Case: In re a Debtor [1914] 3 KB 726
Outcome: followed
A claim for unliquidated damages for breach of contract can fall within the term " cross demand " ( Re Griffin, Ex parte Soutar (1890) 1 BC (NSW) 29) ; as can a claim for unliquidated damages for a tort ( In re Judd, Ex parte Pike , supra at 539 40). A claim for relief under the Industrial Relations Act 1996 (NSW), being a claim that the creditor pay the debtor any money that may be found owing under an arrangement as varied by the Industrial Relations Commission may also be a cross-claim or counter-demand: Re Zakrzewski; Zakrzewski v Rodgers [2000] FCA 1187 at [33] [34], [2000] FCA 1187 ; 178 ALR 694 at 704 5 per Madgwick J. A " cross demand " need not have any connection with the cause of action out of which the judgment debt arose: cf In re a Debtor [1914] 3 KB 726. A judgment debtor is thus able to " buy up a claim against the judgment creditor in order to have a 'cross demand' ": In re Judd; Ex parte Pike (1924) 24 SR (NSW) 537 at 540 per Maughan AJ. 28 Consistent with the legislative objective sought to be achieved by s 40(1)(g) , it has been held that the phrase " could not have been set up " refers to a " cross-claim, set-off or cross demand " which could not have been set up as a matter of law; a mere failure to take advantage of an opportunity to do so does not fall within s 40(1)(g): Re Vicini; Ex parte E A Sealey &amp; Co (1982) 64 FLR 323. Fisher J there usefully summarised as follows some of the relevant authorities (at 326): The relevant words of the Act were considered by Lockhart J in Re Brink; Ex parte The Commercial Banking Company of Sydney Ltd. (1980) 44 FLR 135, at p 139, when he said: "The words 'that he could not have set up in the action or proceeding in which the judgment or order was obtained' mean 'which he could not by law set up in the action': see Re Jocumsen (1929) 1 ABC 82 , at p 85; Re A Debtor [1914] 3 KB 726, at p 730 per Avory J.; Re Stockvis (1934) 7 ABC 53 , at p 57, especially per Lukin J where his Honour said: 'I take as a counterclaim, set off or cross demand which could not be set up as one which, from point of time, or from its nature, or from absence of empowering provisions, or from positive inhibition so to do, could not be set up in the particular case in which judgment was obtained ... . Mere failure to take advantage of the opportunity can hardly be said to be inability.'" In Re A Debtor the circumstances were that, at the time of judgment, the debtor was not the assignee of a debt, which debt he in answer to the bankruptcy notice relied upon as constituting a counterclaim which he could not have set up in the proceedings. Thus at the time of judgment he could not have as a matter of law set up the counterclaim. It was nothing to the point that he might have earlier taken an assignment. At p 730 Avory J said: "I think that upon the true interpretation of the section a debtor is entitled to set up in answer to a bankruptcy notice a counter-claim which rebus sic stantibus he could not in law have set up in the action in which the judgment was obtained, even though he could, if he had chosen, have taken steps which would have rendered the counter-claim available to him in the action. "I think it means a counter-claim which as things then stood the debtor could not set up in the action." The judgment debtor was there asserting that, despite his best endeavours, he could not obtain " factual and expert evidence " to establish his counterclaim. That was not sufficient to bring himself within s 40(1)(g). Fisher J concluded (at 326): In my opinion these statements of principle... determine the matter against the debtor. There was no reason in law why he could not set up his counterclaim in the creditor's proceedings. ... See also: Re Jocumsen (1929) 1 ABC 82 at 85 per Henchman J; Clark v UDC Finance Ltd [1985] 2 NZLR 636 at 639 40.