Re Griffiths; in the matter of the Bankrupt Estate of Trevor Griffiths [2004] FCAFC 102 (16 August 2004)

Last Updated: 27 October 2004

FEDERAL COURT OF AUSTRALIA

Re Griffiths; in the matter of the Bankrupt Estate of Trevor Griffiths

[2004] FCAFC 102

CORRIGENDUM

RE GRIFFITHS; IN THE MATTER OF THE BANKRUPT ESTATE OF TREVOR GRIFFITHS

V 7046 OF 2003

BEAUMONT, WEINBERG & CRENNAN JJ
16 AUGUST 2004
MELBOURNE

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	V 7046 OF 2003

	IN THE MATTER OF THE BANKRUPT ESTATE OF TREVOR GRIFFITHS
	THE OFFICIAL TRUSTEE IN BANKRUPTCY (AS THE TRUSTEE OF THE BANKRUPT ESTATE OF TREVOR GRIFFITHS) APPLICANT

JUDGES:	BEAUMONT, WEINBERG & CRENNAN JJ
DATE:	16 AUGUST 2004
PLACE:	MELBOURNE

CORRIGENDUM

Amendment to the Reasons for Judgment of the Honourable Justices Beaumont, Weinberg and Crennan delivered on 16 August 2004.

Para [73], second sentence should read:

"... But, at the same time, we can accept that in some exceptional circumstances, this date may not produce the fairer and more convenient operation. ..."

I certify this is a true copy of corrigendum to the Reasons for Judgment of the Honourable Justices Beaumont, Weinberg and Crennan.

Associate:

Dated: 27 October 2004

FEDERAL COURT OF AUSTRALIA

Re Griffiths; in the matter of the Bankrupt Estate of Trevor Griffiths

[2004] FCAFC 102

BANKRUPTCY – proof of debt – correct procedure for conversion of foreign debt claims into Australian currency.


Federal Court of Australia Act 1976 (Cth)
Bankruptcy Act 1966 (Cth) s 82
Corporations Act 2001 (Cth) s 554C
Bankruptcy Regulations
Federal Court of Australia Rules
Insolvency Rules 1986


Brayson Motors Pty Ltd (In Liquidation) v Federal Commissioner of Taxation [1985] HCA 20; (1985) 156 CLR 651 cited
Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation [1981] HCA 26; (1981) 147 CLR 297 cited
Fisher v Madden [2002] NSWCA 28; (2002) 54 NSWLR 179 cited
In re United Railways of Havana and Regla Warehouses Ltd [1961] AC 1007 cited
In re Amalgamated Investment & Property Co Ltd [1985] Ch 349 cited
In re Dynamics Corporation of America (In Liquidation) [1976] 2 All ER 669 applied
In re Tillam Boehme & Tickle Pty Ltd (In Liquidation) [1932] VLR 146 cited
In re Thurlow; Ex parte Official Receiver [1895] 1 QB 724 cited
McIntosh v Shashoua [1931] HCA 56; (1931) 46 CLR 494 cited
Manners v Pearson & Son [1898] 1 Ch 581 cited
Maschinenfabrik Augsburg Nurenburg Aktiengesellschaft v Altikar Pty Ltd (1984) 3 NSWLR 152 cited
Miliangos v George Frank (Textiles) Ltd [1976] AC 443 discussed
Re British American Continental Bank Ltd v Credit General ‘Liégeois’ Claim’ [1922] 2 Ch 589 discussed
Re British American Continental Bank Ltd, Goldzieher and Penso’s Claim [1922] 2 Ch 575 discussed
Re Capel; Ex parte Marac Finance Australia Limited [1994] FCA 890; (1994) 48 FCR 195 cited
Re Chesterman’s Trusts [1923] 2 Ch 466 discussed
Re Gresham Corporation Pty Ltd [1990] 1 Qd R 306 discussed
Re Lines Bros. Ltd (In Liquidation) [1983] 1 Ch 1 discussed
Re Pearce (1933) 6 ABC 126 discussed
Société des Hôtels du Touquet-Paris-Plage v Cumming [1922] 1 KB 451 cited
SS Celia v SS Volturno [1921] 2 AC 544 cited

I Fletcher, The Law of Insolvency, 3^rd ed., Sweet & Maxwell, London, 2002
W N Stable and J B Blagden (eds.) Williams on Bankruptcy, 14^th ed., Sweet & Maxwell, London, 1932




RE GRIFFITHS; IN THE MATTER OF THE BANKRUPT ESTATE OF TREVOR GRIFFITHS

V 7046 OF 2003

BEAUMONT, WEINBERG & CRENNAN JJ
16 AUGUST 2004
MELBOURNE

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	V 7046 OF 2003

	IN THE MATTER OF THE BANKRUPT ESTATE OF TREVOR GRIFFITHS
	THE OFFICIAL TRUSTEE IN BANKRUPTCY (AS THE TRUSTEE OF THE BANKRUPT ESTATE OF TREVOR GRIFFITHS) APPLICANT
JUDGES:	BEAUMONT, WEINBERG & CRENNAN JJ
DATE OF ORDER:	16 AUGUST 2004
WHERE MADE:	MELBOURNE

THE COURT DECLARES THAT:

1. For the purposes of s 82 of the Bankruptcy Act 1966 (Cth), where a claim is made for a debt payable in this country but expressed in terms of a foreign currency, the general rule is that the conversion from that currency to Australian currency must be made at the rate of exchange operating as at the date of the bankruptcy.

AND THE COURT ORDERS THAT:

1. The costs of the Trustee and of the contradictor be paid out of the bankrupt estate.
2. The matter be remitted to the docket Judge for any further orders.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	V 7046 OF 2003

	IN THE MATTER OF THE BANKRUPT ESTATE OF TREVOR GRIFFITHS
	THE OFFICIAL TRUSTEE IN BANKRUPTCY (AS THE TRUSTEE OF THE BANKRUPT ESTATE OF TREVOR GRIFFITHS) APPLICANT

JUDGES:	BEAUMONT, WEINBERG & CRENNAN JJ
DATE:	16 AUGUST 2004
PLACE:	MELBOURNE

REASONS FOR JUDGMENT

THE COURT:

INTRODUCTION

1 This is an application, brought pursuant to s 134(4) of the Bankruptcy Act 1966 (Cth) (‘the Act’), for directions, and (if appropriate) for declaratory orders, as to the correct procedure for conversion of foreign debt claims in bankruptcy into Australian currency.

2 On acceptance by the Official Receiver of his debtor’s petition, Trevor Griffiths (‘the Bankrupt’) became bankrupt on 22 January 2002. The Official Trustee (‘the Trustee’) is the trustee of the bankrupt estate. The Bankrupt’s Statement of Affairs disclosed that he had a number of United States creditors (‘the foreign creditors’) who had lodged proofs of ‘debt’ for adjudication. Those proofs indicated that their respective ‘debts’ were incurred on various dates.

