Case: In re A Bankruptcy Notice [1934] 1 Ch 431
Outcome: considered
The present Bankruptcy Notice was served on 11 February 2008 requiring either payment or the making of an " arrangement to the creditor's satisfaction for settlement of the debt " within 21 days. Annexed to the Bankruptcy Notice was a Certificate of Judgment of the District Court certifying the recovery of judgment in that Court. 5 The Application was filed in this Court on 29 February 2008. That Application seeks an order setting aside the Bankruptcy Notice . The power of this Court to set aside a bankruptcy notice was not questioned: Re Sterling; Ex parte Esanda Ltd [1980] FCA 61 ; (1980) 30 ALR 77 at 83 per Lockhart J; Dimasi v Nangiloc Colignan Farms Pty Ltd [2007] FCA 308 at [25] , [2007] FCA 308 ; 239 ALR 330 at 337 per Ryan J. 6 In the present proceeding it is claimed that the Applicant has " a counter-claim, set-off or cross-demand as referred to in s 40(1)(g) " of the Bankruptcy Act 1966 (Cth). Section 41(7) of the 1966 Act has the effect that, upon that Application having been filed, the time for compliance with the Notice is deemed to have been extended until the Court determines the Application . 7 The " counter-claim, set-off or cross-demand " relied upon by the present Applicant is his right to set-off the losses incurred in respect to the development of the Merrylands property. These losses, it is accepted by the parties, exceed the judgment debt upon which the Bankruptcy Notice is founded. 8 That " counter-claim, set-off or cross-demand " is said by the Applicant to be one that he " could not have set up in the action or proceeding in which the judgment or order was obtained " within the meaning of and for the purposes of s 40(1)(g). 9 The litigation in the Supreme Court dates back to 2004 when an Amended Statement of Claim was apparently filed seeking declaratory relief as to the arrangement between the parties in respect to the development property. To be resolved was whether the nature of any arrangement between the then Plaintiff and Defendant was simply one whereby work was performed in return for remuneration or whether the parties would each be entitled to a 50% share of profits on sale. 23 In In re Judd, Ex parte Pike, supra, Maughan AJ observed that the word " counter-claim " most probably refers to " those claims which might be the subject of a counter-claim in equity "; the term " set-off " was said to refer to " those claims which might be the subject of a set-off at common law ". And the term " cross demand " was said to be " not a technical term and must ... refer to claims other than those which would be comprised in the two expressions 'counter-claim' and 'set-off' ": (1924) 24 SR (NSW) 537 at 539. An " unrestricted meaning ", it was said, was to be given to the word " cross demand " (at 540). The meaning of each of these terms was also explored in In re A Bankruptcy Notice [1934] 1 Ch 431. Declaratory relief sought in the Chancery Division as to an entitlement to a charge on the proceeds of property was held not to be a " counter-claim, set-off or cross demand ". Lord Hanworth MR there observed that " set-off " was " a word well known and established in its meaning " (at 437). Of the term " cross demand " it was observed (at 438): I turn, therefore, to what to my mind is the wider word, "cross-demand." If a cross-demand is only to be interpreted as meaning something which could have been introduced into the action by way of counterclaim, it adds nothing to the word "counterclaim." "Cross-demand" seems to me to be a word introduced in order to give a wider ambit to the meaning of these claims, something that would not be described, certainly, as a set-off, something that could not have been brought in the action, something that still lies outside a counterclaim, but is of a nature which can be specified and which is of such a nature that it equals or exceeds the amount of the judgment debt. I do not desire to say what "cross-demand" may include, but it is not difficult to say that it does not include a claim of such uncertain nature as appears in these Chancery proceedings. That claim does not appear to be one which it would be proper to describe as a cross-demand; it is a claim of right which may inure ultimately for the benefit of the judgment debtor. Therefore, it appears that there is no sufficient ground for setting aside this bankruptcy notice; the bankruptcy notice stands good and must be complied with. Romer and Maugham LJJ delivered separate judgments but agreed with Lord Hanworth MR. 37 Attached to the Bankruptcy Notice as served upon the Applicant on 11 February 2008 was the judgment of the District Court, being the Certificate of Judgment signed by the Registrar of that Court. For the purposes of s 40(1)(g) , the " action or proceeding " in which that judgment was obtained was necessarily the District Court proceeding. " A proceeding ", it may be noted, " may mean something as distinct from an action or any step thereunder in which final orders are made for the payment of money. It may also mean a step in an action, in which proceeding a final order is made for the payment of money ": Re Black; Ex parte Jeffery (1932) 4 ABC 157 at 160 per Lukin J. 38 The judgment entered by that Court was entered as a consequence of the Certificate having been issued in respect to those costs which had been ordered to be paid by the Supreme Court and the subsequent filing of that Certificate by the Respondent with the District Court. There was no suggestion that that judgment had in fact been stayed. The Bankruptcy Notice as served stated that it had not been stayed. 39 The process whereby that judgment came to be entered by the District Court is regulated by the provisions of the Legal Profession Act 2004 (NSW) and the Uniform Civil Procedure Rules 2005 (NSW) . 46 The result of the present Application, it is considered, can be stated simply. For the purposes of the present Application , it was accepted that the joint venture agreement as between the Applicant and the Respondent gave rise to losses, those losses being said to be approximately $160,000. Those losses obviously exceed the judgment debt of $77,498.96. But, as at the date upon which the Bankruptcy Notice was served in February 2008, no account had been taken -- as had been ordered by Hall J in March 2007. Whether an account had or had not been taken, however, those losses could not have been set up during the process whereby the costs assessor made a determination as to costs. Nor could those losses have been set up in opposition to the filing of the Certificate of the costs assessor with the District Court and the judgment thereafter being taken to have been made by reason of s 368(5) of the Legal Profession Act . 47 The Application to have the Bankruptcy Notice as served on 11 February 2008 set aside should thus be allowed. 48 The orders of the Court are: 1. The Application be allowed. 2. The Bankruptcy Notice No NN 0290 of 2008 be set aside. 3. The Respondent is to pay the costs of the Applicant. I certify that the preceding forty-eight (48) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Flick. Associate: Dated: 24 September 2008 Counsel for the Applicant: A McInerney Solicitor for the Applicant: Ellison Tillyard Callanan Counsel for the Respondent: D Ash Solicitor for the Respondent: Watson and Watson Date of Hearing: 18 September 2008 Date of Judgment: 24 September 2008 AustLII: Copyright Policy | Disclaimers | Privacy Policy | Feedback URL: http://www.austlii.edu.au/au/cases/cth/FCA/2008/1452.html