Re Estate of Late Anthony Alan Davis [1985] FCA 429 (21 November 1985)

FEDERAL COURT OF AUSTRALIA

Re: ESTATE OF LATE ANTHONY ALAN DAVIS
No. W691 of 1983
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA
BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES AND THE AUSTRALIAN CAPITAL TERRITORY
Sheppard J.

CATCHWORDS

Bankruptcy - power conferred on Registrar to direct that interest on certain moneys "at the rate prescribed" form part of an estate - no rate prescribed until after commencement of period for which Registrar would otherwise have been prepared to direct payment of interest - whether Registrar empowered to direct payment of interest for entirety of period or only for a period commencing on the date of the prescription of the interest rate.

Bankruptcy Act 1966, ss. 20J, 315

Bankruptcy Rules, 195A and 119

Acts Interpretation Act 1901, s. 48

HEARING

SYDNEY
21:11:1985

ORDER

The question asked in the special case dated 18 September 1985 referred to the Court by the Registrar in Bankruptcy pursuant to rule 119 of the Bankruptcy Rules be answered in the affirmative.

There be no order as to costs.

NOTE: Settlement and entry of orders is provided for in Rule 124 of the Bankruptcy Rules.

DECISION

This is a special case stated pursuant to rule 119 of the Bankruptcy Rules. The case raises for consideration a question of the construction of sub-sec. 20J(2) of the Bankruptcy Act 1966. That section is found in Division 2 of Part II of the Act. Division 2 is entitled, "Common Investment Fund" defined in s. 20A as "the Common Fund". The fund is provided for in s. 20B which provides that the Official Trustee shall open and maintain an account to be known as the Common Investment Fund. With the exception of certain moneys, to which it is unnecessary to refer, all moneys received by the Official Trustee after the commencement of the section are to be paid into the Common Fund.

2. Section 20J was inserted into the Act by the Bankruptcy Amendment Act 1980, s. 16. Its provisions commenced on 1 February 1981. Subsections (1), (2) and (4) of s. 20J are as follows:-

"(1) Where the Official Trustee is the trustee of
the estate of a bankrupt or of a deceased debtor,
the estate is not entitled, except as provided by
sub-sections (2) and (3), to interest on moneys
held by the Official Trustee as the trustee of
the estate.

(2) Where moneys have been held, or are likely
to be held, for a prescribed reason, or for one
prescribed reason and then for another prescribed
reason, by the Official Trustee as the trustee of
the estate of a bankrupt or of a deceased debtor
for not less than one year longer than those
moneys would have been held, or would be likely
to be held, by the Official Trustee but for that
reason or those reasons, the Registrar may
direct, by writing under his hand, that interest
on those moneys, at the rate prescribed for the
purposes of this section and in respect of such
period as he determines, shall form part of that
estate.

. . . . . . . . . . . . . . . . . . . . . . . .

(4) Where it is established that moneys held by
the Official Trustee as the trustee of the estate
of a bankrupt or of a deceased debtor do not form
part of the estate, interest on those moneys is
payable to the person to whom those moneys are
payable, out of the Common Fund, at the rate
prescribed for the purposes of this section and
in respect of the period during which those
moneys are held by the Official Trustee."

Sub-section (3) is not of relevance.

3. The facts recounted in the case disclose that one Anthony Alan Davis died on 23 November 1981. Probate of his will was granted on 4 August 1982 by the Supreme Court of New South Wales, the executor being Neville James Eldrid. On 25 July 1983 an administration order was made by the Court on the application of the said Neville James Eldrid pursuant to s. 247 of the Act whereby the Official Trustee was made trustee of the estate.

4. On 26 September 1984 the Official Receiver on behalf of the Official Trustee applied to the Registrar in Bankruptcy pursuant to sub-sec. 20J(2) of the Act for a direction that interest on moneys held in the fund be paid to the estate for the period 16 August 1983 to 16 August 1984 and that such interest should form part of the estate. A Deputy Registrar advised the Official Receiver of her intended response to his application. She said in part:-

"I consider that s. 315 Bankruptcy Act 1966 and s.
48(1)(b) Acts Interpretation Act 1901 make it
clear that any Rules to the Bankruptcy Act take
effect from the date of notification in the
Gazette. On that basis rule 195A takes effect
from 23 July 1984 and the interest rate of 10%
would apply from that date. No interest rate was
prescribed prior to that date."

5. The Official Receiver amended his application to one seeking interest from 23 July 1984. On 18 February 1985 the Deputy Registrar made the following direction pursuant to s. 20J of the Act:-

"Pursuant to s. 20J of the Bankruptcy Act 1966 I,
Margaret Ann Lennan, a Deputy Registrar in
Bankruptcy for the Bankruptcy District of New
South Wales and the Australian Capital Territory
DIRECT THAT interest, calculated at the rate of
10 per centum per annum for the period 23 July
1984 to 31 January 1985, on moneys held by the
Official Trustee as trustee of the estate of the
late Anthony Alan Davis by reason that a person
has, or has had, under consideration in good
faith the institution of legal proceedings, SHALL
form part of the aforementioned estate."