3 The present ‘debts’ appear to be ordinary cases of claims for recovery based, in each case, upon a breach of contract on the part of the debtor.

4 The Trustee is of the opinion that the maximum dividend that all creditors (that is, foreign and other creditors) could expect to receive is approximately 30 cents in the (Australian) dollar.

5 The Trustee’s solicitors have advised the Trustee that the requirements for conversion of foreign debts into Australian currency appear to be uncertain, since there are at least three possibilities: first, that the conversion be made on the date the debt was incurred; secondly, that the conversion be made on the date of bankruptcy; and thirdly, that the conversion be made on the date on which the dividend is declared.

6 According to evidence in his affidavit sworn 5 May 2004, Michael Edwards Lhuede, the Trustee’s solicitor –

‘3. ...[C]alculations ...converting a debt of US$65,318.10 [owed to a particular foreign creditor] to Australian currency at the respective debts [are]:

(a) Conversion at date of debt:- AUS$0.55660 = US$1.00

Debt in Australian Dollars = $117,351.96

Dividend ($0.30/$1.00) = $35,205.59

(b) Conversion at date of bankruptcy:- AUS$0.51730 = US$1.00

Debt in Australian Dollars = $126,267.35

Dividend ($0.30/$1.00) = $37,880.20

(c) Conversion at date divided declared:- AUS$0.723336 = US$1.00

Debt in Australian Dollars = $90,301.19

Dividend ($0.30/$1.00) = $27,090.36

4. At the date of swearing this affidavit I have converted the debt used as an example in paragraph 3 of this Affidavit, using the conversion rate which applies as at today’s date namely AUS$0.728401 = US$1.00

Debt in Australian Dollars = $89,673.27

Dividend ($0.30/$1.00) = $26,901.98’

7 Pursuant to the provisions of s 20(1A) of the Federal Court of Australia Act 1976 (Cth), the Chief Justice has directed that the Court’s original jurisdiction in this matter shall be exercised by a Full Court.

8 Notice of this application has been given to creditors, including foreign creditors. However, pursuant to the provisions of O 80 of the Court’s Rules, Mr Gronow has been requested to act as contradictor (by appearing as amicus curiae) in the proceedings.

9 By orders of this Court dated 10 May 2004, all creditors were given the opportunity to make submissions, in addition or opposition to any of the submissions already made, within 42 days of the date of the orders. A letter relating to the costs of the proceedings, dated 20 May 2004, from the solicitors previously acting for two Australian creditors, Matthew and Renee Gleeson, has been brought to the attention of the Court. No further submissions have been received.

THE COMPETING SUBMISSIONS

10 It is common ground that the Act is silent on the present question.

11 Mr Bigmore QC, as Counsel for the Trustee, submits that the appropriate date is the date of the bankruptcy (but not, for reasons to be mentioned later (at [61]), the date of its commencement). Mr Bigmore further submits that, if the Court were minded to make a direction or declaration as to the date for foreign currency conversion in a bankruptcy, it may also be appropriate to direct that (unless the Trustee is able to make an estimate of an ‘uncertain’ debt under s 82(4) of the Act) the exchange rate be calculated in the manner specified in Bankruptcy Regulation 4.04(3), which provides (in relation to bankruptcy notices only):

‘4.04(3) For the purposes of paragraph (2) (b) [see [14] below], the conversion of an amount of foreign currency into an equivalent amount of Australian currency must be done in accordance with the exchange rate that, on the second working day before the day on which the relevant application is lodged under subregulation 4.01 (1) [which lists the documents to be included in the relevant application], is the relevant opening telegraphic transfer rate of the Commonwealth Bank of Australia.’

12 Mr Gronow has presented arguments in favour of two other methods; that is to say, either (i) the date when the debt became due and payable in United States dollars; or (ii) the date when the Trustee, having allowed a proof of debt, proposes to pay a dividend.

THE LEGISLATIVE SCHEME FOR PROOF OF DEBTS

13 As noted, the Act contains no provision on the point. Nor is there any provision in the Bankruptcy Regulations on this question, although (as mentioned) a somewhat similar problem is dealt with in the Regulations in the case of bankruptcy notices. (One can, of course, ‘look at regulations, not to construe an overall scheme, or to throw light on ambiguity in a statutory provision, but to ascertain what the scheme is’ per Mason J, in discussion with counsel, in Brayson Motors Pty Ltd (In Liq.) v Federal Commissioner of Taxation [1985] HCA 20; (1985) 156 CLR 651 at 652.)

14 The provisions of the Act dealing with proof of debts (Division 1 of Part VI of the Act) include the following:

• Subject to the operation of Division 1, all debts and liabilities, present or future, certain or contingent, to which a bankrupt was subject at the date of the bankruptcy are provable (s 82(1)). (A ‘liability’ includes: (a) compensation for work or labour done; (b) an obligation, or possible obligation, to pay money, or money’s worth, on the breach of an express or implied covenant, contract, agreement or undertaking, whether or not the breach occurs, is likely to occur, or is capable of occurring, before the bankrupt’s discharge; and (c) an express or implied engagement, agreement or undertaking, to pay, or capable of resulting in the payment of, money or money’s worth, whether the payment is: (i) fixed or unliquidated in amount; (ii) present or future, or certain or dependent on a contingency, in respect of time; or (iii) capable of being ascertained by fixed rules or only as a matter of opinion, in manner of valuation (s 82(8)).
• The trustee shall make an estimate of the value of provable debt or liability which, by reason of its being subject to a contingency, or for any other reason, does not bear a certain value (s 82(4)).
• A person aggrieved by such an estimate may appeal to the Court (s 82(5)).
• If the Court finds that the value of the debt or liability cannot be fairly estimated, the debt or liability shall be deemed not to be provable (s 82(6)).
• The trustee shall examine each proof of debt and its grounds and shall admit it in whole or in part, or reject it in whole or in part, or require further evidence in support of it (s 102(1)). A dissatisfied creditor may apply to the Court to review the decision (s 104(1)) and the Court may then confirm, reverse or vary that decision (s 104(2)).
• If the amount of a debt includes cents, the cents must be disregarded in admitting proof of the debt (s 103).

15 As mentioned, provision is made by Bankruptcy Regulation 4.04(2) in respect of bankruptcy notices where a judgment or order is expressed in an amount of foreign currency. The notice must: (a) contain a statement to the effect that payment of the amount of foreign currency there expressed may be paid in that currency, or by means of a specified amount of Australian currency that is stated to be equivalent to the amount of foreign currency; and (b) set out: (i) the applicable rate of exchange, being the rate worked out in accordance with Reg. 4.04(3) (cited in [11]); and (ii) the conversion calculation; and (iii) a statement that conversion of the amount of foreign currency into Australian currency has been made in accordance with this regulation.

16 It follows, as has been said, that no particular provision is made in the legislative scheme for the purpose of proving a debt incurred or payable in a foreign currency.

THE AUTHORITIES

17 However, in the absence of legislative intervention, the Courts in England and in this country have needed to address the present issue.

