Mackenzie v Rees [1941] HCA 21

Mackenzie v Rees [1941] HCA 21

Where the original interest-bearing debt has been replaced by promissory notes free of interest and a deed of arrangement is executed while the notes are current (not dishonoured), the original debt does not revive and no interest accrues against the surplus unless contractually provided. Interest as damages for dishonour under section 62 of the Bills of Exchange Act cannot be claimed against surplus in bankruptcy if the note does not bear interest by contract.

Parties
Appellant: Donald Mackenzie; Respondent: Thomas Brown & Sons Ltd.; Respondent: George Rees (Trustee)
Jurisdiction
Australia
Procedural Posture
Bankruptcy Appeal / On Appeal From Supreme Court of Queensland Exercising Jurisdiction in Bankruptcy
Outcome
Appeal dismissed (by operation of equally divided court); order below varied as outlined.
Legal Topics
Interest Bearing Debts, Promissory Notes, Deeds of Arrangement, Bankruptcy Surplus Distribution, Creditor Claims After Arrangement
Bankruptcy Interest Bearing Debts Promissory Notes Deeds of Arrangement Bankruptcy Surplus Distribution Creditor Claims After Arrangement

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Parties

Donald Mackenzie

Appellant

Thomas Brown & Sons Ltd.

Respondent

George Rees (Trustee)

Respondent

Procedural Posture

Bankruptcy Appeal / On Appeal From Supreme Court of Queensland Exercising Jurisdiction in Bankruptcy

Legal Issues

  1. 1 Whether creditors who took promissory notes free of interest for an original interest-bearing debt may prove for interest out of a bankruptcy surplus after a deed of arrangement;
  2. 2 Whether interest as damages for dishonour of promissory notes not bearing interest may be claimed against bankruptcy surplus under section 62 of the Bills of Exchange Act 1909-1936.

Ratio Decidendi

Where the original interest-bearing debt has been replaced by promissory notes free of interest and a deed of arrangement is executed while the notes are current (not dishonoured), the original debt does not revive and no interest accrues against the surplus unless contractually provided. Interest as damages for dishonour under section 62 of the Bills of Exchange Act cannot be claimed against surplus in bankruptcy if the note does not bear interest by contract.

Court Disposition

Appeal dismissed (by operation of equally divided court); order below varied as outlined.

Orders

  • Order of Philp J. except with respect to costs discharged.
  • Thomas Brown & Sons Ltd. are entitled to prove against surplus for interest at the rate of seven per cent per annum from 7th June 1933 on £5,062 13s. 2d. outstanding from time to time after that date.