Unicomb v Cairns

Federal Court of Australia|2009-09-04|Before: Perram J

REASONS FOR JUDGMENT 1 The question in this case is whether a bankruptcy notice should be set aside. Messrs Unicomb and Turner - who are the appellants in this Court - claim that the notice issued to them is invalid by reason of three defects. The three defects they allege are: (a) the notice is based on a judgment debt for $105,925.86, but, despite that, claims an entitlement to a judgment sum of $102,653.36. Generally, formal defects do not invalidate a bankruptcy notice. Messrs Unicomb and Turner deny the defect is a formal one; (b) the judgment, regardless of the amount claimed, was issued on 9 October 2008. Although the notice claims interest for the period 10 October 2008 to 16 October 2008 (a period of seven days) it does not claim interest for the actual day of the judgment. They claim that interest is due for the day on which a judgment is handed down. It follows, so they submit, that the interest claimed ($196.87) is understated. Again, they contend that that defect is not formal; and (c) if the judgment sum had been paid within 28 days of the date of the judgment, no interest would have been payable because the law gives a discount to those who meet judgments promptly. The notice was issued on 20 October 2008 (that is on the 11th day after the judgment and within the 28 day period). Messrs Unicomb and Turner submit that it was not possible to say that the interest then claimed was due since it remained possible until the expiry of the 28th day after 9 October - that is, 6 November 2008 - that no interest might be due if the judgment sum was paid before that time. Accordingly, the notice claims too much which, so they submit, is a non-formal defect. 2 Messrs Unicomb and Turner applied to the Federal Magistrate's Court to set aside the notice. At that time they put their case only on grounds (a) and (c) set out above. The learned Federal Magistrate rejected both grounds and dismissed the application with costs. They now appeal to this Court raising the same two grounds again. Additionally they raise ground (b) for the first time. No objection was taken to that course by counsel for the respondent, Mrs Cairns. 3 Appeals to this Court from the Federal Magistrate's Court are generally heard by a Full Court. However, the Chief Justice determined pursuant to s 25(1)(A) of the Federal Court of Australia Act 1976 (Cth) that this particular appeal should be heard by a single judge. 4 In my opinion, for reasons which follow, each of the three grounds advanced by Messrs Unicomb and Turner should be rejected and the appeal should be dismissed with costs.

Issue (a): Underclaimed judgment sum 5 The bankruptcy notice claimed a judgment sum of $102,925.86 whereas the judgment sum entered on 9 October 2008 was for $105,925.86. There appeared therefore to be an understatement of the judgment debt in the order of some $3,272.50. Before the Federal Magistrate, and in written submissions in this Court, Mrs Cairns argued that the figure of $3,272.50 could lawfully be demanded from Messrs Unicomb and Turner. 6 The reasons for this are not simple. However, in oral argument in this Court counsel for Mrs Cairns was content to assume that the sum of $3,275.50 could lawfully be demanded from the debtors. The burden of counsel's submission was that, even assuming that to be so, the defect was but a formal one. That description mattered because of s 306(1) of the Bankruptcy Act 1966 (Cth)which provides: (1) Proceedings under this Act are not invalidated by a formal defect or an irregularity, unless the court before which the objection on that ground is made is of the opinion that substantial injustice has been caused by the defect or irregularity and that the injustice cannot be remedied by an order of that court. 7 Of this provision Mason CJ, Wilson, Brennan and Gaudron JJ said in Kleinwort Benson Australia Ltd v Crowl (1988) 165 CLR 71 at [80]: Understatement of the amount due, whether it be an understatement of the judgment debt or of interest payable thereon, will thus constitute a defect which is substantive rather than formal only if the understatement is objectively capable of misleading the debtor as to what is necessary for compliance with the notice. It may be that, in a given case, understatement is capable of misleading the judgment debtor particularly if the notice is capable of producing uncertainty as to whether the debtor is required to pay the amount in fact due or the amount specified in the notice. In such a case uncertainty arises, not merely from the understatement, but from the understatement in the context of the particular bankruptcy notice. No such uncertainty arises if it is clear that payment of the amount specified in the notice will constitute compliance with the notice. (emphasis added) 8 See also Adams v Lambert (2006) 228 CLR 409 at 415-416 [17]-[18]. 9 The relevant portions of the judgment were as follows: Judgment/Order … Plaintiff SUZANNE ROSE CAIRNS … Date made 12 August 2008 as to $3,272.50 14 September 2008 as to $102,653.36 TERMS OF ORDER 1. Judgment for the plaintiff in the sum of $105,925.86 as per certificate as to determination of costs issued on 12 August 2008 and 14 September 2008. 10 The relevant portion of the bankruptcy notice was as follows: 1. SUZANNE ROSE CAIRNS ("the creditor") of: C/- Mullane & Lindsay Solicitors Level 3, 418 Hunter Street NEWCASTLE NSW 2300 claims you owe the creditor a debt of $102,850.23, as shown in the Schedule. 2. The creditor claims that the debt is due and payable by you. A copy of the judgments or orders relied upon by the creditor is attached. At the time of applying for this Notice, execution of the judgments or orders had not been stayed. 11 The Schedule relevantly provided: Column 1 Column 2 1. Amount of judgments or orders $102,653.36 plus 2. Legal costs if ordered to be paid and a specific amount was not included in the judgments or orders (see Note 1, below) $ plus 3. If claimed in this Bankruptcy Notice, interest accrued since the date of judgments or orders (see Note 2, below) $196.87 4. Subtotal $102,850.23 less 5. Payments made and/or credits allowed since date of judgments or orders $ 6. Total debt owing $102,850.23