18 The main Australian authority in this area is Re Pearce (1933) 6 ABC 126, a decision of Lukin J under the Bankruptcy Act 1924 – 1932 (Cth), arising on a motion by a trustee for directions and/or declarations as to the amount in Australian pounds for which a debt expressed in English sterling, owing to an English creditor, should be admitted to proof.

19 Lukin J said (at 143):

‘The English authorities make it clear that ordinarily where the claim is for a debt payable in this country but expressed in terms of a foreign currency, the conversion from that currency to sterling must be made at the rate of exchange ruling on the date when the debt became due and payable. See cases set down in Williams on Bankruptcy, 14^th Ed., pp. 144 and 145. That English rule of law applies equally here. The crucial date seems to be when payment becomes due and payable.’

20 Lukin J, however, observed (at 143 – 144) that there might be two possible exceptions to the rule: (i) where the parties have contracted, expressly or impliedly, to exclude its application; or (ii) where the debt arises out of the relationship of principal and agent which gives certain rights between the parties that may be said to mollify the application of that rule of law. It appears that neither exception could apply in the present matter, but exception (ii) was, in fact, applied in Pearce.

21 As authority for the proposition that conversion is made when the debt is due and payable, Lukin J, as mentioned, cited Williams on Bankruptcy (14^th ed., 1932), at 144 – 145. The authors (W N Stable and J B Blagden) cite English authority (mentioned below) and submit that:

 Where a claim sounding in debt arising from a breach of contact which was originally expressed in terms of a foreign currency is sought to be enforced before an English court, it must, before it can be comprised in an English judgment, be reduced to and expressed in sterling.
 Where the claim is for breach of contract, the proper date for making the conversion is the date of the breach.
 Where the claim is for a debt payable in England, but expressed in terms of a foreign currency, the conversion from that currency to sterling must be made at the rate of exchange ruling on the date when the debt became due and payable.
 Where the claim is for a debt payable abroad to a foreign creditor expressed in terms of the currency of that country, in Re British American Continental Bank, Limited, Crédit Général Liégeois’ Claim [1922] 2 Ch 589 it was held (and the decision has been generally followed) that the same rule should be applied, so that the crucial date is the date when payment was due.

22 In Liégeois’ Claim, above, a claim was made in the winding up of a company (a bank) in England for a debt, by way of an overdraft, due from the bank to the claimants (a Belgian company) in Belgium in Belgian currency. It was argued for the claimants (at 591) that the correct date for ascertaining the amount of a debt in English money was the date of the judgment; and that, assuming that this proof is to be treated as if it were an action for the recovery of a debt, the proper date was the date of judgment; that is, in that case, the date of the winding up order, which corresponds with a judgment in the case of an action.

23 P O Lawrence J rejected the claimant’s argument, holding that the correct date on which the debt ought to be converted into English money was the date when the debt became due in Belgium, that is, 10 January 1921, the date when the account was closed, rather than 25 January 1921, the date of the winding up order.

24 His Lordship said (at 593):

‘...[T]he question ... falls to be determined ... as if this Court were sitting on January 25, 1921, and were then trying an action brought by the [claimants] against the bank for the recovery of their debt ....’

25 Reliance was placed by P O Lawrence J upon the judgment of Vaughan Williams LJ in Manners v Pearson & Son [1898] 1 Ch 581, where the plaintiff was claiming to recover debts payable to him in Mexico in Mexican currency. Notwithstanding some obiter observations by Atkin LJ in Cumming’s Case (see [26]), P O Lawrence J (at 594) regarded the question as ‘finally settled’ by the decision of the House of Lords in S.S. Celia v S.S. Volturno [1921] 2 AC 544; that is to say, that the date for conversion into English money is the date when the breach or the tort was committed, and not the date when the judgment of the Court is pronounced.

26 The (obiter) observations of Atkin LJ were expressed in Société des Hôtels du Touquet-Paris-Plage v Cumming [1922] 1 KB 451 at 465, where it was held by the Court of Appeal that a debt, payable abroad in a foreign currency, did not cease to be a foreign debt by reason of its being sued for in England; and that, upon depreciation of the foreign currency, payment being made abroad after action was brought, the debt was discharged. But, at the end of his reasons, Atkin LJ added (at 465):

‘... [N]o case that I know of has yet decided what the position is when a foreign creditor, to whom a debt is due in his country in the currency of his country, comes to sue his debtor in the Courts of this country for the foreign debt. Much may be said for the proposition that the debtor’s obligation is to pay, say, francs, and so continues until the debt is merged in the judgment which should give him the English equivalent at that date of those francs. It is a problem which seems to require very full consideration, and which I personally should desire to reserve.’

27 In stating that the decision in Liégeois’ Claim has ‘generally been followed’, the authors of Williams invite a comparison with Re Chesterman’s Trusts [1923] 2 Ch 466 in which Liégeois’ Claim, and the cases relied on by P O Lawrence J, were distinguished by the Court of Appeal on the facts.

28 The question in Re Chesterman’s Trust was (as Warrington LJ expressed it (at 485)): ‘... not ... for what amount personal judgment would be recovered ... [but] how much of the fund representing the mortgaged property is to be paid to the mortgagee in order to entitle the mortgagor to redeem’. In an action to administer English trusts, represented by a fund in Court, some of the persons entitled (subject to a life interest), who were Germans, borrowed from Dutch banks certain sums in Imperial German marks and executed mortgages of their shares to secure repayment. Upon the death of the life tenant, the fund became distributable. An inquiry was directed to ascertain what was due as to the incumbrances. By a certificate dated 24 November 1922, the Master certified that there was due to the mortgagee a certain rate of German Reich marks. At first instance, Russell J directed that payment to each mortgagee of such sum in sterling as at the date of the certificate represented the value of the German Reich marks found due under the mortgages. Under this order, the mortgagees would receive in satisfaction of their mortgages very small sums of English money. They appealed to the Court of Appeal, contending (inter alia) that the rate of exchange should be that prevailing on the days when the respective sums became payable by virtue of the personal obligations contained in the mortgages.

29 Warrington LJ said (at 484 – 485):

‘In the ordinary case of damages for breach of contract it is settled that conversion must be made as at the date of the breach ... . The same principle has been applied when the breach is non-payment of a debt at the time it became due ... . But we have not to consider in the present case for what amount personal judgment would be recovered. The question before us is how much of the fund representing the mortgaged property is to be paid to the mortgagee in order to entitle the mortgagor to redeem. Supposing as soon as the amount due had been ascertained by the certificate the mortgagor had paid or tendered that sum in marks he would have been entitled to require a release of the mortgaged property. The price of those marks if he had bought them in the market would have been determined by the rate of exchange on the day of the date of the certificate, and I think that date has been rightly selected by the learned judge as the date for conversion, being that on which the amount due was finally ascertained. The case is not unlike that of a stock mortgage under which the mortgagor had to replace a sum of stock and the mortgagee took the chance of a rise or fall in price.’

