Re Serafino; Ex parte Classic Manufacturing Pty Ltd

[1989] FCA 159

Re: JOHN SERAFINO
Ex Parte: CLASSIC MANUFACTURING PTY LIMITED
No. P1358 of 1988
FED No. 159
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA

GENERAL DIVISION
BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES AND THE AUSTRALIAN CAPITAL TERRITORY
Burchett J.(1)

CATCHWORDS

Bankruptcy - bankruptcy notice claimed interest for the day on which the District Court judgment founding it was entered - whether that day should have been included - whether the notice claimed too much - meaning of s.41(5) of Bankruptcy Act - sufficient notice under that subsection - meaning of the phrase "as from the date" in s.85 of the District Court Act (NSW) - principles of computation of time - rule that judicial act is considered as done at earliest moment of day on which it was done - waiver of objection to a bankruptcy notice - claim for interest on moneys paid into Court for period until payment out to judment creditor - Re Manson 14 FCR 109 at 110-111 distinguished.

Bankruptcy Act 1966 (Cth) s.41(5)

District Court Act 1973 (NSW) s.85

Interpretation Act 1987 (NSW) s.36

District Court Rules, Part 3 Rule 1

HEARING

SYDNEY

#DATE 14:4:1989

Counsel for the Debtor: Mr M.R. Aldridge

Solicitors for the Debtor: Kemp Strang & Chippindall

Appearing for the
Petitioning Creditor: Mr C.J. Cooper

Solicitors for the
Petitioning Creditor: Barkell & Peacock

ORDER

The creditor's petition be dismissed.

The petitioning creditor pay the debtor's costs.

NOTE: Settlement and entry of orders is dealt with in rule 124 of the Bankruptcy Rules.

JUDGE1

On 2 December 1987, a judgment was entered by consent in the District Court of New South Wales, at Sydney, in an action brought upon a guarantee by Classic Manufacturing Pty Limited, the petitioning creditor in the present proceedings, against John Serafino, the debtor in the present proceedings. The judgment was in the following terms:-

"IT IS THIS DAY ADJUDGED:

1. The plaintiff recover against the defendant $16,500.00 on its claim inclusive of costs agreed at the sum of $1,500.00

2. The defendant pay $15,000.00 within 14 days.

THE COURT THIS DAY NOTES THE AGREEMENT BETWEEN THE PARTIES THAT -

1. Pursuant to and for the purpose of Section 129 of the District Court Act of 1973 the parties agree that the ruling, order, direction or decision of the Court in this action shall be final.

2. The sum of $2,000.00 paid into Court by the defendant shall be paid out forthwith to the plaintiff or its solicitors and credit for that amount shall be given by the plaintiff to the defendant against the amount of $15,000.00 payable pursuant to the judgment herein.

3. The entitlement of the respective parties to costs in proceedings No. 30612/1986 in this Court and No. 16229/1984 in the Supreme Court of New South Wales are

(sic) satisfied by these terms and judgment and that the parties hereto notwithstanding any orders made in the said proceedings referred to in this paragraph shall not be entitled to any costs as against the other or at all in respect of any of those proceedings."

After the issue of an earlier abortive bankruptcy notice, the petitioning creditor arranged for a bankruptcy notice to be issued dated 29 April 1988, which was served on the debtor on 2 May. This bankruptcy notice included the following:-

"WHEREAS CLASSIC MANUFACTURING PTY LIMITED of 174-180 Goulburn Street, Darlinghurst, Sydney in the State of New South Wales (hereinafter referred to as 'the judgment creditor') has claimed that the balance of $14,500.00 together with interest thereon at the rate of 18.00 per centum per annum on so much of the judgment debt (including costs) as is from time to time unpaid from 2nd December, 1987 to 1st March 1988 and thereafter at the rate of 15.00 per centum per annum ... which at 29th April 1988 amounts to $999.55 making a total of $15,499.55 is due by you to the judgment creditor under a final judgment obtained by the judgment creditor against you in the District Court New South Wales at Sydney on the 2nd day of December 1987, being a judgment the execution of which has not been stayed: THEREFORE TAKE NOTICE that within 14 days after service of this notice on you, excluding the day on which this notice is served on you, you are required -

(A) to pay the sum of $15,499.55 so claimed by the judgment creditor to The Registrar of the District Court of New South Wales at 225 Macquarie Street, Sydney ... ."

