LEADENHALL AUSTRALIA PTY LTD v MR PETER FRANCIS DOMAN [2024] SASCA 77

On Appeal from SUPREME COURT OF SOUTH AUSTRALIA (THE HONOURABLE JUSTICE MCDONALD) [2023] SASC 97 Appellant: LEADENHALL AUSTRALIA PTY LTD Counsel: MR S MCDONALD SC WITH MR G FINLAYSON - Solicitor: DIASPORA LEGAL First Respondent: MR PETER FRANCIS DOMAN Counsel: MR P ADAMS - Solicitor: DMAW LAWYERS Second Respondent: MR JASON PAUL DOMAN Counsel: MR P ADAMS - Solicitor: DMAW LAWYERS Hearing Date/s: 10/11/2023 File No/s: CIV-23-007938 A SUPREME COURT OF SOUTH AUSTRALIA (Court of Appeal: Civil) DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment. The onus remains on any person using material in the judgment to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court in which it was generated. LEADENHALL AUSTRALIA PTY LTD v DOMAN & ANOR [2024] SASCA 77 Judgment of the Court of Appeal (The Honourable Chief Justice Kourakis, the Honourable Justice Bleby and the Honourable Justice Blue) 26 June 2024 INTEREST - RECOVERABILITY OF INTEREST - AWARD OF INTEREST ON DEBTS AND SUMS CERTAIN - INTERPRETATION BANKRUPTCY - ADMINISTRATION OF PROPERTY - PROOF OF DEBTS - WHAT DEBTS PROVABLE – INTEREST BANKRUPTCY - ADMINISTRATION OF PROPERTY - PROOF OF DEBTS - WHAT DEBTS PROVABLE - JUDGMENT DEBTS BANKRUPTCY - ADMINISTRATION OF PROPERTY - DISTRIBUTION OF PROPERTY - SURPLUS - RIGHT OF CREDITOR TO INTEREST ACCRUING AFTER SEQUESTRATION The appellant sued the respondents in the Magistrates Court for post-judgment interest on a District Court judgment from the date on which the respondents became bankrupt. A Magistrate granted summary judgment in favour of the appellant for $100,000 plus costs and interest. A Judge allowed the respondents’ appeal against the judgment and set it aside. The Judge held that, on the proper construction of sections 82 and 153 of the Bankruptcy Act 1966 (Cth), interest accruing on a pre-bankruptcy interest-bearing debt between the date of bankruptcy and discharge from bankruptcy does not survive bankruptcy but rather is postponed in bankruptcy pending a surplus, at which time it is paid or, in the absence of a surplus, the liability is discharged by section 153. The Judge held that consequentially subsection 58(3) precludes the institution of a legal proceeding for bankruptcy-period interest because such a proceeding is in respect of a provable debt. -- 1 of 81 -- The appellant seeks leave to appeal against that judgment. The appellant contends that bankruptcy- period interest is not a provable debt under, and for the purposes of, sections 58, 82, and 153 and is not the subject of discharge under section 153 or moratorium under section 58 of the Bankruptcy Act 1966 (Cth). The respondents contend under a notice of alternative contention that interest accrues automatically on the District Court judgment and cannot be the subject of a separate action in the Magistrates Court. Held by Blue AJA (Bleby JA agreeing): 1 On the proper construction of section 40 of the District Court Act 1991 (SA) and of the Enforcement of Judgments Act 1991 (SA), interest accrues on and augments a District Court judgment debt automatically; is enforceable as such and is not capable of being the subject of a separate action for such post-interest judgment (at [110]). 2 On the proper construction of subsections 82(3B), 153(1) and 58(3) of the Bankruptcy Act 1966 (Cth), although by reason of subsection 82(3B) a creditor cannot prove for bankruptcy- period interest on an interest-bearing debt under Part VI, bankruptcy-period interest forms part of a single debt which is a provable debt for the purposes of subsections 153(1) and 58(3) (at [414]). 3 It follows that the appellant was not entitled to sue the respondents for the bankruptcy-period interest in the Magistrates Court (at [415]). 4 Appeal dismissed (at [417]). Held by Kourakis CJ (dissenting in relation to the Bankruptcy Act 1966 (Cth)): 1 On the proper construction of section 40 of the District Court Act 1991 (SA) and of the Enforcement of Judgments Act 1991 (SA), interest accrues on and augments a District Court judgment debt automatically; is enforceable as such and is not capable of being the subject of a separate action for such post-interest judgment (at [1]). 2 On the proper construction of subsections 82(3B), 153(1) and 58(3) of the Bankruptcy Act 1966 (Cth), bankruptcy-period interest is not a provable debt for the purposes of subsections 153(1) and 58(3) and the debtor is not release from liability to pay it on discharge from bankruptcy (at [1]). Acts Interpretation Act 1901 (Cth) s 15AB; Bankruptcy Act 1966 (Cth) s 5, s 43, s 55, s 58, s 82, s 84, s 89, s 102, s 104, s 108, s 109, s 116, s 148, s 149, s 153, s 153A, s 156A, s 160; Corporations Act 2001 (Cth) s 459E; District Court Act 1991 (SA) s 40; District Court Civil Rules 2006 (SA) r 261; District Court Civil Supplementary Rules 2014 r 217; Enforcement of Judgments Act 1991 (SA); Magistrates Court Act 1991 (SA) s 8(1)(a), s 10(1), s 35; Magistrates Court (Civil) Rules 2013 (SA) r 134; Supreme Court Act 1935 (SA) s 114; Uniform Civil Rules 2020 (SA) r 185.1, referred to. Agusta Pty Ltd v Provident Capital Limited [2011] NSWSC 807; Anderson Formrite Pty Ltd v CASC Hire Pty Ltd (2005) 147 FCR 379 ; Berenguel v Minister for Immigration and Citizenship (2010) 264 ALR 417; Chapman v WOC Offshore BV [1993] I L Pr 229; CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384; Clyne v Deputy Commissioner of Taxation (Cth) (1981) 150 CLR 1; Coventry v Charter Pacific Corporation Ltd (2005) 227 CLR 234; Edwards v Stocks (2008) 17 Tas R 408; Esso Australia Pty Ltd v Australian Workers’ Union (2017) 263 CLR 551; Estate of Nitopi (No 3) [2021] NSWSC 1136; Federal Commissioner of Taxation v Consolidated Media Holdings Ltd (2012) 250 CLR 503; Foots v Southern Cross Mine Management Pty Ltd (2007) 234 CLR 52; Gaunt v Taylor (1834) 3 My & K 302 (40 ER 115); Grace v Grace (No 9) [2014] NSWSC 1239; Harrison v Melhem (2008) 72 NSWLR 380; In re Clagett; ex parte Lewis (1888) 36 WR 653; In re Follows; ex parte Follows [1895] 2 QB 521; In the matter of Colour Metal Pty Ltd [2021] NSWSC 1012; Jones v Director of Public Prosecutions [1962] AC 635; JS McMillan Pty Ltd v Commonwealth (1997) 77 FCR 337; Landmark Operations Limited v J Tiver Nominees Pty Ltd (No 3) [2009] SASC 329; Leadenhall Australia Pty Ltd v Doman [2018] SADC 123; Mackenzie v Rees (1941) 65 CLR 1; Midland Montague Australia Ltd v Harkness (1994) 119 FLR 374; Milevski v Paltos (No 2) [2022] NSWSC 437; Momcilovic v The Queen (2011) 245 CLR; Mondelez Australia Pty Ltd v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union (2020) 271 -- 2 of 81 -- CLR 495; Murphy v Farmer (1988) 165 CLR 19; Newton v Grand Junction Railway Co (1846) 153 ER 1133; P Aker Flowerbulbs Pty Ltd v Coulter (2004) 140 FCR 410; Page v Commonwealth Life Assurance Society Ltd 1935) 36 SR(NSW) 85; Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355; R v A2 (2019) 269 CLR 507; Re Estate of Low; ex parte Low (1899) 20 LR(NSW) B & P 17; Re Hyman; ex parte Law (1930) 3 ABC 61; Re Lehmann; ex parte Hasluck (1890) 7 Morr 181; Re Manion; ex parte Deputy Commissioner of Taxation (1979) 37 FLR 78; Re Mullavey; ex parte Australia and New Zealand Banking Group Ltd (1977) 32 FLR 1; Re O’Keefe; ex parte Australian Factors Ltd (1963) 19 ABC 101; Re Paul & Gray Ltd (1933) 33 SR(NSW) 295; Re Scott [2006] FCA 718; Re Wilson (1877) 3 VLR 95; Reis v Carling (1908) 5 CLR 673; Saeed v Minister for Immigration and Citizenship (2010) 241 CLR 252; SST Consulting Services Pty Ltd v Rieson (2006) 225 CLR 516; Storey v Lane (1981) 147 CLR 549; SZTAL v Minister for Immigration and Border Protection (2019) 262 CLR 362; The London, Chatham & Dover Railway Co v The South Eastern Railway Co [1893] AC 429; Thiess v Collector of Customs (2014) 250 CLR 664, considered. -- 3 of 81 -- -- 4 of 81 -- LEADENHALL AUSTRALIA PTY LTD v DOMAN & ANOR [2024] SASCA 77 Court of Appeal -– Civil: Kourakis CJ, Bleby JA and Blue AJA 1 KOURAKIS CJ: For the reasons given by Blue AJA, I too would hold that interest on the judgment debt is not recoverable by action in the Magistrates Court. Interest accrues on a judgment only by reason of the rules of court in which the judgment is given and by force of those rules is an integral component of the judgment itself. An award, or the accrual, of post-judgment interest does not amount to a separate judgment debt, the benefit of which inures to the successful party’s use. Rather, it is, and has long been recognised as, a disincentive for the delay of satisfaction of the judgment debt by the judgment debtor and a reflection of the judgment debt’s use value to the judgment creditor.1 Such an award reflects no more than the fact that the judgment debt has been ‘fructifying in the wrong pocket’.2 However, for the following reasons, I would hold that post-bankruptcy interest is not a provable debt and the Domans were not discharged from that component of the judgment debt on their discharge from bankruptcy. 2 I state my reasons in short form by reference to the applicable provisions of the Act as it stands which are the provisions which must necessarily determine the question. 3 First, the terms of s 82(3B) of the Bankruptcy Act 1966 (Cth) are intractable. Interest accrued in the bankruptcy-period which, but for sub-s (3B), would have otherwise fallen within sub-s (1) as a component of a provable debt, is expressly declared not to be a provable debt. The subsection creates a statutory construct, by which what might otherwise be a single debt is split into two debts for the purposes of the Act: one of which is provable; the other of which is not. That that is the effect of sub-s (3B) is apparent from a plain reading of the language of that subsection. It is only ‘in so far’ as the debt in question ‘consists of interest accruing’ on a provable debt that it is not provable in a bankruptcy. The use of the phrase ‘in so far’ suggests that it is only to the extent3 that an otherwise provable debt consists of an unprovable component of bankruptcy-period interest that it is unprovable in the bankruptcy, with the balance remaining provable and, thus, liable to discharge under s 153(1) of the Act. The language of s 153(1) is similarly intractable, and, by its terms, does not encompass debts unprovable in a 1 See, eg, The London, Chatham & Dover Railway Co v The South Eastern Railway Co [1893] AC 429, 437 (Lord Herschell LC, Lord Watson, Lord Morris and Lord Shand agreeing); P Aker Flowerbulbs Pty Ltd v Coulter (2004) 140 FCR 410, 420 [50] (Weinberg J). 2 Newton v Grand Junction Railway Co (1846) 16 M & W 139; 153 ER 1133, 1134 (Alderson B arguendo), quoted in Grace v Grace (No 9) [2014] NSWSC 1239, [64] (Brereton J); Estate of Nitopi (No 3) [2021] NSWSC 1136, [18] (Parker J); Milevski v Paltos (No 2) [2022] NSWSC 437, [10] (Parker J). 3 See, eg, JS McMillan Pty Ltd v Commonwealth (1997) 77 FCR 337, 356 (Emmett J); SST Consulting Services Pty Ltd v Rieson (2006) 225 CLR 516, 528-9 [35]-[37] (Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ). Cf Chapman v WOC Offshore BV [1993] I L Pr 229, 237-8 [21]-[26] (Hirst J). -- 5 of 81 -- [2024] SASCA 77 Kourakis CJ 2 bankruptcy, such as, on my reading of s 82(3B), that component of a judgment debt comprising post-judgment interest. 4 Secondly, the balance of competing interests as between creditors and the bankrupt and, as amongst creditors so affected, may be thought less than perfect but that is not reason enough to depart from the plain meaning of the provisions. The division of the assets of a bankrupt necessarily requires pragmatic compromises, especially around interest on a debt. Those compromises are informed by historical attitudes to the charging of interest. So much is clear from the history of bankruptcy legislation very helpfully surveyed by Blue AJA which shows that caps were placed on the payment of contractually charged interest and a different rate was paid in the absence of any contractual provision. The balance struck by s 82(3B) of the Act is to exclude post-bankruptcy interest all together. 5 Thirdly, that balance is workable. If there is no surplus after payment of all provable debts, there is no reason why those creditors with a right to contractual interest cannot choose to pursue it if they assess it cost effective to do so. It does not adversely affect the interests of other creditors to allow them to do so. True it is that the bankrupt will be twice, perhaps even thrice or more, vexed but that is in respect of a debt which s 82(3B) states is not provable. Any surplus after payment of all provable debts would be returned to the discharged bankrupt subject to any garnishee order a creditor entitled to post-bankruptcy interest might obtain. 6 Fourthly, the authorities on early bankruptcy legislation do not support a construction which departs from the ordinary meaning of the critical provisions. What may be loosely described as the ‘common law of bankruptcy’ is an amalgam of decisions construing the provisions of the 1705 English Statute and explicating the discretions exercisable thereunder. The relevant provisions in Mackenzie v Rees4 included post-bankruptcy interest as a provable debt (s 81(1) of the Bankruptcy Act 1924-1933 (Cth)), and required pro rata payment of all debts ‘proved’ in bankruptcy (s 89 of the Bankruptcy Act 1924-1933 (Cth)). The interpretation of the provisions adopted by the decision in Mackenzie (leaving aside the question of whether those interpretations were given obiter or as a necessary step in the disposition of the appeal) was that, until proved, the otherwise provable debt of post-bankruptcy interest did not have to be satisfied pari passu. The decision also accepted a, perhaps surprising, discretion to defer proof of the debt unless and until there was a surplus over and above all provable debts including post-bankruptcy interest. There is no need for such sophistry under the current Act. Post-bankruptcy interest is simply not provable. 7 I would allow the appeal. I would make orders confirming the dismissal of the action, but I would declare that the respondents have not been discharged from their obligation to pay post-bankruptcy interest, so that the debt can be enforced. It is unnecessary to consider the mechanism by which the latter declaration might 4 (1941) 65 CLR 1 (‘Mackenzie’). -- 6 of 81 -- [2024] SASCA 77 Blue AJA 3 be made because my construction of the Act in that respect is not shared by the majority of the Court. 8 BLEBY JA: I would dismiss the appeal and uphold the notice of contention for the reasons given by Blue AJA. 9 BLUE AJA: The appellant Leadenhall Australia Pty Ltd (Leadenhall) sued the respondents Peter Doman and Jason Doman (the Domans) in the Magistrates Court for post-judgment interest on a District Court judgment (November 2018) from the date on which the Domans became bankrupt (January 2019). A Magistrate granted summary judgment in favour of Leadenhall for $100,000 plus costs and interest. 10 A Judge of this Court allowed the Domans’ appeal against the judgment and set it aside.5 The Judge held that, on the proper construction of sections 82 and 153 of the Bankruptcy Act 1966 (Cth) (the Act), interest accruing on a pre-bankruptcy interest-bearing debt between the date of bankruptcy and discharge from bankruptcy (bankruptcy-period interest) does not survive bankruptcy but rather is postponed in bankruptcy pending a surplus, at which time it is paid or, in the absence of a surplus, the liability is discharged by section 153. The Judge held that consequentially subsection 58(3) precludes the institution of a legal proceeding for bankruptcy-period interest because such a proceeding is in respect of a provable debt. 11 Leadenhall seeks leave to appeal against that judgment. Leadenhall contends under its notice of appeal that bankruptcy-period interest is not a provable debt under and for the purposes of sections 58, 82 and 153 and is not the subject of discharge under section 153 or moratorium under section 58 of the Act. 12 The Domans contend under a notice of alternative contention that interest accrues automatically on the District Court judgment and cannot be the subject of a separate action in the Magistrates Court. 13 The notice of appeal and the notice of alternative contention raise two issues of general importance: 1 Can a creditor pursue a debtor personally for interest accruing after the bankruptcy of the debtor when the creditor is precluded from pursuing the principal against the debtor personally? 2 Can a judgment creditor sue a judgment debtor in the Magistrates Court for interest accruing under the District Court Act 1991 (SA) on a judgment granted by the District Court? 5 Doman v Leadenhall Australia Pty Ltd [2023] SASC 97. -- 7 of 81 -- [2024] SASCA 77 Blue AJA 4 Background 14 Leadenhall sued the Domans in the District Court. On 30 November 2018 the District Court granted judgment against the Domans for $706,019.40.6 15 Interest from 30 November 2018 accrued on the judgment debt under section 40 of the District Court Act 1991 (SA) (the District Court Act) and the combination of rule 261 of the District Court Civil Rules 2006 (SA) and rule 217 of the District Court Civil Supplementary Rules 2014 (SA) at a rate (the District Court post- judgment interest rate) equal to the cash rate of interest last set by the Reserve Bank of Australia (adjusted biannually) (the Cash Rate) plus six per cent per annum. 16 Leadenhall took steps under the Enforcement of Judgments Act 1991 (SA) (the Enforcement Act) to enforce the judgment. 17 On 2 January 2019 Jason Doman became bankrupt and on 4 January 2019 Peter Doman became bankrupt. At the date of the bankruptcies, post-judgment interest had accrued on the judgment debt at 7.5 per cent per annum. 18 The District Court post-judgment interest rate reduced on 1 July 2019 to 7.25 per cent per annum and further reduced on 1 January 2020 to 6.75 per cent per annum. 19 On 18 May 2020 the Uniform Civil Rules 2020 (SA) (the Uniform Civil Rules) commenced and repealed prospectively amongst others the District Court Civil Rules 2006 (SA) and the District Court Civil Supplementary Rules 2014 (SA). Rule 185.1 provides that post-judgment interest on a District Court (and Supreme Court and Magistrates Court) judgment debt accrues at six per cent per annum. 20 On 23 March 2021 Leadenhall instituted a claim in the Magistrates Court against the Domans for post-judgment interest on the District Court judgment from their respective dates of bankruptcy (2 and 4 January 2019) up to 25 February 2021. The claim was prima facie expressed to be for $100,394.93 against Peter Doman and $100,685.08 against Jason Doman but was limited to $100,000 against each due to the monetary limit of the jurisdiction of the Magistrates Court. 21 Leadenhall subsequently filed an interlocutory application seeking summary judgment. 22 On 6 October 2021 a Magistrate granted summary judgment in favour of Leadenhall for $100,000 and reserved the questions of costs and interest. The Magistrate rejected a contention by the Domans that the action was precluded by sections 58 and 153 of the Act. 6 Leadenhall Australia Pty Ltd v Doman [2018] SADC 123. -- 8 of 81 -- [2024] SASCA 77 Blue AJA 5 23 In January 2022 the Domans were discharged from bankruptcy. 24 The Domans appealed against the judgment. On 23 June 2023 a single Judge allowed the appeal and set aside the judgment. The Judge upheld the contention by the Domans that the action was precluded by sections 58 and 153 of the Act. Reasoning of courts below The Magistrate 25 The Magistrate referred to the legislative provisions and authorities cited by the parties. 26 The Magistrate concluded: I have reached the view that the respondents have no real prospects of successfully defending the applicant’s claim for the following reasons: • The overarching feature of the Bankruptcy Act is the concept of a provable debt in bankruptcy. • Those debts which are provable are spelled out by s 82 of the Bankruptcy Act: matters falling outside those categories are not provable. • The scope and operation of s 58(3) of the Bankruptcy Act turns on the proper interpretation of s 82 and the concept of a provable debt. • Similarly, the discharge provided by s 153 of the Bankruptcy Act is expressly dependent upon the status of the debt or liability as a provable debt. • The language in s 82(3B) and its application is clear: the post-bankruptcy interest on a provable debt (ie. Running Interest) is not a provable debt. This provision does no more. It follows that a debt consisting of the Running Interest is not discharged after bankruptcy under s 153(1) which only operates to release the bankrupt from all debts provable in the bankruptcy. Likewise, s 58(3) is not engaged, nor is there any other provision in the Bankruptcy Act that precludes the applicant from commencing this action for the Running Interest from the respondents at this stage. The appeal Judge 27 The Judge on appeal referred to the legislative provisions and authorities cited by the parties. 28 The Judge said: The equitable distribution of the assets of the insolvent debtor to prevent one creditor obtaining an undue advantage over others is a fundamental purpose of bankruptcy law. The legislation as a whole is aimed at marshalling assets, ascertaining debts and claims and applying the former towards satisfaction of the latter. It is aimed at releasing a bankrupt from an ever-escalating cycle of debt. Whilst there is no doubt that there are debts and liabilities that will sit outside of the Bankruptcy Act where the legislation is reasonably -- 9 of 81 -- [2024] SASCA 77 Blue AJA 6 open to more than one construction, a construction that would promote the purpose or object of the Act must be preferred to a construction that would not. … The first amendment to [section 82] occurred in 1987 with the introduction of s 82(3B). The purpose of that amendment could not have been made clearer in the accompanying detailed explanatory memorandum. It was to codify the common law or remove doubt to give ‘statutory standing’ to the rule in MacKenzie. … To my mind it would be a perverse outcome to determine that the effect of this amendment is the opposite of what was expressly intended by Parliament that is to preserve the common law in relation to the post-bankruptcy interest. This interpretation gains support from of the nature of the debt that is the subject of s 82(3B). Unlike the debts that have been the subject of the other amendments this debt is the product of an original debt that is in fact provable in the bankruptcy. Each of the other debts stands alone as part of a relevant legislative regime. In my view it would add to the absurdity of the result that a creditor could potentially receive only a very small percentage of the provable debt but subsequently be entitled to litigate for the full amount of the interest that became payable post-bankruptcy. It begs the question of when the liability for the interest will end. The appellants’ argument is further supported by s 153A – Annulment on payment of debts. This section relates to circumstances in which there are sufficient funds in the estate to pay the provable debts in full. This section adopts the position of the common law in relation to post-bankruptcy interest by stipulating that: … [i]n determining whether there has been full payment of a debt that bears interest, the interest must be reckoned up to and including the date on which the debt (including interest) is paid. In other words as under the common law the bankrupt will not receive any surplus until such time that all outstanding interest is paid. This section reflects the unique historical context of post-bankruptcy interest and creates provision for its payment albeit only at a point in time that all other debts are paid. That is despite the fact that it is not provable in the bankruptcy. It is consistent with a fair approach to the distribution of assets between the creditors. … The respondent contends that [section 153] makes it plain that the discharge is only from debts provable in the bankruptcy and it follows that liability for post-bankruptcy interest continues… … In my view s 153 must be read together with s 153A. The latter provides the means which post-bankruptcy interest should be dealt with which sits outside of the normal position in relation to the discharge of a bankrupt. In reading the two sections in this manner, results in a legislation framework which reflects and preserves the common law position. -- 10 of 81 -- [2024] SASCA 77 Blue AJA 7 29 The Judge held that in any event a proceeding for, or enforcement of, bankruptcy-period interest is in respect of a provable debt within the meaning of subsection 58(3). The Judge said: For a claim to fall within s 58(3) it must be ‘in respect of a provable debt. The words ‘in respect of’ have a wide meaning and are to take their colour from the context in which they are found. The expression only requires ‘some discernible and rational link’ between the matters in question. The width of the words in the context of this section has been the basis for the courts to conclude that the nexus between the proceedings and the relevant provable debt may even be indirect. Post-bankruptcy interest cannot be found to exist unless the original debt is in existence. It follows that it is ‘in the respect of’ a provable debt. The Magistrate erred in finding that s 58(3) of the Bankruptcy Act did not apply. Interest on judgment debt 30 It is convenient to address the issue arising on the notice of alternative contention before turning to the issue arising on the notice of appeal. Legislative regime: interest on judgment debts Current statutory provisions 31 Section 40 of the District Court Act provides: 40—Interest on judgment debts (1) A judgment debt bears interest at a rate prescribed by the rules. (2) Subject to any direction by the Court to the contrary, the interest runs— (a) in the case of adjudicated costs—from the date the costs are adjudicated or an earlier date fixed by the adjudicating officer; (b) in the case of any other monetary sum—from the date of the judgment. 32 The “rules” referred to in subsection 40(1) are defined by subsection 3(1) to mean the rules of the District Court in force under the District Court Act. In turn section 51 empowers the making of rules of the court by the Chief Judge and two other Judges of the Court. 33 Section 40 is modelled on section 114 of the Supreme Court Act 1935 (SA) (the Supreme Court Act) which provides in similar (but not identical) terms that money payable under a Supreme Court judgment bears interest at the rate prescribed by the rules of court made by the Supreme Court. 34 Section 35 of the Magistrates Court Act 1991 (SA) (the Magistrates Court Act), which was enacted at the same time as the District Court Act, provides in otherwise identical terms that a judgment debt bears interest at a rate prescribed by the rules of the Magistrates Court made by the Chief Magistrate and two other Magistrates of the Court. -- 11 of 81 -- [2024] SASCA 77 Blue AJA 8 35 As observed above, the District Court Civil Rules 2006 (SA) and the District Court Civil Supplementary Rules 2014 (SA) prescribed post-judgment interest at the Cash Rate plus six per cent per annum. Rule 134 of the Magistrates Court (Civil) Rules 2013 (SA) prescribed post-judgment interest at ten per cent per annum. Legislative history 36 At common law and in equity, judgments did not carry interest (post-judgment interest).7 The creditor could bring a separate action claiming interest on a judgment debt as damages.8 Thus, in 1834 in Gaunt v Taylor9 Sir John Leech MR said: At law a judgment does not carry interest, but interest may be recovered at law, in the shape of damages, by an action on the judgment. … It appears by the authorities which have been cited that equity in this respect follows the law; and, as a general rule, a judgment creditor is not allowed interest on his judgment in the Master’s office. The same vexatious course of proceeding, which would entitle the creditor to interest at law, will certainly entitle him to interest on his judgment in equity.10 37 In 1837 An Act for the Establishment of a Court to be called the Supreme Court of the Province of South Australia (No 5 of 7 Wm IV) 1837 (SA) (the Supreme Court Act 1837 (SA)) was enacted. It established the Supreme Court of South Australia. The Court was given the jurisdiction and powers (including of enforcement) of the English common law and equity courts. 