Error in ordering summary judgment
52 There is some difficulty, with respect, in discerning the basis on which the judge ordered summary judgment. The judge was critical of the framing of the appellant's defence, but the determinative basis appears to have been that it was not open to the appellant to defend the respondent's claim by challenging in the District Court the facts and circumstances set out in the Notice.
53 At an early point in her reasons the judge said -
"And I note that in fact when the defence was filed there were only two issues that were in fact traversed by a denial. One of these was that no submissions of explanation had been provided and the other was a denial that the statement of claim 'constitutes a pleading in accordance with the rules of Court'."
54 This was not correct. The denials had gone further, and included in para 2 of the defence denial of "the assertions of fact contained in paragraphs 5, 11, 12, 13 and 14 of the notice". Whether or not it was open to the appellant to go behind the Notice in the proceedings in the District Court, by his defence he did so, and made plain his position that the facts and circumstances set out in the Notice were not correct and that he could defend the claim on that ground.
55 After referring to s 139ZQ of the Act and the respondent's reliance on s 139ZQ(3) and (8)), the judge said -
"What then is the state of the pleadings? I think I have already made it quite clear that I consider the notice of grounds of defence to be less than helpful. Essentially it is not in dispute that there was a transaction, that the plaintiff is a registered trustee in bankruptcy and trustee of the bankrupt estate of Milad Elias, that the official receiver issued a notice to the defendant on or about 3 July 2003, that this notice related to a transaction, that the defendant was served with a notice on 13 July 2003 and that the defendant has failed to pay the plaintiff the amount specified in the notice order.
It is not in dispute on the pleadings, and this is important, that the notice is regular on its face. There is no claim, and Mr Gray made this quite clear, in this Court, that the notice is invalid. There is no assertion that the notice should be for example set aside. Now Mr Gray asserted that these were in fact matters for the plaintiff satisfying the onus of proof. However, what amounts to discharging an onus of proof will depend very often on what the pleadings in a case say."
56 This is not easy to understand, but does not pay regard to what the defence did put in issue. There appears to proleptically underlie the judge's view of the pleading that, so long as there was a "valid" Notice, the facts and circumstances set out in it were not open to challenge. However, it is not necessary to explore this further because, after some further matters, the judge said -
"Now I have repeatedly complained about this defence not disclosing any cause of action that I can determine. There is no assertion for example that the transaction was not a void, but a valid, transaction and the assertion that I should somehow look into affidavits that have been filed in the proceedings to determine this when these are matters that should be pleaded in my view is unsatisfactory. However, that is a minor point because the real question is whether these proceedings can be challenged in this Court at all."
57 The judge then said -
"It is not in dispute that a person upon whom a s 139ZQ notice is served has an option of seeking an order under s 139ZS to set aside the order or to seek a declaration under s 30 of the Bankruptcy Act . That is a matter about which the parties agree. The trouble is that the Court as defined in the Bankruptcy Act under ss 5 and 27 of that Act is the Federal Court or the Federal Magistrates Court. This Court simply does not have the jurisdiction to entertain such an application. It must be brought in the Federal Court.
What the defendant goes on to say in paragraph 4 subs C of the defendant's written submissions, is that the defendant can, as an alternative, defend the proceedings the trustee may bring to recover the monies or property referred to in the notices. In other words what is said is that notice issued under division 4B of the Bankruptcy Act are little more than letters of demand. It is a request for money. It may be that the person who receives it will pay up but if they do not there has to be a full hearing on the facts. And that, to be frank, is what Mr Gray is submitting, and that is what I have a problem with because the whole purpose, as I read the provisions of the Bankruptcy Act and the intention of the legislation, is to prevent that very scenario from occurring. Where a notice has been issued the Act, clearly, by its structure, it anticipates that an application will be brought to set aside the notice or to seek a declaration under s 30 of the Bankruptcy Act or some similar application. And it may well be that in the course of so doing, or if the proceedings are brought without the issuing of a s 139ZQ notice that there is a defence which involves looking a the merits of whether the transaction is void or not. I have no problem with that. What I have a problem with is the assertion that if a notice is issued and, there being no payment, an application is brought to sue on the notice as a debt so to speak that the proceedings can be defended in this Court without seeking to set aside the notice.