30 The English authorities were considered by the House of Lords in Miliangos v George Frank (Textiles) Ltd [1976] AC 443. In Miliangos, a contract was made in Switzerland stipulating payment in Swiss currency. Payment was not made. The plaintiffs sued for the sums due, asking for judgment in Swiss francs, as an alternative to claiming judgment in sterling. The proper law of the contract was Swiss, and the money of account (as of payment) was Swiss. It was held, by a majority, that it was legitimate for the House to depart from the ‘breach date conversion’ rule, and recognise that an English court was entitled to give judgment for a sum of money expressed in a foreign currency in the case of obligations of a money character to pay foreign currency under a contract, the proper law of which was that of a foreign country, and when the money of account was that of that country; but that the claim had to be specifically for foreign currency or its sterling equivalent; and that conversion should be at the date when the court authorised enforcement of the judgment in terms of sterling.

31 Lord Wilberforce said (at 466):

‘The fons et origo of the modern self-imposed limitation is clearly the judgment of ... Lindley MR in Manners [above] ...[at] 586 – 587.’

32 (In Manners, Lindley MR observed (at 586 – 587), in an action for an account that ‘[t]he terms of the contract’ (to pay a certain amount in Mexican currency) ‘confer no right to payment in English money’; and that ‘speaking generally’ the [English] Courts ... have no jurisdiction to order payment of money except in ... [English] currency’.)

33 (It will further be recalled that in Liégeois’ Claim, reference was made to observations of Vaughan Williams LJ in Manners at 592. His Lordship held that the amount of the English judgment must be expressed in English currency and the amount ‘must be based on the quantity of English sterling which one would have to pay here to obtain in the market the amount of the debt payable in foreign currency delivered at the appointed place of payment – i.e., the amount payable according to the rate of exchange’.)

34 In Miliangos, Lord Wilberforce said (at 466 – 477):

‘I think it is clear that [Lindley MR] is saying no more than that for enforcement purposes conversion into sterling must be made and he leaves open the question whether before the Debtors Act 1869 an order could have been made in Chancery for a foreign currency (in that case Mexican dollars). He continues that no necessity for conversion arises until the court orders payment and says that it does not follow that the sum to be inserted in the order is the (sterling) equivalent at that time, for there may be damages or interest as well. So I think that he leaves open the whole question of specific orders: and since this time, no real re-examination of the practicability of them has been made. In Beswick v. Beswick [1967] UKHL 2; [1968] A.C. 58 this House laid down that in a suitable case specific performance may be ordered of an agreement to pay a sum of money of the United Kingdom. Lord Pearce (p. 89) quoted from Hart v. Hart (1881) 18 Ch.D. 670, 685, the words:

"‘... when an agreement for valuable consideration ... has been partially performed, the court ought to do its utmost to carry out that agreement by a decree for specific performance.’"

If this is so as regards money of this country, I can see no reason why it should not be so as regards foreign money: indeed, the latter seems to have a more "specific" character than the former.’

35 His Lordship went on to say (at 468) (citing S.S. Volturno) that –

‘... the principles on which damages are awarded for tort or breach of contract are both very intricate and not the same in each case, involve questions of remoteness ... and have no direct relevance to claims for specific things, in which I include specific foreign currency.’

36 Lord Wilberforce added (at 468 – 469) that as regards –

‘...foreign money obligations ... the claim must be specifically for the foreign currency ... or the sterling equivalent at the [relevant] date ... . As regards the conversion date to be inserted in the claim or in the judgment of the court, the choice ... is between (i) the date of action brought, (ii) the date of judgment, (iii) the date of payment ...[that is] the date when the court authorises enforcement of the judgment in terms of sterling. The date of payment is taken in the convention annexed to the Carriage of Goods by Road Act 1965 (article 27 (2)). ... I would favour the payment date ... . In the case of a company in liquidation, the corresponding date for conversion would be the date when the creditor’s claim in terms of sterling is admitted by the liquidator ... .’ (Emphasis added for this dictum.)

37 Lord Cross, agreeing with Lord Wilberforce, said (at 495):

‘[I]n ... Cummings ... [at] 465 ... Atkin LJ said ... [of the date of conversion]:

"Much may be said for the proposition that the debtor’s obligation is to pay, say, francs, and so continues until the debt is merged in the judgment which should give him the English equivalent at that date of those francs."

The first case which decided that in such circumstances the proper date to take for conversion was the date of the failure to pay the foreign currency was apparently the decision ... in Liégeois ... in coming to which the judge was, I think, influenced by his belief – which to my mind was erroneous – that Lindley M.R. and Rigby L.J. in Manners ... were in agreement with Vaughan Williams L.J. that in such a case the date of the failure to pay was the proper date to take. The decision of P. O. Lawrence J. was however accepted as correct by the Court of Appeal in Madeleine Vionnet et Cie. v. Wills [1940] 1 K.B. 72, and by this House in the Havana case [1961] A.C. 1007 – though in the latter case Lords Reid and Radcliffe evidently felt considerable doubts on the point – doubts which are understandable enough if one remembers that the dissenting judgment of Vaughan Williams L.J. in Manners ... on which the doctrine really rests is based on the view which their Lordships repudiated that the plaintiffs’ claim is for damages for failure to deliver a commodity.’

38 Lord Cross added (at 498) (as obiter) that he agreed with Lord Wilberforce that ‘where the foreign money obligation is the subject of a proof in bankruptcy or liquidation the date for conversion into sterling should be the date of the admission of the proof.’

39 However, these obiter observations were not followed by Oliver J, upon an application by an English liquidator to determine the date, or dates, on which dollar creditors should be converted into sterling in In re Dynamics Corporation of America (In Liquidation) [1976] 2 All ER 669. It was there held that the date of the winding up order was the date at which conversion ought to be made.

40 Oliver J said (at 679):

‘What the House of Lords was, as I read it, concerned with in the Miliangos case was how the English court, in delivering judgment, should give effect to the right which the foreign creditor has to the delivery of a certain quantity of foreign currency. But I certainly do not read the decision as entitling the creditor to an uncertain amount, and there does not appear to me to be at the date of the liquidation any uncertainty in the claim which would justify the claim being estimated under section 316. Of course if the Miliangos case had the effect for which counsel contends, I am bound to apply it, but if that case does compulsively lead to this conclusion it does seem to me, I must say, to accord very ill with the provisions of both the winding up and the bankruptcy rules, and to cut right across the principle of pari passu distribution which is enshrined in section 302 of the Act of 1948, and this must be so, I think, not only as between dollar creditors and sterling creditors but between the dollar creditors inter se. The liquidator in this case has to deal with proofs from numerous dollar creditors whose total debts, as I have said, amount to over $48,000,000, and as a practical matter it would be quite impossible to adjudicate on all proofs on the same day, but the rate of exchange alters daily, or almost daily, and sometimes alters very materially.’