38 In 1837 An Act to establish Courts of Resident Magistrates, to appoint Resident Magistrates to confer on Justices of the Peace certain Powers until such Resident Magistrates’ be appointed, to provide for the Recovery of small Debts and the punishment of certain Offences within the Province of South Australia (No 2 of 1 Vic) 1837 (the Magistrates and Justices Act 1837 (SA)) was enacted. It empowered the Governor to create Courts of the Resident Magistrate for different districts. Such Courts were vested with jurisdiction to hear, amongst other things, civil actions subject to a monetary limit. 39 In 1838 An Act for abolishing Arrest on Mesne Process in Civil Actions, except in certain Cases; for extending the Remedies of Creditors against the Property of Debtors; and for amending the Laws for the Relief of Insolvent Debtors in England 1 & 2 Vict c 110 (UK) (the 1838 English statute) was enacted. Section 17 provided: 7 Gaunt v Taylor (1834) 3 My & K 302 (40 ER 115) at 309-310 per Sir John Leach MR; Reis v Carling (1908) 5 CLR 673 at 676 per Griffith CJ (with whom Barton J agreed) and 684 per O'Connor J. 8 Gaunt v Taylor (1834) 3 My & K 302 (40 ER 115) at 309-310 per Sir John Leach MR. 9 (1834) 3 Myl & K 302 (40 ER 115). 10 At 309-310. -- 12 of 81 -- [2024] SASCA 77 Blue AJA 9 … That every judgment debt shall carry interest at the rate of four pounds per centum per annum from the time of entering up the judgment, or from the time of the commencement of this Act in case of judgments then entered up and not carrying interest, until the same shall be satisfied, and such interest may be levied upon a writ of execution on such judgment. 40 In 1845 An Ordinance for adopting in South Australia certain parts of an Act made and passed in the Imperial Parliament, which was held in the first and second years of the reign of her Majesty, intituled An Act for abolishing Arrest on Mesne Process in Civil Actions, except in certain Cases; for extending the Remedies of Creditors against the Property of Debtors; and for amending the Laws for the Relief of Insolvent Debtors in England (SA) (the Debtors Act 1845 (SA)) was enacted. Section 10 was in largely the same terms as section 17 of the 1838 English statute. It provided: 10 Judgment debts to carry interest That every judgment debt shall carry interest at the rate of five pounds per centum per annum from the time of entering up the judgment, or from the time of the commencement of this ordinance in case of judgments then entered up and not carrying interest, until the same shall be satisfied, and such interest may be levied upon a writ of execution on such judgment. 41 This provision applied to judgments of the Supreme Court as well as of the Courts of the Resident Magistrate. 42 In 1850 An Ordinance for the Recovery of Small Debts and Trial and Punishment of Minor Offences in South Australia (No 5 of 1850) (SA) (the Small Debts Act 1850 (SA)) was enacted. It repealed the Magistrates and Justices Act 1837 (SA). It empowered the Governor to establish Local Courts. Such Courts were vested with jurisdiction among other things to hear civil actions subject to a monetary limit. Section 10 of the Small Debts Act 1850 (SA) applied to Local Courts as well as to the Supreme Court. The Small Debts Act 1850 (SA) contained provisions for enforcement of judgments by writs of fieri facias and unsatisfied judgment summonses. 43 In 1861 the Local Courts Act 1861 (SA) was enacted. It repealed the Small Debts Act 1850 (SA). It contained similar but more extensive provisions creating, conferring jurisdiction on and providing for the enforcement of judgments of Local Courts. 44 In 1867 the Supreme Court Act 1867 (SA) was enacted. It supplemented the Supreme Court Act 1837 and intermediate Acts which had amended or supplemented it. Section 33 provided: 33 Ten per cent interest on judgment debts Every judgment debt shall carry interest at the rate of Ten Pounds per centum per annum, from the time of entering up the judgment until the same shall be satisfied, in lieu and instead of Five Pounds per centum per annum, as provided by the Ordinance No. 9 of 1845. -- 13 of 81 -- [2024] SASCA 77 Blue AJA 10 45 This provision effectively amended, but did not repeal, section 17 of the Debtors Act 1845 (SA). 46 In 1886 the Local Courts Act 1886 (SA) was enacted. It repealed the Local Courts Act 1861 (SA). It contained similar provisions creating, conferring jurisdiction on and providing for the enforcement of judgments of Local Courts. Section 141 provided: 141 Execution to issue against goods Judgments and orders of any Local Court, Judge, or Special Magistrate, for the payment of moneys may be enforced in a case of default or failure of payment thereof forthwith, or at the time or times thereby directed, in the manner hereinafter set out, and shall carry interest on the amount thereof at the rate of Eight Pounds per centum per annum from the date thereof until Payment. 47 In 1926 the Local Courts Act 1926 (SA) was enacted. It repealed the Local Courts Act 1886 (SA). It contained similar provisions creating, conferring jurisdiction on and providing for the enforcement of judgments of Local Courts. Section 153 provided: 153 Execution to issue against goods Judgments and orders of any Local Court, Judge, or Special Magistrate for the payment of money — (a) may be enforced in case of default or failure of payment thereof forthwith, or at the time or times thereby directed, in the manner hereinafter set out; and (b) shall carry interest on the amount thereof at the rate of Eight Pounds per centum per annum from the date thereof until payment. 48 In 1935 the Supreme Court Act was enacted. It repealed the Supreme Court Act 1867 (SA). It also repealed the Debtors Act 1845 (SA). Section 114 provided: 114 Interest on judgment debts (1) All money, including costs, payable under any judgment or order shall bear interest at the rate from time to time prescribed by the rules of court. (2) The interest shall be computed from the following times: (a) in the case of money other than taxed costs, from the time specified in the judgment or order, and if no time is so specified from the date of the judgment or order; (b) in the case of taxed costs, from the date of the certificate of the taxing officer by whom the costs were taxed. -- 14 of 81 -- [2024] SASCA 77 Blue AJA 11 49 In 1947 the Local Courts Act 1926 (SA) was amended11 to change the post- judgment interest rate from eight to five per cent per annum. 50 In 1991 the Magistrates Court Act 1991 (SA) was enacted. It created the Magistrates Court of South Australia and repealed the Local Courts Act 1926 (SA).12 As described above, section 35 was modelled on section 114 of the Supreme Court Act. 51 In 1991 the District Court Act 1991 (SA) was enacted. It created the District Court with civil (as well as criminal) jurisdiction. As described above, section 40 was and is in materially identical terms to section 35 of the Magistrates Court Act. 52 In 1991 section 114 of the Supreme Court Act was amended13 by inserting at the end of paragraph (2)(b) “or an earlier date specified by the taxing officer in the certificate” to bring it into line with the equivalent sections in the District Court Act and Magistrates Court Act. 53 In 2013 section 114 of the Supreme Court Act was amended14 to substitute references to “adjudication” of costs for “taxation” of costs. The notice of alternative contention 54 By the notice of alternative contention, the Domans contend that the Magistrate erred in finding that there was an identifiable proper claim by Leadenhall against them. They contend that post-judgment interest automatically becomes part of a judgment debt pursuant to section 40 of the District Court Act; which is enforceable directly under the Enforcement Act; which provides the exclusive mechanism for recovery and enforcement; and the Magistrates Court has no jurisdiction to entertain a claim for such interest. 55 Leadenhall contends that post-judgment interest is not enforceable directly under the Enforcement Act and, even if it is, the Magistrates Court is not deprived of jurisdiction to entertain a claim for such interest, which can be sued for as a standalone debt. 56 This issue turns on the proper construction of section 40 of the District Court Act and of the relevant provisions of the Enforcement Act. Ultimately, it is necessary to construe those provisions in conjunction with each other. I first address the construction of the provisions before considering authorities cited by the parties. 57 Section 40 of the District Court Act provides: 40—Interest on judgment debts 11 By the Local Courts Amendment Act 1947 (SA). 12 In 1969 the title of the Act had been amended to the Local and District Criminal Courts Act 1926. 13 By the Statutes Repeal and Amendment (Courts) Act 1991 (SA). 14 By the Statutes Amendment (Attorney-General's Portfolio No 2) Act 2013 (SA). -- 15 of 81 -- [2024] SASCA 77 Blue AJA 12 (1) A judgment debt bears interest at a rate prescribed by the rules. (2) Subject to any direction by the Court to the contrary, the interest runs— (a) in the case of adjudicated costs—from the date the costs are adjudicated or an earlier date fixed by the adjudicating officer; (b) in the case of any other monetary sum—from the date of the judgment. 58 The only matter left by the section to be prescribed by the Rules is the rate of interest. There is no provision empowering the Rules to prescribe compound interest or compounding intervals. 59 The section provides for interest to run on the monetary sum the subject of the judgment (including any pre-judgment interest) and on any costs the subject of the judgment upon their being fixed. In each case, the section provides that interest runs from the date of fixing of the monetary sum (the date of the judgment and the date of fixing costs respectively). This is subject only to exercise of discretion by the Court (including the adjudicating officer in the case of costs) to order otherwise. 60 Starting with the text of subsection 40(1), the provision is expressed to operate automatically of its own force: it does not require any order or judgment by the District Court (or any other court) for its operation. 61 The subsection is expressed in terms of the judgment debt “bearing” interest. This connotes that the post-judgment interest augments the judgment debt rather than being separate and distinct from it. Although post-judgment interest is separately identifiable, the principal, pre-judgment interest and costs are separately identifiable (and may be fixed at different times) but form component parts of a judgment debt, rather than pre-judgment interest and costs being separate and distinct from the principal. 62 Section 40 is not expressed in a manner to create a statutory cause of action for which the judgment creditor may sue in another court. When the legislature creates a statutory cause of action, it uses language apposite to do so. For example, section 236 of the Australian Consumer Law as applied by section 14 of the Fair Trading Act 1987 (SA) creates a statutory cause of action for damages caused, amongst other things, by misleading conduct. Similarly, section 20L of the Retail and Commercial Leases Act 1995 (SA) creates a statutory cause of action for recovery of a lease premium. By contrast, section 40 does not create a statutory cause of action to recover post-judgment interest but directly augments the judgment debt with post-judgment interest. 63 If, as Leadenhall contends, a judgment creditor could not directly enforce payment of post-judgment interest under the Enforcement Act but were required first to sue for and obtain judgment in that court (or another court), it would not only defeat the evident purpose of section 40 (addressed below) but it would also -- 16 of 81 -- [2024] SASCA 77 Blue AJA 13 be contrary to the plain meaning of the words that the judgment debt “bears” interest. 64 Further, as observed above, section 40 provides for simple interest and not compound interest. If, as Leadenhall contends, a judgment creditor were able to sue (whether in the same court or a different court) and obtain judgment for such post-judgment interest, it would be contrary to the operation of section 40. For example, assume that a judgment creditor obtains judgment for $1,000,000 in the District Court on 1 January 2022 and the judgment bears interest up to 1 January 2023 at ten per cent per annum, resulting in post-judgment interest accruing under section 40 of $100,000. Assume that the judgment creditor sues for and obtains judgment in the District Court for the interest of $100,000 on 2 January 2023. Pursuant to section 40, the new judgment would start to accrue its own interest at ten per cent per annum, resulting in a compounding of interest contrary to the intent and effect of section 40. 65 Turning to the context of section 40 in parallel legislation, section 114 of the Supreme Court Act and section 35 of the Magistrates Court Act provide for post- judgment interest on judgments of those Courts. 66 Under the rule making power of each Court under its respective Act,15 it is a matter for each Court to fix its own interest rate under the post-judgment interest legislative provision. There is nothing in the legislative provisions to prevent the different courts fixing different interest rates (and indeed that was the case prior to 2020 when the Uniform Civil Rules were made). Accordingly, the legislature must necessarily have contemplated that different interest rates might be fixed by the different Courts. 67 If, as Leadenhall contends, a judgment creditor were able to sue in a second court for post-judgment interest in respect of a judgment in a first court, it could result in post-judgment interest accruing after the second judgment at a different rate to that prescribed in respect of the first judgment. For example, as observed at [17] above, in the first half of 2019 the post-judgment interest rate prescribed under section 40 of the District Court Act was 7.5 per cent per annum. However, the post- judgment interest rate prescribed under section 35 of the Magistrates Court Act was ten per cent per annum. If a District Court judgment creditor could obtain judgment for post-judgment interest in the Magistrates Court, the judgment in the Magistrates Court would bear interest at ten per cent per annum contrary to the purpose and effect of section 40 of the District Court Act that it bear interest at the rate prescribed by the District Court, namely 7.5 per cent per annum. 68 These matters point strongly in favour of a construction of section 40 of the District Court Act (and its counterparts) that interest accrues on and augments a 15 Supreme Court Act 1935 (SA) section 127; District Court Act 1991 (SA) section 51; Magistrates Court Act 1991 (SA) section 49. -- 17 of 81 -- [2024] SASCA 77 Blue AJA 14 judgment debt automatically; is enforceable as such and is not capable of being the subject of a separate action for such post-judgment interest. 69 The context of section 40 of the District Court Act includes the legislative history of statutory provisions for post-judgment interest summarised above. This history strongly supports the construction referred to in the previous paragraph. 70 First, it is clear that the purpose of section 10 of the Debtors Act 1845 (SA) was to avoid the bringing of a separate action at common law for post-judgment interest and to provide instead that the judgment, by force of the statute, automatically bear interest at the prescribed rate. As described above, section 40 of the District Court Act is derived by direct lineage from section 10 of the Debtors Act 1845 (SA). 71 Secondly, section 10 of the Debtors Act 1845 (SA) and the immediate predecessors of section 40 of the District Court Act, namely section 141 of the Local Courts Act 1886 (SA) and section 153 of the Local Courts Act 1926 (SA) contained provisions for the direct enforcement of post-judgment interest together with the judgment debt augmented by that interest. This demonstrates that a separate action was not needed to recover post-judgment interest before enforcement and, on the contrary, it was to be enforced directly. 72 The evident purpose of section 40 of the District Court Act is to provide that interest runs automatically on a District Court judgment debt and is enforceable without bringing a separate action seeking judgment for the post-judgment interest. 73 Turning to the Enforcement Act, it is expressed in its long title to “make provision for the enforcement of judgments; and for other purposes”. 74 The Enforcement Act distinguishes between monetary judgments and non- monetary judgments. The term “judgment” is defined broadly and non- exhaustively by section 3 as follows: judgment includes an order, declaration or decree; 75 The term “monetary judgment” is defined by section 3 as follows: monetary judgment means a judgment for the payment of a sum of money (whether or not the judgment provides for any other form of relief); 76 Part 2 deals with monetary judgments. It provides five alternative methods of enforcement of monetary judgments. It empowers “the court”, on application by the judgment creditor, to make various enforcement orders. The term “the court” is defined by section 3 to mean the Supreme Court, District Court or Magistrates Court (a court). 77 Part 2 empowers a court: -- 18 of 81 -- [2024] SASCA 77 Blue AJA 15 (a) to order (after investigating the judgment debtor’s means under an investigations summons) payment by the judgment debtor of the judgment debt by one or more instalments in accordance with a timetable fixed by the court (sections 4 and 5); (b) to make a garnishee order that money of, or owing to, the judgment debtor in the hands of or from a third person be attached to answer the judgment and paid to the judgment creditor (section 6); (c) to issue a warrant of sale authorising the seizure and sale of a judgment debtor's property to satisfy a monetary judgment (section 7); (d) to charge property of a judgment debtor with a judgment debt or part of a judgment debt (section 8); (e) to appoint a receiver for the purpose of enforcing a judgment (section 9). 78 Whether post-judgment interest is encompassed in the definition of “monetary judgment” turns on the effect of section 40 of the District Court Act (and its counterparts). If the effect of section 40 is that post-judgment interest augments the judgment debt, it will be encompassed in the definition of judgment debt in section 3 of the Enforcement Act. Conversely, if the effect of section 40 is that post-judgment interest is separate and distinct from the judgment debt, it will not be encompassed in the definition of judgment debt in section 3 of the Enforcement Act. 79 The provisions of the Enforcement Act support the construction of section 40 of the District Court Act that post-judgment interest augments the judgment debt. 80 First, there is nothing in Part 2 of the Enforcement Act that suggests that separate enforcement steps are required in respect of the original judgment debt and post-judgment interest. On the contrary, sections 4 to 9 proceed on the basis that a single enforcement proceeding (of the given type) is taken in respect of a given judgment debt. 81 Secondly, it would be extremely cumbersome if a judgment creditor were required to sue for and obtain a judgment for post-judgment interest and to bring enforcement proceedings under the Enforcement Act to enforce payment of the original judgment debt and separately again to enforce payment of the post- judgment interest. There appears to be no purposive reason to read the scheme as operating in such an inefficient matter. 82 Leadenhall contends that, despite the construction advanced by it, in some circumstances a judgment creditor may receive post-judgment interest as a result of enforcement steps taken in respect of the original judgment debt (excluding post-judgment interest). In particular, Leadenhall contends that, if a warrant of sale is issued to satisfy the original judgment debt, even on the construction advanced by it post-judgment interest accruing on the original judgment debt would be -- 19 of 81 -- [2024] SASCA 77 Blue AJA 16 payable to the judgment creditor. Leadenhall contends that such post-judgment interest would be so payable on the basis that it would be inequitable for any excess proceeds of the sale of property to be returned to the judgment debtor when a readily calculable debt is still owed by the judgment debtor to the judgment creditor. 83 I reject that contention. Leadenhall cites no authority in support of its proposition. On Leadenhall’s premise that post-judgment interest is not directly enforceable under the Enforcement Act on enforcement of the original judgment debt, there is no reason to distinguish between post-judgment interest and any other debt that may happen to be owing by the judgment debtor to the judgment creditor. On Leadenhall’s premise, the sole purpose of the grant and execution of the warrant of sale is payment of the original judgment debt. Once that purpose has been achieved by payment of the original judgment debt, the debtor would be entitled to the balance of the sale proceeds. There is no principle of equity which would render it inequitable for the balance of the sale proceeds to be paid to the debtor. 84 In any event, even if Leadenhall’s contention were accepted, it would not apply to other enforcement steps such as an order under section 5 for payment of the judgment debt by instalments; a garnishee order under section 6 or a charging order under section 8. Further, it would not detract from the matters addressed above pointing towards a construction of section 40 of the District Court Act (and its counterparts) that post-judgment interest augments the judgment debt and is enforceable under the Enforcement Act. 85 Having regard to the text, context and evident purpose of section 40 of the District Court Act (and its counterparts) in conjunction with the provisions of the Enforcement Act relating to the enforcement of monetary judgements, post- judgment interest automatically augments the judgment debt and is enforceable under the Enforcement Act. No separate judgment is required to be obtained for the enforcement of payment of post-judgment interest. 86 Leadenhall contends that, even if a separate judgment is not required to be obtained for the enforcement of payment of post-judgment interest, nevertheless the Magistrates Court has jurisdiction under section 8(1)(a) of the Magistrates Court Act to entertain a claim for post-judgment interest. 87 Section 8(1)(a) of the Magistrates Court Act provides: 8—Civil jurisdiction (1) The Court has jurisdiction— (a) to hear and determine an action (at law or in equity) for a sum of money where the amount claimed does not exceed $100 000; -- 20 of 81 -- [2024] SASCA 77 Blue AJA 17 88 Leadenhall contends that a claim for post-judgment interest is an action at law or in equity for a sum of money within the meaning of that provision and there is no exclusion within section 8 of a claim for post-judgment interest. 89 Subsection 10(1) of the Magistrates Court Act provides: 10—Statutory jurisdiction (1) The Court has any jurisdiction conferred on it by statute. 90 It appears to be the intention of section 8(1)(a) to confer jurisdiction to hear common law and equitable causes of action and of section 10 to confer jurisdiction to hear statutory causes of action. Assuming in favour of Leadenhall that jurisdiction need not be conferred by another statute expressly on the Magistrates Court, nevertheless it is necessary for the other statute to create a statutory cause of action. For the reasons given above, section 40 of the District Court Act does not do so. 91 Sections 8 and 10 of the Magistrates Court Act do not confer jurisdiction on the Magistrates Court to hear a claim for a judgment debt insofar as it comprises the principal component of a judgment of another Court (or indeed of the Magistrates Court itself), nor insofar as it comprises the pre-judgment interest component or the costs component of such a judgment. Likewise, they do not confer jurisdiction on the Magistrates Court to hear a claim for post-judgment interest on the judgment of another Court (or indeed of the Magistrates Court itself). 92 The construction of the Magistrates Court Act advanced by Leadenhall would, in any event, be inconsistent with section 40 of the District Court Act, which provides for post-judgment interest to augment the District Court’s judgment debt rather than to be the subject of a separate action in a different court. 93 Having regard to the text, context and evident purpose of section 40 of the District Court Act, the provisions of the Enforcement Act and sections 8 and 10 of the Magistrates Court Act, post-judgment interest augments the District Court’s judgment debt and is enforceable under the Enforcement Act and the Magistrates Court does not have jurisdiction to entertain a claim for post-judgment interest on the District Court judgment debt. 94 Turning to authority, the parties cite a decision by a Supreme Court Master and a decision by a District Court Master in relation to the enforcement of post- judgment interest accruing on a Supreme Court and a District Court judgment respectively. They also cite, or those decisions refer to, authorities in other jurisdictions. 95 The authorities in other jurisdictions by and large address issues different to the issue of construction in the present case and they arise in different contexts. -- 21 of 81 -- [2024] SASCA 77 Blue AJA 18 They are tangential to the issue of construction in the present case and ultimately offer little assistance, being little more than straws in the wind. 96 First, in In re Clagett; ex parte Lewis16 Lewis obtained judgment against Clagett for £329 and Clagett became an insolvent debtor under the Insolvency Acts. Section 92 of the 1838 English statute provided that, if a surplus remained after the debts of an insolvent debtor had been discharged, the Court had power to order that the surplus be vested in the insolvent debtor. The principal of £329 had been paid to Lewis’s estate but not post-judgment interest. The issue was whether such interest should be paid to Lewis’s estate before payment to Clagett’s estate pursuant to section 92. This raised an issue of construction of section 92. The Court of Appeal held that the interest was required to be paid. 97 Lord Esher MR said: It is not necessary to say that it is part of the judgment debt; it is enough to say that it is a debt necessarily and inevitably attached to the judgment debt if not paid immediately.17 Lindley LJ said: The effect of section 17 is that in order to satisfy a judgment debt you must pay principal and interest up to the time of payment. The original debt is merged in the judgment, and the judgment debt carries interest till satisfied… Has this debt been satisfied? No; it is not satisfied till interest is paid.18 Bowen LJ said: The judgment debt is to carry interest. The meaning seems to be this—that the judgment debt is to bear interest, as it were like a tree bears fruit, the interest to be a legal liability accruing de diem in diem from the time when judgment is entered up till payment. The section, in addition, gives the judgment creditor a remedy by execution; but I think it is open to him to recover the interest in any way known to the law for recovering debts like this. It may be recovered by substantive action of debt. It is an obligation in the nature of debt, annexed and tied to the judgment debt by statute, and the judgment debt is not satisfied until it is satisfied in such a way as to put an end to the obligation to pay interest as well is principal.19 98 The observation by Bowen LJ appears to support the construction advanced by Leadenhall but the observation by Lindley J tends to support the construction advanced by the Domans. In any event the case involved the operation of section 92 and the issue in the present case did not arise for decision. 