In a case such as the present, the "relevant date" is the date of the winding up order.
9 Section 438 causes provisions of the Bankruptcy Act 1966 (Cth) to apply. Section 82(3B) of the Bankruptcy Act, introduced by the Bankruptcy Amended Act 1987 (Cth) and therefore in force at the commencement of this winding up and at all times since, is as follows:
"A debt is not provable in a bankruptcy in so far as the debt consists of interest accruing, in respect of a period commencing on or after the date of the bankruptcy, on a debt that is provable in the bankruptcy."
10 This bankruptcy provision applies, via s.438 of the Companies (New South Wales) Code, if Tahore Holdings is properly regarded as an "insolvent" company as referred to in s.438. From this point, I consider the correct analysis to be that set out in my judgment in Re Emilco Pty Ltd (2002) 43 ACSR 536 (a case raising the same issue of "post-liquidation interest" under like provisions of the Corporations Law), with reference to "Emilco" understood as a reference to Tahore Holdings:
"But even if Emilco is not "insolvent", proofs in relation to interest bearing debts are limited in the same way as is stated in s.82(3B). Whether the company is solvent or insolvent, the right to prove is a right referable to the state of its indebtedness as at the commencement of the winding up, while any question of entitlement to interest accruing after that commencement falls to be dealt with separately once it becomes clear (assuming that it does) that there is a surplus after satisfaction of provable claims as they existed at commencement and are afterwards admitted. The matter was put thus by Giffard LJ in Re Humber Ironworks and Shipbuilding Company (Warrant Finance Company's case) (1869) LR 4 Ch App 643:
'For these reasons I am of opinion that dividends ought to be paid on the debts as they stand at the date of the winding-up; for when the estate is insolvent this rule distributes the assets in the fairest way; and where the estate is solvent, it works with equal fairness, because, as soon as it is ascertained that there is a surplus, the creditor whose debt carries interest is remitted to his rights under his contract; and, on the other hand, a creditor who has not stipulated for interest does not get it. I may add another reason, that I do not see with what justice interest can be computed in favour of creditors whose debts carry interest, while creditors whose debts do not carry interest are stayed from recovering judgment, and so obtaining a right to interest.'
In Re W W Duncan & Co [1905] 1 Ch 307, the crystallisation of claims that occurs at commencement of winding up was the subject of a question posed by Buckley J to himself and then immediately answered:
'Now what do you admit to proof for dividend in the winding-up of a company? The amount of the debt at the commencement of the winding-up. That has nothing whatever to do with the payment of interest accruing due after the winding-up if the company turns out to be solvent. There could not until the fact of solvency was ascertained be a right to claim that interest. The sum for which proof can be made is the amount which is entitled to rank for dividend against the assets to such an extent as they will go.'
Whether a creditor whose debt bears interest and who has proved for the principal plus interest to the commencement of the winding up may receive anything on account of interest accruing due after that commencement depends on whether there is a surplus in the hands of the liquidator after all expenses and the like have been met and funds thereafter remaining have been distributed among creditors rateably according to the amounts for which their proofs have been admitted. If a surplus does remain - that is, there has been payment of 100 cents in the dollar in respect of all admitted claims and the liquidator still has funds in hand - the creditor with a claim for post-commencement interest referable to an obligation incurred by the company before commencement is entitled to assert his or her contractual right against the company. This is the position in bankruptcy ( Re Hyman (1930) 3 ABC 61) and also in winding up: Re Fine Industrial Commodities Ltd [1956] Ch 256."
11 These observations apply equally to the present case under the Companies (New South Wales) Code, but with one note of explanation or clarification. Implicit in those observations is the assumption that an obligation to pay interest will be contractual. The same assumption appears in the judgment of Windeyer J in Re Spedley Securities Ltd (2000) 34 ACSR 689 to which Ms Bearup took me when the present application was heard. These references to contractual interest do not mean that interest payable by virtue of some other legally binding obligation stands on some different footing and is not comprehended by the principles stated. It is just that the interest obligation before the court in the particular cases was a contractual obligation. Indeed, as observations of Wootten J in Re A Forsyth & Co Pty Ltd (1975) 1 ACLR 247 show, interest payable by virtue of a contract is but one example of interest within the rule. In Mackenzie v Rees (1941) 65 CLR 1, members of the High Court approached the matter by reference to interest bearing debt generally, without distinction as to the type of obligation requiring the payment of interest: see, in particular, the discussion in the judgment of Dixon J at pages 9 to 14.
12 The source of the obligation to pay interest in the present case is s.95 of the Supreme Court Act 1970. That section declares that, where judgment is given or an order is made for the payment of money, interest shall, unless the court otherwise orders, be payable at the prescribed rate from the date when the judgment or order takes effect on so much of the money as is from time to time unpaid. The principles I have outlined by reference to the extract from Re Emilco Pty Ltd (above) apply to interest required by s.95 to be paid upon a judgment debt in exactly the same way as they apply to interest required by contract to be paid upon a contractual debt. In the particular instance under discussion, Rogers CJCommD did not make any order displacing or modifying the operation of s.95 of the Supreme Court Act.
13 Having reached a point in his administration where he holds a surplus after payment of debts as proved and admitted, Mr Kershaw seeks guidance on the question whether he should, by means referred to in his affidavit, seek claims for post-liquidation interest by creditors whose debts as admitted have already been paid, as well as making a final invitation for the submission of proofs generally. The emergence of a surplus is seen to make appropriate an approach of that kind which would otherwise be superfluous. The steps that Mr Kershaw considers might be taken, including by way of advertising, and the proposed treatment of claims for post-liquidation interest, are set out at paragraphs 36 to 40 of his affidavit sworn on 22 March 2004. Those steps are both prudent and desirable, as a matter of procedure. They also recognise and proceed upon the principles regarding post-liquidation interest that I have referred to above and consider to be correct. Those principles should be applied in relation to all debts upon which interest was continuing to accrue at the time the winding up order was made, regardless of the nature or source of the legal obligation to pay interest.
14 I therefore -
(a) make a direction under s.379(3) of the Companies (New South Wales) Code that Scott Bradley Kershaw, the liquidator of Tahore Holdings Pty Limited, is justified in taking the action set out in paragraphs 36 to 40 of his affidavit sworn on 22 March 2004 and filed herein; and
(b) order that costs of the application be costs in the winding up of Tahore Holdings Pty Limited.
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