41 His Lordship continued (at 684):

‘What the court is seeking to do in a winding up is to ascertain the liabilities of the company at a particular date and to distribute the available assets as at that date pro rata according to the amounts of those liabilities. In practice the process cannot be immediate, but notionally I think it is, and, as it seems to me, it has to be treated as if it were, although subsequent events can be taken into account in quantifying what the liabilities were at the relevant date. In the context of a liquidation, therefore, the relevant date for the ascertainment of the amount of liability is the notional date of discharge of that liability, and, despite what was said by Lord Wilberforce and Lord Cross by way of illustration, that date must, in my judgment, be the same for all creditors and it must be "the date of payment" for the purposes of any judgment which has been entered for the sterling equivalent at the date of payment of a sum expressed in foreign currency.’

42 The reasoning in Dynamics Corporation was followed by the Court of Appeal in Re Lines Bros. Ltd (In Liquidation) [1949] UKHL 1; [1983] Ch 1. The issue (as stated by Lawton LJ (at 9)) was whether the liquidator should pay dividends in sterling at the rate of exchange prevailing at the date of the resolution to wind up, or at the rates prevailing when any payments are made.

43 In citing Lord Wilberforce’s dictum, Lawton LJ said (at 12):

‘Counsel have satisfied me that a date based on a liquidator’s admission of a claim would cause confusion since claims are made at different times and may not be admitted in the order in which they are received. He may have to make protracted inquiries about a claim before admitting it.’

44 Lawton LJ added (at 13):

‘Being a form of collective enforcement, the beginning of a winding up was in its legal nature the equivalent of the court giving leave to enforce a judgment; and just as a judgment in a foreign currency could not be enforced until it was converted into sterling so a liquidator could not apply the property of a company in satisfaction of its liabilities pari passu until he had put a value in sterling on any claims made in a foreign currency. The liquidator has to compare like with like and a Swiss franc cannot be compared with a [sterling] until the sterling value is known. A convenient date for making the valuation is the date when the winding up starts since this is the date which, for over a hundred years before the Miliangos case ..., was accepted as the date beyond which no further liabilities could accrue. The assets realised "should be applied equally and rateably in payment of the debts as they existed at the date of the winding up": see In re Humber Ironworks and Shipbuilding Co. (1869) L.R. 4 Ch. App. 643, per Selwyn L.J. at p. 646.’

45 Brightman LJ (at 18 – 19) cited a passage from the decision of P O Lawrence J in British American Bank v Goldzieher and Penso’s Claim [1922] 2 Ch 575 as follows (at 582 – 583):

‘In a winding up, this Court has to ascertain all the liabilities of the company being wound up for the purpose of effecting the proper distribution of its assets amongst its creditors. A date has necessarily to be fixed on which all debts and other liabilities are to be treated as definitely ascertained, both for the purpose of placing all creditors on an equality and for the purpose of properly conducting the winding up of the affairs of the company. According to the rules and practice now prevailing, the date so fixed is the date of the winding-up order. One effect of fixing that date is to compel those creditors whose claims do not consist of debts or of liquidated demands ascertained and payable before that date to estimate and assess the amounts which they claim to be due to them on that date. Another effect of fixing that date is that when a claim is disputed this Court will decide the dispute as though it were being determined on the day when the winding-up order was made. Accordingly, in a case where a creditor has an unsatisfied claim against the company for damages for breach of contract, and the amount of those damages is in dispute, this Court will ascertain the correct amount as if it were sitting on the day of the winding-up order and were then trying an action for damages for the breach of that contract.’

46 Brightman LJ then said (at 19):

‘I have quoted at length from authorities on a proposition which is accepted as axiomatic, in order to underline the point that the winding up date is the date of valuation of liabilities. As an account can only be struck in a single currency, it must follow that the scheme of company liquidation requires that a foreign debt shall be converted into sterling (if sterling is the currency of the liquidation) as at the date of liquidation and at no other date.’

47 Dynamics Corporation and Lines Bros were followed in In re Amalgamated Investment & Property Co Ltd [1985] Ch 349 (per Vinelott J at 364).

48 These principles have now been embodied in bankruptcy administration in England by Rule 6.111 of the Insolvency Rules, providing as follows:

‘r 6.111 Debt in foreign currency

(1) For the purpose of proving a debt incurred or payable in a currency other than sterling, the amount of the debt shall be converted into sterling at the official exchange rate prevailing on the date of the bankruptcy order.

(2) "The official exchange rate" is the [middle exchange rate on the London Foreign Exchange Market at the close of business] ..., as published for the date in question. In the absence of any such published rate, it is such rate as the court determines.’ (Emphasis added)

49 Of this statutory amendment to the quantification of claims in proof of bankruptcy debts, Fletcher, The Law of Insolvency, 3^rd ed., comments (at 271 – 272):

‘The recent alteration, originating via commercial case law, of what had been a long-established rule of English law [see [49]] was clearly effected in the interests of ensuring justice for creditors in an age of rapidly fluctuating exchange rates. It will be of special advantage to creditors, of course, in cases where sterling undergoes depreciation as against the foreign currency in question during the period between the time when payment was originally due and the time when the creditor’s proof is admitted. In the converse situation, where sterling undergoes appreciation against the currency in question, the result will nonetheless be just, because the foreign creditor will still receive what he has bargained for, namely a specific amount of a specified foreign currency, notwithstanding the fact that when payment is made it may cost the debtor (or his trustee) less in terms of sterling to purchase the necessary foreign currency than if payment had been made at the proper time. Indeed, it has long been accepted [see [49]] that in cases where a debt, expressed in foreign currency and also payable abroad, has actually been paid in accordance with these conditions, the debtor will have obtained a good discharge from his obligation despite the fact that, by paying later than the time agreed, he may have derived a material advantage from a movement of exchange rates working in his favour between the time payment was due and the time payment was actually made.’

50 (The ‘long-established rule’ mentioned is the ‘breach’ rule; and the ‘long’ acceptance is a reference to Cummings’ Case, above, stated by Fletcher to be ‘still apparently good law’.)

51 We note, in passing, that there does not appear to be a uniform rule in the United States of America with respect to the proper date for conversion of foreign money obligations: cf Hicks v Guinness, 269 U.S. 71 (1925) (‘breach day’ rule) with Deutsche Bank Filiale Nurnberg v Humphrey, 272 U.S. 517 (1926) and Zimmerman v Sutherland, 274 U.S. 253 (1927) (‘judgment day’ rule); see also In re Good Hope Chemical Corporation, 747 F.2d 806 (1^st Cir. 1984, cert. denied, 471 U.S. 1102 (1985); In Re National Paper & Type Company of Puerto Rico, 77 B.R. 355, 357 (Bkrtcy D.P.R. 1987); Reliastar Life Insurance Company v IOA Re, Inc., 303 F3d 874, 883 (8^th Cir. 2002). In New York the proper conversion date is the judgment date as dictated by s 27(b) of the New York Judiciary Law enacted in 1987 as follows:

‘In any case in which the cause of action is based upon an obligation denominated in a currency other than the currency of the United States, a court shall render or enter a judgment or decree in the foreign currency of the underlying obligation. Such judgment or decree shall be converted into the currency of the United States at the rate of exchange prevailing on the date of entry of the judgment or decree.’