16 (1888) 36 WR 653. 17 At 654. 18 At 654. 19 At 654. -- 22 of 81 -- [2024] SASCA 77 Blue AJA 19 99 Secondly, in Reis v Carling20 Carling & Co obtained judgment in the Queensland Supreme Court against Reis Bros amongst other things for costs. Reis Bros paid the taxed costs promptly before Carling & Co levied execution. Unlike the position in South Australia, Queensland had not enacted any provision for post- judgment interest modelled on section 17 of the 1838 English statute. The only provision for interest on a judgment was in the rules of Court related to the issue of a writ of fieri facias. The High Court held that post-judgment interest was not recoverable by Carling & Co. The decision is therefore not relevant in the present case. 100 O’Connor J, in the course of his reasons for judgment, contrasted the position in Queensland with the position under the 1838 English statute. He said: At common law a judgment debt did not carry interest, and the only way of recovering interest on such a debt was by action on the judgment. In England that defect was remedied by 1 & 2 Vict. c. 110, s. 17, which provided that every judgment debt should carry interest at the rate named in the Statute from the time of entering up judgment, and that there might be a levy for the recovery of such interest under a writ of execution on the judgment. … In 1876 the Queensland Judicature Act was passed, and then, for the first time, a statutory right was given to a successful suitor in respect of interest on a judgment. The right, however, was not given as in the English Act, 1 & 2 Vict. c. 110, which enacts that the judgment shall carry interest. The sole provision relating to the recovery of interest is that contained in Order XLI., r. 14 of the Schedule, and the forms of writ for carrying that rule into effect. No right of action is given in respect of interest on the judgment, and interest becomes part of the judgment under one set of circumstances only, that is, when a writ of execution to recover the moneys due on the judgment is issued. … ... The intention of the legislature of Queensland as expressed by their enactment clearly was not to make interest on a judgment a judgment debt payable by the judgment debtor as part of that debt, but to make it recoverable only in cases where the creditor was driven to put in force his remedy by execution and as incidental to the exercise of that remedy.21 101 The observations by O’Connor J support the construction advanced by the Domans but the issue in the present case did not arise for decision. 102 Thirdly, there are a series of cases concerning the ability of a creditor to include post-judgment interest in a bankruptcy notice issued under section 41 of the Act. That section empowers the issue of a bankruptcy notice in respect of a judgment debt. It is established by case law that a bankruptcy notice can only demand payment of a sum of money for which execution may issue.22 It has been 20 (1908) 5 CLR 673. 21 At 684, 685. 22 In re Follows; ex parte Follows [1895] 2 QB 521 at 525 per Williams J (with whom Wright J agreed); Re O’Keefe; ex parte Australian Factors Ltd (1963) 19 ABC 101 at 103-104 per Clyne J; Re Manion; ex parte Deputy Commissioner of Taxation (1979) 37 FLR 78 at 83 per Lockhart J. -- 23 of 81 -- [2024] SASCA 77 Blue AJA 20 held that post-judgment interest can be included in a bankruptcy notice, thereby implicitly holding that it can be enforced by execution.23 103 Fourthly, there are a series of cases concerning the ability of a creditor to include post-judgment interest in a statutory demand issued under section 459E of the Corporations Act 2001 (Cth) without a verifying affidavit. Subsection 459E(3) requires a verifying affidavit for all debts except for a “judgment debt”. In several cases24 it has been held that post-judgment interest is not part of a “judgment debt” within the meaning of that subsection. On the other hand, in Agusta Pty Ltd v Provident Capital Limited25 Hammerschlag J held that post-judgment interest is part of a “judgment debt” within the meaning of that subsection. This conflict has apparently not been resolved at intermediate appellate court level. However, these cases related to the meaning of “judgment debt” in subsection 459E(3) and the issue in the present case did not arise for decision. 104 Turning to the two South Australia cases, in Landmark Operations Limited v J Tiver Nominees Pty Ltd (No 3)26 Landmark had obtained charging orders in February and June 2009 over plant and equipment under section 8 of the Enforcement Act, and an order in August 2009 that it be at liberty to sell most of those items and apply the proceeds to the judgment debt entered in November 2008. Landmark had also, exercising its mortgagee powers, sold real estate for in excess of $8 million. Ms Tiver sought a stay of execution in respect of the sale of the plant and equipment, contending that Landmark would fully recover its judgment debt, albeit without post-judgment interest, out of the proceeds of sale of the real estate. She contended that post-judgment interest was not recoverable under the August 2009 order for the sale of the plant and equipment. Master Lunn refused the application for a stay of execution. 105 Master Lunn referred to some of the cases referred to above. Master Lunn said: I accept the submission of counsel for the third defendant that such post judgment interest is not part of the judgment given on 26 November 2008 and hence is not part of the “judgment” referred to in the Order of 12 August 2009. However, I do not accept that its recoverability by the plaintiff is confined to where the plaintiff obtains a separate judgment for it. … 23 Re Wilson (1877) 3 VLR 95 at 96 per Molesworth J; Re Lehmann; ex parte Hasluck (1890) 7 Morr 181 at 183 per Cave J; Re O’Keefe; ex parte Australian Factors Ltd (1963) 19 ABC 101 at 103-104 per Clyne J; Re Mullavey; ex parte Australia and New Zealand Banking Group Ltd (1977) 32 FLR 1 at 8- 9 per CA Sweeney J; Re Manion; ex parte Deputy Commissioner of Taxation (1979) 37 FLR 78 at 83 per Lockhart J. 24 See for example Anderson Formrite Pty Ltd v CASC Hire Pty Ltd [2005] FCA 1424, (2005) 147 FCR 379 at [63] per Siopsis J; In the matter of Colour Metal Pty Ltd [2021] NSWSC 1012 at [37] per Leeming JA. 25 [2011] NSWSC 807. 26 [2009] SASC 329. -- 24 of 81 -- [2024] SASCA 77 Blue AJA 21 … If [Landmark] can sell, and obtain payment for, the plant and equipment before settlement on the land sales, it is entitled to receive this money... What it is likely to mean in practice is that the plaintiff will get partial satisfaction of its judgment through the Order of 12 August 2009 and then when the settlements on the land sales do occur it will received [sic] amounts which, when taken with the other amounts previously received, will exceed the amount of the judgment. At that point the plaintiff will then be required to account to the third defendant for any surplus recovered by it. If necessary this Court will adjudicate upon that account and determine any amount properly refundable. Doubtless in that account the plaintiff will claim a debit to the third defendant for the post judgment interest. It is certainly arguable that it is entitled to have this debt brought into account on the taking such an account, but I need not now finally determine the point.27 106 Master Lunn proceeded to exercise his discretion against the grant of a stay because Ms Tiver would suffer no hardship if a stay were not granted. Master Lunn did not decide the issue which arises in the present case. 107 In Leadenhall Australia Pty Ltd v Doman28 Leadenhall had procured the issue of investigations summonses against the Domans in respect of the judgment the subject of this appeal. The Domans applied to set aside the summonses on the grounds of lack of utility because all of the Domans’ assets had vested in their bankruptcy trustees and in any event the summonses were impermissibly broad. Master Keith upheld those two grounds and decided to set aside the summonses. 108 Master Keith went on to consider an alternative contention by the Domans that the statutory right to examine them under section 5 of the Enforcement Act was confined to their means to satisfy the original judgment and did not extend to post-judgment interest. Master Keith upheld that contention but it was unnecessary for his decision given that he had already decided to set aside the summonses on other grounds. On this appeal, the parties have reversed their positions and now make opposite contentions to their contentions put to Master Keith. However, it is not suggested that Master Keith’s decision gives rise to an issue estoppel. 109 Master Keith referred to some of the cases referred to above. He also referred to the judgment of Master Lunn in Landmark Operations Limited v J Tiver Nominees Pty Ltd (No 3)29 but proceeded on the misunderstanding that Master Lunn had decided the point in question. The reasoning of Master Keith is not persuasive as to the proper construction of section 40 of the District Court Act or the relevant provisions of the Enforcement Act. 110 The cases cited by the parties do not change the conclusion reached above based on the text, context and evident purpose of the relevant statutory provisions; that is, post-judgment interest augments the District Court judgment debt and is enforceable under the Enforcement Act, and that the Magistrates Court does not 27 At [10]-[11]. 28 [2018] SADC 123. 29 See for example Anderson Formrite Pty Ltd v CASC Hire Pty Ltd [2005] FCA 1424, (2005) 147 FCR 379 at [63] per Siopsis J; In the matter of Colour Metal Pty Ltd [2021] NSWSC 1012 at [37] per Leeming JA. -- 25 of 81 -- [2024] SASCA 77 Blue AJA 22 have jurisdiction to entertain or grant judgment on a claim for post-judgment interest in respect of the District Court judgment debt. 111 It follows that the Domans’ alternative contention is established. Leadenhall was not entitled to summary judgment on its claim in the Magistrates Court. On the contrary, the Magistrates Court lacked jurisdiction to entertain the action. Legislative regime: bankruptcy The Bankruptcy Act 112 Section 43 of the Act vests jurisdiction in the Federal Court and the Federal Circuit and Family Court of Australia, on presentation of a creditor’s petition, to make a sequestration order against the estate of a debtor, which results in the debtor becoming a bankrupt. Section 55 empowers a debtor to present a debtor’s petition to the Official Receiver which, upon acceptance, results in the debtor becoming a bankrupt. 113 Upon a debtor becoming a bankrupt, under sections 156A and 160, a registered trustee who has consented to act as trustee of the debtor, or otherwise the Official Trustee, becomes the trustee of the estate of the bankrupt (the bankruptcy trustee). 114 Section 58 vests, subject to the Act, existing property and after-acquired property of the bankrupt in the bankruptcy trustee. Subsections 58(1), 58(2) and 58(6) relevantly provide: 58 Vesting of property upon bankruptcy—general rule (1) Subject to this Act, where a debtor becomes a bankrupt: (a) the property of the bankrupt, not being after-acquired property, vests forthwith in the Official Trustee or, if, at the time when the debtor becomes a bankrupt, a registered trustee becomes the trustee of the estate of the bankrupt by virtue of section 156A, in that registered trustee; and (b) after-acquired property of the bankrupt vests, as soon as it is acquired by, or devolves on, the bankrupt, in the Official Trustee or, if a registered trustee is the trustee of the estate of the bankrupt, in that registered trustee. … (2) Where a law of the Commonwealth or of a State or Territory requires the transmission of property to be registered and enables the trustee of the estate of a bankrupt to be registered as the owner of any such property that is part of the property of the bankrupt, that property, notwithstanding that it vests in equity in the trustee by virtue of this section, does not so vest at law until the requirements of that law have been complied with. … -- 26 of 81 -- [2024] SASCA 77 Blue AJA 23 (6) In this section, after-acquired property, in relation to a bankrupt, means property that is acquired by, or devolves on, the bankrupt on or after the date of the bankruptcy, being property that is divisible amongst the creditors of the bankrupt. 115 Part VI provides for the collection and realisation by the trustee of the property of, and contributions from, the bankrupt; the proof of debts by creditors; and distributions to creditors. 116 Section 116 identifies property that is divisible amongst the creditors of the bankrupt. Its principal provision is section 116(1)(a), which provides: 116 Property divisible among creditors (1) Subject to this Act: (a) all property that belonged to, or was vested in, a bankrupt at the commencement of the bankruptcy, or has been acquired or is acquired by him or her, or has devolved or devolves on him or her, after the commencement of the bankruptcy and before his or her discharge; and … is property divisible amongst the creditors of the bankrupt. 117 Section 82 identifies debts and liabilities that are provable in a bankruptcy. It relevantly provides: 82 Debts provable in bankruptcy (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 become subject before his or her discharge by reason of an obligation incurred before the date of the bankruptcy, are provable in his or her bankruptcy. … (2) Demands in the nature of unliquidated damages arising otherwise than by reason of a contract, promise or breach of trust are not provable in bankruptcy. (3) Penalties or fines imposed by a court in respect of an offence against a law, whether a law of the Commonwealth or not, are not provable in bankruptcy. (3AA)An amount payable under an order made under section 1317G of the Corporations Act 2001 is not provable in bankruptcy. (3AB)A debt incurred under any of the following is not provable in bankruptcy: (a) Part 4-1 of the Higher Education Support Act 2003 (HELP debts); (aaa) Part 3A of the VET Student Loans Act 2016 (VETSL debts); (aa) Part 2AA.3 of the Social Security Act 1991 (student start-up loan debts); -- 27 of 81 -- [2024] SASCA 77 Blue AJA 24 (ab) Division 3 or 4 of Part 2 of the Student Assistance Act 1973 (ABSTUDY student start-up loan debts); (b) Part 3.1 of the Australian Apprenticeship Support Loans Act 2014 (Australian apprenticeship support loan debts). (3A) An amount payable under an order made under a proceeds of crime law is not provable in bankruptcy. (3B) A debt is not provable in a bankruptcy in so far as the debt consists of interest accruing, in respect of a period commencing on or after the date of the bankruptcy, on a debt that is provable in the bankruptcy. (4) The trustee shall make an estimate of the value of a debt or liability provable in the bankruptcy which, by reason of its being subject to a contingency, or for any other reason, does not bear a certain value. (5) A person aggrieved by an estimate so made may appeal to the Court not later than days after the day on which the person is notified of the estimate. (6) 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 in the bankruptcy. (7) If the Court finds that the value of the debt or liability can be fairly estimated, the shall assess the value in such manner as it thinks proper. (8) In this section, 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 discharge of the bankrupt; 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) in respect of amount—fixed or unliquidated; (ii) in respect of time—present or future, or certain or dependent on a contingency; or (iii) in respect of the manner of valuation—capable of being ascertained by fixed rules or only as matter of opinion. 118 Subsection 5(1) defines a provable debt to mean “a debt or liability that is, under this Act, provable in bankruptcy”. 119 Section 84 provides for the lodgement of proofs of debts. Subsections 84(1) and 84(2) provide: 84 Manner of proving debts -- 28 of 81 -- [2024] SASCA 77 Blue AJA 25 (1) Subject to this Division, a creditor who desires to prove a debt in a bankruptcy shall lodge, or cause to be lodged, with the trustee a proof of debt in accordance with this section. (2) A proof of debt: (a) shall set out particulars of the debt; (b) shall be in accordance with the approved form; (c) shall specify the vouchers, if any, by which the debt can be substantiated; and (d) shall state whether or not the creditor is a secured creditor. 120 Section 102 provides for the trustee to admit or reject proofs of debt (subject to a right of appeal under section 104). Subsection 102(1) provides: 102 Admission or rejection of proofs (1) The trustee shall examine each proof of debt and the grounds of the debt sought to be proved and, subject to the power of the Court to extend the time, shall, not later than 14 days after the expiration of the period specified in the notice of intention to declare a dividend as the period within which creditors may lodge their proofs of debt, either: (a) admit the proof of debt in whole; (b) admit it in part and reject it in part; (c) reject it in whole; or (d) require further evidence in support of it. 121 Section 108 provides a default position that (subject to priorities prescribed by section 109 and any other provisions of the Act) all proved debts rank equally and in the event of a deficiency are to be paid proportionately. It provides: 108 Debts proved to rank equally except as otherwise provided 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. Note: The rules under this Subdivision for payments of debts can be affected by proceeds of crime orders and applications for proceeds of crime orders: see Subdivision B. 122 Section 109 provides that nine classes of debts or liabilities are to be paid in priority to other payments. 123 Section 89 applies to a secured debt consisting partly of principal and partly of interest and provides a rule for pro rata apportionment of payments to those components of the debt. It provides: 89 Apportionment where security realized before or after bankruptcy -- 29 of 81 -- [2024] SASCA 77 Blue AJA 26 (1) Where a debt that consisted partly of principal and partly of interest was secured and the security has been realized before the debtor became a bankrupt, the proceeds of the realization shall, for the purposes of this Act but not otherwise, notwithstanding any agreement to the contrary, be deemed to have been apportioned in satisfaction of principal and interest in the proportion that the principal bore, at the time of the realization, to the amount then payable as interest at the agreed rate. (2) Where a debt that consists partly of principal and partly of interest is secured and the security is realized after the debtor became a bankrupt or the value of the security is estimated in the creditor’s proof of debt, the amount realized or estimated shall, for the purposes of this Act but not otherwise and notwithstanding any agreement to the contrary, be deemed to have been apportioned in satisfaction of principal and interest in the proportion that the principal bears to the amount payable as interest at the agreed rate. 124 Section 58 precludes the institution or prosecution of a legal proceeding against, or enforcement of a remedy against the personal property of, the bankrupt in respect of a provable debt. Subsections 58(3) to 58(5A) provide: (3) Except as provided by this Act, after a debtor has become a bankrupt, it is not competent for a creditor: (a) to enforce any remedy against the person or the property of the bankrupt in respect of a provable debt; or (b) except with the leave of the Court and on such terms as the Court thinks fit, to commence any legal proceeding in respect of a provable debt or take any fresh step in such a proceeding. (4) After a debtor has become a bankrupt, distress for rent shall not be levied or proceeded with against the property of the bankrupt, whether or not the bankrupt is a tenant of the landlord by whom the distress is sought to be levied. (5) Nothing in this section affects the right of a secured creditor to realize or otherwise deal with his or her security. (5A) Nothing in this section shall be taken to prevent a creditor from enforcing any remedy against a bankrupt, or against any property of a bankrupt that is not vested in the trustee of the bankrupt, in respect of any liability of the bankrupt under: (a) a maintenance agreement; or (b) a maintenance order; whether entered into or made, as the case may be, before or after the commencement of this subsection. 125 Sections 149 to 149Q provide for automatic discharge and court ordered discharge from bankruptcy. 126 Subsection 153(1) provides: (1) Subject to this section, where a bankrupt is discharged from a bankruptcy, the discharge operates to release him or her from all debts (including secured debts) -- 30 of 81 -- [2024] SASCA 77 Blue AJA 27 provable in the bankruptcy, whether or not, in the case of a secured debt, the secured creditor has surrendered his or her security for the benefit of creditors generally. 127 None of the qualifications in the other subsections of section 153 to the scope of a discharge are applicable in the present case. 128 Section 153A provides for annulment of a bankruptcy. Subsections 153A(1), (1A) and (6) provide: 153A Annulment on payment of debts (1) If the trustee is satisfied that all the bankrupt’s debts have been paid in full, the bankruptcy is annulled, by force of this subsection, on the date on which the last such payment was made. (1A) In determining whether there has been full payment of a debt that bears interest, the interest must be reckoned up to and including the date on which the debt (including interest) is paid. … (6) In this section: bankrupt’s debts means all debts that have been proved in the bankruptcy and includes interest payable on such of those debts as bear interest, and the costs, charges and expenses of the administration of the bankruptcy, including the remuneration and expenses of the trustee. Predecessor legislation 129 The Domans and the appeal Judge relied, in the construction of the Act, on the history of bankruptcy legislation before the enactment of the Act. English legislation 130 An Act against such Persons as do make Bankrupt 34 & 35 Henry VIII c 4 (Eng & Wales) (the 1542 English statute) was enacted in 1542. It is generally regarded as the origin of bankruptcy and of bankruptcy legislation.30 131 I refer to “bankruptcy” as an institution in which control (and usually ownership) of property of the subject (the bankrupt) is taken by a third party for the purpose of realisation and payment to creditors of the bankrupt collectively and (from 1705) the bankrupt is or may be released from debts or liabilities. I do not encompass imprisonment for debt, which both pre-dated (at common law and under statute) and post-dated 1542. 132 The preamble of the 1542 English statute referred to diverse and sundry persons who fled to parts unknown or kept their houses not minding to pay their 30 WS Holdsworth, A History of English Law vol 8, p 236; Bromley v Goodere (1743) 1 Atk 75 (26 CR 49) at 77; Page v Commonwealth Life Assurance Society Ltd (1935) 36 SR(NSW) 85 at 89 per Jordan CJ (with whom Bavan J agreed). -- 31 of 81 -- [2024] SASCA 77 Blue AJA 28 creditors their debts. It was not limited to English or Welsh subjects or to traders (contrast the 1571 English statute referred to below). 133 The statute empowered the Lord Chancellor, Keeper of the Great Seal and other named officials, on complaint by a creditor, to take and sell real and personal property of the “offender”. They were empowered to pay the proceeds to: … every of the said creditors a portion rate and rate-like according to the quantity of his or their debts. 134 The statute did not further describe or define the debts of creditors. It did not exempt interest (pre- or post-bankruptcy) from the debts to be paid pro rata. 135 The statute expressly provided that, if creditors were not fully satisfied and paid for their debts, they could pursue the debtor for the balance as if the Act had not been enacted. 136 An Act touching Orders for Bankrupt 13 Elizabeth I c 7 (Eng & Wales) (the 1571 English statute) was enacted in 1571. Section I provided that merchant subjects who fled, kept house or committed certain other acts to defraud or hinder creditors were deemed and taken for a Bankrupt. 137 Section II empowered the Lord Chancellor or Lord Keeper of the Great Seal, on complaint by a creditor, to appoint Commissioners who were empowered to take and sell real and personal property of the bankrupt. The Commissioners were empowered to pay the proceeds to: …every of the said creditors a portion, rate and rate like, according to the quantity of his or their debts. 138 Like the 1542 statute, the 1571 statute did not further describe or define the debts of creditors. 139 Section IV required the Commissioners, on request by the bankrupt, to provide an account of receipts and payments and to make payment of the overplus, if any such shall be, to the bankrupt. 140 Section X provided that, if creditors of such offenders were not fully satisfied and paid for their debts, they could pursue the debtor for the balance as if the Act had not been enacted. 141 An Act to prevent Frauds frequently committed by Bankrupts 4 Anne c 17 (Eng & Wales) (the 1705 English statute) was enacted in 1705. 142 Section I required persons who became bankrupt under the bankruptcy statutes to surrender and submit to examination on oath before the Commissioners within 30 days after notice of the commission. -- 32 of 81 -- [2024] SASCA 77 Blue AJA 29 143 Section IV provided for the arrest of bankrupts who did not so surrender. Section V provided that an arrested bankrupt who submitted to examination was to have the same benefits under the statute as if they had surrendered under section I. 144 Section VII relevantly provided that: That all and every person or persons so becoming bankrupt, as aforesaid, who shall, within the time limited by this act, surrender him, her or themselves to the major part of the Commissioners therein named and in all things conform as in and by this act as directed, …shall be discharged from all debts due by him, her, or them due and owing at the time that he, she, or they did come bankrupt. 