Consideration and determination
27 There is a helpful summary of the relevant principles guiding the Court's jurisdiction by Colvin J in CFB18 v Reader Lawyers & Mediators [2018] FCA 611; 16 ABC(NS) 26 at [32] to [36]:
32. A debtor served with a bankruptcy notice who brings a set aside application within time will not commit an act of bankruptcy in failing to comply with the notice if the debtor satisfies the Court that he or she has a counter-claim, set‑off or cross‑demand equal to or exceeding the amount claimed that he or she could not have set up in the action or proceeding in which the judgment or order for the amount claimed was obtained: s 40(1)(g) of the Bankruptcy Act.
33. Where an application is made to set aside a bankruptcy notice on the basis of such an offsetting claim, the Court must weigh up considerations as to the legal and factual merit of the claim relied upon by the debtor and the justice of allowing the bankruptcy proceedings to go ahead or requiring them to await the determination of the claim: Guss v Johnstone [2000] HCA 26 at [40]. The offsetting claim must sound in money and it must be a claim that it is proper and reasonable for the debtor to litigate: Vogwell v Vogwell (1939) 11 ABC 83, 85. It must be raised in the same right as the claim the subject of the bankruptcy notice: Ebert v Union Trustee Company of Australia Ltd (1960) 104 CLR 346, 351‑352. So, for example, a claim made in a trustee capacity can only be met by an offsetting claim against the debtor in the same trustee capacity.
34. The various formulations in the cases as to what must be established by the party seeking to set aside the notice were summarised by Lindgren J in Re Glew; Glew v Harrowell [2003] FCA 373 at [9]. They include, the existence of a "prima facie case", "a fair chance of success" or the party is "fairly entitled to litigate" the claim and that the party is advancing a "genuine" or "bona fide" claim. However, it is not simply a matter of evaluating whether there is a claim with the requisite strength. Rather, the question is whether the claim is of a kind that, in all the circumstances (including the Court's view of the strength of the offsetting claim), it is just to allow the party to pursue rather than face bankruptcy. One aspect of the claim to consider is its strength. A weak claim will not suffice. Otherwise, an assessment of strength is to be considered in the context of other considerations that bear upon the justice of allowing the bankruptcy proceedings to continue without the claim first being determined.
35. The claim must be articulated in the supporting affidavit filed with the application to set aside. After reviewing the relevant cases, Bromwich J concluded in Coshott v Prentice (No 2) [2016] FCA 1531 at [40] that:
for an application to set aside a bankruptcy notice to be competent and trigger the automatic statutory extension of time for compliance in s 41(7), the offsetting claim must be "effective" or "real" at the time the application is made; it must be bona fide; it must on its face show a relevant offsetting claim. Such a jurisdictional requirement for a competent application cannot be supplemented after the time for compliance has expired because that is too late to engage jurisdiction and trigger an extension of time.
36. The claim may then be supplemented by further affidavits relied upon at the hearing of the application to set aside the bankruptcy notice, but new claims cannot be introduced.
28 It is also well settled that in conducting a review of the Registrar's decision, the review is conducted as a hearing de novo (see Jageev Pty Ltd v Deane (1997) 72 FCR 398 at 399 and Deputy Commissioner of Taxation v Vasiliades [2015] FCA 1190 at [2]).
29 Applying those principles to the circumstances here, I am not satisfied that the Coombers have established that they have a prima facie case in NCAT which is of sufficient strength to warrant the setting aside of the bankruptcy notice. My reasons are as follows.
30 First, as noted above, as matters stand at present, it is not even clear that NCAT will accept for filing the fresh application lodged on 4 October 2019. That, of course, is entirely a matter for NCAT but, as set out above, there is a long history to the Coombers' claim for compensation in respect of the impounding and sale of the 19 cattle, which is the sole subject matter of the proposed proceeding.
31 Secondly, assuming that the proceeding is accepted for filing, I am required under the relevant principles to assess its strength or weakness. The background to the proceeding would indicate that its prospects are quite weak, having regard to the decision and detailed reasons of NCAT provided on 31 July 2019 and 2 August 2019 respectively. Furthermore, as noted above, the Coombers' application to set aside that decision in COM 19/35907 was also dismissed on 14 August 2019. Although NCAT's letter dated 14 August 2019 records that the applicants would take advice on whether they wished to pursue an appeal, they have delayed doing so for almost ten weeks and will, presumably, require time to be extended to prosecute the appeal. Obtaining such leave may well be difficult against the background of the dismissal and/or withdrawal of the previous claim.
32 Thirdly, the Coombers attempt to revive the claim is said to rely upon previously unavailable material, including the orders of NCAT dated 20 August 2018, including order 10. The Coombers have failed to identify any tenable basis upon which they would be entitled to compensation for breach of an NCAT order, assuming (without deciding) that there has been such a breach.