1. By letter dated 5 May 1988, the solicitors for the debtor notified the solicitors for the judgment creditor of their allegation that "the interest which has been claimed in the second notice (ie the bankruptcy notice in question) does appear to be excessive of the amount due under the terms of the judgment relied (sic)." The letter continued:-
   

"This letter serves to give you notice pursuant to S.41(5) that the amount claimed in the second notice is in excess of the proper amount due pursuant to the judgment."

By letter dated 11 May 1988, the petitioning creditor's solicitors acknowledged receipt of the letter of 5 May 1988. It is accordingly clear that the notice conveyed by that letter was given within the time allowed for payment by the bankruptcy notice. It is not disputed that the letter constituted proper notice within the meaning of s.41(5) of the Bankruptcy Act 1966, which is in the following terms:-

"A bankruptcy notice is not invalidated by reason only that the sum specified in the notice as the amount due to the creditor exceeds the amount in fact due, unless the debtor, within the time allowed for payment, gives notice to the creditor that he disputes the validity of the notice on the ground of the mis-statement."

1. The authorities say that it is not necessary for a debtor, who gives a notice under s.41(5), to specify any calculation of the alleged excess of the claim, made in the bankruptcy notice, over the amount in fact due. It is sufficient if he notifies the creditor that he disputes the validity of the notice on the ground that the amount specified in it exceeds the amount actually due: Re Murray (1959) 18 ABC 152 at 156; Re Wilhelmsen; Ex parte Gould (1986) 11 FCR 107 at 108.

2. Notice having been given under s.41(5), if in fact the bankruptcy notice did claim an excessive amount, though by a small margin, its effectiveness was destroyed. As Gibbs C.J. said in Walsh v. Deputy Commissioner of Taxation of the Commonwealth of Australia (1984) 156 CLR 337 at 339:-
   

"There is no doubt that a bankruptcy notice will be invalid if the sum specified in the notice as the amount due to the creditor exceeds the amount for which the creditor is entitled to issue execution, provided that the debtor gives timely notice under s.41(5) of the Bankruptcy Act 1966 (Cth), as amended, that he disputes the validity of the notice on that ground."

See also Re Greenhill; Ex parte Myer (NSW) Ltd (1984) 5 FCR 84.

1. Notwithstanding the letter of 5 May 1988, the petitioning creditor presented a creditor's petition on 10 June 1988, which relied on non-compliance with the bankruptcy notice. A notice of intention to oppose petition was filed on behalf of the debtor disputing that he had committed the act of bankruptcy alleged in the petition.

2. The question thus raised for decision is whether the bankruptcy notice claims about $4 too much by reason of the inclusion in it of interest calculated in respect of 2 December 1987, the day the judgment was entered. The argument presented on behalf of the debtor was that this day should have been excluded.

3. Prima facie, one would expect the debtor's contention to be correct. It would be odd if a judgment debtor incurred interest in a case where he paid the judgment on the very day when it was given. The conclusion seems to follow that the first day in respect of which he would incur interest would be the day following the day of judgment.

4. But the matter must be resolved by reference to the effect of the judgment having regard to the terms of the District Court Act 1973 (NSW) and the District Court Rules 1973. Section 85 of the Act provides as follows:-
   

"(1) Unless the Court orders in any particular case that interest be not payable, interest shall, subject to subsection (3), be payable on so much of the amount of a judgment debt as is from time to time unpaid.

(2) Interest payable under subsection (1) in respect of a judgment debt shall -

(a) subject to subsection (3), be calculated as from the date when the judgment debt came into being or from such later date as the Court in any particular case fixes;

(b) be calculated at the rate prescribed for the purposes of section 95(1) of the Supreme Court Act, 1970; and

(c) form part of the judgment debt, but not so as to require the payment of interest upon interest.

(3) Notwithstanding subsection (1) and (2), where -

(a) the amount of the judgment debt (excluding the amount of costs to be ascertained by taxation or otherwise) is paid in full within twenty-one days after the judgment debt becomes payable; or

(b) the amount of costs ascertained by taxation or otherwise is paid in full within twenty-one days after that amount is so ascertained,

interest shall, unless the Court otherwise orders in any particular case, not be payable on the amount so paid."