6. The Deputy Registrar based her decision to allow interest from 23 July 1984 and not from 16 August 1983 on the fact that the prescription of the rate of interest for the purposes of sub-s. 20J(2) was notified in the Gazette on 23 July 1984; see Statutory Rule No. 155 of 1984 which inserted rule 195A into the Bankruptcy Rules. The rule is as follows:-

"For the purposes of section 20J of the Act the
rate of 10 per cent per annum is prescribed."

No date of effect was specified in the rule or elsewhere.

7. Paragraph 48(1)(b) of the Acts Interpretation Act 1901 provides that regulations take effect, in the absence of a specified date, from the date of notification in the Commonwealth of Australia Gazette. Section 315 of the Bankruptcy Act provides that s. 48 of the Acts Interpretation Act applies in relation to Bankruptcy Rules as if references in s. 48 to regulations were references to rules. Section 315 is otherwise a provision in usual form empowering the making of rules, inter alia, prescribing all matters which are required or permitted to be prescribed by the Act.

8. The question then is whether, because the rate of interest was not prescribed until 23 July 1984, the Deputy Registrar was prevented from directing the payment of interest from a date earlier than the date of the prescription.

9. I agree with counsel for the Registrar that the rule had no effect prior to its coming into force. One would not have needed s. 48 of the Acts Interpretation Act to support that proposition. But in my opinion that is not, as he submitted it was, conclusive of the outcome. In my opinion one has to consider the provisions of the relevant subsection, sub-sec. 20J(2), in order to determine what the position is. The relevant part of the subsection is:-

". . . the Registrar may direct, by writing under
his hand, that interest on those moneys, at the
rate prescribed for the purposes of this section
and in respect of such period as he determines,
shall form part of that estate."

At the time of the direction the rate had been prescribed. Did the legislature intend that the Registrar should not be empowered to direct the payment of interest in respect of any period prior to the date of a prescription? Or was it intended that, provided there was a prescription, the Registrar could direct payment for any period whether commencing prior to or after the date of the prescription?

10. Counsel for the Official Trustee drew my attention to the contrast which there is between sub-s. (2) and sub-s. (4) of s. 20J. The latter provision is one which requires payment of interest to persons whose moneys have been held by the Official Trustee and have been found not to form part of an estate. In that event interest on those moneys is payable to the persons to whom the moneys are payable at the rate prescribed for the purposes of the section and in respect of the period during which those moneys are held by the Official Trustee. As counsel said, there could scarcely be any doubt, in cases to which that provision applies, that, if the moneys were found to be payable after the prescription, the interest would run from a date, if it were otherwise appropriate that it should, prior to the prescription. That is because the period is plainly specified in the subsection.

11. In my opinion the provisions of sub-s. (2) are not different in their effect. In cases to which it applies the Registrar has a discretion. The Official Trustee is not entitled to interest as of right. The Registrar must decide whether to direct that interest be paid. That is why the subsection is expressed as it is, and why it differs in form from the provisions of sub-s. (4). But the Registrar is not, in my opinion, fettered in the exercise of his discretion by the fact that the date of the prescription of the rate of interest happens to be later than the commencement of the period which the Registrar would otherwise think appropriate for the payment of interest. I agree that s. 48 of the Acts Interpretation Act and s. 315 of the Bankruptcy Act operate to make it clear that rule 195A did not come into force and had no effect until 23 July 1984. But once it came into effect the prescribed rate was there to be applied in all cases where the Registrar was called upon to exercise his discretion under the subsection.

12. It follows, therefore, that the Deputy Registrar's discretion was not fettered in any way by the fact that there was no rate prescribed for part of the period for which the Official Trustee claimed interest. The important thing was that the rate had been prescribed at the time she came to exercise her discretion.

13. The question which is raised for determination by the special case is as follows:-

"Whether, having regard to the provisions of
sub-s. 20J(2) of the Bankruptcy Act 1966 and of
Bankruptcy Rule 195A, it is open to the
Registrar, in the exercise of his discretion when
directing the payment of interest on moneys under
the subsection, to direct that interest at the
prescribed rate may be paid from a date earlier
than 23 July 1984."

14. In my opinion the answer to that question is, yes, and I so answer the question asked in the special case.

15. Before I conclude, I would add that the fact that the rate of interest had been prescribed when the Deputy Registrar came to exercise her discretion saves any consideration of the problem which there would have been if an entitlement to interest had arisen in the absence of there being any prescription at all. I refer in passing, however, to the cases of Cameron v. The Deputy Federal Commissioner of Taxation for Tasmania [1924] HCA 12; (1924) 34 CLR 8 and Downey v. Prvor [1960] HCA 49; (1960) 103 CLR 353.

16. Accordingly, the question is answered as I have indicated. There will be no order as to costs.