It seems to me that that would defeat the purposes of the whole notice regime as set out in division 4B and that is not the intention of the legislation. This is not some form of letter of demand with a statutory section set at the top of it of a kind that's merely minatory in nature. The purpose of a notice under division 4B is that that notice must be complied with if it is not set aside or the subject of a declaration or some other form of proceedings, because the trustee, as I understand it, has the option of bringing proceedings in any event. Mr Gray drew to my attention that they may bring proceedings in this Court or in the Federal Court. But that does not mean that where a trustee has issued a notice that somehow that notice is invalidated because there are alternative means for the trustee to bring an action before the Court.
So in summary I am satisfied that the purpose of the division as is set out in the mission statement, if I can call it that, in s 139J of the Act is to enable the recovery of money and property for the benefit of the bankrupt's estate and that the division provides what is called in the statute an administrative mechanism for the recovery of money where a transaction is asserted to be void which is intended to be simple and inexpensive in operation. If properly issued and not set aside under the appropriate provisions of the Act for setting aside notices the issue of the notice requires a person who receives a notice to pay to the trustee an amount equal to the money or the value of the property received or alternatively they must take the action that is before them as being alternative procedures. And I note the reference in the written submissions of the plaintiff to Perfox Pty Ltd in the matter of Chase v The Official Receiver for the Bankruptcy District of New South Wales 200 FCA 1560 [sic: re Permfox Pty Ltd; Chase v Official Receiver for the Bankruptcy District of New South Wales [2002] FCA 1564] where Mr Justice Allsop said this at para 3. In a way his Honour was merely stating the obvious but that is the situation.
Having regard to those matters it follows that I do not accept Mr Gray's submissions that s 139ZS's jurisdiction is very limited and that it does not exhaust the ways in which a person to whom a s 139ZQ notice is served may defeat a trustee's claim. I accept that the cases referred to by Mr Gray, and in particular, Hawsey v Norton (1997) 76 FCI 389 [sic: Halse v Norton (1997) 76 FCR 389] make it quite clear that there is a statutory procedure for the issuing of a notice and that once that notice has been issued a party who receives that notice must take steps as are necessary to comply with it.
One point which appeared to be raised before me, although it was canvassed faintly, was the assertion that in fact a letter had been sent to the official receiver explaining the nature of the transaction and that therefore in some way there had been compliance with the notice. That's a matter that really should be canvassed in any application to set aside the notice. Accordingly, having regard to these matters, and I am conscious that having received the relevant authorities and submissions in reply about an hour and a half ago I may not have done Mr Gray's submissions full justice, I am of the view that it is appropriate that I should enter summary judgment for the defendant."
58 On the application for summary judgment it was sufficient for the appellant to demonstrate an arguable defence. The authorities are well known and the sufficiency has been expressed in different words, including in Dey v Victorian Railways Commissioners (1949) 78 CLR 62 at 91 and Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87 at 99 that it must be clear that there is "no real question to be tried".
59 The judge's citation of Re Permfox Pty Ltd; Chase v Official Receiver for the Bankruptcy District of New South Wales did not support her decision. Allsop J said at [3] that s 139ZQ of the Act provided an administrative mechanism for recovery of transfers void against a trustee, and that "[i]f properly issued, and if not set aside under s 139ZS of the Act, the issue of the notice requires the person to pay to the trustee an amount equal to the money or the value of the property received". This did not address whether or how proceedings brought pursuant to s 139ZQ(8) could be defended where the notice had not been set aside, and left for determination what might be encompassed by "if properly issued".
