FEDERAL COURT OF AUSTRALIA

Condon v Vanessa Two Pty Ltd (No 2) [2018] FCA 1153

ORDERS

THE COURT ORDERS THAT:

1.    In accordance with Order 1 made on 21 June 2018, the first respondent (Vanessa Two) must pay $201,135.57 to the applicant by 4 pm on Friday, 28 September 2018.

2.    Vanessa Two must pay to the applicant interest before judgment in the amount of $34,923.20 pursuant to s 51A(1) of the Federal Court of Australia Act 1976 (Cth) by 4 pm on Friday, 28 September 2018.

3.    The third respondent (Mrs Leahy) must allow the applicant access to collect the Southwind boat bearing registration ADM950N (boat).

4.    If the applicant has given Mrs Leahy at least 48 hours written notice of his intention to collect the boat and Mrs Leahy fails to give unobstructed access for that purpose, the parties have liberty to apply to the Court for ancillary orders to give effect to Order 3.

5.    If Vanessa Two fails to comply with either or both of Orders 1 or 2 by 4 pm on Friday, 28 September 2018, then the applicant has liberty to apply to the Court for a person or persons who consent to such appointment to be appointed as a receiver or other external administrator of Vanessa Two for the purpose of giving effect to Orders 1 and 2.

6.    Order 3 made on 21 June 2018 is quantified in a lump sum amount of $20,000 and by agreement between the parties, the respondents must pay that amount to the applicant by 31 August 2018.

7.    The respondents must pay the applicant’s costs incurred since 21 June 2018 in a lump sum amount of $800 (exclusive of GST) by 31 August 2018.

8.    Liberty be granted to the parties to seek such ancillary or other orders as may be required to give effect to the foregoing orders.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

FARRELL J

1    On 21 June 2018, the Court delivered judgement on an amended application made by Mr Condon as trustee of the bankrupt estate of Stephen Barry Charles Gribble (Mr Gribble): see Condon v Vanessa Two Pty Ltd [2018] FCA 947.

2    The Court made declarations under s 121(1) of the Bankruptcy Act 1966 (Cth) that the following transactions were void against Mr Condon:

(1)    the transfer of a Southwind boat with registration ADM950N from Mr Gribble to the third respondent, Mrs Leahy; and

(2)    the transfer of $201,135.57 (being the amount of the cheque representing Mr Gribble’s inheritance from his late mother’s estate) to a bank account operated by the first respondent (Vanessa Two) on or about 12 March 2013.

3    The Court also ordered that Vanessa Two must pay $201,135.57 to Mr Condon within a period to be determined by the Court and that Mrs Leahy deliver the boat up to him at a time, place and in a manner to be determined by the Court. The respondents were ordered to pay Mr Condon’s costs as agreed or assessed unless the parties elected to adopt a lump sum procedure.

4    The parties were asked to provide draft orders to address these issues. There are a few matters on which the parties could not agree.

Interest up to judgment

5    In Mr Condon’s amended application, he claimed “interest” as well as “costs”. Mr Condon agitated the question of costs in written submissions filed before the hearing of his application but no submissions were made in support of orders for interest up to judgment. The matter of interest up to judgment was not addressed in the judgment rendered on 21 June 2018.

6    Mr Condon claims interest of $64,889.64 under s 51A(1) of the Federal Court of Australia Act 1976 (Cth) in respect of the amount of $201,135.57 for the period from 12 March 2013 (the date of the transaction) to 21 June 2018. Mr Condon did not cite any authority in which orders were made under s 121 of the Bankruptcy Act for the selection of this period as the basis for the calculation. At [17] of the submissions sent to chambers on 6 July 2018, Mr Eardley, counsel for Mr Condon, made his only submission on the principles to be applied in this matter as follows:

A majority of the Full Federal Court (Beaumont and Einfeld JJ, Sackville J dissenting) held that interest should be awarded under s 51A(1): see SCI Operations Pty Ltd v Commonwealth (1996) 69 FCR 346. Beaumont and Einfeld JJ said at 365-366:

In our view, s 51A(1)(a) should be treated as picking up the date when, by the operation of the relevant legal processes, the cause of action, notionally, or in truth, arose. In other words, it is possible here, given the retrospective operation of s 269N, to construe s 51A(1)(a) as referring to a cause of action arising, retrospectively, in September 1987, rather than on 3 June 1994. A retrospective perspective for the purposes of s 51A(1)(a) would accord with the intent of the scheme of the customs legislation. That is to say, s 51A(1)(a) should be interpreted so as to refer to the date when the cause of action arose, or should be treated as having arisen. Such a minor gloss upon the provision is, we think, permissible as reflecting the intention of the legislation, given its remedial character. (emphasis added)

7    Alternatively, Mr Condon claims interest of $34,923.20, calculated from 11 June 2015, the date the sequestration order was made, to 21 June 2018.

8    The respondents oppose interest up to judgment being ordered on the basis that the judgment delivered on 21 June 2018 made no provision for it. They submit that:

(1)    Although Vanessa Two was the recipient of $201,135.57 which Mr Gribble received from his mother’s estate, there “is no question about the avoidability of that payment until such time as the Declaration was made by Her Honour and therefore [Vanessa Two] should not be penalised further”;

(2)    The judgment delivered on 21 June 2018 was a final judgment and nothing in r 39.05 of the Federal Court Rules 2011 (Cth) would authorise that judgment to be varied; and

(3)    An order for pre-judgment interest cannot properly be characterised as an “ancillary or other order as be required to give effect” to the other orders made on 21 June 2018 so as to fall within the liberty granted in Order 6 made on that day.

9    The respondents made no submissions concerning the date from which interest up to judgment should be calculated if those submissions were not accepted, nor did they seek to cavil with the calculations set out in Mr Condon’s submissions at [16].

10    Section 51A(1) of the Federal Court of Australia Act provides as follows:

51A Interest up to judgment

(1)    In any proceedings for the recovery of any money (including any debt or damages or the value of any goods) in respect of a cause of action that arises after the commencement of this section, the Court or a Judge shall, upon application, unless good cause is shown to the contrary, either:

(a)    order that there be included in the sum for which judgment is given interest at such rate as the Court or the Judge, as the case may be, thinks fit on the whole or any part of the money for the whole or any part of the period between the date when the cause of action arose and the date as of which judgment is entered; or

(b)    without proceeding to calculate interest in accordance with paragraph (a), order that there be included in the sum for which judgment is given a lump sum in lieu of any such interest.

11    I do not accept the respondents’ submissions having regard to the Full Court’s decision in Hanave Pty Ltd v LFOT Pty Ltd (2004) 136 FCR 566; [2004] FCAFC 180. At [36], Kiefel J (as Kiefel CJ of the High Court then was) found that s 51A does not require that interest up to judgment be claimed at a point prior to judgment, although circumstances in which such interest has not previously been claimed may be an important consideration in determining whether “good cause” is shown within the meaning of s 51A. Wilcox J and Allsop J (as Allsop CJ of this Court then was) agreed at [6]. Further, at [37], Kiefel J pointed out that an award of interest before judgment is compensatory and is made because an applicant has been kept out of the money to which they are entitled.

12    In this case, Mr Condon has elected to press the application for interest which was included in the amended application immediately following judgment being entered. I see no “good cause” or any offence to the finality of litigation arising from that circumstance which would disentitle Mr Condon to interest up to judgment, albeit that it would have been more efficient if the matter had been canvassed in submissions made at the hearing.

13    There then arises the question of how the interest should be calculated. When did the “cause of action” arise? Although Mr Condon’s submissions did not say so explicitly, I take his reliance on the quoted passage from SCI Operations Pty Ltd v Commonwealth (1996) 69 FCR 346 at 365-366 to mean that the cause of action “notionally, or in truth, arose” on 12 March 2013, even though any such claim could not have been made until a sequestration order was made against Mr Gribble’s estate on 11 June 2015 and a trustee in bankruptcy was appointed.

14    An appeal from the decision of the majority in SCI Operations Pty Ltd was allowed by the High Court: see Commonwealth of Australia v SCI Operations Pty Ltd (1998) 192 CLR 285; [1998] HCA 20. It is unfortunate that the High Court’s decision was not addressed in Mr Condon’s submissions.