33 Fourthly, there would appear to be formidable hurdles to that part of the fresh application which relates to an alleged cause of action under the Agricultural Tenancies Act. As Ms Fishburn, who appeared for the respondent, pointed out, any claim for compensation relating to a dispute under that legislation could only be made by an owner or a tenant and had to be made in NCAT no later than three months after the relevant dispute or at the end of tenancy, whichever is the later (see ss 20(1) and (2)). The respondent no longer owns the relevant property and NCAT has determined that the lease ended in late 2018. These matters weigh heavily against the prospects of the Coombers being able to make good the case which is outlined at [23] above.
34 Fifthly, although it is strictly unnecessary to decide the admissibility of Mr Lewis' two reports because the proceeding will be dismissed on other grounds, for completeness I will explain why I consider the two reports to be inadmissible. The first report dated 9 August 2019 does not comply with the Court's Expert Evidence Practice Note. There is no indication that Mr Lewis was even aware of that practice note when he completed his initial two page evaluation. Mr Lewis' qualifications as an expert are also unclear. He describes himself as a retired Chartered Architect (sic?) and former breeder of Salers and Rangemaster cattle, and that he owned and operated a Salers Cattle Stud in Millthorpe. He does not provide any evidence of how long he bred such cattle or the extent of his personal involvement in the cattle stud. Mr Lewis said that he had shown cattle in competition with Cairo Salers at various shows, but he provided no details of when that occurred and whether or not his familiarity with the Salers breed remains current.
35 I also consider that Mr Lewis does not provide sufficient information as to how he carried out the valuation of the 19 cattle. It is evident that he relied upon photographs of the cattle provided to him by the Coombers, but there is no indication that he knew how old the cattle were or their estimated weight, which would generally be relevant to their value. Mr Lewis states that his valuations were based upon "reasonable and fair prices for stud cattle, not trade cattle and research on pricing" from various stated sources, including newspapers and his previous experience, but again particulars of these matters are scant.
36 It was only after the Court pointed out on 14 August 2019 of the need to comply with the Expert Evidence Practice Note that Mr Lewis then provided an Addendum to his valuation dated 2 October 2019. This Addendum contained a statement that Mr Lewis had read and complied with the Expert Evidence Practice Note and Harmonised Expert Witness Code of Conduct and agreed to be bound by them. It also said that his opinions were based "substantially on specialised knowledge arising from my training, study and experience". Again, no sufficient particulars were provided of those matters. Mr Lewis also frankly and correctly drew attention to the fact that the Coombers had provided him with material "for guidance as to the manner in which to set out my independent Valuation (sic)", together with photographs of the cattle. As Ms Fishburn pointed out, one of the documents provided to Mr Lewis provided the Coombers' own personal valuation of the 19 cattle, which totalled $35,500. Mr Lewis' valuation was slightly higher at $38,800, but the Court cannot be confident that this valuation was arrived at independently and without regard to the Coombers' own valuation. Providing that particular information to Mr Lewis goes well beyond giving Mr Lewis "guidance as to the manner in which to set out [his] independent Valuation (sic)".
37 Although Mr Lewis' first report was made available to the respondent in August 2019, a copy of his second report was only served late on Friday, 4 October 2019 (i.e. immediately before the long weekend in New South Wales). I accept that Ms Fishburn did not sight the second report until after it was referred to during the course of the hearing. She indicated that if she had had earlier access to it, she would have required Mr Lewis to be available for cross-examination.
38 For all these reasons, I would if necessary have ruled the two expert reports to be inadmissible. If that would have been in error, I would have given Mr Lewis' evidence little if any weight for similar reasons to those set out above.
39 Finally, and independently of the other matters raised above, there is a very live issue as to whether the Coombers are entitled to rely upon a counter-claim, in the form of the recently lodged application in NCAT relating to the 19 cattle, in circumstances where, although a related claim was on foot when the originating application to set aside the bankruptcy notice was filed, that earlier claim has been either dismissed or withdrawn. Mr Coomber explained that the only NCAT proceeding now relied upon is the fresh application, which relies in part on an alleged breach of Order 10 of orders made by NCAT on 20 August 2018, together with matters arising under the Agricultural Tenancies Act. In Mr Coomber's own words, as recorded in Addendum A to the NCAT application, this "new Commercial List Application is in respect of new and additional matters which were not able to be previously fully presented to the Tribunal and as such, it is now presented to the Tribunal as a fresh application".
40 As Bromwich J stated in Coshott v Prentice (No 2) [2016] FCA 1531 at [40], an offsetting claim must be effective or real at the time the application is made and this jurisdictional requirement cannot be supplemented after the time for compliance has expired. Even accepting that in a hearing de novo there is a complete rehearing of the facts and law as they exist at the time of review (Zdrilic v Hickie [2016] FCAFC 101; 246 FCR 532 at [28]-[29]), that aspect of the proceeding cannot overcome the incompetency of the application to set aside the bankruptcy notice. A claim may be supplemented by subsequent affidavits, but new claims cannot be introduced. This is directly inconsistent with the explicit terms of the "Background Data" which is Addendum A to the fresh application dated 3 October 2019.