145 In Bromley v Goodere31 Sir Stephen Evance became bankrupt on 31 December 1711. All creditors were paid 20 shillings in the pound including interest on interest-bearing debts up to 31 December 1711, leaving a large surplus. The Lord Chancellor Lord Hardwicke held that creditors with interest-bearing debts were entitled to payment of interest out of the surplus before payment to Sir Stephen Evance’s heirs. He summarised the statutes discussed above and said: ... I come now to the main question, Whether creditors for debts carrying interest by contract, are entitled to have subsequent interest? and I think they are. … The statute of Henry the 8th has been so much altered by subsequent acts, that it does not deserve any consideration, therefore laying that out of the case, I will begin with the 13 Eliz cap 7. … The next direction in the act is, what the commissioners should do in regard to debts; they are directed to pay to every one of the creditors a portion rate-like according to the quantity of his or their debts. And the question is, What debts are here meant? And I am of opinion it means debts due at the time of the bankruptcy, or when the commission issued, which is the same; … but this construction must be confined to cases where there is a deficiency, for it is then only the creditors are to have a portion rate-like. The act goes on to take notice of the surplus, which it directs is to be paid to the bankrupt, and gives full power to the creditor to recover the residue of his debt, in like manner and form, as it should and might have done before the making of this act … This shews the surplus to be paid over to the bankrupt, is only the surplus after payment of the whole debts; for it would be vain to pay any other surplus, when it might have been recovered from him again by the creditors. … I come now to consider it upon the 4th and 5th of Ann, cap 17 … 31 (1743) 1 Atk 75 (26 ER 49). -- 33 of 81 -- [2024] SASCA 77 Blue AJA 30 First, What are made the debts? Secondly, What is the operation of the certificate? … As to the first, I do not find the words, Debts due before the time of the bankruptcy. Except in the clause of discharge, so that they seem to be left the same as in the former act. Consider therefore the effect of the discharge, the certificate is not to operate as a discharge of the fund before vested in the assignees, but to extend only to any remedy to be taken against the person of the bankrupt, or his future effects … therefore I am of opinion it was meant to discharge the person of the bankrupt, and his estate subsequently accrued, and not the estate in the hands of the assignees. … And suppose that from the difficulty of getting in the bankrupt’s effects, and by his estates carrying interest, there should be a surplus, it would be absurd to say the creditors should not have interest likewise. … Upon the whole therefore I declare, “That as there is a considerable residue of Sir Stephen Evance’s estate above what has been divided upon the principal of the debts, and the interest of debts carrying interest down to the time of the commission, … all the creditors of Sir Stephen Evance by bonds, contracts or notes carrying interest, are entitled to receive interest out of his estate for the principal sums, which were owing at the time the commission issued, from the day of its issuing, until they receive full satisfaction, before any surplus shall be conveyed to the representatives of Sir Stephen Evance.32 146 In Ex parte Koch33 the Lord Chancellor Lord Eldon said: If there is any contract for interest, the debt will carry interest: but I have always understood the rule in bankruptcy, that debts, carrying interest, and no others, are in the case of a surplus, to have interest subsequent to the commission.34 147 An Act to amend the Laws relating to Bankrupts 6 George IV c 16 (UK) (the 1825 English statute) was enacted in 1825. It repealed and consolidated the statutes summarised above and other statutes which had amended or supplemented those statutes. It applied to “Traders” as defined by the statute. 148 Section 46 provided that “every creditor of the bankrupt may prove his debt”. Section 51 provided for the proof of debts not yet due deducting a rebate of interest at five per cent per annum from the time of declaration of the dividend to the time when the debt would have become payable. Section 56 provided for debts payable upon a contingency which had not yet happened to be valued having regard to the 32 At 77-78, 79-80. 33 (1813) 2 V & B 343 (35 ER 134). 34 At 344. -- 34 of 81 -- [2024] SASCA 77 Blue AJA 31 contingency or otherwise to be the subject of proof after happening of the contingency. 149 Section 132 provided for payment of a surplus to the bankrupt. It provided that: the assignees shall not pay any such surplus until all creditors who have proved under the commission shall have received interest upon their debts, to be calculated and paid at the rate and in the order following: (that is to say,) all creditors whose debts are now by law entitled to carry interest, in the event of a surplus, shall first receive interest on such debts at the rate of interest reserved or by law payable thereon, to be calculated from the date of the commission, and after such interest shall have been paid, all other creditors who have proved under the commission shall receive interest on their debts from the date of the commission, at the rate of four pounds per centum. 150 Sections 121 and 122 provided for the issue of a certificate to be executed by the Commissioners certifying that the bankrupt had duly surrendered and conformed to the laws in force concerning bankrupts at the time of issuing the commission and to be signed with a certification of consent by four fifths in number and value of creditors proving debts of £20 or more, or alternatively after six months from the last examination of the bankrupt by either three fifths in number and value of such creditors or by nine tenths in number of such creditors. 151 Section 121 provided that such a bankrupt: shall be discharged from all debts due by him when he became a bankrupt, and from all claims and demands hereby made provable under the commission. 152 An Act to amend and consolidate the Laws relating to Bankrupts 12 & 13 Victoria c 106 (UK) (the 1849 English statute) was enacted in 1849. It repealed the 1825 English statute and other statutes which had amended or supplemented it. Section 65 provided that it applied to “Traders” as defined by the statute. 153 Section 164 provided that every creditor may prove his debts. Section 172 provided for proof of debts not yet due, and sections 177 and 178 provided for proof of contingent debts. Section 180 provided that a creditor with a non-interest bearing debt or sum certain due before bankruptcy was entitled to prove for interest at a rate not exceeding four pounds per centum per annum from the due date to the date of bankruptcy. 154 Section 197 provided that, if the produce of the bankrupt’s estate was sufficient to pay to creditors 20 shillings in the pound and interest and to leave a surplus, the Court might order such surplus to be paid to the bankrupt but such surplus should not be paid until all creditors who had proved had received interest on their debts calculated and paid from the date of bankruptcy, first to creditors with interest-bearing debts and then to other creditors. 155 Sections 198 and 199 provided for the issue of a certificate of conformity to the bankrupt. The certificate was to be signed by the Court and the Commissioner. -- 35 of 81 -- [2024] SASCA 77 Blue AJA 32 It was to be issued after a hearing by the Court at which a creditor could oppose the issue. It was to be issued if the bankrupt had made full discovery of his estate and effects and in all things conformed. 156 Section 200 provided that a certificate of conformity discharged the bankrupt from: all debts due by him when he became bankrupt, and from all claims and demands made provable under the bankruptcy… 157 An Act to amend the Law relating to Bankruptcy and Insolvency in England 24 & 25 Victoria c 134 (UK) (the 1861 English statute) was enacted in 1861. It amended the 1949 English statute. Section 69 provided that all Debtors, whether Traders or not, were subject to the provisions of the statute. 158 Sections 158 and 159 provided for the making by the Court of an order of discharge. A creditor was entitled to oppose discharge. If it was alleged and proved after trial by jury before the Commissioner that the bankrupt had committed a misdemeanour under the statute, the Commissioner had power to direct that the order of discharge be refused or suspended. Otherwise, the Court was to consider the conduct of the bankrupt before and after adjudication and, if satisfied of prescribed types of misconduct, the Court could refuse or suspend an order of discharge or grant it subject to conditions. 159 Section 161 relevantly provided: The Order of Discharge shall, upon taking effect, discharge the bankrupt from all debts, claims, or demands provable under his bankruptcy, save as herein otherwise provided … 160 The Bankruptcy Act 1869 (UK) (32 & 33 Victoria c 71) (the 1869 English statute) amended and consolidated the law of bankruptcy in England and Wales. Its application was not limited to traders. The Insolvent Debtors and Bankruptcy Repeal Act 1869 (UK) repealed the 1849 English statute and other statutes which had amended or supplemented it. 161 Section 31 of the 1869 English statute provided that demands in the nature of unliquidated damages arising other than by reason of a contract or promise were not provable, nor a debt or liability contracted with the creditor having notice of an act of bankruptcy. Otherwise all debts and liabilities, present or future, certain or contingent, to which the bankrupt was subject at the date of the receiving order or to which he may become subject during its continuance by reason of an obligation incurred previously were debts provable in bankruptcy. 162 Section 36 provided that interest on any debt provable in bankruptcy may be allowed by the trustee under the same circumstances in which interest would have been allowable by jury if an action had been brought for such debt. -- 36 of 81 -- [2024] SASCA 77 Blue AJA 33 163 Section 45 provided that the bankrupt was entitled to any surplus remaining after payment of his creditors, and of the costs, charges, and expenses of the bankruptcy. 164 Sections 48 and 49 provided that, when a bankruptcy was closed, the bankrupt might apply to the Court for an order of discharge. The bankrupt required the consent of the creditors by a special resolution. The Court was required to be satisfied either that a dividend of at least 10 shillings in the pound had been paid or would, but for the negligence or fraud of the trustee, have been paid to creditors or alternatively that the creditors by special resolution had resolved that the bankruptcy or failure to pay such a dividend arose from circumstances for which the bankrupt could not justly be held responsible. The Court was empowered to suspend an order of discharge if satisfied that the bankrupt made default in giving up his property or a prosecution had been commenced against him for an offence against the Debtors Act 1869 (UK). 165 Section 49 provided that an order of discharge released the bankrupt from all debts provable under the bankruptcy, except debts or liabilities incurred by fraud or breach of trust or certain Crown debts. 166 The Bankruptcy Act 1883 (46 & 47 Vic c 52) (UK) (the 1883 English statute) amended and consolidated the law of bankruptcy in England and Wales. It repealed the 1869 English statute. 167 Section 37 was essentially in the same terms as section 31 of the 1869 English statute. 168 Section 39 provided that the rules in the Second Schedule applied to the proof of debts. Rule 20 of the Second Schedule was in essentially the same terms as section 180 of the 1849 English statute. 169 Subsection 40(5) provided that, if there was any surplus after payment of the foregoing debts, it was to be applied in payment of interest from the date of the receiving order at the rate of four per cent per annum on the debts proved in the bankruptcy. 170 Section 28 empowered the Court to make an order of discharge of the bankrupt. The official receiver, trustee and creditors were entitled to be heard. Upon proof of misdemeanours under the Statute or the Debtors Act 1869 (UK), the Court was to refuse a discharge. Upon proof of stipulated criteria, the Court might refuse the order, suspend the operation of the order or grant the order with or without conditions. 171 Section 30 provided that an order of discharge released the bankrupt from all debts provable in bankruptcy, except debts or liabilities incurred by fraud or certain Crown debts. -- 37 of 81 -- [2024] SASCA 77 Blue AJA 34 172 The Bankruptcy Act 1914 (UK) (4 & 5 George V c 59) (the 1914 English statute) amended and consolidated the law of bankruptcy. It repealed the 1883 English statute. 173 Section 30 provided that demands in the nature of unliquidated damages arising other than by reason of a contract or promise were not provable, nor a debt or liability contracted with the creditor having notice of an act of bankruptcy. Otherwise all debts and liabilities, present or future, certain or contingent, to which the bankrupt was subject at the date of the receiving order or to which he may become subject during its continuance by reason of an obligation incurred previously were debts provable in bankruptcy. 174 Section 33 provided that the rules in the Second Schedule applied to the proof of debts. Rule 21 of the Second Schedule was in essentially the same terms as section 180 of the 1849 English statute. Subsection 33(8) provided that: If there is any surplus after payment of the foregoing debts, it shall be applied in payment of interest from the date of the receiving order at the rate of four pounds per centum per annum on all debts proved in the bankruptcy. 175 Section 66 provided that, where a debt had been proved and the debt included interest, such interest was for the purposes of dividend to be calculated at a rate not exceeding five per cent per annum without prejudice to the right of the creditor to receive out of the estate any higher rate of interest to which he may be entitled after all the debts proved in the estate had been paid in full. 176 Section 26 empowered the Court to make an order of discharge of the bankrupt. It was to similar effect to section 28 of the 1883 English statute. 177 Section 28 provided that an order of discharge released the bankrupt from all debts provable in bankruptcy, except debts or liabilities incurred by fraud or for seduction etc or certain Crown debts. 178 Section 29 empowered the Court to annul a bankruptcy adjudication where the debtor ought not to have an adjudged bankrupt or the debtor’s debts had been paid in full. Colonial and State legislation 179 The Australian Colonies and States had, at the time of enactment of the Bankruptcy Act 1924 (Cth), enacted bankruptcy legislation which was modelled on the United Kingdom legislation in force at different times but also contained local variations or provisions.35 35 For the history of colonial legislation, see JLB Allsop and L Dargan, ‘The History of Bankruptcy and Insolvency Law in England and Australia' in JT Gleeson, JA Watson and E Peden (eds), Historical Foundations of Australian Law (Federation Press, 2013) vol, 2, p 415(Allsop & Dargan); J Edelman, H Meehan and G Cheung, ‘The evolution of bankruptcy and insolvency laws and the case of the deed of -- 38 of 81 -- [2024] SASCA 77 Blue AJA 35 180 The legislation in South Australia,36 Western Australia,37 New South Wales38 and Victoria39 was modelled substantially, with significant local variations, on the 1883 English statute.40 181 The legislation in Tasmania41 and Queensland42 was modelled substantially, with significant local variations, on the earlier 1869 English statute.43 182 The legislation in each jurisdiction contained a broad definition of provable debts essentially modelled on section 31 of the 1869 statute and the equivalent provisions in the United Kingdom successors to that statute. The wording of the definition was capable of including bankruptcy-period interest and there was no express exclusion of such interest. 183 The legislation in each jurisdiction provided that a discharge released the bankrupt from all provable debts (subject to varying exceptions), although the circumstances giving rise to discharge varied between the jurisdictions. 184 The legislation in the jurisdictions differed in relation to interest and surpluses. Queensland, Western Australia and South Australia 185 The legislation in Queensland, Western Australia and South Australia expressly provided for bankruptcy-period interest in the event of a surplus, and payment of a surplus to the bankrupt only after payment of such interest. 186 Section 140 of the Insolvency Act 1874 (Qld) was in similar terms to section 31 of the 1869 English statute. Subject to the unliquidated damages and bankruptcy act notice exceptions, section 140 provided that: … all debts and liabilities present or future certain or contingent to which the insolvent is subject at the date of the order of adjudication or to which he may become subject during the continuance of the insolvency by reason of any obligation incurred previously to the date of the order of adjudication shall be deemed to be debts provable in the insolvency. 187 Section 157 provided that the insolvent was entitled to any surplus remaining after payment of his debts with interest at the prescribed rate. company arrangement’ (2019) Lloyd’s Maritime and Commercial Law Quarterly 571 (Edelman, Meehan & Cheung). 36 Insolvent Act 1886 (SA). 37 Bankruptcy Act 1892 (WA). 38 Bankruptcy Act 1898 (NSW). 39 Insolvency Act 1915 (Vic). 40 Allsop & Dargan at 455; Edelman, Meehan & Cheung at 589. 41 Bankruptcy Act 1870 (Tas). 42 Insolvency Act 1874 (Qld). 43 Allsop & Dargan at 455; Edelman, Meehan & Cheung at 589. -- 39 of 81 -- [2024] SASCA 77 Blue AJA 36 188 Section 173 provided that a certificate of discharge released the insolvent from all debts provable under the insolvency subject to exceptions in similar terms to sections 48 and 49 of the 1869 English statute. 189 Section 211 of the Insolvent Act 1886 (SA) was in similar terms to section 31 of the 1869 English statute. Section 211 provided that (subject to an exception in the case of unliquidated damages claims arising otherwise than by reason of a contract or promise): All debts and liabilities, present or future, liquidated or unliquidated, certain or contingent, to which an insolvent shall be subject at the date of the filing of the insolvency petition, or to which he may become subject by reason of any obligation incurred previously to such date, shall be deemed provable debts. 190 Section 233 was in similar terms to section 122 of the 1825 English statute. It provided that, if the estate was sufficient to pay 20 shillings in the pound and interest, the Court may order the surplus to be paid to the insolvent. The interest was to be calculated from the date of the filing of the petition. The interest on debts legally carrying interest was to be paid at the rate agreed on or legally payable and, subject to full payment of such interest, interest on all other debts was to be paid at the rate of eight pounds per centum per annum. 191 Sections 177, 178 and 184 provided that, on the issue of a conformance certificate, the insolvent was discharged from all provable debts. 192 Section 35 of the Bankruptcy Act 1892 (WA) was in similar terms to section 31 of the 1869 English statute. Subject to the unliquidated damages and bankruptcy act notice exceptions, subsection 35(3) provided that: … all debts and liabilities, present or future, certain or contingent, to which the debtor is subject at the date of the receiving order, or to which he may become subject before his discharge by reason of any obligation incurred before the date of the order of the receiving order, shall be deemed to be debts provable in bankruptcy. 193 Subsection 38(6) provided that, if there was any surplus after paying the foregoing debts, it should be applied in payment of interest from the date of the receiving order at the rate of eight pounds per centum per annum on all debts proved in the bankruptcy. Section 62 provided that the bankrupt was entitled to any surplus remaining after payment in full of his creditors, with interest, as by the Act was provided. 194 Section 28 provided that, subject to exceptions in similar terms to sections 48 and 49 of the 1869 English statute, an order of discharge released the bankrupt from all debts provable in bankruptcy. New South Wales 195 Section 45 of the Bankruptcy Act 1898 (NSW) was in similar terms to section 37 of the 1883 English statute. Subsection 45(3) provided that (subject to an -- 40 of 81 -- [2024] SASCA 77 Blue AJA 37 exception in the case of unliquidated damages claims arising otherwise than by reason of a contract or promise): … all debts and liabilities, present or future, certain or contingent, to which the debtor is subject at the date of the sequestration order, or to which he may become subject before his discharge by reason of any obligation incurred before the date of the sequestration order, shall be deemed to be debts provable in bankruptcy. 196 Section 44 provided that, subject to exceptions in similar terms to section 28 of the 1883 English statute and an additional exception, an order of discharge released the bankrupt from all debts provable in bankruptcy. 197 Section 81 provided that a bankrupt was entitled to any surplus remaining after payment in full of all of his creditors, with interest as by the Act provided, and of the costs, charges and expenses of the proceedings under the bankruptcy petition. 198 Rule 20 of the Third Schedule provided that a creditor might prove for interest on a non-interest-bearing debt at a rate not exceeding six per centum per annum to the date of the order. Interest on an interest-bearing debt was for the purpose of dividend to be calculated at a rate not exceeding eight per centum per annum without prejudice to the right of a creditor to receive out of the estate a higher rate of interest after all proved debts had been paid in full. 199 In Re Estate of Low; ex parte Low44 a trustee of the will of the deceased bankrupt sought an annulment on the ground that all debts (including interest to the date of bankruptcy) had been paid in full. The question arose whether bankruptcy-period interest must be paid in the event of a surplus. Walker J held that, on the proper construction of section 81 of the Act, such interest must be paid. Walker J said: This enactment is exactly the same as s 65 of the English Bankruptcy Act of 1883; but while the English Act provides (s 40 [5]) that “if there is any surplus after payment of the foregoing debts, it shall be applied in payment of interest from the date of the receiving order at the rate of £4 per cent per annum on all debts proved in the bankruptcy,” the colonial Act, by a curious oversight—for such I judge it to be—contains no similar provision. But the intention of s 81 is, I think, reasonably plain viz., that the bankrupt is not to take the surplus till interest has been paid to the date of satisfaction of the debts. One can see why, in an insolvent estate, the sequestration order should stop interest running in favour of creditors; but, where the estate shows a surplus, and there is no question of competition amongst claimants, why should sequestration stop interest as between a creditor and the bankrupt…45 Tasmania 200 Section 30 of the Bankruptcy Act 1870 (Tas) was in similar terms to section 31 of the 1869 English statute. Section 30 provided that (subject to an exception 44 (1899) 20 LR(NSW) B & P 17. 45 At 23. -- 41 of 81 -- [2024] SASCA 77 Blue AJA 38 in the case of unliquidated damages claims arising otherwise than by reason of a contract or promise): … all debts and liabilities, present or future certain or contingent, to which the debtor is subject at the date of the order of adjudication, or to which he may become subject during the continuance of the bankruptcy by reason of any obligation incurred previously to the date of the order of adjudication, shall be deemed to be debts provable in bankruptcy. 201 Section 48 provided that, subject to exceptions in similar terms to section 49 of the 1869 English statute, an order of discharge released the bankrupt from all debts provable in bankruptcy. 202 Section 44 provided that a bankrupt was entitled to any surplus remaining after payment of his creditors, and of the costs, charges and expenses of the bankruptcy. Victoria 203 Section 187 of the Insolvency Act 1915 (Vic) was in similar terms to section 37 of the 1883 English statute. Section 187 provided that (subject to an exception in the case of unliquidated damages claims arising otherwise than by reason of a contract or promise): … all debts and liabilities present or future certain or contingent to which the insolvent is subject at the date of the order of sequestration, or to which he becomes subject before he obtains his certificate by reason of any obligation incurred previously to the date of the order of sequestration, shall be deemed to be debts provable in insolvency... 204 Section 191 was in similar terms to section 36 of the 1869 English statute. Section 191 provided that interest on any debt provable in insolvency may be allowed by the Court or trustee under the same circumstances in which interest would have been allowable by jury if an action had been brought for such debt. 205 Sections 241 and 242 provided that, subject to exceptions in similar terms to section 28 of the 1914 English statute, an order of discharge released the bankrupt from all debts provable under the insolvency. 206 Section 205 provided that an insolvent was entitled to any surplus remaining after payment in full of his creditors, and of the costs, charges and expenses of the proceedings in the insolvency. Commonwealth predecessor legislation 207 The Bankruptcy Act 1924 (Cth) (the 1924 Act) was enacted by the Commonwealth pursuant to the bankruptcy and insolvency power in section 51 of the Commonwealth Constitution. The 1924 Act was largely modelled on the 1914 statute (which in turn was largely modelled on the 1883 English statute) and -- 42 of 81 -- [2024] SASCA 77 Blue AJA 39 incorporated some aspects of the State legislation summarised above with some further alterations.46 208 Subsection 81(1) provided: All debts and liabilities, present or future, certain or contingent, to which the bankrupt is subject at the date of the sequestration order, or to which he may become subject before his discharge by reason of any obligation incurred before the date of the sequestration order, shall be deemed to be debts provable in the bankruptcy: Provided however that demands in the nature of unliquidated damages arising otherwise than by reason of a contract, promise, or breach of trust, shall not be provable in bankruptcy. 209 Section 84 created an order of priority of certain (priority) debts. Subsection 84(5) provided that, where a debt had been proved which included interest, such interest was for the purposes of dividend to be calculated at a rate not exceeding eight pounds per cent per annum without prejudice to the right of a creditor to receive out of the estate any higher rate of interest to which he may be entitled after all the debts proved in the estate had paid in full. 210 Section 89 provided: Subject to the provisions of this Act, all debts proved in the bankruptcy shall be paid pari passu. 211 Section 118 provided: The bankrupt shall be entitled to any surplus remaining after payment in full of his creditors, and of the costs, charges, and expenses of the bankruptcy. 212 Section 119 empowered the Court to make an order of discharge of the bankrupt. It was modelled on section 26 of the 1914 English statute and was to similar effect to section 28 of the 1883 English statute summarised above. 213 Section 121 provided that an order of discharge released the bankrupt from all debts provable in bankruptcy, except debts or liabilities incurred by fraud or for seduction etc or certain Crown debts. 214 Section 124 empowered the Court to annul a bankruptcy adjudication where the debtor ought not to have been adjudged bankrupt or the debtor’s debts had been paid in full. 215 In Re Hyman; ex parte Law,47 Re Paul & Gray Ltd48 and Page v Commonwealth Life Assurance Society Ltd49 it was held that, under the 1924 Act, in the event of a deficiency, bankruptcy-period interest was not claimable in a 46 Allsop & Garvan at 455-456. 