12 Without recourse to any other materials it is clear, in the language of Kleinwort Benson, "that payment of the amount specified in the notice will constitute compliance with the notice". I discern nothing objectively misleading about the notice. It follows, ineluctably, that the defect was a formal one. Messrs Unicomb and Turner did not contend that the other requirements of s 306(1) were not satisfied. Accordingly, therefore, the notice was not invalid on this ground and should not be set aside. 13 The solicitor who appeared for Messrs Unicomb and Turner pointed to a number of authorities decided before Kleinwort Benson which had held that an understatement in a bankruptcy notice of the amount of a judgment sum (as opposed to an error in the calculation of interest) was not a formal defect and rendered a notice invalid. Reliance was also placed upon the High Court's decision in Walsh v Deputy Federal Commissioner of Taxation (1984) 156 CLR 337 at 339 where Gibbs CJ (with whom each of the other Justices agreed) said that a notice would be invalid if it claimed more than the judgment sum. However, neither of those matters is persuasive - the former, because all of those cases now must be read in light of Kleinwort Benson and Adams v Lambert; the latter, because it is concerned with overstatement rather than understatement.

Issue (b): Interest on the first day of the judgment 14 Messrs Unicomb and Turner then claimed that the notice was defective because it failed to claim from them interest for the day of 9 October 2008, that is, the day of the judgment. Mrs Cairns, on the other hand, submitted that no interest was due on the day that a judgment is delivered. 15 The interest was due under s 101(1) of the Civil Procedure Act 2005 (NSW) which is in these terms: (1) Unless the court orders otherwise, interest is payable on so much of the amount of a judgment (exclusive of any order for costs) as is from time to time unpaid. 16 The amount of the interest was then to be calculated "from the date on which the judgment takes effect": s 101(2). This is a provision dealing with a period of time dating from a given day. Accordingly, it must be read in light of s 36(1) of the Interpretation Act 1987 (NSW) which is in these terms: (1) 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. 17 It follows that the time under s 101(2) is to be reckoned exclusive of the day of the judgment unless a contrary intention is shown by the terms of the Act: s 5(2) Interpretation Act 1987 (NSW). No contrary intention, in my opinion, appears from the face of s 101. Even if s 36(1) did not apply, the common law exhibited a similar approach to the construction of the word "from" where questions of time were concerned. The cases are usefully collected by Sheller JA in Hughes v NM Superannuation Pty Ltd (1993) 29 NSWLR 653 at 667. Regardless of which approach one takes, it has been held that interest on a judgment calculated using the word "from" excludes interest on the actual day upon which a judgment is delivered: see Serafino; ex parte Classic Manufacturing Pty Ltd (1989) 86 ALR 283 at 287 per Burchett J. The necessary consequence is that the bankruptcy notice was correct not to demand interest for the day of 9 October 2008.

Issue (c): Whether interest may be demanded within 28 days of judgment date 18 Interest runs under s 101(2) of the Civil Procedure Act 2005 (2005), which is set out above. However, subsection (2) must be read in light of subsection (3), which provides: (3) Despite subsection (1), interest is not payable on the amount of a judgment if the amount is paid in full within 28 days after the date on which the judgment takes effect, unless the court orders to the contrary. 19 The judgment was entered on 9 October 2008. The official receiver issued the bankruptcy notice on 20 October 2008 and it was served (or taken to have been served) on Messrs Unicomb and Turner on 6 November 2008. The 28 days referred to in subsection (3) expired at midnight on 6 November 2008. Had Messrs Unicomb and Turner chosen to pay the judgment sum at any time prior to the end of 6 November 2008 then s 101(3) would have relieved them of any obligation to pay interest which had until then subsisted. Messrs Unicomb and Turner submitted that it followed that at the time the notice was issued on 20 October 2008 that the interest was not due and hence that the notice was invalid. 20 This argument should be rejected. Section 101(3) does not prevent interest accruing within the 28 day period following the judgment date. Rather, it lifts that interest obligation on the happening of a contingency viz payment within that period. If the contingency does not occur then the interest was always and continues to be due. It follows that, so long as Messrs Unicomb and Turner did not pay the judgment sum and thereby enliven s 101(3), interest continued to be due under s 101(2). The evidence does not disclose any payment by them of the judgment sum prior to the expiry of the 28 day period from which it follows that the interest demanded was correctly claimed.

Result 21 Each of the appellant's arguments having been rejected the appeal should be dismissed with costs. I certify that the preceding twenty-one (21) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Perram.

Associate: Dated: 4 September 2009 Solicitor for the Appellants: Mr M. Foley, Foleys Solicitors

Solicitor for the Respondent: Mullane & Lindsay Solicitors

At a glance

Court

Decision date

Before

Source

Judgment (8 paragraphs)

Parties

Legislation Cited (4)

Cases Cited (5)

Cited By (1)