60 Nor did the judge's citation of Halse v Norton support her decision. In that case it was held that, once the applicant under s 139ZS had adduced evidence to show that there was a real issue to be tried as to the transaction in question, the trustee had the onus of proving that the transaction was void as against him. Black CJ said that the power to issue a notice is "conditioned upon … the existence of the facts and circumstances that produce [the result of voidness]" (at 392), and that s 139ZS was not the exclusive means of challenging a notice. Lee and Nicholson JJ said that s 139ZS permitted review of the Official Receiver's opinion and his acts based on that opinion (at 398). To the contrary of supporting s 139ZS as the exclusive avenue for defeating a trustee's claim, their Honours accepted its non-exclusivity, and recognised that a notice could be challenged by challenging the facts and circumstances and the voidness said to result.
61 Their Honours all referred to Re McLernon; ex parte SWF Hoists and Industrial Equipment Pty Ltd v Prebble (1995) 58 FCR 391, in which Carr J had accepted that a notice was neither conclusive nor challengeable only through s 139ZS; his Honour's reasons included (at 403) -
"I have already referred above to the fact that there is no provision that a s 139ZQ notice is conclusive. A hearing under s 139ZS is in my opinion a hearing de novo in which the Court may investigate and determine the correctness of the facts and circumstances stated in the notice and whether any defence to the liability asserted in the notice arises out of additional facts proved by the applicant. Furthermore, in my opinion, there are alternative means for challenging the notice. Olney J in Re Lucera referred to s 30 of the Act as a source of such a power. For example, under s 30(1)(b) the Federal Court would have power in an appropriate case to make a declaration that the condition precedent to the operation of s 139ZQ had not been satisfied and also to grant an injunction restraining any further proceedings based upon a notice issued under that section."
62 The force of a notice given under s 139ZQ of the Act may arise beyond the circumstances of the present case. It may arise in proceedings concerning a charge under s 139ZR, or in criminal proceedings taken under s 139ZT. The Act does not expressly say that liability to pay a charge or commission of an offence can only be contested via an application under s 139ZS. A notice may have prima facie force, and there are arguments for giving it more than prima facie force unless set aside such an application, but there are also arguments to the contrary. In my opinion, there is a real question to be tried as to whether the appellant could defend the respondent's claim by challenging, otherwise than by an application under s 139ZS of the Act, the facts and circumstances set out in the Notice.
63 The respondent submitted in this Court that setting aside the Notice was within the exclusive bankruptcy jurisdiction, and in substance that, if there were alternative avenues to challenge, they did not include a defence in the District Court. This did not receive direct consideration in the judge's reasons. Where the recipient may be sued, the question as to a charge may arise or the recipient may be put on trial in a court other than the Federal Court or the Federal Magistrates Court, there is at least an arguable case that a contention as earlier indicated may be put forward in the court in which action is taken against the recipient, and is not within the exclusive bankruptcy jurisdiction. As was pointed out by Barrett J in Green v Schneller (2001) 189 ALR 464 at 469, referring to Sutherland v Brian (1999) 149 FLR 321, when a person becomes bankrupt courts must determine all kinds of questions about the consequences, and there is not exclusive jurisdiction in respect of every question turning on the interpretation and application of the Act. In providing for proceedings in a court of competent jurisdiction, s 139ZQ(8) treats those proceedings as other than proceedings under or by virtue of the Act. The same can be said of criminal proceedings taken under s 139ZT. There is in my view a real question to be tried as to whether the challenge can be brought in the District Court proceedings.
64 I express no concluded view, only that this was not a case for summary judgment and summary judgment should not have been ordered. There is no point in this Court going further, because in the view I have taken about adjournment the success or failure of the application to the Federal Magistrates Court (which we were told was still on foot and awaiting the outcome in this Court) is likely now to govern. For that reason also, the present rather unsatisfactory pleadings (on both sides) in the District Court may not matter, but if the proceedings in that Court go further they should receive attention so that the issues between the parties are clear and there are no false issues.