47 (1930) 3 ABC 61. 48 (1933) 33 SR(NSW) 295. 49 (1935) 36 SR(NSW) 85. -- 43 of 81 -- [2024] SASCA 77 Blue AJA 40 bankruptcy but, in the event of a surplus, it was claimable before the surplus was payable to the bankrupt. 216 In Mackenzie v Rees50 Dixon J and McTiernan J each quoted a passage from the reasons of Harvey CJ in Eq in In Re Paul & Gray Ltd51 The following passage was referred to, with Dixon J quoting the second paragraph and McTiernan J quoting the balance of the fourth paragraph: Before there was any legislation on the subject it was clearly established by the Courts which administered bankruptcy under judge made rules of administration, that, for convenience and it is spoken in the case of Ex parte Ador as a pure rule of convenience, debts carrying interest were proved with interest up to the date of sequestration... as time was required to get in all the claims and also to realise assets, it was as a rule of convenience treated that in the first instance the assets were to be distributed on that basis. Then as soon as every creditor who established his proof on that basis had got his dividend, there was still a surplus, the old practice of the bankruptcy judges was that interest-bearing debts were also entitled to a further amount of interest from the date of sequestration up till the date when the debt was liquidated, in order that justice might be done to the creditor, and that the bankrupt might not sail away with assets in his pocket, getting rid of the liability to his creditor. There was no release of future interest. The liability to the interest still remained a liability, but, for convenience, the proof of it was carried out in two stages. First, up to the date of the sequestration. If that exhausted the assets there was an end of it and the bankrupt was relieved from any further liability. If, on the other hand, there were still assets left after that distribution, then the liability to pay the interest was a continuing liability which also could be proved before the surplus assets were distributed to the bankrupt. That was the law until various Acts were passed in England and the various States. That was what might be called the common law of Bankruptcy. [Harvey CJ in Eq then referred to the legislation in Western Australia, South Australia and Queensland providing for interest to be payable in the case of a surplus, and the legislation in New South Wales in respect of which Walker J in Ex parte Low took a similar approach as summarised above.] The Federal Bankruptcy Act did not follow the provisions of the State Acts which provided for an express rate of interest out of the surplus assets. It has left the matter to be determined, as it seems to me, by the general law as applicable in bankruptcy… In my opinion the Federal legislature, in deliberately abstaining from following the then existing provisions of the English Act and the provisions of so many State Acts, meant to say not that no interest was to be paid, but that interest was to be paid according to the old common- law rule of bankruptcy; that is, interest according to the contractual rate only. The result is that out of the surplus creditors of interest-bearing debts are entitled to the full contracted rate of interest, but non-interest-bearing debts will not carry any interest out of surplus.52 217 In Mackenzie v Rees53 Dixon J adopted the same construction of the 1924 Act. Dixon J said: 50 (1941) 65 CLR 1. 51 (1933) 33 SR(NSW) 295. 52 At 300-303. (Citation omitted) 53 (1941) 65 CLR 1. -- 44 of 81 -- [2024] SASCA 77 Blue AJA 41 It has been a principle of English bankruptcy law, since the time at all events of Lord King, that no proof should be allowed for interest accruing after the commencement of the bankruptcy, even upon interest-bearing debts. But if there were a surplus then intermediate interest might be allowed as against the debtor. If, according to the tenor of the obligation, a debt bore interest, the debtor could not obtain the surplus until interest accruing after the commencement of the bankruptcy had been met thereout. The rule and the qualification had their origin in the fact that the earlier bankruptcy laws excluded future debts alike from proof against the assets and from the relief those laws gave the debtor by the discharge of the debtor's accrued debts. Future interest not accrued at the act of bankruptcy or other commencement of the bankruptcy was not a debt provable, and therefore interest stopped at that event for the purposes of proof. Correspondingly, the debtor was not discharged from his liability to such interest, and it was therefore equitable that it should be deducted from the surplus before it was paid over to him. But afterwards changes were made in the statutory provisions, and the reasons for the rules about interest were placed on quite different grounds. The principal rule, namely, that excluding intermediate interest from proof, came to be regarded as a rule of convenience in administration, as a practice of the Court of Bankruptcy designed to secure equality and justice among creditors where there was a deficiency. Thus, in Ex parte Kensington; Re Lancaster, Sir George Rose says: "The rule that interest stops at the bankruptcy is not a rule of law nor of equity; it is the practice in bankruptcy, adopted for convenience, as any other course might lead to many difficulties." In Re Browne & Wingrove; Ex parte Ador, Lindley L.J. says: "The rule which prevents proof for future interest is not a positive enactment, it is rather a rule of convenience."… The principle has long received statutory recognition and, to some extent, expression: Cf. 6 Geo. IV. c. 16, sec. 132; 12 & 13 Vict. c. 106, sec. 197; rule 77 of Bankruptcy Rules 1870 under 32 & 33 Vict. c. 71; 46 & 47 Vict. c. 52, sec. 40 (5); and 4 & 5 Geo. V. c. 59, sec. 33 (8), and cf. sec. 66. But the Commonwealth Bankruptcy Act 1924-1933 contains no analogous provisions. Indeed, some difficulty may be felt in reconciling the operation of the principle as part of our law of bankruptcy with the express language of some provisions of the Act. But it is possible, I think, to give effect both to the principle and to the form in which the legislation is cast by treating the principle as one determining the order in which debts are to be discharged in the course of administration; that is, by accepting the more modern view that the rule is one of justice and convenience, as opposed to the earlier view that it depended upon the exclusion of future interest from proof and also from the release or discharge given to the debtor. Thus the wide language of sec. 81 (1) may be taken as covering intermediate interest, so that it is not altogether excluded as a claim against the assets and, at the other end, sec. 118 may be regarded as conferring upon the debtor a right to the surplus only after intermediate interest has been paid. The principle then may be considered as operating between these two termini, so to speak, and as requiring that, for the purpose of adjusting the rights of creditors, interest accruing after sequestration shall be put out of consideration in the first instance, and shall be allowed only if and when a surplus is ascertained. ... Sec. 89, however, presents some difficulty. For it might be thought to require that every claim against the assets, not given priority by some express provision, should rank pari passu with every other such claim. But the section has its counterpart in the English legislation, and there no difficulty has been felt in treating the rule as consistent with the legislation... It is to be noted that the provision speaks of "debts proved": "all debts proved in the bankruptcy shall be paid pari passu." The principle in question may be regarded as dealing with the proof of debts and as postponing proof for interest to accrue or accruing after sequestration until a surplus is established. So regarded, the principle does not conflict with sec. 89 because, until there is a surplus, the claim for intermediate interest cannot be a "debt -- 45 of 81 -- [2024] SASCA 77 Blue AJA 42 proved." At all events, it has been decided in Australia that the principle applies to a bankruptcy under the Commonwealth Act and under the similar New-South-Wales Acts. In Re Low; Ex parte Low Walker J. decided that under the enactments of New South Wales intermediate interest must be paid on interest-bearing debts out of a surplus. The provision corresponding to sec. 118 of the Commonwealth Act made "payment in full of all his creditors with interest" a condition of the bankrupt's title to the surplus, and that no doubt influenced the decision. But in Re Paul & Gray Ltd.] Harvey C.J. in Eq., after a full argument, held that it was the intention of the Federal legislature that "interest was to be paid according to the old common-law rule of bankruptcy." Speaking with reference to interest payable by contract, he formulated that rule as follows:—"There was no release of future interest. The liability to the interest still remained a liability, but, for convenience, the proof of it was carried out in two stages. First, up to the date of the sequestration. If that exhausted the assets there was an end of it, and the bankrupt was relieved from any further liability. If, on the other hand, there were still assets left after that distribution, then the liability to pay the interest was a continuing liability which also could be proved before the surplus assets were distributed to the bankrupt. That was the law until various Acts were passed in England and the various States. That was what might be called the common-law of bankruptcy." In Re Hyman Lukin J. had arrived at the same conclusion. Both Harvey C.J. in Eq. and Lukin J. followed and applied Re Low. See, too, Re Richards. In my opinion the view so adopted is correct, and a bankruptcy under the Federal Act is governed by the principle of administration which allows no proof for interest accruing or to accrue after sequestration unless and until a surplus is found to exist, and then allows creditors to claim upon the surplus for interest accruing since sequestration upon interest- bearing debts.54 218 McTiernan J adopted the same construction. McTiernan J said: The rules applicable where the bankruptcy is governed by the Australian bankruptcy law are conveniently stated by Harvey C.J. in Eq. in the case of Re Paul & Gray Ltd. He said:— "In my opinion the Federal legislature, in deliberately abstaining from following the then existing provisions of the English Act and the provisions of so many State Acts, meant to say not that no interest was to be paid, but that interest was to be paid according to the old common-law rule of bankruptcy; that is, interest according to the contractual rate only. The result is that out of the surplus creditors of interest-bearing debts are entitled to the full contracted rate of interest, but non-interest-bearing debts will not carry any interest out of surplus."55 219 Williams J agreed with Dixon J’s construction. Williams J said: I am satisfied, for the reasons given by my brother Dixon, that creditors who have debts which bear interest by contract can prove against the surplus for the interest which accrues after the date of adjudication on the respective amounts of their debts outstanding from time to time. To the authorities to which he has referred I will add Page v Commonwealth Life Assurance Society Ltd and Jowitt v Callaghan.56 220 Rich ACJ did not dissent from this construction. Rich ACJ said: 54 At 8-12. (Footnotes and some citations omitted) 55 At 18 (Footnote omitted) 56 At 24. (Footnotes omitted) -- 46 of 81 -- [2024] SASCA 77 Blue AJA 43 The parties by clause 6 (3) of the deed of arrangement have evinced a clear intention that the law of bankruptcy is to be applied as to payment of dividends. Since, in the case of surplus of assets, the law of bankruptcy allows interest thereout on interest-bearing debts to creditors who held promissory notes in respect of their debts, it is in accordance with the expressed intention as to the applicability of the law of bankruptcy, as manifested in clause 6 (3), that interest should be allowed at the rate which, apart from the promissory notes, the debt in question bore.57 221 The Justices reached opposing conclusions on a different issue, namely whether creditors who had taken non-interest-bearing promissory notes in lieu of their original interest-bearing contractual rights had lost the right to interest. Rich ACJ and Williams J held that they had not lost the right to interest. Dixon J and McTiernan J held that they had lost that right. This difference has no bearing on the authority of the case in relation to bankruptcy-period interest on interest- bearing debts. Evolution of the Act 222 When enacted in 1966, section 82 of the Act did not contain subsection (3B). There was no exclusion from the definition of a provable debt in respect of bankruptcy-period interest. The only exclusions contained in section 82 were those contained in subsections (2) and (3), namely unliquidated damages arising otherwise than by reason of a contract, promise or breach of trust and penalties or fines for a criminal offence. Subject to the addition of the exclusion in respect of penalties or fines, section 82 was essentially the same as section 81 of the 1924 Act. 223 Section 148 provided: 148 Right of bankrupt to surplus A bankrupt is entitled to any surplus remaining after payment in full of (a) the costs, charges and expenses of the administration of the bankruptcy; (b) all debts that have been proved in the bankruptcy; and (c) interest on interest-bearing debts that have been proved in the bankruptcy. 224 Part VII provided for automatic discharge and Court-ordered discharge (sections 149 to 153) and Court-ordered annulment (section 154). 225 Subsection 153(1) provided: 153 Effect of order of discharge (1) Subject to this section, where a bankrupt is discharged from a bankruptcy, the discharge operates to release him from all debts (including secured debts) provable 57 At 6. -- 47 of 81 -- [2024] SASCA 77 Blue AJA 44 in the bankruptcy, whether or not, in the case of a secured debt, the secured creditor has surrendered his security for the benefit of creditors generally. 226 Section 153 was similar to section 121 of the 1924 Act. It was subject to a similar exception for fraud and an additional exception for bail bonds and recognizances. 227 Section 154 empowered the Court to make an order annulling the bankruptcy if the person ought not to have been made bankrupt or the bankrupt’s unsecured debts had been paid in full or released. 228 Although no cases were cited by the parties concerning the construction of the Act before its amendment in 1987 in relation to bankruptcy-period interest, there is no reason why the approach of the High Court in Mackenzie v Rees58 in relation to bankruptcy-period interest would not have applied to the Act before 1987. 229 In 1987 section 82 was amended by the Bankruptcy Amendment Act 1987 (Cth) (the 1987 Amending Act) by the insertion of subsection (3B) in its present form. No amendment was made to section 148 or section 153. 230 In 1992 section 148 was repealed by the Bankruptcy Amendment Act 1991 (Cth) (the 1992 Amending Act). 231 Part VII - Discharge of Bankrupts was largely repealed and largely replaced by a new Part VII - Discharge and Annulment. The provisions relating to discharge were substantially remodelled but there was no relevant change to section 153. 232 Section 154 was replaced by sections 153A, 153B and 154. Section 153B empowered the Court to annul a bankruptcy if the person ought not to have been made bankrupt in the same terms as under the former section 154. Section 153A automatically annulled a bankruptcy of its own force if the trustee was satisfied that all of the bankrupt’s debts had been paid in full. Section 153A relevantly provided: 153A Annulment on payment of debts (1) If the trustee is satisfied that all the bankrupt's debts have been paid in full, the bankruptcy is annulled, by force of this subsection, on the date on which the last such payment was made. (2) The trustee must, as soon as practicable after that date, give to the Registrar a written certificate setting out the former bankrupt's name and bankruptcy number and the date of the annulment. … 58 (1941) 65 CLR 1. -- 48 of 81 -- [2024] SASCA 77 Blue AJA 45 (6) In this section: ‘bankrupt's debts’ means all debts that have been proved in the bankruptcy and includes interest payable on such of those debts as bear interest, and the costs, charges and expenses of the administration of the bankruptcy, including the remuneration and expenses of the trustee. 233 On its proper construction, the definition of “bankrupt’s debts” in subsection 153A(6), in referring to interest payable on interest-bearing debts, included bankruptcy-period interest. This is because pre-bankruptcy interest is already encompassed in debts proved in the bankruptcy. 234 In 2002 section 153A was amended by the Bankruptcy Legislation Amendment Act 2002 (Cth) (the 2002 Amending Act) by inserting a new subsection (1A) (in its present terms): (1A) In determining whether there has been full payment of a debt that bears interest, the interest must be reckoned up to and including the date on which the debt (including interest) is paid. 235 This provision was inserted out of an abundance of caution, given that this was already the effect of the definition of “bankrupt’s debts” in subsection (6). Bankruptcy-period interest 236 Leadenhall contends that, on its proper construction, subsection 82(3B) distinguishes in respect of interest-bearing debts between principal and pre- bankruptcy interest, which comprises a debt that is provable pursuant to subsection 82(1), and bankruptcy-period interest, which comprises a separate debt that is not provable pursuant to subsection 82(3B). 237 Leadenhall contends that, on its proper construction, subsection 153(1) refers to and effects a release in respect of the principal and pre-bankruptcy interest debt but not in respect of the bankruptcy-period interest debt. It also indirectly effects a release of interest otherwise accruing on the principal and pre-bankruptcy interest after discharge (post-bankruptcy interest) because the principal upon which such post-bankruptcy interest could accrue ceases to exist. 238 Leadenhall contends that, on its proper construction, subsection 58(3) refers to and precludes the institution or prosecution (subject to leave) of a proceeding or enforcement of a remedy in respect of the principal and pre-bankruptcy interest debt but not in respect of the bankruptcy-period interest debt. 239 Leadenhall contends that, under the 1924 Act (and under the Act prior to 1987), it was not the position (whether on the construction of or implication from the provisions of the legislation or under the so-called “common law of bankruptcy”) that a bankrupt was or could be released upon discharge from bankruptcy from liability in respect of bankruptcy-period interest and the position prior to 1987 in this respect remains the position since 1987. Alternatively, if the -- 49 of 81 -- [2024] SASCA 77 Blue AJA 46 position prior to 1987 was as contended by the Domans, that position changed in 1987 as a result of the introduction of subsection (3B) into section 82. 240 Leadenhall contends that, if there is a surplus after the payment in full of all provable debts, the bankruptcy trustee is required to pay bankruptcy-period interest to creditors before paying any balance to the bankrupt. Leadenhall contends that this is because it would be inequitable for the bankrupt to receive the surplus before payment to such creditors. Leadenhall does not identify the principle of equity which operates to render such receipt inequitable. Leadenhall contends alternatively that the requirement for such payment arises by implication from the Act or by “judge made law”. 241 Leadenhall contends that the Judge erred in her construction of subsections 82(3B), 153(1) and 58(3); in holding that the words used in subsection 82(3B) are ambiguous; in giving effect to a conclusion as to the intended operation of subsection 82(3B) without identifying the construction of the words used by which that result was achieved; and in holding implicitly that section 153A negated the effect of subsection 82(3B) making bankruptcy-period interest a non-provable debt. 242 Leadenhall contends that the Judge erred in failing to give full effect to the reasoning of the High Court in Coventry v Charter Pacific Corporation Ltd59 and Foots v Southern Cross Mine Management Pty Ltd.60 243 Leadenhall contends that the Judge erred in following the decision of the Full Court of the Supreme Court of Tasmania in Edwards v Stocks.61 Leadenhall submits that the Judge should have declined to follow this decision because either it is “plainly wrong” or it was per incuriam by not referring to the two decisions of the High Court referred to in the previous paragraph. 244 Leadenhall does not contend that the Judge erred in having regard to the explanatory memorandum in respect of the Bill that became the 1987 Amending Act. However, Leadenhall contends that the Judge erred in her reading of the explanatory memorandum. 245 Leadenhall contends that the Judge erred in holding that in any event a proceeding for or enforcement of bankruptcy-period interest is “in respect of” a provable debt within the meaning of subsection 58(3). 246 The Domans contend that, on its proper construction, subsection 82(3B) treats principal and pre-bankruptcy and bankruptcy-period interest as a single debt but the bankruptcy-period interest component is not provable under Part VI of the Act. It is implicit from Part VII of the Act that, if there is a surplus after payment of creditors pursuant to Part VI, the bankruptcy trustee is empowered and obliged 59 [2005] HCA 67, (2005) 227 CLR 234. 60 [2007] HCA 56, (2007) 234 CLR 52. 61 [2008] TASSC 12, (2008) 17 Tas R 408. -- 50 of 81 -- [2024] SASCA 77 Blue AJA 47 to pay any bankruptcy-period interest to creditors. If this does not fully pay all bankruptcy-period interest, the bankrupt on discharge is released from the single debt comprising principal and pre-bankruptcy and bankruptcy-period interest pursuant to section 153. If this does fully pay all bankruptcy-period interest, the bankruptcy is annulled pursuant to section 153A. 247 The Domans contend that, on their proper construction, in respect of interest- bearing debts subsections 153(1) and 58(3), in referring to a “provable debt”, refer to the single debt comprising principal and pre-bankruptcy and bankruptcy-period interest. Subsection 153(1) effects a discharge in respect of that single debt and subsection 58(3) imposes a moratorium on the prosecution of a proceeding for, or enforcement of payment of, that single debt. 248 The Domans contend that, under the 1924 Act and its antecedents (and under the Act prior to 1987), it was the position (under the so-called “common law of bankruptcy”, or on the construction of or implication from the provisions of the legislation) that a bankrupt was or could be released upon discharge from bankruptcy from liability in respect of bankruptcy-period interest and the position prior to 1987 in this respect remains the position since 1987. The Domans contend that the amendments enacted in 1987 and 1992 did not alter this position. 249 The Domans contend that the explanatory memorandum in respect of the Bill that became the 1987 Amending Act supports the construction of the relevant provisions and in particular of subsection 82(3B). 250 The Domans take issue with Leadenhall’s contentions concerning the decisions of the High Court in Coventry v Charter Pacific Corporation Ltd62 and Foots v Southern Cross Mine Management Pty Ltd63 and of the Full Court of the Supreme Court of Tasmania in Edwards v Stocks.64 251 The Domans contend that in any event a proceeding for, or enforcement of, bankruptcy-period interest is “in respect of” a provable debt within the meaning of subsection 58(3). Interpretation principles 252 The applicable principles of statutory interpretation are not controversial in their application in this case. 62 (2005) 227 CLR 234. 63 (2007) 234 CLR 52. 64 (2008) 17 Tas R 408. -- 51 of 81 -- [2024] SASCA 77 Blue AJA 48 253 A statutory provision is to be construed by reference to its text, context and purpose.65 Context includes not only other provisions of the legislation in question, but also the legislative history and extrinsic materials.66 254 In Thiess v Collector of Customs67 French CJ, Hayne, Kiefel, Gageler and Keane JJ said: Statutory construction involves attribution of meaning to statutory text. As recently reiterated: This Court has stated on many occasions that the task of statutory construction must begin with a consideration of the [statutory] text. So must the task of statutory construction end. The statutory text must be considered in its context. That context includes legislative history and extrinsic materials. Understanding context has utility if, and in so far as, it assists in fixing the meaning of the statutory text. Objective discernment of statutory purpose is integral to contextual construction. The requirement of s 15AA of the Acts Interpretation Act 1901 (Cth) that "the interpretation that would best achieve the purpose or object of [an] Act (whether or not that purpose or object is expressly stated …) is to be preferred to each other interpretation" is in that respect a particular statutory reflection of a general systemic principle. For: it is one of the surest indexes of a mature and developed jurisprudence not to make a fortress out of the dictionary; but to remember that statutes always have some purpose or object to accomplish, whose sympathetic and imaginative discovery is the surest guide to their meaning. 68 255 Prima facie, a word (or phrase) is to be given its natural or ordinary meaning (where applicable) but this may be displaced by contextual or purposive considerations. 256 In Project Blue Sky Inc v Australian Broadcasting Authority69 McHugh, Gummow, Kirby and Hayne JJ said: [T]he duty of a court is to give the words of a statutory provision the meaning that the legislature is taken to have intended them to have. Ordinarily, that meaning (the legal meaning) will correspond with the grammatical meaning of the provision. But not always. The context of the words, the consequences of a literal or grammatical construction, the purpose of the statute or the canons of construction may require the words of a legislative provision to be read in a way that does not correspond with the literal or grammatical meaning.70 65 Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28, (1998) 194 CLR 355 per McHugh, Gummow, Kirby and Hayne JJ. 66 Federal Commissioner of Taxation v Consolidated Media Holdings Ltd [2012] HCA 55, (2012) 250 CLR 503 at [39] per French CJ, Hayne, Crennan, Bell and Gageler JJ. 67 [2014] HCA 12, (2014) 250 CLR 664. 68 At [22]-[23]. (Footnotes omitted) 69 (1998) 194 CLR 355. 