1. What has to be decided, therefore, is the meaning of the expression "as from the date when the judgment debt came into being", no later date having been fixed by the District Court and subsection (3) not being applicable. General propositions relevant to this question were stated by Barwick C.J. in Associated Beauty Aids Pty Limited v. Commissioner of Taxation of the Commonwealth of Australia (1965) 113 CLR 662 at 667-668. The Chief Justice said:-
   

"No doubt, generally where time is to be computed from a day, that day is excluded from the computation. The same is true of the computation as from a date, which is but a convenient abbreviation of the full expression, the day of the date."

After referring to the particular problem there under consideration as one not dealing with the computation of time but with the consequence of an event which had taken place, Barwick C.J. added, at p 668:-

"There is no general rule as to the consequences of the use of the preposition 'from', whether it be in the computation of the period of time, or in any other connexion. In general, in computing a period of time from a date, the period will commence at the end of the day of that date, but there is no universally operating rule to that effect, see, for example, the illustration given in the note at page 1068 of the report of R. v Stevens and Agnew (1804) 5 East 244 (102 ER 1063), and Wilkinson v Gaston (1846) 9 QB 137 (115 ER 1227). When, as here, a change is to take place from a stated time, the general 'rule' as to the computation of a period of time is not of direct significance, though it is illustrative of the separating effect of the preposition 'from'. In my opinion, it does not usually have an inclusive but rather an exclusive or separatist quality. But unquestionably it may have either. Thus, the preposition derives its relevant quality from the context in which it is found, which includes the purpose which the document in which it is found is evidently designed to effect."

Windeyer J. preferred to decide the case on its own context and circumstances without expressing any view of the general effect in the law of the word "from". Owen J., at 671, was of the opinion that "usually" in the case where a period is fixed from a particular day for the doing of some act, that day is excluded. The proposition accepted by Owen J. is in accordance with what Jordan C.J. said in Ex parte Toohey's Ltd; Re Butler (1934) 34 SR (NSW) 277 at 285-286. See also Norton on Deeds, 2nd ed (1928) 178, where the rule is traced back to Coke on Littleton s. 46b.

1. It seems to me that the principles stated by Barwick C.J. and Owen J. favour the contentions of the debtor in the present case. Generally, a computation of time "as from" a date involves the exclusion of that date, though this is not universally so and the ultimate determinant is to be found in the purpose of the provision, as revealed by its context. I do not think it would be consistent with the purpose of s.85 to treat a judgment debtor as liable to pay a day's interest on the very day of judgment, or in respect of that day. I think interest should be calculated on the judgment pursuant to s.85(2)(a), excluding the date when the judgment came into being.

2. Counsel for the debtor referred me also to s.36 of the Interpretation Act 1987 (NSW), sub-section 1 of which provides:-
   

"If in any Act or instrument a period of time, dating from a given day, act or event, is prescribed or allowed for any purpose, the time shall be reckoned exclusive of that day or of the day of that act or event."

This section, clearly enough, applies to the interpretation of the District Court Act. If s.85(2)(a) can be regarded as prescribing a period of time for the purpose of the calculation of the interest payable under sub-section (1) of the same section, then s.36 of the Interpretation Act would confirm the view at which I have arrived. If not, it is at least consistent with the general method of computation of time by reference to a starting point enunciated in the cases mentioned above. See also Part 3 Rule 1 of the District Court Rules, which evinces an approach similar to that taken by s.36.

1. For the petitioning creditor, it was conceded that there is no room, in a case of overstatement of the debt in a bankruptcy notice, for any de minimis principle. But I was referred to s.83A of the District Court Act, authorising the allowance of interest in proceedings for the recovery of money for the whole or part of the period "between the date when the cause of action arose and the date when judgment takes effect." The argument asserted the construction I have given to s.85, in the light of s.83A, would involve an anomalous interest holiday for the day of judgment. It seems to me the two sections are talking about quite different things, and the supposedly curious consequence is of no importance. Attention was then drawn to the use of the word 'after' in s.85(3)(a) and in Part 7 Rule 4(2) of the Supreme Court Rules 1970, as well as in Part 52 Rule 15 of the District Court Rules. However, I do not think any of these provides a context to persuade me against what I think is the appropriate construction of s.85(2)(a).

