Judgement No. BA. snd CATCHWORDS BANKRUPTCY - Bankruptcy notice - Validity - Notice based on judgment of Supreme Court of the Australian Capital Territory - Judgment entered by consent after moneys paid into Court ~ Moneys not accepted in satisfaction of cause of action - Moneys paid in directed to be paid out in part satisfaction of judgment - Delay in payment out - Whether sum specified in notice overstated by claiming interest on full amount of judgment debt between date of entry and date of receipt of moneys paid into Court. Bankruptcy Act 1966 (Cth), sub-s.41(5) Australian Capital Territory Supreme Court Act 1933 (Cth), s.54 Rules of the Supreme Court of the Australian Capital Territory, Orders 26, 42A Re ROY ALLAN MANSON and KEITH MICHAEL SLATER (Judgment Debtors) Ex parte ROY ALLAN MANSON (Applicant) ALEXANDER WILLIAM GEORGE HOLDEN (Respondent) No. ACT G 131 of 1986 Neaves J. 25 February 1987 Canberra IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION BANKRUPTCY DISTRICT OF THE No. ACT B 131 of 1986 STATE OF NEW SOUTH WALES AND THE AUSTRALIAN CAPITAL TERRITORY Re: ROY ALLAN MANSON and KEITH MICHAEL SLATER Judgment Debtors Ex parte: ROY ALLAN MANSON Applicant ALEXANDER WILLIAM GEORGE HOLDEN Respondent MINUTE OF ORDER JUDGE MAKING ORDER : Neaves J. DATE OF ORDER : 25 February 1987 WHERE MADE : Canberra THE COURT ORDERS THAT: 1. The application dated 28 November 1986, in so far as it seeks an order that the bankruptcy notice herein dated 22 October 1986 be set aside, be dismissed. The time for compliance with the said bankruptcy notice be extended up to and including 4 March 1987. The applicant Roy Allan Manson pay the respondent's costs of the application. Note: Settlement and entry of orders is dealt with in rule 124 of the Bankruptcy Rules. IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION ACT B 131 of 1986 BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES AND THE AUSTRALIAN CAPITAL TERRITORY weve vewvw Re: ROY ALLAN MANSON and KEITH MICHAEL SLATER Judgment Debtors Ex parte: ROY ALLAN MANSON Applicant ALEXANDER WILLIAM GEORGE HOLDEN Respondent CORAM : Neaves J. DATE : 25 February 1987 REASONS FOR JUDGMENT This application to set aside a bankruptcy notice raises a novel point. The bankruptcy notice, dated 22 October 1986, was directed to Roy Allan Manson and Keith Michael Slater ("the judgment debtors") and based on a final judgment obtained by Alexander William George Holden ("the judgment creditor") in the Supreme Court of the Australian Capital Territory on 13 May 1986. It required the judgment debtors within 21 days after service of the notice upon them to pay the sum of $17,746.46 said to be due under the final judgment. That amount was made up of two components - an amount of $16,284.78 representing the amount for which the judgment was entered ($28,000) less an amount of $11,715.22 acknowledged to have been paid to the judgment creditor and an amount of $1,461.68 being interest at the rate of 15 per centum per annum on the balance of the judgment debt owing from time to time from 13 May 1986 to 22 October 1986. The bankruptcy notice was served on Roy Allan Manson ("the applicant") on 8 November 1986. Within the time allowed by the bankruptcy notice for payment, notice was given to the judgment creditor on the applicant's behalf that he disputed the validity of the bankruptcy notice on the ground that the sum specified in the notice as the amount due to the judgment creditor exceeded the amount in fact due (Bankruptcy Act 1966 (Cth) ("the Act"), sub-s.41(5)). By application dated 28 November 1986 the applicant applied to the Court for an order that the bankruptcy notice be set aside on the ground that the sum specified in the notice as the amount due to the judgment creditor was overstated andon the further ground that there was an irregularity in the form of the notice. The time for compliance with the notice has been extended until further order pending the hearing and determination of the application. I shall deal first with the question of the alleged overstatement of the amount due to the judgment creditor. The question arises in the following circumstances. By an action commenced in the Supreme Court of the Australian Capital Territory the judgment creditor as plaintiff sought various orders against the judgment debtors and a company as defendants. The hearing of that action commenced on 12 May 1986. On that day the solicitors for the defendants, purporting to act pursuant to Order 26, rule 1 and 4 of the Rules of the Supreme Court of the Australian Capital Territory filed and served on the plaintiff a document headed "Notice of Payment into Court", the text of which, omitting formal parts, was as follows: "TAKE NOTICE that the Defendants have paid into Court the sum of $13,410.71 and say that this sum is enough to satisfy the Plaintiff's claim in full but deny liability therefor." Two cheques were lodged with the Registrar of the Supreme Court, one in the sum of $6,705.35 drawn by the applicant and the other in the sum of $6,705.36 drawn by Keith Michael Slater. The judgment creditor did not accept the purported payment into Court but the action was settled on the following day, 13 May 1986. Various orders were made by consent by Gallop J. including an order that there be judgment for the plaintiff (the judgment creditor) against the first and second defendants, that 1s to say against the judgment debtors, in the sum of $28,000. A further order 4. was made by consent that "the sum paid into Court by the First and Second Defendants be paid out to the Plaintiff in partial