70 At [78]. (Footnote omitted) -- 52 of 81 -- [2024] SASCA 77 Blue AJA 49 257 In SZTAL v Minister for Immigration and Border Protection71 Kiefel CJ, Nettle and Gordon JJ said: The starting point for the ascertainment of the meaning of a statutory provision is the text of the statute whilst, at the same time, regard is had to its context and purpose. Context should be regarded at this first stage and not at some later stage and it should be regarded in its widest sense. This is not to deny the importance of the natural and ordinary meaning of a word, namely how it is ordinarily understood in discourse, to the process of construction. Considerations of context and purpose simply recognise that, understood in its statutory, historical or other context, some other meaning of a word may be suggested, and so too, if its ordinary meaning is not consistent with the statutory purpose, that meaning must be rejected.72 258 In R v A273 Kiefel CJ and Keane J (with whom Nettle and Gordon JJ and Edelman J generally agreed) said: The method to be applied in construing a statute to ascertain the intended meaning of the words used is well settled. It commences with a consideration of the words of the provision itself, but it does not end there. A literal approach to construction, which requires the courts to obey the ordinary meaning or usage of the words of a provision, even if the result is improbable, has long been eschewed by this Court. It is now accepted that even words having an apparently clear ordinary or grammatical meaning may be ascribed a different legal meaning after the process of construction is complete. This is because consideration of the context for the provision may point to factors that tend against the ordinary usage of the words of the provision. … None of these cases suggest a return to a literal approach to construction. They do not suggest that the text should not be read in context and by reference to the mischief to which the provision is directed. They do not deny the possibility, adverted to in CIC Insurance Ltd v Bankstown Football Club Ltd, that in a particular case, "if the apparently plain words of a provision are read in the light of the mischief which the statute was designed to overcome and of the objects of the legislation, they may wear a very different appearance". When a literal meaning of words in a statute does not conform to the evident purpose or policy of the particular provision, it is entirely appropriate for the courts to depart from the literal meaning. A construction which promotes the purpose of a statute is to be preferred.74 259 However, a statutory provision cannot be given a construction which the text cannot reasonably bear.75 260 In Momcilovic v The Queen76 French CJ said: There are different ways of undertaking the interpretive task and, in a particular case, they may yield different answers to the same questions. But if the words of a statute are clear, so too is the task of the Court in interpreting the statute with fidelity to the Court's 71 [2017] HCA 34; 262 CLR 362. 72 At [14]. (Footnotes omitted) 73 [2019] HCA 35, (2019) 269 CLR 507. 74 At [32], [37]. (Footnotes omitted) 75 Jones v Director of Public Prosecutions [1962] AC 635 at 662 per Lord Reid; Momcilovic v The Queen [2011] HCA 34, (2011) 245 CLR at 1 at [39] per French CJ). 76 (2011) 245 CLR at 1. -- 53 of 81 -- [2024] SASCA 77 Blue AJA 50 constitutional function. The meaning given to the words must be a meaning which they can bear. As Lord Reid said in Jones v Director of Public Prosecutions: It is a cardinal principle applicable to all kinds of statutes that you may not for any reason attach to a statutory provision a meaning which the words of that provision cannot reasonably bear. If they are capable of more than one meaning, then you can choose between those meanings, but beyond that you must not go. In an exceptional case the common law allows a court to depart from grammatical rules and to give an unusual or strained meaning to statutory words where their ordinary meaning and grammatical construction would contradict the apparent purpose of the enactment.77 261 Prima facie, a word (or phrase) is to be given the same meaning in different sections of an Act.78 However, the weight of this presumption is relatively slight79 and it readily yields to context.80 262 In Clyne v Deputy Federal Commissioner of Taxation81 Gibbs CJ said: No doubt there is a presumption that where the same word is used on more than one occasion in a section it is intended to have the same meaning in each case, but this is not a presumption of very much weight; there is no rigid rule; it all depends on the context.82 263 Mason J (with whom Aickin J and Wilson J agreed) said: [T]here is a presumption that in a statute the same word is always used with the same meaning, especially when it is used more than once in the same section. However, it is now settled that presumption readily yields to the context and, as Gibbs J noted in McGraw- Hinds (Aust) Pty Ltd v. Smith: "It is well recognized that a word may be used in two different senses in the same section of the one Act".83 264 In the same vein, there is a presumption that a word (or phrase) that is defined has the defined meaning whenever it is used in an Act, but this presumption also yields to context. Subsection 5(1) of the Act provides explicitly that the term “provable debt” is as defined by it “unless the contrary intention appears”, but in any event, this would be implied.84 77 At [39]. (Footnotes omitted) 78 Clyne v Deputy Commissioner of Taxation (Cth) [1981] HCA 40, (1981) 150 CLR 1 at 10 per Gibbs CJ and 15 per Mason J (with whom Aickin J and Wilson J agreed). 79 Clyne v Deputy Commissioner of Taxation (Cth) (1981) 150 CLR 1 at 10 per Gibbs CJ; Murphy v Farmer [1988] HCA 31, (1988) 165 CLR 19 at 27 per Deane, Dawson and Gaudron JJ. 80 Clyne v Deputy Federal Commissioner of Taxation (1981) 150 CLR 1 at 15 per Mason J (with whom Aickin J and Wilson J agreed); Murphy v Farmer (1988) 165 CLR 19 at 27 per Deane, Dawson and Gaudron JJ. 81 (1981) 150 CLR 1. 82 At 10. (Citation omitted) 83 At 15. (Citation omitted) 84 Financial Services Council Ltd v Industry Super Pty Ltd (2014) 222 FCR 455 at [34] per Gilmour, Flick and Perram JJ. -- 54 of 81 -- [2024] SASCA 77 Blue AJA 51 Preliminary issues 265 Before construing the relevant provisions of the Act having regard to their text, context and purpose, it is convenient to address four preliminary issues. The “common law of bankruptcy” 266 As observed above, the Domans refer in their submissions to the “common law of bankruptcy”. The Domans submit that this is the source of the law that has applied since 1705 that bankruptcy-period interest is not payable on bankruptcy at first instance but is payable if and only if there is otherwise a surplus and, upon discharge from bankruptcy, the bankrupt is released in respect of the entire interest-bearing debt including bankruptcy-period interest. 267 As observed at [130] and following above, there was no bankruptcy at common law. Bankruptcy is entirely a creature of statute and the law of bankruptcy is entirely statutory. It is to be contrasted, for example, with defamation, which was originally a creature of the common law and is now the subject of both common law and statute. 268 In former times (up to the middle of the twentieth century), there was a general tendency to refer to decisions of the courts concerning the construction of and implications from statutes and principles adopted in applying the statutory provisions as “the common law”. This terminology was adopted in various historical decisions up to that time which referred to the “common law of bankruptcy”. However, the modern and contemporary approach is to regard such decisions not as involving the common law, but involving statutory interpretation and application. 269 Accordingly, it is a misnomer to refer to the “common law of bankruptcy” as the source of the law concerning bankruptcy-period interest under the Act (or its antecedents). Rather, it is necessary to apply the principles of statutory interpretation to the provisions of the Act (and where relevant to the provisions of its antecedents). 270 This is not to say that, on its proper construction, the Act does not operate, by its express provisions or by implication, in the manner contended by the Domans. However, it is necessary to acknowledge the source of the law as being legislative rather than the common law. The “equity” arising on a surplus 271 As observed above, Leadenhall refers in its submissions to equity as the source of the law that it submits requires the bankruptcy trustee to pay bankruptcy- period interest to creditors before paying any balance to the bankrupt. Leadenhall does not identify the equitable doctrine or principle which requires this, other than by submitting that it would be inequitable for the position to be otherwise. -- 55 of 81 -- [2024] SASCA 77 Blue AJA 52 272 As observed below, it is a curious feature of the current version of the Act as it has existed since 1992 that it makes no express provision as to what happens in the event of a surplus after payment of all proved debts (leaving aside payment in full of bankruptcy-period interest which is governed by section 153A). 273 As addressed below, one possible implication is that, in that event, the surplus is to be paid to the bankrupt. The alternative implication is that, in that event, the surplus is to be paid to creditors with interest-bearing debts in part payment of bankruptcy-period interest (on a pro rata basis). 274 If the first implication applies, there is no room for application of any principle of equity requiring payment instead to creditors with interest-bearing debts. Moreover, there is no equitable doctrine or principle that would require such payment. It is not necessary to decide whether such a creditor could seek a garnishee order under a provision such as section 6 of the Enforcement Act because, if so, that would only be on the application and for the benefit of the individual creditor and not such creditors generally and collectively. 275 Conversely, if the second implication applies, there is no room for application of any principle of equity because it is required by the Act as a matter of implication. The position under antecedent legislation 276 The parties make opposing submissions as to whether, under the Act prior to 1987 and its antecedents, a bankrupt was or could be released upon discharge from bankruptcy from liability in respect of bankruptcy-period interest. 277 The Domans contend that this was established by the decision of the High Court in Mackenzie v Rees.85 Leadenhall accepts that this was the effect of the judgment of Dixon J in that case, but refers to the fact that Dixon J and McTiernan J were in the “minority”86 on the disposition of the appeal. Leadenhall contends that at most only one other Justice agreed with Dixon J in this respect such that the decision is not authoritative. It contends that the earlier decision of the Full Court of the New South Wales Supreme Court in Page v Commonwealth Life Assurance Society Ltd87 prevails, which it contends is to the opposite effect. 278 The judgments of the four Justices in Mackenzie v Rees are summarised at [217] and following above. Dixon J held that bankruptcy-period interest was part of a provable debt, although it was to be dealt with at two stages: at the initial stage it was not to be provable but, in the event of what would otherwise be a surplus, it was provable. This is clear from the judgment of Dixon J and, in particular, from the disquiet Dixon J expressed (albeit ultimately overcome) about rationalising the 85 (1941) 65 CLR 1. 86 The decision of Rich ACJ and Williams J to dismiss the appeal prevailing. 87 (1935) 36 SR(NSW) 85. -- 56 of 81 -- [2024] SASCA 77 Blue AJA 53 subordination of bankruptcy-period interest to other provable debts despite the pari passu provisions of section 89 of the 1924 Act. 279 Williams J explicitly agreed with Dixon J on this issue88 (albeit expressing a different view on the unrelated issue whether creditors who had taken non-interest- bearing promissory notes in lieu of their original interest-bearing contractual rights had lost the right to interest). 280 McTiernan J explicitly adopted the analysis by Harvey CJ in Eq in In Re Paul & Gray,89 who had earlier reached the same conclusion as Dixon J.90 281 Rich ACJ said that “in the case of surplus of assets, the law of bankruptcy allows interest thereout on interest-bearing debts to creditors”. Although Rich ACJ did not undertake a comprehensive analysis like that undertaken by Dixon J, if his Honour had disagreed with the analysis undertaken by Dixon J, he would have expressly said so. In any event, if the judgment of Rich ACJ is left aside, there was a clear majority adopting the analysis of Dixon J. 282 In the earlier decisions upon which Leadenhall relies, it was held by Lukin J in Re Hyman; ex parte Law91 and by Jordan CJ (with whom Bavin J agreed) in Page v Commonwealth Life Assurance Society Ltd92 that in bankruptcy the right to bankruptcy-period interest is subordinated to other debts. However, the source of this subordination was put by Lukin J and arguably by Jordan CJ on the opposite basis to that put by Dixon J (with whom Williams J relevantly agreed) and McTiernan J. It was put on the basis that bankruptcy-period interest is not a provable debt and that consequently the bankrupt is not released from the liability to pay it. 283 In Re Hyman & Anor; ex parte Low93 Lukin J said: Lindley LJ … said: “It has long been a settled rule in bankruptcy that interest accruing after adjudication is not admitted to proof”. This is not a positive enactment, but a rule of convenience... It is very clear on the other authorities to which I will refer later that the right to interest is not thereby cancelled but only postponed until after payment to all creditors of the amounts provable in bankruptcy. … Sec. 121 … then goes on to provide that [the order of discharge] shall release him from all other debts provable in bankruptcy. The release then does not extend to debts not provable in bankruptcy, and, therefore, does not release him from interest between the date of the order of sequestration and the payment of his principal debt. 88 See [219] above. 89 See [216] above. 90 See [218] above. 91 (1930) 3 ABC 61. 92 (1935) 36 SR(NSW) 85. 93 (1930) 3 ABC 61. -- 57 of 81 -- [2024] SASCA 77 Blue AJA 54 I am of opinion that the claim for this interest, though not a debt provable in bankruptcy as that expression is used in the Act, is payable as a debt of the bankrupt from which he cannot be released by the order of discharge, and the bankrupt cannot be paid any amount of surplus which does not allow for the payment of this debt.94 284 In Page v Commonwealth Life Assurance Society Ltd95 Jordan CJ (with whom Bavin J agreed) said: [I]n Re Hyman Lukin J held that a claim for interest subsequent to the sequestration order on an interest-bearing debt, though not provable in the bankruptcy, is payable as a debt of the bankrupt from which he cannot be released by the order of discharge, and the bankrupt cannot be paid an amount as surplus which does not allow for payment of the debt. It is the undoubted policy of the bankruptcy law to concern itself only with such claims as are provable in bankruptcy, and to treat any surplus assets which may remain as belonging to the bankrupt. But it has never been the policy of that law to treat the bankrupt or his property as exempted from liability for non-provable claims except to the extent necessary for the satisfaction of all such claims as are provable.96 285 It is true, as Leadenhall submits, that in the passage reproduced at [217] above Dixon J referred to Lukin J in Re Hyman arriving at the same conclusion as Harvey CJ in Eq in In Re Paul & Gray Ltd.97 However, as Harvey CJ in Eq held in the passage quoted by Dixon J, and Dixon J himself clearly held in his own reasons, bankruptcy-period interest is a provable debt (albeit postponed), though it is evident that Dixon J was referring to the fact of postponement referred to by Lukin J in Re Hyman. 286 It is true also that in the passage reproduced at [219] above Williams J added a reference to Page v Commonwealth Life Assurance Society Ltd. For the same reason, it is evident that Williams J was referring to the fact of postponement referred to by Jordan CJ. 287 The analysis by Dixon J that the basis for postponement of bankruptcy-period interest was that it was a provable debt (albeit not provable in the first instance) applied not only to the position under the 1924 Act but also to its antecedent legislation. It applied at least as far back as the 1825 English statute and the intermediate legislation of the United Kingdom and the Colonies and States between 1825 and 1924. It applied also to the Act prior to 1987. Accordingly, as at the time of the 1987 Amending Act, it had been the position for at least 160 years. Extrinsic materials 288 The Judge relied, and the Domans on appeal rely, on statements contained in the explanatory memorandum presented by the Minister for Consumer Affairs during the second reading speech of the Bill that became the 1987 Amending Act. 94 At 62, 64-65. (Citations omitted) 95 (1935) 36 SR(NSW) 85. 96 At 98. 97 (1933) 33 SR(NSW) 295. -- 58 of 81 -- [2024] SASCA 77 Blue AJA 55 289 At common law, reference to extrinsic materials is permissible for the purpose of ascertaining the mischief to which a legislative provision is directed (in other words, its purpose). There is no precondition that ambiguity must first be apparent, nor that construction by reference to text, context and purpose first be exhausted before reference is made to extrinsic materials. 290 In CIC Insurance Ltd v Bankstown Football Club Ltd98 Brennan CJ, Dawson, Toohey and Gummow JJ said: It is well settled that at common law, apart from any reliance upon s 15AB of the Acts Interpretation Act 1901 (Cth), the court may have regard to reports of law reform bodies to ascertain the mischief which a statute is intended to cure. Moreover, the modern approach to statutory interpretation (a) insists that the context be considered in the first instance, not merely at some later stage when ambiguity might be thought to arise, and (b) uses "context" in its widest sense to include such things as the existing state of the law and the mischief which, by legitimate means such as those just mentioned, one may discern the statute was intended to remedy. Instances of general words in a statute being so constrained by their context are numerous. In particular, as McHugh JA pointed out in Isherwood v Butler Pollnow Pty Ltd, if the apparently plain words of a provision are read in the light of the mischief which the statute was designed to overcome and of the objects of the legislation, they may wear a very different appearance. Further, inconvenience or improbability of result may assist the court in preferring to the literal meaning an alternative construction which, by the steps identified above, is reasonably open and more closely conforms to the legislative intent.99 291 Similarly, in SZTAL v Minister for Immigration and Border Protection100 Kiefel CJ, Nettle and Gordon JJ said: The starting point for the ascertainment of the meaning of a statutory provision is the text of the statute whilst, at the same time, regard is had to its context and purpose. Context should be regarded at this first stage and not at some later stage and it should be regarded in its widest sense. This is not to deny the importance of the natural and ordinary meaning of a word, namely how it is ordinarily understood in discourse, to the process of construction. Considerations of context and purpose simply recognise that, understood in its statutory, historical or other context, some other meaning of a word may be suggested, and so too, if its ordinary meaning is not consistent with the statutory purpose, that meaning must be rejected.101 292 Subsection 15AB(1) of the Acts Interpretation Act 1901 (Cth) (the Interpretation Act) permits consideration of extrinsic material to determine the meaning of a provision other than confirming its ordinary meaning conveyed by its text provided that either: 1 the provision is ambiguous or obscure; or 98 (1997) 187 CLR 384. 99 At 408. (Footnotes omitted) 100 [2017] HCA 34, (2017) 262 CLR 362. 101 At [14]. (Footnotes omitted) See also Gageler J at [36]-[37]. -- 59 of 81 -- [2024] SASCA 77 Blue AJA 56 2 the ordinary meaning conveyed by the text taking into account context and purpose leads to a result that is manifestly absurd or is unreasonable. 293 Section 15AB does not displace the common law but operates concurrently with it. In Newcastle City Council v GIO General Ltd102 Toohey, Gaudron and Gummow JJ said: In the interpretation of s 40, the Court may consider the Explanatory Memorandum relating to the Insurance Contracts Bill 1984 which was laid before the House of Representatives by the responsible Minister. The common law, independently of s 15AB of the Acts Interpretation Act 1990 (Cth) (the ‘Interpretation Act’), permits the Court to do so in order to ascertain the mischief which the statute was intended to cure.103 294 Subsection 15AB(1) provides: (1) Subject to subsection (3), in the interpretation of a provision of an Act, if any material not forming part of the Act is capable of assisting in the ascertainment of the meaning of the provision, consideration may be given to that material: (a) to confirm that the meaning of the provision is the ordinary meaning conveyed by the text of the provision taking into account its context in the Act and the purpose or object underlying the Act; or (b) to determine the meaning of the provision when: (i) the provision is ambiguous or obscure; or (ii) the ordinary meaning conveyed by the text of the provision taking into account its context in the Act and the purpose or object underlying the Act leads to a result that is manifestly absurd or is unreasonable. 295 There is no such prerequisite to consideration being given to extrinsic material to confirm that the meaning of the provision is the ordinary meaning conveyed by text, context and purpose. Strictly it is a prerequisite that the extrinsic material is capable of assisting in the ascertainment of the meaning of the provision but it is self-evident that it would and could not be used if it were incapable of so assisting. 296 It is necessary first to construe the provision by reference to text, context and purpose without regard to the extrinsic material. Logically, a court cannot determine the ordinary meaning conveyed by text, context and purpose (referred to in paragraph (a) and sub-paragraph (b) (ii)) until it has construed the provision without regard to the extrinsic material. Similarly, a court cannot determine whether a provision is ambiguous or obscure until it has construed the provision without regard to the extrinsic material. 102 (1997) 191 CLR 85. 103 At 99. See also CIC Insurance Ltd v Bankstown Football Club Ltd quoted at [290] above and Attorney- General (Cth) v Oates [1999] HCA 35, 198 CLR 162 at [28] per Gleeson CJ, McHugh, Gummow, Kirby and Hayne JJ. -- 60 of 81 -- [2024] SASCA 77 Blue AJA 57 297 In Saeed v Minister for Immigration and Citizenship,104 in the context of an issue of construction of the Migration Act 1958 (Cth), French CJ, Gummow, Hayne, Crennan and Kiefel JJ said: [I]t is erroneous to look at extrinsic materials before exhausting the application of the ordinary rules of statutory construction.105 298 Section 15AB does not contain an explicit limit on the manner in which extrinsic materials can be used once the relevant threshold test for use is passed. They can obviously be used to ascertain the mischief to which the legislative provision is directed, or in other words its purpose. 299 It is not so clear whether the second reading speech or explanatory memorandum can be used to ascertain the meaning intended by the legislature (objectively assessed). 300 On the one hand, in Harrison v Melhem106 Mason P (with whom Spigelman CJ, Beazley and Giles JJA agreed) said obiter: Statements in Parliament, even by ministers during the second reading debate, will however seldom be available to elucidate the meaning of the later-enacted text. Identification of mischief and purpose is one thing, statement of meaning is another. .. … I do not consider the Interpretation Act 1987 or the common law of statutory interpretation in Australia to permit resort to a minister’s speech to guide the meaning of legislation beyond identifying its purpose.107 Spigelman CJ added: Statements of intention as to the meaning of words by ministers in a Second Reading Speech, let alone other statements in parliamentary speeches are virtually never useful. Relevantly, in my opinion, they are rarely, if ever, “capable of assisting in the ascertainment of the meaning of the provisions” within s 34(1) of the Interpretation Act 1987. I only refrain from using the word “never” to allow for a truly exceptional case, which I am not at present able to envisage.108 301 The first paragraph from the judgment of Mason P and the paragraph from the judgment of Spigelman CJ are not expressed in absolute terms, referring to “seldom” and “virtually never”. 302 In a number of intermediate appellate court decisions, one or other of these passages has been cited with approval. 104 [2010] HCA 23, (2010) 241 CLR 252. 105 At [33]. 106 [2008] NSWCA 67, (2008) 72 NSWLR 380. 107 At [162], [172]. 108 At [12]. -- 61 of 81 -- [2024] SASCA 77 Blue AJA 58 303 On the other hand, prior to the decision in Harrison v Melhem, the High Court had in Re Bolton; Ex parte Beane109 used the second reading speech to assist in ascertaining the intended effect of the relevant provision. Mason CJ, Wilson and Dawson JJ said: Furthermore, given that s 19 is ambiguous, consideration may be given in ascertaining the meaning of the provision to the second reading speech of the Minister when introducing the Bill for the Act into the House of Representatives in 1963: Acts Interpretation Act 1901 (Cth), as amended, s 15AB. That speech quite unambiguously asserts that Part III relates to deserters and absentees whether or not they are from a visiting force. But this of itself, while deserving serious consideration, cannot be determinative; it is available as an aid to interpretation. The words of a Minister must not be substituted for the text of the law.110 Toohey J (although dissenting in the result) took the same approach, saying: Any doubt about the matter is, I think, resolved by a consideration of the second reading speeches in the House of Representatives and the Senate at the time the Defence (Visiting Forces) Act 1963 was introduced. Those speeches are among the admissible material referred to in s 15AB of the Acts Interpretation Act 1901 Cth). The material is therefore capable of assisting in ascertaining the meaning of provisions in Pt III of the Defence (Visiting Forces) Act if those provisions are ambiguous or obscure.111 304 Since the decision in Harrison v Melhem, the High Court has used explanatory memoranda for this purpose in several cases.112 305 The concepts of the purpose of a legislative provision and the intended effect (or meaning) of a legislative provision are closely intertwined.113 It is not possible to draw a bright line in the application of the two concepts. It appears that the difference discerned between them is a matter of degree: purpose being more general, and intended effect being more specific but where the line is drawn in a particular case can be problematic or debatable. 306 In Shorten v David Hurst Constructions Pty Ltd114 Basten JA said: Taken together, these provisions [sections 33 and 34 of the Interpretation Act 1987 (NSW) avoid semantic distinctions between the mischief or the purpose or the intention of the 109 (1987) 162 CLR 514. 110 At 517-518. 111 At 540-541. 