CLR 71. I am satisfied, however, that when one reads the words in the context in which they appear in the Bankruptcy Notice, they are not capable of misleading the debtor. They merely indicate, in my view, that the rate of interest of 14.95 per cent per annum is to be the rate of interest that will be applied until the payment of the debt in full. The words that follow indicate that that interest rate has been applied up to a certain date and the result of that application is to produce the total figure consisting of the original debt plus the amount of interest which is referred to. I am satisfied that no debtor could reasonably have been misled by the use of those words. Therefore, this basis of the opposition to the validity of the Bankruptcy Notice fails.
The basis numbered 1(b) reads:
"The Notice claims interest for 48 days which is incorrect."
There is no concession by the creditors that 48 days is indeed an incorrect period of time. In any event, no notice under s 41(5) of the Bankruptcy Act 1966 ("the Act") was ever given in respect of this period. I am quite satisfied that this ground does not have the effect of rendering the Bankruptcy Notice invalid.
The opposition to the validity of the Bankruptcy Notice contained in paragraph 1 of the Notice of Grounds of Opposition therefore fails.
Grounds 2 and 4, which I shall not set out in full in these short reasons, both deal with the fact that the debtor has appealed from the decision of Rolfe J in the proceedings referred to earlier in these reasons. Ground 2 refers to the fact of the appeal. Ground 4 refers to the ground of appeal.
It has been submitted by counsel for the debtor that in circumstances where an appeal has been brought against a judgment on which the judgment debt founding a Bankruptcy Notice relies, then a petition should not be allowed to go ahead whilst that appeal is pending. This principle is consistent with authority but is, of course, subject to the proviso that the appeal should appear to be genuine and arguable.
In relation to this proviso, counsel for the creditors submitted at the outset that there appears to have been a degree of delay in the prosecution of the appeal. However, as counsel for the debtor submits, this is not a matter that should be given great weight as it is always in the hands of the creditors to approach the Court of Appeal and seek a dismissal of the appeal for want of prosecution. In order to decide whether the petition should be stayed until the appeal is decided, I must, therefore, look to the substance of the appeal.
The proceedings before his Honour were confined by concessions which were apparently made at the hearing to one issue, namely:
"Is the mortgagor entitled to redeem three commercial units on payment of no more than the separate values of those units (or any lesser sum)?"
The submission of the first defendant on this issue constituted the sole defence of the defendants to the plaintiffs' claim for possession. The submission, which his Honour set out on page 7 of the judgment in the form in which it is annexed to the affidavit of the debtor, relied upon an alleged clog on the equity of redemption in relation to the prepayment in part of moneys owing in respect of the mortgage on individual units.
This submission was rejected by his Honour and the appeal relates directly to the portion of his Honour's judgment in relation to the submission from the words "the submission initially advanced" on page 7 down to the words "clog on the equity of redemption" on page 8.
I do not propose to read out that part of his Honour's judgment. However, I have fully considered it together with the other parts of his Honour's judgment dealing with the question of an alleged clog on the equity of redemption. I have also had the benefit of full submissions by counsel on each side as to the force and cogency of this aspect of his Honour's judgment. I have come to the conclusion that an appeal against this aspect of the judgment, whilst no doubt genuine, cannot really be said to be arguable or to constitute a sufficient ground for denying to the petitioning creditors the sequestration order they seek. Accordingly, grounds 2 and 4 are dismissed.
The remaining ground of opposition, ground 3, is in the following terms:
"The debtor has a cross-claim against the petitioning creditors of such a nature that the present petition should be dismissed."
The Notice of Opposition does not provide any particulars in relation to this cross-claim. However, from what has been put to me from the bar table, I gather that the substance of the cross-claim was originally pleaded in the case before Rolfe J but was expressly abandoned. I consider that on general principles, it would not be permissible for the cross-claim to be raised in separate proceedings, in the circumstances that it could have been raised in the proceedings before Rolfe J. Indeed, it appears that it was in substance raised but later abandoned.
In any event, the evidence which has been put before me in relation to the cross-claim does not satisfy me that any viable cross-claim exists. The substance of the cross-claim relies on an agreement, the particulars of which are set out in paragraph 26 of the affidavit of John Campbell Hawkins
dated 10 July 1995. This paragraph was subject to objection by the creditors. I find it unnecessary to rule on the objection because, in my view, the paragraph is quite insufficient to persuade me that there was any such agreement of an enforceable kind. For these reasons I find that ground 3 has not been made out.
In these circumstances all the grounds of objection against the making of the sequestration order have failed. Further, I am satisfied that the debtor committed the act of bankruptcy alleged in the petition, and I am satisfied with the proof of the other matters of which s 52(1) of the Act requires proof.
Accordingly, I make the following orders:
I make a sequestration order against the estate of the debtor.
I order that costs, including reserved costs, be taxed and paid according to the Act.
I direct that a draft of this order be delivered to the Registrar within 7 days in accordance with Rule 124(2).
Application has been made under s 52(3) of the Act for a stay of proceedings under the sequestration order for a period of 21 days. In the circumstances I propose to make an order under that section. Accordingly the sequestration order that I have just made will be stayed for a period of 21 days from today's date.
I certify that the preceding eight (8) pages are a true copy of the reasons for judgment herein of the Honourable Justice M. L. Foster.
Associate:
Date: 25 JULY 1995
A P P E A R A N C E S
COUNSEL FOR THE APPLICANT: V.R. GRAY
INSTRUCTED BY: JOHN LLOYD & CO SOLICITORS
COUNSEL FOR THE RESPONDENT: M.R. ALDRIDGE
INSTRUCTED BY: HARPER WATSON SOLICITORS
DATE OF HEARING: 25 JULY 1995
DATE OF JUDGMENT: 25 JULY 1995
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