By way of comparison, the Restatement (Third) of Foreign Relations law SS823 (2) provides:

‘If, in a case arising out of foreign currency obligation, the court gives judgment in dollars, the conversion from foreign currency to dollars is to be made at such a rate as to make the creditor whole and to avoid rewarding a debtor who has delayed in carrying out the obligation.’

This would appear to allow Courts to select the rule that in any particular case, will prevent the loss due to fluctuating exchange rates being borne by the injured party or the party not in breach.

52 In this country, in September 1988, the Australian Law Reform Commission published its (Harmer) Report No. 45 ‘General Insolvency Inquiry’ in which the Commission considered claims denominated in foreign currency. Reference was made to Dynamics Corporation and to Lines and it was noted that, in the case of a corporate liquidation, the only Australian case was In re Tillam Boehme & Tickle Pty Ltd (In Liquidation) [1932] VLR 146.

53 (In Tillam, Mann J held (at 149) that ‘the relevant date is not when the amount is in fact paid or when judgment for it is given but the date when the same became due’.)

54 The Report stated (at 328):

‘810. Three approaches. The Commission considered three approaches which can be taken to this area of the law.

• The principle enunciated in the Dynamics Corporation and the Lines Bros cases could be codified. The legislation would provide for all claims to be converted as at the date of the commencement of the insolvency administration.

• The legislation could stipulate the commencement of the insolvency administration as the date for conversion but could permit contractual provisions varying that date.

• Another date for conversion, for example, the date at which a debt is admitted or the date of declaration of a dividend, could be set.

The problem with the third approach is that, although it fixes a date, the occurrence of the relevant event by reference to which the date for conversion is determined will be very much a matter for the individual insolvency administrator. The same criticism might be made of the second approach, on the assumption that the parties may themselves choose to provide for a date which is, in fact, at the discretion of either the creditor or the insolvency administrator.

811. Recommendation. The Commission favours the first approach and therefore recommends that the principle which represents the law in this area as enunciated by the English courts be codified. This recommendation will apply equally to the amount of claims which are liquidated after the date of commencement of the winding up. The Commission further recommends that the situation where exchange rates fluctuate on the one day be specifically provided for.’

55 The principles in Dynamics Corporation and Lines Bros were accepted by Dowsett J in Re Gresham Corporation Pty Ltd [1990] 1 Qd R 306, where a company in liquidation owed debts to various creditors expressed in foreign currency. His Honour referred to Pearce, noting that Lukin J had held that there were exceptions to the ‘breach’ conversion rule, one of which Lukin J applied.

56 In directing that the amount of proofs in foreign currency be converted to Australian dollars at the rate appropriate on the date upon which the company was placed into liquidation, Dowsett J said (at 307 – 308):

‘[In Dynamics Corporation] Oliver J., after careful consideration of the history of the realisation of assets in bankruptcy and company liquidations and of the current English legislation, came to the conclusion that the appropriate date was the date of the winding-up order. I must say that I find his Lordship’s reasoning persuasive, and although our legislation tends to diverge more and more from the current English legislation, I think that the considerations which led his Lordship to that conclusion may well be persuasive here. A perusal of our code indicates that it is anticipated that the liability of a company to a creditor will be able to be fixed with certainty after the making of the winding-up order. In a strictly logical sense, this must be done before a dividend can be calculated, and in the case of a large liquidation, it seems unlikely that the date of acceptance of proof would be the same for all creditors. It would not be appropriate that the amount to be derived by a foreign currency creditor vary, dependent upon whether his proof were accepted at the beginning or the end of that process. In ... Lines Bros ..., the Court of Appeal followed ... Dynamics Corporation ... in preference to Miliangos. The principle was again accepted by Vinelott J. in ... Amalgamated Investment ...at 364.

I share the concern displayed by Oliver J. in ... Dynamics Corporation ... in not following the observations made by members of the House of Lords in the course of their speeches in Miliangos, but the fact that the line of authority commencing with ... Dynamics Corporation ... has not been contradicted leads me to believe that such decision has been accepted as a fair basis for the resolution of questions concerning the distribution of assets in a winding-up. It appears to me to be theoretically and practically sound, if I may say so with respect, and it is the course that should be followed here.’

57 In 2001, the Parliament adopted the Harmer recommendation by adding s 554C to the Corporations Act, as follows:

‘Conversion into Australian currency of foreign currency debts or claims

(1) This section applies if the amount of a debt or claim admissible to proof against a company would, apart from this section, be an amount of foreign currency.

(2) If the company and the creditor or claimant have, in an instrument created before the relevant date, agreed on a method to be applied for the purpose of converting the company’s liability in respect of the debt or claim into Australian currency, the amount of the debt or claim that is admissible to proof is the equivalent in Australian currency of the amount of foreign currency, worked out as at the relevant date and in accordance with the agreed method.

(3) If subsection (2) does not apply, the amount of the debt or claim that is admissible to proof is the equivalent in Australian currency of the amount of foreign currency, worked out by reference to the opening carded on demand airmail buying rate in relation to the foreign currency available at the Commonwealth Bank of Australia on the relevant date.’

58 In Re Capel; Ex parte Marac Finance Australia Limited [1994] FCA 890; (1994) 48 FCR 195, in considering the operation of the ‘mutual dealings’ provision within s 86 of the Act, Drummond J, citing Dynamics Corporation, said (at 206):

‘It is a basic principle of insolvency law that the liquidation and distribution of an insolvent’s assets are treated as notionally taking place on the date of the insolvency decree... .’

59 In Fisher v Madden [2002] NSWCA 28; (2002) 54 NSWLR 179, the Court of Appeal of the New South Wales Supreme Court approved the reasoning in Dynamics Corporation in determining priority of debts in a receivership, emphasising ‘[t]he importance of, and the practice for, determining the date for ascertaining the liabilities of a company being wound up’ (per Sheller JA at 191).

ARGUMENTS ON THE CHOICE OF AN APPROPRIATE DATE FOR EXCHANGE RATE CONVERSION

60 As mentioned, three possible (alternative) dates have been propounded, as follows:

The date of the bankruptcy

61 In his argument, Mr Bigmore submitted:

• Oliver J’s reasoning in Dynamics Corporation should be applied here; that is, there should be but one date upon which all proved claims are ascertained for the purpose of calculating a rateable distribution.
• It is not convenient (having regard to the objectives of the bankruptcy and company winding up laws) to choose the ‘breach date’ (i.e. the date when payment fell due) for each separate debt – a date capable of complication in the event that the claim is for a simple debt, for damages for breach of contract (and whether the law of the contract is local or foreign) or for other liabilities.
• Although, following the dicta of Lord Wilberforce and Lord Cross in Miliangos, the ‘payment date’ (i.e. the date authorised by the Court for enforcement) would be apt in the (unusual) case of solvent debtor, for the reasons given in Dynamics Corporation, administrative inconvenience and unfairness as between creditors, could result if the ‘payment date’ is chosen for insolvent debtors.
• In Pearce, reliance was placed (indirectly) upon Liégeois’ Claim; upon Chesterman and upon Cummings’ Case. However, in Miliangos, these cases were cited as examples of the ‘breach date’ rule, a rule swept away in that case in favour of the ‘payment date’ rule. Lord Wilberforce noted (at 469) that the law on this topic is ‘judge made’, having observed (at 467):
‘To change the rule would ... avoid injustice in the present case ... [and] enable the law to keep in step with commercial needs and with the majority of other countries facing similar problems.’