settlement of the judgment". Judgment was entered for the plaintiff in the sum of $28,000 plus costs. The Registrar of the Supreme Court subsequently informed the solicitor for the judgment creditor that the cheque drawn by Mr Slater had been dishonoured. The amount of $6,705.35, being the proceeds of the cheque drawn by the applicant, were paid out to the solicitors for the judgment creditor on 25 August 1986. The solicitors had received on 4 July 1986 an amount of $5,009.87 in part payment of the judgment debt. There is no dispute that, at the date of the bankruptcy notice, the amount of $28,000 for which judgment had been entered had been reduced to $16,284.78 by the payments of $5,009.87 and $6,705.35 to which reference has been made. The dispute concerns the inclusion in the bankruptcy notice of the amount of $1,461.68 on account of interest. The amount of $1,461.68 was calculated at the rate of 15 per centum per annum on the amounts shown hereunder in respect of periods specified - 5. Interest on $28,000 from 13 May 1986 $598.36 to 4 July 1986 Interest on $22,990.13 from 5 July 1986 481.85 to 25 August 1986 Interest on $16,284.78 from 26 August 381.47 1986 to 22 October 1986 $1,461.68 The amount was calculated, so the judgment creditor claims, in accordance with s.54 of the Australian Capital Territory Supreme Court Act 1933 (Cth) which provides ~ "A judgment debt under a judgment of the Court carries interest at such rate as is fixed by the Rules of Court from the date as of which the judgment is entered." The rate of 15 per centum per annum is the appropriate rate of interest (see Order 42A, rule 1). There is no doubt that interest is properly payable only upon so much of a judgment debt as from time to time remains unpaid. The applicant contends that the above calculation is incorrect as the amount of the judgment debt ($28,000) must be taken to have been reduced on 13 May 1986 by the amount of $6,705.35, the amount for which his cheque was drawn, notwithstanding that that amount was not in fact received by the solicitors for the judgment creditor until 25 August 1986. When money is paid into Court under Order 26, rule 1 and is accepted by the plaintiff in satisfaction of the 6. claim by giving notice of his acceptance to the defendant, the plaintiff thereupon becomes entitled to receive payment of the accepted sum in satisfaction of the claim (Order 26, sub-rule 2(1)). In such case no judgment 1s entered so that no question can arise as to interest thereon. Where the money paid in is not accepted by the plaintiff in satisfaction of the claim, the money will remain in Court and may only be paid out in pursuance of an order of the Court or a Judge (Order 26, rule 3). In the circumstances of this case, where there was, in truth, no payment to the Supreme Court of the amount of $13,410.71 specified in the notice dated 12 May 1986 given on behalf of the defendants in the action jointly, there is a real question whether there was any valid payment into Court. I do not, however, find it necessary to express any view on that question as I am satisfied that there is no basis for the submission of the applicant that, upon the making of the consent orders on 13 May 1986, the payment of the sum of $6,705.35 into Court is to be treated as a payment of that sum to the judgment creditor in part satisfaction of the judgment debt of $28,000. The only effect of the order for payment out made by Gallop J. on that date was to authorise the Registrar of the Court to account to the judgment creditor for such sum as had been paid into Court. The order did not amount to payment. That was effected only when the Registrar forwarded the amount held in Court to the solicitors for the judgment creditor. 7. The farst objection to the validity of the bankruptcy notice, therefore, fails. The second objection, that there is an irregularity 1n the form of the notice, focuses not on the body of the notice itself but on the note appearing at the foot of the notice the purpose of which 1s to inform the person to whom the notice is directed of the effect of sub-s.41(7) of the Act. The notice in this case provides that, if the judgment debtor has a counter-claim, set-off or cross demand of the requisite kind, he may within the period set out in the body of the notice "file and affidavit to that effect". This was said to be an irregularity sufficient to warrant the notice being set aside. I am unable to agree. It is not clear whether the draftsman intended, as the applicant submits, that the notice read "file and serve an affidavit to that effect" or whether he intended to follow the prescribed form and, indeed, the language of sub-s.41(7) of the Act and state that, in the circumstances envisaged, the judgment debtor might "file an affidavit to that effect". On either view there 1s no substance in the point that the notice was likely to mislead the person to whom 1t was directed. The submission provides no basis for setting aside the notice. The application is, therefore, dismissed. I am, however, prepared to extend the time for compliance with the notice up to and including 4 March 1987. pay the respondent's costs of the application. Counsel for the applicant Solicitors for the applicant Counsel for the respondent Solicitor for the respondent Date of hearing I certify that this and the preceding 7 pages are a true copy of the Reasons for Judgment herein of the Honourable Mr Justice Neaves. Ven "Paw Associate Dated: 25 February 1987 Mr U.D. Boettcher Meyer Boettcher & Clapham Mr G.J.D. Richardson Sly & Russell 13 February 1987 The applicant must