112 Berenguel v Minister for Immigration and Citizenship [2010] HCA 8, (2010) 264 ALR 417 at [21] per French CJ, Gummow and Crennan JJ; Mills v Federal Commissioner of Taxation [2012] HCA 51, (2012) 250 CLR 71 at [27]-[28] per Gageler J (with whom French CJ, Hayne, Kiefel and Bell JJ agreed); Mondelez Australia Pty Ltd v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union [2020] HCA 29, (2020) 271 CLR 495 at [29]-[32] per Kiefel CJ, Nettle and Gordon JJ. 113 Berenguel v Minister for Immigration and Citizenship (2010) 264 ALR 417 at [21] per French CJ, Gummow and Crennan JJ; Mills v Federal Commissioner of Taxation (2012) 250 CLR 71 at [27]-[28] per Gageler J (with whom French CJ, Hayne, Kiefel and Bell JJ agreed); Mondelez Australia Pty Ltd v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union (2020) 271 CLR 495 at [29]-[32] per Kiefel CJ, Nettle and Gordon JJ. 114 [2008] NSWCA 134; (2008) 72 NSWLR 211. -- 62 of 81 -- [2024] SASCA 77 Blue AJA 59 legislature and the meaning of the language used. Language is used in a context which extends beyond the instrument in which it is to be found. Extrinsic material may be considered if it can illuminate the meaning of the statutory language. … It would seem that linguistic meaning and purpose are inextricably interwoven: accordingly a distinction of the kind identified in Harrison, if intended, is unattractive. It finds no basis in the statutory language of the Interpretation Act, nor, in my view, in High Court authority.115 307 The text of section 15AB of the Interpretation Act identifies the use to which extrinsic material can be put provided that the preconditions to its use are satisfied, namely to “assist in the ascertainment of the meaning of the provision”. The text does not suggest that a distinction is to be drawn between purpose and intended effect in such ascertainment. Given that the provision is an adjunct to the common law which already permits use to ascertain mischief or purpose, the context and purpose of section 15AB do not support the suggested distinction. 308 Pearce expresses the view that extrinsic materials can potentially be used to ascertain intended effect.116 Barnes, Dharmananda and Moran express a similar view, but in more guarded terms.117 309 If explanatory memoranda can be so used, they are merely one factor in ascertaining the meaning of the provision. Caution needs to be exercised in the use of parliamentary materials, whether to assist in ascertaining purpose or intended effect, for reasons that have often been articulated by the High Court. Further the use of extrinsic materials is subject to the limitation referred to at [313] below. 310 I consider that the better view is that extrinsic materials can be used to ascertain intended effect. However, the explanatory memoranda in question in this case refer to what is properly characterised as mischief and purpose on any view. 311 Merely because the preconditions for use of extrinsic materials under section 15AB are met does not entail that they will automatically be used. Subsection 15AB(3) provides: (3) In determining whether consideration should be given to any material in accordance with subsection (1), or in considering the weight to be given to any such material, regard shall be had, in addition to any other relevant matters, to: (a) the desirability of persons being able to rely on the ordinary meaning conveyed by the text of the provision taking into account its context in the Act and the purpose or object underlying the Act; and 115 At [20], [27]. 116 DC Pearce, Statutory Interpretation in Australia (10th ed, 2024) at [3.21]. 117 J Barnes, J Dharmananda and E Moran, Modern Statutory Interpretation Framework, Principles and Practice (2023) at [24.10](e). -- 63 of 81 -- [2024] SASCA 77 Blue AJA 60 (b) the need to avoid prolonging legal or other proceedings without compensating advantage. 312 Under both common law and statute, on the one hand, although the task of statutory construction begins (and ends) with the text, it is not confined to ascertaining the ordinary meaning conveyed by the text of the provision. Context and/or purpose may indicate a meaning intended by the legislature that is different to the ordinary meaning of the words used. Section 15AB explicitly permits recourse to extrinsic materials in defined circumstances to displace the ordinary meaning conveyed by the text, context and purpose. 313 On the other hand, if the language of the legislative provision is intractable, subject to irrelevant exceptions,118 recourse to extrinsic material does not permit a court to give it a different meaning. 314 In Esso Australia Pty Ltd v Australian Workers’ Union119 Kiefel CJ, Keane, Nettle and Edelman JJ said: The Court's ability to construe a statutory provision in a manner that departs from the natural and ordinary meaning of the terms of the provision in the context in which they appear is limited to construing the provision according to the meaning which, despite its terms, it is plain that Parliament intended it to have. It is not the Court's function to attempt to overcome unintended consequences of the intended operation of a provision by construing the provision as if it had a meaning that Parliament did not intend it to have. 120 315 Accordingly, on the one hand the Judge was entitled at common law to have regard to extrinsic materials for the purpose of ascertaining the mischief addressed by and purpose of the statutory provisions as part of considering textual, contextual and purposive considerations without first exhausting intrinsic considerations. 316 On the other hand, the Judge was not entitled at common law or under section 15AB to have regard to the intended effect of the statutory provisions (if at all) until first exhausting intrinsic textual, contextual and purposive considerations. Text, context and purpose 317 I address the construction of the relevant provisions from first principles before considering authorities cited by the parties. 318 Section 82 has a dual function. It has a substantive function because it identifies debts and liabilities that are provable in bankruptcy. It also has a definitional function because it (in conjunction with section 5) defines the term “provable debt”. 319 Sections 84 and 102, which provide for the lodgement and admission or rejection of proofs of debt (and the other provisions of Division 1 of Part VI), do 118 Such as reading in a word obviously omitted in special circumstances. 119 [2017] HCA 54, (2017) 263 CLR 551. 120 At [52]. -- 64 of 81 -- [2024] SASCA 77 Blue AJA 61 not expressly provide that a proof of debt can only be lodged and admitted in respect of a provable debt. However, this is necessarily implicit. Accordingly, there is an interrelationship between section 82 on the one hand, and sections 84 and 102 on the other hand. 320 There is also an interrelationship between sections 82 on the one hand, and sections 153 and 58(3) on the other hand. This is because sections 5 and 82 in conjunction define a provable debt and sections 153 and 58(3) operate in respect of provable debts. 321 The issue of construction in the present case turns on the construction of section 82 and of section 153 and of the interrelationship between them. It turns in a secondary sense on the construction of subsection 58(3) but, for reasons which will appear, the operation of that section is linked inextricably to the operation of section 153. 322 It is common ground that bankruptcy-period interest falls within subsection 82(1) because it arises from an obligation incurred before the date of bankruptcy. The only relevant subsection of section 82 is subsection (3B). 323 Starting with the text of subsection 82(3B), it provides: A debt is not provable in a bankruptcy in so far as the debt consists of interest accruing, in respect of a period commencing on or after the date of the bankruptcy, on a debt that is provable in the bankruptcy. 324 The subsection only has application, and meaning, in respect of an interest- bearing debt. For ease of reference, I refer to interest-bearing debts as debts and ignore non-interest-bearing debts in respect of which the issue of construction under consideration does not arise. 325 Leaving aside for the time being the interest component, debts can arise in multiple ways. For example, a debt might arise as a result of a loan by a creditor to a debtor and the principal component of the debt (upon which interest accrues) may comprise the initial advance plus fees and charges less any repayments. A debt may arise upon a sale of goods on credit terms and the principal component of the debt may comprise the sale price plus fees and charges (such as freight or credit charge) less any payments. Although the principal can be regarded as comprising multiple components, the debt itself is generally regarded as a single debt. 326 In common parlance, where a debt is interest-bearing, reference to a debt is generally understood as encompassing both principal and interest as a single debt (which for example in the case of a loan has multiple components such as the initial advance, fees and charges, interest and less repayments). However, on occasions, reference to a debt may, depending on the context, be understood as reference to the principal component only of the debt. -- 65 of 81 -- [2024] SASCA 77 Blue AJA 62 327 On the construction advanced by Leadenhall, subsection 82(3B) treats interest accruing after the date of bankruptcy (bankruptcy-period interest) as a different debt, which is a non-provable debt, to the principal and interest owing at the date of bankruptcy (principal), which is a provable debt. 328 On the construction advanced by the Domans, subsection 82(3B) treats principal and bankruptcy-period interest as a single debt, but provides that the single debt cannot be the subject of proof insofar as it consists of bankruptcy- period interest. 329 Subsection 82(3B) (reproduced at [323] above) refers to “a debt” or “the debt” on three occasions. 330 It is clear from the use of the definite article on the second occasion and from the provision as a whole that the second reference to “the debt” is a reference to the identical concept the subject of the first reference to “a debt”. 331 It is clear also that these first two references encompass principal and bankruptcy-period interest as a single debt, because they refer to the debt “insofar as [it] consists of interest”. Pausing at this point, these two references support the Domans’ construction. 332 On the other hand, the third reference to “a debt” is a reference to the principal only. Considered in isolation of the first two references, this tends to support Leadenhall’s construction. However, considered in conjunction with the first two references, it is ambiguous. It might refer to the principal being treated as a separate debt to bankruptcy-period interest or it might refer to it merely as a component of a single debt encompassing bankruptcy-period interest. 333 Considered as a whole, the text of subsection 82(3B) is ambiguous. 334 The question arises as to why the legislature has used the concept of a debt “insofar as [it] consists of interest”. If were intended to provide to the effect of Leadenhall’s construction, it could more simply have provided to the effect “interest on a debt in respect of a period commencing on or after the date of the bankruptcy is not a provable debt”. By contrast, the concept of a debt “insofar as it consists of interest” suggests the primacy of a single debt albeit a creditor cannot prove for the interest component of that single debt. 335 Turning to the immediate context of subsection (3B) within section 82, there are several other exceptions to subsection 82(1). For example, the first exception is an unliquidated damages demand (subject to its own proviso) and the second exception is a criminal penalty or fine imposed by a court. There are two differences between the exception contained in subsection (3B) and the exceptions contained in the other subsections. 336 The first difference is substantive. The subject of the other exceptions are stand-alone liabilities where the nature of the liability results in its being an -- 66 of 81 -- [2024] SASCA 77 Blue AJA 63 exception. By contrast, bankruptcy-period interest the subject of the exception in subsection (3B) is not only dependent upon the principal but accrues automatically by reason of and by reference to the principal. 337 The second difference is linguistic. The other exceptions are all expressed in terms that the defined liability or liabilities “is/are not provable in bankruptcy”. The exception in subsection (3B) alone is expressed in terms of a debt not being provable in bankruptcy in so far as it consists of interest. 338 The result of these combined differences is that the other exceptions do not particularly support Leadenhall’s construction. They are either neutral or might be regarded as providing some support to the Domans’ construction. 339 Turning to the text of subsection 153(1), it relevantly provides: Subject to this section, where a bankrupt is discharged from a bankruptcy, the discharge operates to release him or her from all debts (including secured debts) provable in the bankruptcy … 340 The subject matter of the release is “debts provable in the bankruptcy”. 341 Leadenhall contends that the reference in subsection 153(1) to a debt provable in the bankruptcy is a reference to a provable debt which is defined by section 82, and subsection 82(3B) provides that a debt is not provable in bankruptcy insofar as it comprises bankruptcy-period interest. The same (or substantially the same) phrase “debt provable in bankruptcy” and the defined term “provable debt” should, in accordance with the presumption, be given the same meaning in these different provisions of the Act. Accordingly, there is no release of bankruptcy-period interest. 342 The Domans contend that the reference in subsection 153(1) to a debt provable in the bankruptcy is a reference, in the case of an interest-bearing debt, to the single debt referred to in at least the first and second references to debt in subsection 82(3B). Accordingly, there is a release of the entire single debt (which includes the bankruptcy-period interest). 343 Although not explicitly acknowledged by the Domans, the construction advanced by them necessarily involves giving the reference to a debt provable in bankruptcy (a provable debt) a different meaning in and for the purposes of section 153 to the meaning in Part VI Division 1 addressing the proof of debts. The question becomes whether contextual and purposive considerations (in conjunction with textual considerations) justify a construction involving a differential meaning in this respect. 344 Turning to the context of sections 82 and 153 within the Act, section 82 is part of Division 1 of Part VI which deals with proof of debts. Section 82’s immediate purpose is to govern the subject matter of proofs of debt. Part VI more broadly deals with the administration of the property of the bankrupt. By contrast, -- 67 of 81 -- [2024] SASCA 77 Blue AJA 64 section 153 is part of Part VII which deals with a bankrupt’s discharge and annulment. 345 The mere fact that sections 82 and 153 fall within different Parts addressing different subject matter does not, of course, entail that the same words or defined term are to be given a different meaning in the different sections. Nevertheless, just as the same meaning presumptions may potentially have greater strength when the word (or phrase) appears in the same section; conversely, they may potentially have lesser strength when they appear in different Parts addressing different subject matters. 346 Section 89 (reproduced at [123] above) refers to “a debt that consisted partly of principal and partly of interest”. This section treats principal and interest as comprising a single debt. It therefore marginally supports the Domans’ construction. 347 Leadenhall accepts that section 153 will release interest accruing after discharge from bankruptcy on the debt as it stood at the date of bankruptcy (post- bankruptcy interest). Accordingly, on Leadenhall’s construction, section 153 releases interest accruing before the date of bankruptcy and interest accruing after discharge from bankruptcy, leaving only interest accruing during bankruptcy (bankruptcy-period interest) unreleased. This result of Leadenhall’s construction is anomalous. There is no principled reason why only bankruptcy-period interest should survive discharge from bankruptcy. This anomalous and unreasonable result supports the construction advanced by the Domans. 348 Turning to purposive considerations, in broad terms the purposes of the Act are twofold. First, to provide for the collection of property and contributions from the bankrupt and distribution of the proceeds amongst the bankrupt’s creditors on a pro rata basis subject to priorities specified by the Act. Secondly, to release the bankrupt from debts and liabilities arising from obligations incurred before becoming bankrupt (subject to exceptions specified by the Act), so that the bankrupt can make a clean start (subject to those exceptions). 349 In Storey v Lane121 Gibbs CJ (with whom Mason J, Wilson J and Brennan J agreed) said: An essential feature of any modern system of bankruptcy law is that provision is made for the appropriation of the assets of the debtor and their equitable distribution amongst his creditors, and for the discharge of the debtor from future liability for his existing debts.122 350 The evident reasons for precluding creditors from submitting proofs of debt that include bankruptcy-period interest is that it is considered fairer as between competing creditors that those creditors with interest-bearing debts and those creditors with debts bearing interest at higher rates not receive a greater return on 121 [1981] HCA 47, (1981) 147 CLR 549. 122 At 556. -- 68 of 81 -- [2024] SASCA 77 Blue AJA 65 their pre-bankruptcy debts merely for those reasons and that including bankruptcy- period interest in proofs of debt would require continuous recalculation of admitted debts during the bankruptcy period. These reasons explain why bankruptcy-period interest is excluded from the proofs of debt regime but do not provide a reason why the bankrupt would not be released from bankruptcy-period interest. 351 The evident reason for the release effected by section 153 not extending to the other exclusions contained in subsections 82(2) to 82(3A) is that the bankrupt should not in principle be released from debts of that character (criminal penalties,123 certain pecuniary penalty orders,124 student/apprenticeship government loans125 or unliquidated damages demands subject to the proviso126). This reason does not apply to bankruptcy-period interest. On the contrary, the general purpose of the Act is to enable the bankrupt to make a clean start subject only to liabilities that should not as a matter of principle be released. 352 On Leadenhall’s construction, bankruptcy-period interest over a three year bankruptcy might well equal the principal owing at the commencement of the bankruptcy. For example, a credit card debt with interest at 24 per cent per annum compounding monthly would accrue interest in excess of the principal over three years. If the debtor again became bankrupt at the end of three years and so on, the debtor could be in perpetual bankruptcy if their earnings were not sufficient to make contributions to their bankruptcy trustee. 353 It is true that the debtor in this situation could become bankrupt a second time during the currency of the original bankruptcy, in which case the bankruptcy- period interest would be lower and would diminish further with successive early bankruptcies. However, it is an unlikely intention to impute to the legislature that there be successive bankruptcies resulting from bankruptcy-period interest being excluded from the release effected by section 153. 354 Contextual considerations include legislative history. There are two aspects of the legislative history that support the Domans’ construction. First, as outlined at [278] and following above, prior to the 1987 amendments, the regime under the Act (and under its antecedents since at least 1825) was that bankruptcy-period interest was not payable at first instance but was payable in the event of a surplus after payment of proved debts and bankruptcy administration costs (a prima facie surplus) and was encompassed in the release effected by section 153 (and its antecedents). This was a rational regime that was in accordance with the purposes of the Act. It is an unlikely intention to impute to the legislature that the regime be changed to produce an irrational result not in accordance with the purposes of the Act. 123 Bankruptcy Act 1966 (Cth) subsection 82(3). 124 Bankruptcy Act 1966 (Cth) subsection 82 (3AA). 125 Bankruptcy Act 1966 (Cth) subsection 82(3AB). 126 Bankruptcy Act 1966 (Cth) subsection 82(2). This exemption was historically implied by the courts. -- 69 of 81 -- [2024] SASCA 77 Blue AJA 66 355 Secondly, when the Act was amended in 1987 to introduce subsection 82(3B), section 148 provided explicitly that, in the event of a prima facie surplus, bankruptcy-period interest was payable and the bankrupt was only entitled to any surplus still remaining. This explicitly subordinated bankruptcy-period interest to other debts and liabilities arising from obligations incurred before bankruptcy but provided for its payment in the event otherwise of a surplus. It would have been anomalous in and after 1987 (until section 148 was repealed in 1992) if a creditor was given both the right to share in the proceeds of the property divisible in bankruptcy (albeit contingent because subordinated) and a right to proceed against the bankrupt outside the bankruptcy. 356 In 1992, as summarised at [230] and following above, substantial amendments were made to Part VII. They included the repeal of section 148 and the insertion of a new section 153A which automatically annulled a bankruptcy of its own force if the trustee was satisfied that all of the bankrupt’s debts (including bankruptcy-period interest) had been paid in full. 357 The repeal of section 148 left the Act silent as to two matters. First, what was the source of power for the bankruptcy trustee to make payments out (to bankruptcy-period interest creditors and the remaining surplus to the bankrupt) in the event of a prima facie surplus and what were the mechanisms for the trustee to determine to whom bankruptcy-period interest was payable and in what amounts? Secondly, what was the trustee to do in the event of a prima facie surplus sufficient to pay some but not all bankruptcy-period interest? 358 As to the first matter, section 148 had previously expressly empowered the trustee to make payments out in the event of a prima facie surplus. Given the existence of new section 153A, it must necessarily be implied that the trustee has power to pay out bankruptcy-period interest to creditors with interest-bearing debts. Further, it must be implied that the trustee is to adopt a mechanism to determine to whom bankruptcy-period interest is payable and in what amounts. Part VI contains a detailed regime for the lodgement and admission or rejection of proofs of debt. It might be implied that the trustee is empowered to adopt a regime of the trustee’s devising provided that it is reasonably adapted to its purpose. Alternatively, it might be implied that the trustee is to adopt the same regime under Part VII as applies under Part VI. Either way, both the power to determine bankruptcy-period interest and the power to pay it out and to pay the remaining surplus to the bankrupt must be implied. 359 As to the second matter, in the absence of a provision formerly contained in the Act until 1992 (such as section 148), an implication must arise from the Act as to how a trustee is to deal with a prima facie surplus. Self-evidently, the trustee cannot retain the surplus for themselves. 360 There are only two possible rational implications. First, the trustee is to pay the prima facie surplus in partial satisfaction of bankruptcy-period interest. -- 70 of 81 -- [2024] SASCA 77 Blue AJA 67 Secondly, the trustee is to pay the prima facie surplus to the bankrupt. Either way, the requirement to pay the prima facie surplus must be implied. 361 If the latter implication is drawn, it entails that the trustee is required to go through the process of calling for details of bankruptcy-period interest from creditors and determining the amount of bankruptcy-period interest payable to them but, if it transpires that the prima facie surplus is insufficient to pay all bankruptcy-period interest (a partial surplus), the trustee is to pay no such interest but rather pay the prima facie surplus to the bankrupt. This is an unlikely construction. 362 It is much more rational that a consistent approach is adopted in the event of a prima facie surplus, namely it is used in either event to pay bankruptcy-period interest. If that is insufficient to pay in full, the bankrupt will be discharged from bankruptcy under section 153. If that is sufficient to pay in full (a complete surplus), the remaining balance will be paid to the bankrupt and the bankruptcy will be annulled pursuant to section 153A. 363 It might be argued that the legislature must have intended to change the effect of the law by repealing section 148. However, on any view the repeal left a lacuna in the event of a partial surplus. The legislature addressed a complete surplus but did not address a partial surplus. This circumstance negates any implied intention to change the effect of the law. On the contrary, there is no rational reason for the legislature to have changed the effect of the law in this respect. 364 As observed above, it is permissible at common law to have regard unconditionally to explanatory memoranda for the purpose of identifying the mischief intended to be addressed by and the purpose of a legislative provision. 365 Clause 26.1 (addressing repeal of section 148) and clause 29.7 (addressing insertion of new section 154) of the explanatory memorandum presented to Parliament by the Minister during the Minister’s second reading speech in respect of the Bill that became the 1992 Amending Act relevantly contained the following passage: 26.1 Subsection 148(1) of the Act provides that where the debts of the bankrupt, including interest on interest-bearing debts, and the costs, charges and expenses of the administration, including the expenses and remuneration of the trustee have been paid in full, the bankrupt is entitled to whatever property or money remains. The Bill proposes the amendment of the Act so that where the bankruptcy is paid out, it will be automatically annulled, and surplus property will revert automatically to the former bankrupt. This will be provided for in new section 154 proposed to be inserted by clause 29 of the Bill… … 29.7 As with existing subsection 154(2), proposed new section 154 is a validating provision, in relation to acts and things done since the date of bankruptcy, up to the annulment of the bankruptcy… The trustee may apply the property of the bankrupt which is still vested in the trustee in payment of the costs, charges and expenses of the administration of the bankruptcy and the remuneration and expenses of the trustee -- 71 of 81 -- [2024] SASCA 77 Blue AJA 68 (proposed paragraph 154(1)(b)). Where there remains property of the bankrupt still vested in the trustee, that property will revert to the former bankrupt (proposed paragraph 154(1)(c)).127 366 The explanatory memorandum confirms what appears from the Act and the 1992 Amending Act itself, that the purpose of the repeal of section 148 and insertion of new section 153A was to provide for annulment in the case of a complete surplus. That purpose did not include addressing the case of a partial surplus. 367 This conclusion is supported by the decision in Mansfield J Re Scott128 referred to at [391] below. 368 On the proper construction of the Act since 1992, the implication that must necessarily be drawn is the former implication referred to at [361] above, namely that in the event of a prima facie surplus, the trustee is to pay in partial satisfaction of bankruptcy-period interest. 369 I note that, if Leadenhall’s contention that bankruptcy-period interest is payable out of a prima facie surplus due to operation of an equitable principle is rejected (as it has been), it is common ground that an implication arises from the Act that in the event of a prima facie surplus, the trustee is to pay the prima facie surplus in partial satisfaction of bankruptcy-period interest. 