• Although, in Gresham, Dowsett J was not referred to Re Tillam (decided in 1932) his Honour did, however, consider Pearce. There is no reason to suppose that his Honour would have felt more constrained by Re Tillam than by Pearce.
• The appropriate date is the date of the bankruptcy, not the date of its commencement. In Lines Bros, as noted, Lawton LJ preferred the ‘date of liquidation’. However, whilst agreeing with this opinion, Brightman LJ then added that the relevant date should be the date of the (voluntary) resolution to wind up. The passing of such a resolution might seem analogous to the commission of an available act of bankruptcy by an individual. However, since there is often contention about whether one or more acts of bankruptcy might have been committed in the six months before bankruptcy, the more convenient date is the actual date of bankruptcy.
• It is desirable that there be consistency between the rule for corporations, as declared in Gresham (and now ‘enshrined’ in s 554C) and the rule for bankruptcies.
• In the present matter, the Court is not asked to reform a rule already established in Australia. Although the earlier English ‘breach date’ cases were acknowledged in Pearce, Lukin J (as mentioned) noted some exceptions, one of which (that is, the agency situation) his Honour applied. Since Lukin J’s recognition of the analysis of the cases by Williams in its 1932 edition was thus obiter, and since the English rule has since been reformed by the House of Lords, it is open to this Court to formulate the appropriate rule in (as it appears) the first instance where the question has arisen squarely for decision. By choosing the date of bankruptcy, Australian law will not only be consistent with the general law in England in its modern form, but also with the United Kingdom’s statutory rule 6.111.
• With respect to the method of calculation of exchange rate, the Court should direct that an estimate be made, pursuant to s 82(4) of the Act, taking into account the manner specified in Reg. 4.04(3) (or alternatively, s 554C of the Corporations Act 2001).

The date when the debt became due and payable

62 In his primary argument, Mr Gronow submitted:

 For the reasons advanced by Lord Simon in dissenting in Miliangos (at 480 – 483) the pre-existing common law position in Australia, as set out in Pearce, ought not now be altered without legislative intervention. (That is to say, the general law position being that the exchange rate is to be applied as at the date when the relevant debt became due and payable in the foreign currency, but subject to any agreement to the contrary, and to overriding doctrines such as the general law of agency, or the principles of equity.)
(In summary, Lord Simon’s dissent was based upon the following considerations:

 Law reform by lawyers for lawyers (unless in exceptionally technical matters) is not socially acceptable.

 Judicial reform here would import an undesirable element of monetary speculation into English litigation.

 The Havana Case should not be overruled.)

 In Gresham, no reason was given for not following Pearce.
 Parliament should be taken to have been aware of the existing state of the law when it enacted the Act in 1966. Moreover, Parliament made no attempt in 2001 to insert into the Act a provision similar to s 554C of the Corporations Act 2001.
 It is without force to argue that the pre-existing ‘common law’ of bankruptcy should be reformed by the Courts because of modern exchange rate fluctuations, since there have been such fluctuations for many years, as the earlier cases indicate.
 Whilst, all other things being equal, it may be desirable to have some uniformity of approach between the law of bankruptcy and that of company winding up, regard must also be had to the circumstance that each now depends on a different legislative scheme. This is even more so when considering decisions under companies legislation in the United Kingdom, as Dynamics Corporation and Lines Bros were.
 Whilst the Act does not expressly determine the present question, a relevant provision of the Act (previously mentioned) is s 82(1), as follows:
‘82(1) Subject to this Division, all debts and liabilities, present or future, certain or contingent, to which a bankrupt was subject at the date of the bankruptcy, or to which he or she may have become subject before ... discharge by reason of an obligation incurred before the date of the bankruptcy, are provable ... .’ (Emphasis added by Mr Gronow.)

 Thus, the focus of s 82(1) is the incurring of the obligation. This suggests that the appropriate date for the application of the exchange date should be the date on which the debt was payable. This would accord with the dealings between the parties, thus providing the principal determinant of the method of ascertaining the appropriate time for applying the exchange rate. Moreover, it is more appropriate than the externally imposed date (that is, of bankruptcy) when the creditors’ rights to recover the amounts owing to them are converted into a right to prove in the bankrupt estate.
 Using the date when the debt becomes due and payable would prevent foreign creditors receiving either a ‘windfall’ upon a favourable movement in exchange rates (between ‘breach’ and sequestration order) or being ‘unfairly’ disadvantaged if that movement is unfavourable.
 By way of analogy, where a bankruptcy notice is issued, demanding payment of a debt in foreign currency, the exchange rate conversion is to be made immediately prior to the date of application for issue of the notice (Reg 4.04(3)); this is the closest practicable date to when the debt demanded is due to be paid, twenty-one days after service of the notice.
 Pearce decided (at 148) that if the debt was not (yet) due and payable at the date of commencement of the bankruptcy, it should be converted as at that date. This is so because, as the Trustee has argued, the creditor’s right alters at that time by being converted from a right to be paid by and enforced against the debtor, to a right to prove in the estate.

The date of admission of proof and declaration of dividend

63 As a secondary (and alternative) argument, Mr Gronow submitted:

 Section 108 of the Act provides:
‘108. Except as otherwise provided by this Act, all debts proved in a bankruptcy rank equally and, if the proceeds of the property of the bankrupt are insufficient to meet them in full, they shall be paid proportionately.’

 Accordingly, s 108 focuses on the value of the debts at the date of proof and payment, rather than as at the date of commencement of the bankruptcy.
 The advantage of applying the exchange rate applicable as at the date of admission of the proofs and declaration of the dividend is that such date is when the creditor actually has an enforceable right to be paid, and thus the right, in practical terms, to receive something.
 It is now the ‘judicially reformed’ general law of Australia, following Miliangos, that a creditor seeking to enter and enforce in local currency a judgment in respect of a foreign currency debt has to convert the debt to local currency, as at the date on which the judgment is registered or obtained, rather than the date when the debt was due and payable (see, e.g. Maschinenfabrik Augsburg Nurenburg Aktiengesellschaft v Altikar Pty Ltd (1984) 3 NSWLR 152).
 Since such a debt was, until registration, payable in foreign currency, but then converted into a different obligation (that is, to pay a judgment debt in local currency as at the date of registration), by analogy, the date of conversion for the payment of a dividend should be the date of admission to proof and declaration of dividend, since this is the time when the creditor acquires an enforceable statutory right to be paid in respect of the debt.
 Although the date now suggested can vary between different creditors, depending upon when the proof was lodged, and upon how long the trustee needs to consider it, this is no different from the case of a solvent debtor, where the time of being able to enforce their rights to be paid the debt can depend on when the debt became due, when action is instituted, and when judgment is registered.
 An advantage of adopting the date here advocated is that the debt will be given a proportion of its true ‘market’ value at a date closer to when it is paid (usually proportionately) to the creditor.