2. The petitioning creditor also sought some comfort in the proposition laid down in the old case, Wright v. Mills (1859) 4 H & N, 488 (cf Official Receiver and Liquidator of Jubilee Cotton Mills, Limited v. Lewis (1924) AC 958 at 969, 973), that a judicial act "is to be considered as having been done at the earliest moment of the day" on which it was done (per Pollock CB at 493). However, as Bramwell B. pointed out (also at 493), this principle is concerned with the precedence of judicial acts over others: "To give a priority to such acts you must suppose them to have been before the others. It is not that you do not inquire into fractions of a day, but that you give precedence to the judicial proceeding." Whatever the true ground of it, the rule is an artificial one designed to meet a particular need, and as is pointed out in Halsbury 4th Ed., Vol. 45, para 1145, Lord Coleridge C.J., in Clarke v. Bradlaugh (1881) 8 QBD 63 at 66, refused to recognise it as universal. Although it is perhaps related to a wider principle than that referred to by Bramwell B. (see Ex parte Toohey's Ltd; Re Butler (supra) at 285), I do not think it affects the true construction of s.85, a section concerned with a problem about which the rule says nothing.

3. There were some further matters raised on behalf of the petitioning creditor. It was said that the overstatement of the interest due had been waived by the debtor, and Re Jack; Ex parte C.V. Holland (Holdings) Limited (1959) 19 ABC 268 at 270 and Re Munson; Ex parte Deputy Commissioner of Taxation (1977) 29 FLR 479 at 483 were cited. But each of these was a case where the debtor expressly declined to take a point plainly open to him. The principles enunciated in Craine v. The Colonial Mutual Fire Insurance Company Limited (1920) 28 CLR 305 at 326 were satisfied. There is a quite different situation in the present case. Here, the point was taken during the currency of the bankruptcy notice, and has been maintained ever since. At most, the parties may have been at some cross purposes in correspondence, but I am satisfied the debtor never deviated from his insistence upon the invalidity of the bankruptcy notice.

4. The other matter relates to the form of the District Court judgment, in which reference is made to the payment into Court of $2,000.00. The judgment notes that this sum "shall be paid out forthwith to the plaintiff or its solicitors and credit for that amount shall be given by the plaintiff to the defendant ... ." In correspondence between the parties, the petitioning creditor's solicitors expressly stated:-
   

"Our client has not claimed, and does not claim, any interest on any part of that sum of $2,000.00 which was already in the hands of the Registrar of the District Court as at the date of judgment, namely, 2nd December 1987. Full credit has been given to your client for that sum as is self apparent from the Bankruptcy Notice itself."

Despite this assurance, an argument was put, in reliance on the reasoning of Neaves J. in Re Manson; Ex parte Manson (1987) 14 FCR 109 at 110-111, that the petitioning creditor was entitled to interest on the sum paid into Court until the date it was received by the judgment creditor. The amount involved was said to be about $50.00, thus well exceeding the amount by which interest was otherwise overstated in the bankruptcy notice. However, it seems to me that there is a clear distinction between the terms of the judgment in Re Manson and what is here in question. Re Manson concerned a judgment of the Supreme Court of the Australian Capital Territory in the sum of $28,000.00, together with an order that "the sum paid into court by the first and second defendants be paid out to the plaintiff in partial settlement of the judgment." In fact, the amount paid into Court had been so paid by two cheques, one of which was subsequently dishonoured. The proceeds of the other were, in due course, paid out to the plaintiff. There was no suggestion that, under the rules of the Supreme Court of the Australian Capital Territory, a judgment debt was required to be paid into Court rather than directly to the judgment creditor. By contrast, the case before me involves a District Court judgment, the amount of which would, under the rules of the District Court, as indeed is asserted by the terms of the bankruptcy notice here in question, be required to be paid to the Registrar of the District Court of New South Wales. To the extent of $2,000.00, it had already been so paid at the date of the judgment. Furthermore, there was not simply an order for payment out, but an express agreement noted by the Court that credit should be given for the amount which had been paid into Court. In those circumstances, I do not think the reasoning in Re Manson is applicable. There is no basis on which the debtor could be held liable to pay any interest in respect of the $2,000.00 for which he was at all relevant times entitled to credit.

1. For these reasons, the creditor's petition must be dismissed with costs.