Case: St George Bank Ltd v Helfenbaum [1999] FCA 1337
Outcome: followed
In St George Bank Ltd v Helfenbaum [1999] FCA 1337 at [13] (" Helfenbaum "), Sundberg J said: "The existence of a cross-claim may be a 'sufficient cause' within s 52(2)(b) for declining to make a sequestration order: Ling v Enrobook Pty Ltd (1997) 74 FCR 19 at 25. It is for the debtor to establish the existence of 'sufficient cause': Cain v Whyte [1933] HCA 6 ; (1933) 48 CLR 639 at 645-646; Ling at 24. He must establish that he has a real claim against the creditor that is likely to succeed. If the Court is satisfied that there is such a claim, and that its quantum is likely to equal or exceed the creditor's claim, it will not make a sequestration order. If the claim is likely to be less than the creditor's claim, the Court will require the debtor, if he is to avoid a sequestration order, to pay the difference between the judgment debt and the amount he is likely to recover on his claim. See Re Player (1962) 19 ABC 277 at 282; Re Schmidt; Ex parte Anglewood Pty Ltd (1968) 13 FLR 111 at 115-116; Ling at 25-26; Commonwealth Bank v McDonald [1999] FCA 984. A debtor does not establish a real claim that is likely to succeed merely by producing a statement of claim in an action against the creditor: Re Rivett; Ex parte Edward Fay Ltd (1932) 5 ABC 182; Player at 282, or by pointing to the existence of current litigation against the creditor: cf Re Douglas Griggs Engineering Ltd [1963] 1 Ch 19 at 23. While the Court does not try the cross-claim in advance, the debtor must adduce sufficient evidence to show that it is a real claim which is likely to succeed: cf Vogwell v Vogwell (1939) 11 ABC 83 at 88; Player at 282." 35 The appellant's counterclaim is set out in pars 50 and 51 of the defence and counterclaim. It states: "By way of Counterclaim the Defendant says: 50. The Plaintiff [the respondent in the appeal] is and was at all material times a corporation registered pursuant to the laws of the State of Victoria. 51. The Defendant refers to and repeats paragraphs 6 to 46 hereof as if they were set out hereunder seriatim." 36 The central allegations in pars 6 to 46 of the defence and counterclaim are that: (a) by a contract of employment made on or about 20 February 1992 which was varied by subsequent agreements, the appellant agreed to work for the respondent as a full-time warehouse distributor and delivery man ("the first contract"); (b) it was a term of the first contract that the defendant would receive such overtime, sick leave, annual leave and long service leave as he was entitled to received under statute ("the statutory entitlements"); (c) it was a term of a subsequent agreement that the appellant would receive a commission equal to 15% of the respondent's net profits ("the commission"); and (d) despite the appellant's requests and in breach of the agreements, the respondent has failed and/or refused to pay to the appellant the statutory entitlements and the commission and therefore the respondent is indebted to the appellant in the sum of $593,432.22. 39 As noted by Sundberg J in Helfenbaum , it is insufficient for the appellant merely to produce the counterclaim. Sufficient evidence must be adduced to show that it is a real claim which is likely to succeed. On the hearing of the appeal, counsel for the appellant did not refer me to any evidence which supported the counterclaim. Rather, counsel submitted that it was unnecessary to look beyond the allegations contained in the counterclaim. He submitted that Hartnett FM had fallen into error simply by failing to take account of, and give weight to, the allegations contained in the counterclaim. I reject these submissions. 40 In her reasons for judgment, Hartnett FM refers to an affidavit sworn 29 July 2005 in which the appellant disposed to his belief that his Supreme Court counterclaim was on foot and needed to be repleaded. Apart from this belief, Hartnett FM said that the appellant had provided no evidence to the Federal Magistrates Court deposing to the factual matters on which the counterclaim is based, despite having more than adequate opportunity of doing so. In these circumstances, it is impossible to say that Hartnett FM erred by making the sequestration order. 41 The 27 October affidavit was not in evidence before Hartnett FM, and no application was made to me for leave to rely upon fresh evidence in this appeal. However, even if regard is had to the material in this affidavit and the exhibits thereto, it does not establish that the counterclaim has a real prospect of success.