370 The fact that, at the time of and since the 1987 Amending Act that inserted subsection 82(3B), the Act provided explicitly and since 1992 implicitly that bankruptcy-period interest is to be paid in the event of a prima facie surplus supports the Domans’ construction for the reasons given above. 371 Pausing at this point before considering whether regard should be had to the explanatory memorandum in respect of the Bill that became the 1987 Amending Act, textual considerations considered in isolation in respect of subsections 58(3B) and 153(1) leave ambiguous the construction of the provisions. However, contextual and purposive considerations support the Domans’ construction. Considered overall, the Domans’ construction is the preferable construction. 372 It is permissible to have regard to the explanatory memorandum at common law to identify the mischief intended to be addressed by and the purpose of a legislative provision. 373 Clause 235 of the explanatory memorandum presented to Parliament during the Minister’s second reading speech in respect of the Bill that became the 1987 Amending Act relevantly contained the following passage: Section 82 provides that all debts are provable in bankruptcy subject to certain exceptions specified in the section and elsewhere in Division 1 of Part VI of the Act. Subclause 39(1) 127 Explanatory Memorandum, Bankruptcy Amendment Bill 1991 (Cth). 128 [2006] FCA 718. -- 72 of 81 -- [2024] SASCA 77 Blue AJA 69 proposes the insertion of a new subsection 82(3B) which in fact states an existing principle of law enunciated by the High Court in Mackenzie v Rees (1941) 65 C.L.R. 1. That principle is that a creditor cannot prove for interest on an interest bearing debt for any period subsequent to the bankruptcy. It is proposed to insert the principle into the Act because creditors preparing proofs of debt are frequently unaware of the requirement to exclude post-bankruptcy interest. A clear statement of the principle in the Act will assist creditors in an understanding of the principles to be observed in preparing a proof of debt.129 374 This passage identifies the mischief to be addressed by the insertion of subsection (3B) that creditors were unaware of the existing principle of law enunciated by the High Court in Mackenzie v Rees130 and in consequence were mistakenly including bankruptcy-period interest in their proofs of debt. The corresponding purpose was to confirm the existing principle of law and make creditors aware that they should not include bankruptcy-period interest in their proofs of debt. 375 This passage supports the Domans’ construction that the amendment was confirmatory of the existing law rather than effecting a radical change to it. 376 It is true, as Leadenhall submits, that the explanatory memorandum referred explicitly only to that aspect of the decision in Mackenzie v Rees that bankruptcy- period interest could not be included in proofs of debt and did not refer to the aspect that it was a subordinated debt and could be claimed at a later stage in the event of a prima facie surplus and accordingly was encompassed in the release effected on discharge. 377 Even if use of the explanatory memorandum were limited to that first aspect of the decision in Mackenzie v Rees, it would still support the Domans’ construction that the mischief and purpose did not entail any change to the existing law. However, the component parts of the principle enunciated in Mackenzie v Rees form an integral whole and, read as a whole, the passage refers to that integrated principle and not merely one part. 378 I return to subsection 58(3). That subsection provides: Except as provided by this Act, after a debtor has become a bankrupt, it is not competent for a creditor: (a) to enforce any remedy against the person or the property of the bankrupt in respect of a provable debt; or (b) except with the leave of the Court and on such terms as the Court thinks fit, to commence any legal proceeding in respect of a provable debt or take any fresh step in such a proceeding. 379 The references in that subsection to a “provable debt” are references to the same concept of a “provable debt” that will in due course be released by the 129 Explanatory Memorandum, Bankruptcy Amendment Bill 1987 (Cth). 130 (1941) 65 CLR 1. -- 73 of 81 -- [2024] SASCA 77 Blue AJA 70 operation of section 153. The two provisions operate in harmony with each other. The purpose and effect of subsection 58(3) is to preclude a creditor during the interim bankruptcy period from enforcing a provable debt that will be released at the end of the bankruptcy period. 380 On the one hand, the contention by the Domans that the use of the phrase “in respect of” extends the subject matter of the moratorium effected by subsection 58(3) beyond provable debts to non-provable debts merely because they have some connection with provable debts must be rejected. 381 On the other hand, if subsection 153(1) refers, in the case of an interest- bearing debt, to the entire debt including bankruptcy-period interest as the provable debt released, subsection 58(3) refers to the same concept as the subject of the moratorium. 382 In conclusion, prima facie the references in subsections 82(2B) and 153(1) to a debt provable in bankruptcy, being a provable debt as defined, are to be given the same meaning by reason of the same meaning presumptions. However, those presumptions readily yield to context. Contextual and purposive considerations rebut the presumptions and indicate that a provable debt for the purposes of proof under Part VI does not include bankruptcy-period interest but the entire debt including bankruptcy-period interest is a provable debt for the purposes of and the subject of the release on discharge effected by section 153(1) (and consequentially the moratorium effected by subsection 58(3)). 383 By reason of the ambiguity referred to at [333] and following above, it cannot be said that the natural and ordinary meaning of the phrase “debt provable in bankruptcy” in subsection 82(3B) (or in subsection 153(1)) is the meaning for which Leadenhall contends. For the reasons given above, the provisions are ambiguous from a textual point of view and the ambiguity is to be resolved having regard to context and purpose in favour of the construction for which the Domans contend. Even if the natural and ordinary meaning were the meaning for which Leadenhall contends, contextual, purposive and rationality considerations indicate that the subsection should be construed in accordance with the Domans’ construction. 384 Having regard to textual, contextual and purposive considerations and subject to consideration of authority below, on the proper construction of subsections 82(3B), 153(1) and 58(3), bankruptcy-period interest forms part of a single provable debt for the purposes of subsections 153(1) and 58(3) notwithstanding that it cannot be included in a proof of debt pursuant to subsection 82(3B). Bankruptcy-period interest is payable out of a prima facie surplus in the bankruptcy. 385 Given that the explanatory memorandum can be considered at common law for the purpose of discerning mischief and purpose, it is not necessary to consider the application of section 15AB of the Interpretation Act. However, for the sake of -- 74 of 81 -- [2024] SASCA 77 Blue AJA 71 completeness, the preconditions are established and the discretion should be exercised in favour of reference on any view. If the meaning identified at paragraph [384] above is the ordinary meaning conveyed by text, context and purpose, regard can be had to the explanatory memorandum to confirm that meaning under section 15AB(1)(a). If the meaning of the provisions in ambiguous, regard can be had to the explanatory memorandum under section 15AB(1)(b)(i). If the meaning advanced by Leadenhall is the ordinary meaning conveyed by text, context and purpose, regard can be had to the explanatory memorandum under section 15AB(1)(b)(ii). Reference to the explanatory memorandum pursuant to section 15AB would support the Domans’ construction. Direct authorities 386 The parties cite four authorities on the issue of construction of the Act post the amendments effected by the 1987 and 1992 Amending Acts the subject of this appeal. 387 In Midland Montague Australia Ltd v Harkness131 Equiticorp Finance Holdings Ltd and Equiticorp Finance Ltd (both in liquidation) were each severally liable to the financiers. An issue arose as the appropriation of dividends received by the financiers from the liquidator of the companies as between principal and interest. Subsection 438(2) of the Companies Code provided that, in the winding up of an insolvent company the same rules applied as under the Act in relation to bankrupts. McClelland CJ in Eq said: [I]t seems clear to me that the rule relating to the appropriation of dividends for the purpose of payment of interest was and is the same both in equity and in bankruptcy, to the effect stated in Bower v Marris. One of the premises upon which this rule is based is the proposition that neither bankruptcy nor winding up, as such, effects a discharge of a debtor’s liability for future interest, although each limits the means by which and the assets against which, such a liability may be enforced. That proposition, as a matter of general law, is overwhelmingly supported by the authorities from Bromley v Goodere onwards, including, in Australia, Re Paul & Gray Ltd and Mackenzie v Rees. This proposition is not affected by s 82(3B) of the Bankruptcy Act 1966, which provides… That subsection does no more than enact in statutory form a principle as to the proof of liabilities carrying interest which has been part of the general law of bankruptcy since 1729: see Mackenzie v Rees. That no change to the law was intended is confirmed by the Explanatory Memorandum presented to each House by the respective ministers moving the second reading of the Bankruptcy Amendment Bill 1987…132 388 This authority supports the construction advanced by the Domans. As observed above, the decisions in Re Paul & Gray Ltd133 and Mackenzie v Rees,134 to which McClelland CJ in Eq referred, established that bankruptcy-period interest could not be included in proofs of debt at the initial stage, as it was a subordinated 131 (1994) 119 FLR 374. 132 At 388. 133 (1933) 33 SR(NSW) 295. 134 (1941) 65 CLR 1. -- 75 of 81 -- [2024] SASCA 77 Blue AJA 72 provable debt that could be claimed at a second stage in the event of a prima facie surplus and was encompassed in the release effected on discharge. 389 Leadenhall points to the fact that, in the second paragraph reproduced above, McClelland CJ in Eq said that bankruptcy as such does not effect “a discharge of a debtor’s liability for future interest, although [it] limits the means by which and the assets against which, such a liability may be enforced.” This is inconsistent with the Act placing no limit on enforcement against the bankrupt themself. Further, the context in which McClelland CJ in Eq immediately referred to Re Paul & Gray Ltd and Mackenzie v Rees shows that the reference to not discharging a liability for future interest was a reference to the ability of the creditor to claim against the bankrupt estate in the event of a prima facie surplus. 390 In Re Scott135 Scott’s trustee paid a dividend of 100 cents in the dollar to the Commonwealth Bank, which appears to have been the only creditor. The trustee also paid the bankruptcy administration expenses, leaving a prima facie surplus of $369,210. By that stage, bankruptcy-period interest in respect of the Commonwealth Bank’s debt amounted to $671,347. Mansfield J held that the prima facie surplus was to be paid to the Commonwealth Bank towards the bankruptcy-period interest and not to Mr Scott. 391 Mansfield J said: Interest accruing on a debt post-bankruptcy is not itself a provable debt: s 82(3B) of the Act. That section reflects what was previously a rule of “justice and convenience”: see per Dixon J in Mackenzie v Rees. In the case of a surplus after payment to the creditors from the bankrupt estate, Mackenzie v Rees (in the passage referred to) also lays down that, if admitted debts bore interest to the bankruptcy, the creditors are also entitled to participate in the surplus by way of interest accruing on them after the bankruptcy, and before the debtor may obtain the surplus. See also Midland Montagu Australia Ltd v Harkness. McLelland CJ at 164 in that case said the proposition is ”overwhelmingly supported by the authorities”.136 392 This authority also supports the construction advanced by the Domans. It is true, as Leadenhall points out, that Mansfield J did not refer expressly to bankruptcy-period interest being released upon discharge (and the question did not arise). 393 However, first, the fact that Mansfield J held that bankruptcy-period interest was payable in the bankruptcy in the event of a prima facie surplus in itself supports the Domans’ construction due to there being a natural choice between the legislation enabling a creditor to participate in the proceeds of bankruptcy as opposed to proceeding against the debtor outside bankruptcy. 394 Secondly, for the same reasons as in respect of the judgment of McClelland CJ in Eq in Midland Montague Australia Ltd v Harkness (to which Mansfield J 135 [2006] FCA 718 . 136 At [8]. (Citations omitted) -- 76 of 81 -- [2024] SASCA 77 Blue AJA 73 also referred), the context in which Mansfield J referred to Mackenzie v Rees shows that Mansfield J was referring to the entirety of the pre-existing position as enunciated in Mackenzie v Rees not having been altered by the enactment of subsection 82(3B). 395 In Edwards v Stocks137 Mr and Mrs Stocks became bankrupt on 15 December 1988 and were discharged from bankruptcy on 15 December 1991. On 30 August 1992 the Official Trustee assigned to them the right to claim damages against the Retirements Benefits Fund Board for misrepresentation in respect of a transaction before their bankruptcies. They obtained a judgment for damages against the Board and the Board in turn obtained judgment by way of indemnity against Mr Edwards and Mr Ellwood who it joined as third parties. The damages included interest of $25,000 in accordance with Hungerfords v Walker138 principles, calculated on the financial damages assessed at $27,558.42 in respect of the period from 30 August 1992 until judgment. 396 Mr Edwards and Mr Ellwood appealed, amongst other things, against the interest award on the ground that any interest liability of the Stocks could not survive the expungement of their debts on bankruptcy. The Full Court of the Supreme Court of Tasmania upheld their appeal on this ground. 397 Crawford J (with whom Slicer J and Blow J agreed on this point) said: The statement [by the trial Judge] that creditors had the right to prove interest at the relevant rates until payment was incorrect, and the statement that the creditors still had the right to recover interest due if there was property available for payment to the creditors, needs explanation. A creditor, upon whose debt interest is running at the time of bankruptcy, is not entitled to prove for the interest for the period after the date of bankruptcy. Bankruptcy Act, s 82(3B). However, against the bankrupt, the creditor is entitled to receive, out of any surplus of the bankrupt estate, interest for the period from the date of the bankruptcy to the payment of the provable debt before any such surplus is payable to the bankrupt. The interest is only payable out of a surplus and if there is no surplus, interest after bankruptcy cannot be claimed from the debtor. There is no suggestion of any such surplus in this case. Therefore, the respondents and their estates were not liable to pay any interest that may have fallen due after the date of the bankruptcy.139 398 Leadenhall accepts that this decision is authority in support of the Domans’ construction and against its own construction. However, it contends that the decision is per incuriam because the Court made no reference to the decisions of the High Court in Coventry140 and Foots.141 In the alternative, it contends that the decision is plainly wrong. 399 I address the two decisions of the High Court relied upon by Leadenhall below. For the reasons given below, the decisions do not relevantly touch on the 137 [2008] TASSC 12. 138 (1989) 171 CLR 125. 139 At [41]. (Citations omitted) 140 (2005) 227 CLR 234. 141 (2007) 234 CLR 52. -- 77 of 81 -- [2024] SASCA 77 Blue AJA 74 construction of subsections 82(3B) and 153(1) and there was no necessity for the Full Court in Edwards v Stocks to refer to them. 400 For the reasons given above, the decision in Edwards v Stocks is not plainly wrong. On the contrary, I consider that it is correct. 401 In White v Spithas142 White sought an order for weekly payments in respect of a judgment debt on an examination summons under the Enforcement Act. Spithas had become bankrupt and the order was sought only in respect of bankruptcy-period interest. Spithas contended that the order was precluded by subsection 58(3) of the Act. Master Norman held that it was not. 402 Master Norman referred to the decisions in Edwards v Stocks and Coventry v Charter Pacific Corporation Limited and Foots v Southern Cross Mine Management Pty Ltd and concluded that the decision of the Tasmanian Full Court was inconsistent with those decisions of the High Court. Master Norman said: The plaintiff is this case does not take issue with the positive proposition [in Edwards v Stocks]… However in my view the negative proposition is, as contended by Mr Finlayson, directly at odds both with the provisions of the legislation and with the reasoning of the High Court in Coventry and Foots. With the greatest respect, the court’s finding in Edwards that interest was payable only in qualified circumstances (namely if there was a surplus in the estate) appears to be inconsistent with the legislation and the High Court’s reasoning in these cases. This court is bound by the High Court and the intention of the legislation is clear.143 403 For the reasons given below, the decisions of the High Court relied upon by Master Norman do not relevantly touch on the construction of subsections 82(3B) and 153(1) and do not dictate the construction of those provisions in respect of bankruptcy period interest. Coventry and Foots 404 In Coventry v Charter Pacific Corporation Limited144 Coventry engaged in misleading conduct that induced Charter Pacific to enter into contracts (to which Coventry was not a party) to invest in and fund Evtech Pty Ltd. Coventry became a bankrupt and was discharged from bankruptcy. Damages for misleading conduct were awarded against him. The issue on the appeal to the High Court was whether his liability for damages was excluded as a provable debt by subsection 82(2) of the Act (“demands in the nature of unliquidated damages”) and in particular whether the proviso to that exclusion (“arising by reason of a contract, promise or breach of trust”) applied. 142 Unreported, District Court of South Australia, Master Norman, 27 October 2015 Decision No 54 of 2015. 143 At [73]-[74]. (Citations omitted) 144 (2005) 227 CLR 234. -- 78 of 81 -- [2024] SASCA 77 Blue AJA 75 405 The High Court held that proviso did not apply because Coventry was not a party to the contract induced by his misleading conduct; it would have applied if he had been such a party. The issue in that case involved the construction of subsection 82(2) and in particular of the proviso referring to a demand “arising by reason of a contract [or] promise”. That issue and the High Court decision is not relevant to the present appeal and Leadenhall does not suggest that it is relevant. 406 However, Leadenhall relies upon the passages that I have italicised for identification in the first and third paragraphs reproduced below from the judgment of Gleeson CJ, Gummow, Hayne and Callinan JJ: If the claim for unliquidated damages made pursuant to the Corporations Law is a debt provable in that person's bankruptcy, discharge from bankruptcy operates to release that person from that claim. If it is not a debt provable in the bankruptcy, discharge from bankruptcy does not operate to release the bankrupt from the claim and, subject to any question of limitation of actions, the claim can be pursued against the former bankrupt after discharge. Moreover, s 58(3) of the Bankruptcy Act 1966 (Cth) does not prevent the claimant, during the bankruptcy, from commencing a legal proceeding in respect of the claim or enforcing any remedy against the person or the property of the bankrupt in respect of that claim. The sub-section denies such competency to a creditor only in respect of "a provable debt". The central question in the appeal hinges on the meaning of s 82(2) of the Bankruptcy Act 1966 and, in particular, what is meant by a demand in the nature of unliquidated damages arising otherwise than by reason of a contract or promise. That expression, used to identify an exception to the definition of debts provable in bankruptcy, has been held not to include a claim for unliquidated damages for fraudulent misrepresentation which induced the party misled to make a contract with the bankrupt (a "bilateral" case). That is, such a claim for damages has been held to be a debt provable in the bankruptcy, and a claim that was to be set off against a claim by the bankrupt estate. But a claim for unliquidated damages for fraudulent misrepresentations where the representations induced the claimant to make a contract with another (a "tripartite" case) has been held not to be a claim provable in the bankruptcy. The bankrupt having made no contract with the party who claims damages from the bankrupt, the claim for damages for fraudulent misrepresentation has been held to be a demand arising otherwise than by reason of a contract or promise. These reasons demonstrate that a statutory claim for unliquidated damages for misleading or deceptive conduct which induced the claimant to make a contract not with the bankrupt but with a third party is not a debt provable in bankruptcy. It is a demand in the nature of unliquidated damages arising otherwise than by reason of a contract or promise. The bankrupt is not discharged from liability. The claim may be pursued by the claimant during the bankruptcy and after discharge from bankruptcy. By contrast, a claim for unliquidated damages for misleading or deceptive conduct by the bankrupt, which induced the claimant to make a contract with the bankrupt, would be a debt provable in bankruptcy.145 407 Leadenhall contends that the passages on which it relies were not confined to the context in which the issue involved subsection 82(2) but applied to the entirety of section 82 including, in particular, subsection 82(3B). 145 At [4]-[6]. (Citations omitted) -- 79 of 81 -- [2024] SASCA 77 Blue AJA 76 408 I reject that contention. The High Court simply was not concerned with the construction, operation or effect of subsection 82(3B). It was only concerned with subsection 82(2). It was making a general statement about the general operation of section 82 and section 153. For the reasons explained above, subsection 82(3B) differs in both substance and form from both subsection 82(2) and the other subsections which create exceptions to subsection 82(1). The High Court did not purport to address, let alone decide, the issue of construction that arises on the present appeal. 409 In Foots v Southern Cross Mine Management Pty Ltd146 Ensham Resources Pty Ltd obtained judgment against Foots for $2,460,000. In September 2005, Foots became bankrupt. In February 2006, Ensham obtained an order that Foots pay its costs of action on an indemnity basis. The issue on the appeal to the High Court was whether Foots’ liability for costs fell within subsection 82(1). No issue of any exceptions to the general rule in subsection 82(1) arose. 410 The High Court held that Foots’ liability for costs did not fall within subsection 82(1) essentially because costs orders are discretionary and the liability therefore only arose on the making of the costs order. The issue in that case involved the construction of subsection 82(1) and in particular construction of the words “to which he or she may become subject … by reason of an obligation incurred before the date of the bankruptcy”. That issue and the High Court decision is not relevant to the present appeal and Leadenhall does not suggest that it is relevant. 411 However, Leadenhall relies upon the passage that I have italicised for identification in the paragraph reproduced below from the judgment of Gleeson CJ, Gummow, Hayne and Crennan JJ: Atypically, this case does not involve an attempt by a creditor to bring its claim within s 82 so as to prove in the bankruptcy of the debtor. Rather, it is the bankrupt debtor, Mr Foots, who wishes to bring a claim against himself within the statutory definition. He does so apparently for two reasons. First, if the costs order made by the Supreme Court were a debt or liability provable in his bankruptcy within the meaning of s 82, the proceedings in which the costs order was made would have been subject to s 58(3) of the Bankruptcy Act. This requires the leave of the Federal Court or Federal Magistrates Court before a creditor takes any fresh step in such a proceeding and that leave was neither sought nor given. Conversely, if the costs order did not give rise to a provable debt, the Supreme Court was free to proceed, subject only to the requirements of Queensland procedure contained in r 72 of the Uniform Civil Procedure Rules 1999 (Q) (‘the UCPR’"). Secondly, if the costs order did produce a provable debt or liability, then Mr Foots would be free of it upon his discharge from bankruptcy. This is because the release provided by s 153 of the Bankruptcy Act releases a bankrupt from debts which were provable in the bankruptcy, but not otherwise.147 146 (2007) 234 CLR 52. 147 At [3]. (Citations omitted) -- 80 of 81 -- [2024] SASCA 77 Blue AJA 77 412 Leadenhall contends that the passage on which it relies was not confined to the context in which the issue involved subsection 82(1) but applied to the entirety of section 82 including in particular subsection 82(3B). 413 I reject that contention. The High Court simply was not concerned with the construction, operation or effect of subsection 82(3B). It was only concerned with the construction, operation and effect of subsection 82(1). It was making a general statement about the general operation of section 82 and section 153. For the reasons explained above, the construction of subsection 82(3B) raises its own unique issues different to issues in relation to the construction of other subsections of section 82. The High Court did not purport to address, let alone decide, the issue of construction that arises on the present appeal. Conclusion on construction issue 414 Having regard to the text, context and evident purpose of subsections 82(3B), 153(1) and 58(3), although by reason of subsection 82(3B) a creditor cannot prove for bankruptcy-period interest on an interest-bearing debt under Part VI, bankruptcy-period interest forms part of a single debt which is a provable debt for the purposes of subsections 153(1) and 58(3). 415 It follows that the institution and prosecution of a proceeding for, and enforcement of payment of, bankruptcy-period interest against the Domans was precluded by the moratorium effected by subsection 58(3) and their liability to pay bankruptcy-period interest was released on their discharge from bankruptcy. 416 The appeal should therefore be dismissed. Conclusion 417 I would grant leave to appeal but would dismiss the appeal. 418 I would uphold the notice of contention. 419 I would hear the parties as to orders to be made for the disposition of the appeal, including whether an order should be made for the disposition of the underlying action in the Magistrates Court and in relation to costs. -- 81 of 81 --