15    SCI Operations Pty Ltd involved a claim by SCI Operations Pty Ltd for prejudgment interest in circumstances where, on 3 June 1994, the day it received a refund of customs duty which had been levied on the importation of PET resin from 1 September 1987, it commenced proceedings in which the claim for interest before judgment was made. The High Court found that the effect of s 269N of the Customs Act 1901 (Cth) was that the refund was payable upon the making of a Commercial Tariff Concession Order (a CTCO) for which application had to be made. Where certain conditions were satisfied, a CTCO order would be made which had the effect of reducing the rate of duty for the period from 1 September 1987 resulting in a refund.

16    McHugh and Gummow JJ in their joint judgment and Brennan CJ found that s 269N of the Customs Act did not render the CTCO retrospective. Rather, on 3 June 1994, when the CTCO was issued, there were brought into existence fresh rights or liabilities in respect of matters or transactions which had occurred on or after 1 September 1987 and therefore there was no entitlement to interest before judgment in respect of the period before 3 June 1994. The cause of action arose on 3 June 1994 and since the refunds were made on that day there was no occasion for interest before judgment.

17    The same analysis applies in relation to transactions which are void against a trustee under s 121(1). Unless and until a trustee is appointed, the transactions are not void against anyone, and the date on which the sequestration order was made and the trustee was appointed is the date on which the cause of action arose.

18    Accordingly, I will order that, in addition to the amount of $201,135.57, the respondents must pay interest before judgment of $34,923.20, calculated from 11 June 2015 to 21 June 2018.

What should be the date for payment of $201,135.57 plus $34,923.20 interest before judgment?

19    The respondents proposed a period of 90 days and Mr Condon proposed a period of 60 days. When judgment was delivered, the Court advised the parties, and in particular, the respondents, that for this purpose, time would be calculated from the date that judgment was rendered. Having regard to that factor, I will order that payment must be made by 4 pm on Friday, 28 September 2018, slightly more than 90 days after judgment was delivered.

What happens if payment is not made by 4 pm on 28 September 2018?

20    The parties appear to be agreed that it would be appropriate that a receiver or other external administrator be appointed to Vanessa Two if it fails to comply with these orders. The parties ask that an order be made that Mr Condon have the power to appoint a receiver or other administrator. As there is no contractual relationship, it is not obvious how even a receiver might be appointed by Mr Condon without the Court’s intervention. An order will be made to similar effect as Order 7 made on 21 June 2018, addressing as well any failure to pay interest before judgment.

21    I note that post-judgement interest is also payable under s 52 of the Federal Court of Australia Act.

Delivery of the boat

22    The parties propose that Mrs Leahy be ordered to allow Mr Condon access to her property to collect the boat and that the parties may vary that order by agreement. With respect, the proposals lack detail and it is difficult to see how the agreement of the parties can vary a Court order. It was the Court’s expectation that there would be some provision for notice of a time or times at which access would be provided. However, the parties have legal advisors. I will make the order as to access and I will provide the parties with liberty to apply to vary the order should it be required. If the parties are able to reach amicable arrangements (as might be hoped), the order will, in any event, be satisfied.

Costs

23    The parties are agreed that the costs order made on 21 June 2018 be quantified in an amount of $20,000 and it is appropriate to make that order.

24    Mr Condon seeks a lump sum order in relation to the costs of submissions in respect of the orders now to be made in an amount of $880 (inclusive of GST). The respondents seek a lump sum costs order in respect of their submissions in an amount of $1,500 if they are successful. As the respondents have not been successful and it is in the interests of efficiency and avoiding costs incurred in assessment to make a lump sum order in relation to this claim for costs, I will make a lump sum order. Mr Condon’s submissions (as did the respondents’) fail to state whether or not he is entitled to claim GST input tax credits. If he is, then costs should be claimed exclusive of GST and the Court will (in the absence of disclosure to the contrary) proceed on the basis that input tax credits will be available: see the Costs Practice Note (GPN – Costs) at [6.5] and [6.8]. On that basis I will order that the respondents pay Mr Condon’s costs of the submissions to address issues raised in the orders made on 21 June 2018 in an amount of $800, GST exclusive.

Associate

Dated:    3 August 2018