CONCLUSIONS

64 As has been seen, in the absence of a provision such as the United Kingdom statutory rule 6.111, a ‘special problem’ (as Fletcher, op. cit. at 270 described it) arises whenever a creditor seeks to prove for a debt which, though claimed in this country, is expressed in terms of some foreign currency.

65 It may be useful, in resolving the issue before the Court to define the nature or character of its jurisdiction in this matter.

66 As mentioned, the trustee has sought directions under s 134(4) of the Act. Section 134 appears in Division 4 of Part VI of the Act. Division 1 (ss 82 – 107) of Part VI is entitled ‘Proof of Debts’. As noted, no mention of the present question is made there. Division 4 of Part VI, in which s 134 is located, is entitled ‘Realization of Property’. Consistently with that description, s 134 is headed ‘Powers exercisable at discretion of trustee’. By s 134(1) it is provided that, subject to the Act, the trustee may do all or any of the following things, including the power to sell all or any part of the property of the bankrupt. By s 134(3) it is provided that, subject to the Act, the trustee may use his or her own discretion in the administration of the estate. By s 134(4) it is provided that the trustee may at any time apply to the Court for directions in respect of a matter arising in connection with that administration.

67 Although the present matter does not arise in respect of the realization of the bankrupt’s property, but in respect of the proof of debts, in our opinion the Court plainly has jurisdiction here, at least by virtue of the operation of s 30(1) and (2) of the Act, as follows:

‘30(1) [General Powers] The Court:

(a) has full power to decide all questions, whether of law or of fact, in any case of bankruptcy ...; and

(b) may make such orders (including declaratory orders and orders granting injunctions or other equitable remedies) as the Court considers necessary for the purposes of carrying out or giving effect to this Act in any such case or matter.

30(2) [Power to direct inquiries and accounts] The Court may direct such inquiries to be made and accounts to be taken for the purposes of any proceeding before the Court as the Court considers necessary and may, when directing an account to be taken, or subsequently, give special directions as to the manner in which the account is to be taken or vouched.’

68 The role of a Court of Bankruptcy was described by the Master of the Rolls in In re Thurlow; Ex parte Official Receiver [1895] 1 QB 724 (at 729), in a passage cited by McTiernan J in McIntosh v Shashoua [1931] HCA 56; (1931) 46 CLR 494 (at 520) as follows:

‘"Of all the procedures in our Courts, that of the Court of Bankruptcy will be the first to brush aside all technicalities to get at what is fair and just. Dr. Lushington used to say of Admiralty law that it was wider than equity or common law, and that the Admiralty Court administered the law according to natural justice. That is also the rule in bankruptcy. In construing an Act of Parliament the Court will, if it can, so construe the Act as to leave the greatest latitude in the Court of Bankruptcy. Administration in bankruptcy is under the control of the Court, except where it is limited by Act of Parliament. It is not the creditors who administer bankruptcy law; it is no part of the rights of the debtor to interfere; no official receiver has a right to interfere, except subject to the control or orders of the Court; and no department of Government has any right to interfere. It is the Court of Bankruptcy alone that controls the administration through its officers ...’ (Emphasis added.)

69 The conduct of a trustee in bankruptcy is subject to the supervision of the Court and a trustee in bankruptcy has historically been regarded as an officer of the Court (see Adsett v Berlouis (1992) 37 FCR 201 at 208).

70 In our opinion, since the legislative scheme is silent on the present question, it is open to the Court, as was held in Thurlow, to ‘construe [the] Act as to leave the greatest latitude in the Court’. It follows, in our view, that it is open to the Court to consider, as potentially applicable, each of the three separate contentions propounded in counsels’ submissions. The real issue then is to determine which of those propounded should be embraced in order to achieve an outcome that is fair and just, subject of course to the operation of any statutory provision.

71 In Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation [1981] HCA 26; (1981) 147 CLR 297, in commenting upon the principles of statutory interpretation, Mason and Wilson JJ said (at 321):

‘Quite obviously questions of degree arise. If the choice is between two strongly competing interpretations, as we have said, the advantage may lie with that which produces the fairer and more convenient operation so long as it conforms to the legislative intention. If, however, one interpretation has a powerful advantage in ordinary meaning and grammatical sense, it will only be displaced if its operation is perceived to be unintended.’

72 In this case, the Act being silent, with three possible competing interpretations propounded, the advantage, in point of statutory construction, lies, in our view, with that which produces the fairer and more convenient operation.

73 In our opinion, prima facie at least, the date of bankruptcy achieves that result, for each of the reasons given in Dynamics Corporation cited above. But, at the same time, I can accept that in some exceptional circumstances, this date may not produce the fairer and more convenient operation. In such a case, the presumption in favour of the bankruptcy date could be displaced, with the onus of its displacement resting upon the dissentient creditor.

74 In other words, in our view, ordinarily, the date of bankruptcy should be fixed as the date for conversion. A trustee in bankruptcy who acts on this basis will not be the subject of criticism. There could, however, be circumstances, in an unusual case, where it may be more appropriate to adopt either of the propositions propounded by Mr Gronow. If that course were urged by a creditor, and contemplated as appropriate by the Trustee, directions could be sought pursuant to s 134(4). To achieve any departure from the ordinary rule, a creditor would need to demonstrate that its application might result in an outcome that was neither fair nor convenient.

75 As to the methodology of conversion, there is no reason, in our opinion, why the mechanics described in reg 4.04(3) should not be applied so as to achieve certainty.

76 Given the "test" case nature of these proceedings, the Trustee may consider it appropriate to apply to the Attorney-General for an ex gratia payment of the costs of the matter to be met by the Commonwealth, upon the footing that the resolution of the present question will assist in the administration of future bankrupt estates.

ORDERS

77 In these circumstances, in our opinion, the Full Court should now order that directions be given in accordance with these reasons; that the matter be remitted to the docket Judge; and that the costs of the Trustee and of the contradictor be paid out of the bankrupt estate.

I certify that the preceding seventy-seven (77) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Beaumont, Weinberg and Crennan.

Associate:

Dated: 16 August 2004

Counsel for the Applicant:	Mr G Bigmore QC
Solicitor for the Applicant:	Gadens Lawyers
Contradictor:	Mr M Gronow
Date of Hearing:	6 May 2004
Date of Judgment:	16 August 2004