Re Willach Plumbing Contractors Pty Ltd v Ex Parte Reece Pty Ltd

[1992] FCA 35

IN THE FEDERAL COURT OF AUSTRALIA	t :
, ,

GENERAL DIVlSlON	No VP 705 of 1991	1
'.
BANKRUPTCY DISTRICT OF THE	1
STATE OF VICTORIA

RE	WILLACH PLUMBING CONTRACTORS PTY LTD
- and
HORST WILLACH as rruarantnr for WILLACH PLUMBING CONTRACTORS PTY LTD

(Debtors)

EX PARTE:  REECE PTY LTD Formerly H J REECE PTY LTD

(Petitioning Creditor)

Coram:	Ryan J
Date:	5 February 1992
Plnce:	Melbourne

EX TEMPORE REASONS FOR JUDGMENT

RYAN J: This is a petition by Reece Pty Limited, formerly H.J. Reecc Pty Limited, for the

sequestration of the estate of the debtor, Horst Willach. The petitioning creditor recovered judgment in the Supreme Court of Victorla on 18 March 1991. That judgment rec~tcd that:

contained the following rec~tal: 

"1 The Defendant pay to the Plaintiff the amount of $119,947.65 together with

interest thereon calculated at 18.5%	per annum from 24 July 1990 to 18 December
1990 and at 16.1%	per annum from 19 December 1990 to 18 March 1991.

2.   The Defendants pay the costs of the proceeding."

On the basis of that judgment a bankruptcy notice was issued on 29 April

"Whereas H.J. Reece Pty Ltd whose registered office is situalr a t 118 Burwood creditor") has claimed that the sum of $133,646.32 cents (INCLUSIVE OF INTEREST) is due by you to him under a final judgmentlfinal order obtained by him against you in the Supreme Court at Melbourne on the 18th day of March 1991, being a judgmentlan order the execution of which has not been stayed.

THEREFORE TAKE NOTlCE that within twenty-one (21) days after service of this notice on you, excluding the day on which this notice is served on you, you arc required -

(a) to pay the sum of $133,646.32 so claimed by the judgment creditor to the

judgment creditor; or

(h) to secure the payment of the sum rcferred to in the last preceding paragraph to the
satisfaction of the Federal Court of Australia or the judgment creditor or compound

the sum so specified to the satisfaction of the judgment creditor."

It has been contended by counsel for the debtor that the bankruptcy notice is invalid because

it fails to specify the amount of interest included in the claim or the period during which that

amount of interest is said to have accrued. On the construction of the bankruptcy notice
which commends itself to me the notice embodies a demand for the judgment debt and some
unspecified amount for interest which brings the total amount so demanded to $133,646.32.

The requirements for a valid banhruptcy notice were discussed by Lockhart J in m

Bankruntcv Act 1966: Ex narte Commercial Bankine Comnanv of Svdnev Limited (1979) 23

ALR 522 where his Honour observed at 526:

"It is well established that i t is permissible, though not obligatory, to include in a
bankruptcy notice, a claim for interest on a judgment debt which bears interest	In

Re Lehmann: Ex uarte Hasluck (1980) 7 Morrell 181; Re Coouer [l9111 2 KB 550; & O'Keefe (1963) 19 ABC 101; [l9641 ALR 561 (a decision of Clyne J); Re Mullavev: Ex Parte ANZ Bankine Grouo Ltd (a decision of CA Sweeney J) (1977) 20 ALR 276; &

; a - and p e Manion: Ex narte Deuutv Commissioner of Taxation (a

decision of myself) (1979) 23 ALR 270.

If a judgment creditor chooses to claim interest on a judgment debt, it is necessary for
the calcuation of the claim to be accurate, and for the period during which the claim
is made to be specified: Re Mullavev. sunra: Re Davis: Ex narte Devuty
Commissioner of Taxation (1963) to ABC 100; [l9631 ALR 764 and kk ~ c ~ o n a l d

(1978) 18 ALR 505.

Understatement of the amount of statutory interest accrued from the date of judgment
to the date of issue of a bankruptcy notice or other date specified in the notice does

not necessarily vitiate the bankruptcy notice. Section 306 of the Act may be capable

of operating to validate a bankruptcy noticc that othcrwisc would be invalid. See the decision of Riley J in Re Munson. suora, and my own decision in Re Manion. suura "

In my view the formula which has been adopted in the present bankruptcy notice does not

specify the period in respect of which the claim for interest is inclusively made. Two

constructions in my view are equally open.	One is that the claim is made inclusive of interest
to the date of the bankruptcy notice.	The alternative construction is that i t is made inclusive

of interest to the date by which the bankruptcy notice has to be satisfied, that is, 21 days

after service of the notice. That ambiguity, I consider, makes the bankruptcy notice capable

of confusing or embarrassing the debtor, and falls to satisfy the requirements which were

enunciated by Klein J in Re Thomas E. Davis; Ex narte the Deoutv Commissioner of

Taxation (1963) 19 A.B.C. 100 whcre his Honour said:

"The notice is perplexing and is an embarrassment to the debtor; the debtor, if able to
pay, is not obl~ged to calculate and ascertain the amount of interest which must be
paid by him to his creditor. The judgment debt of f1,329.15s is one which by law
carries interest. If a judgment creditor by the issue of a bankruptcy notice demands
the payment of interest on thc judgment debt he must calculate the interest the
payment of which is required and specify the amount thereof in the bankruptcy

notice."

Whilst it has been contended by Miss Dav~es for the petitioning creditor that by use of the

inclusive formula the total amount to be paid including interest has been specified, I do not

regard the notice as satisfying the requirement indicated by Lockhart J in Ex oarte

Commercial Bankine Comuany -a ) at 527 where i t was observed:

'I see no reason in principle why a bankruptcy notice, claiming the amount of a

judgment debt and statutory interest thereon, cannot in terms limit the date to which
interest is calculated and claimed. Provided it is made clear that nothing more is
claimed, the judgment debtor knows where he stands, he may comply with the notice
and pay the total amount claimed or secure payment thereof and if he does not do so
he will have committed an act of bankruptcy."

The ambiguity to which I have referred makes it unclear whether by payment of the amount specified in the bankruptcy notice the debtor will satisfy the entire claim for interest to the date of payment, or as I have indicated, merely to the date of the notice or indeed, perhaps

some other date. I have not done the calculations, but having regard to the differential rates of interest specified in the judgment i t may be that the amount of $133,646.32 is inclusive of interest only to the 18th day of March 1991, the date of judgment, and the last date to which interest was specified in the judgment as accruing a t the rate of 16.1 per cent per annum.

For these reasons I consider that the bankruptcy notice is incurably defective and the petition

should be dismissed.

I ccrtify that this and the preceding three (3)

pages are a true copy of the Reasons for

Judgment of his Honour, Mr Justice Ryan.

Signed: &a&

Date: 5 Ebruwy 1992

Counsel for the Judgment Creditor:	Miss J Davies
Solicitor for the Judgment Creditor:	A E Wundele & CO
Counsel for the Judgment Debtor:	MS S Harmer
Solicitor lot the Judgment Debtor:	Keith W Allan & Associates
Date of Hearing:	5 February 1992
Date of Judgment:	5 February 1992