CONSIDERATION
26 The onus is on the Friggers to satisfy the Court that they have a valid counter-claim or set-off and that the facts are such that it is just for the Court to permit them to have the matter heard and determined in the usual way, rather than be forced to comply with the bankruptcy notice by a payment: Re Glew; Glew v Harrowell of Hunt & Hunt Lawyers (N7350 of 2002) (2003) 198 ALR 331 (at [10]-[12]). There Lindgren J said:
10 In Brink [Re Brink; Ex parte Commercial Banking Company of Sydney Ltd (1980) 44 FLR 135] Lockhart J said (at ALR 438-9; FLR 141) that the court is not required to "undertake a preliminary trial of the counter-claim, set-off or cross demand". But, clearly, the application of the criteria above requires the court to make some kind of preliminary assessment, though obviously not to determine the counter-claim, set-off or cross demand finally. And in Guss v Johnstone (2000) 171 ALR 598, Gleeson CJ, Gaudron, McHugh, Kirby and Callinan JJ stated (at 606):
[40] The state of satisfaction referred to in s 40(1)(g), and s 41(7), involves weighing 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.
11 Plainly, in order to "satisfy" the court for the purposes of s 40(1)(g), the debtor is not required to prove, as on a final hearing, the asserted entitlement to recover from the creditor. Accordingly, evidence tendered on an application to set aside is to be tested for admissibility, not as if the proceeding were one in which the debtor's claim was being finally determined, but by reference to the question whether the court should be satisfied that the debtor has a claim deserving to be finally determined.
12 Perhaps little more can usefully be said than that a debtor must satisfy the court that there is sufficient substance to the counter-claim, set-off or cross demand asserted to make it one which the debtor should, in justice, be permitted to have heard and determined in the usual way, rather than be forced to comply with the bankruptcy notice by payment or to commit an act of bankruptcy.
27 It is for the Friggers in this instance to demonstrate that they have a prima facie case against Murfett Legal, that they have a fair chance of success in such a matter, and that the claim is genuine or bona fide: see Dekkan v Evans [2008] FCA 1004 per Jacobson J (at [52]):
His Honour [referring to Lindgren J in Glew v Harrowell (at[9])] observed that the authorities indicate that an applicant must satisfy the Court of three interrelated, and sometimes overlapping matters: first, that he or she has a "prima facie case", even if evidence is not adduced which would be admissible on a final hearing; second, that he or she has "a fair chance of success"; third, that the claim is "genuine" or "bona fide."
28 It is not sufficient for the Friggers to merely assert that they will commence an originating summons for damages, pursuant to s 140 of the Transfer of Land Act, to satisfy the Court of these matters. See, for example, Re Cox (1934) 7 ABC 98 and Ebert v Union Trustee Co of Australia Ltd (1960) 104 CLR 346 (at 350).
29 The fundamental hurdle for the Friggers is the decision of Master Sanderson, where the Friggers' application, alleging an entitlement to damages pursuant to the undertaking given by Murfett Legal, was dismissed with costs. For reasons which the learned Master gave, such claim in damages is not arguable. That also accords with the decision of Le Miere J where the reasonableness of lodging the caveats necessarily was an issue in determining whether to order the removal of the outstanding caveat. It is not to the point that one of the caveats lapsed, presumably once it was clear there was sufficient security protected by the other caveat. The question of the legal ability to lodge the caveats has been determined and the propriety of the actions taken by Murfett Legal has also been confirmed in the Magistrates Court and in the District Court on appeal. Such an argument under the Legal Profession Act is no longer open to the Friggers in light of the decisions of the Supreme Court. Whether the argument was raised there or not, it should have been if it had any merit. It is not open now to go behind the judgments.
30 The same may be said of any argument under the consumer credit regimes, although those arguments are even more problematic. The Friggers submitted:
9. The cost agreement is a credit contract pursuant to the definition s 5 Consumer Credit Code:
(a) clause 6 costs agreement: "you agree to pay such accounts….in accordance with any credit arrangement we may extend in writing to you": Brott v Shtrambrandt & Ors [2009] VSC 467[.]
(b) The respondent's letter dated 17 November 2010 offering to provide credit by allowing the balance to be repaid in instalments.
(c) Credit was provided by Murfett when it deferred, by forbearance, the payment of the outstanding balance: s 4 Consumer Credit Code: Tozer Kelmsley & Milbourne v Point; Geeveekay v Director of Consumer Affairs Victoria [2008] VSC 50 @ [38], [56], [57], Clifford L Pannam, The Law of Money Lenders in Australia and New Zealand (1965) 21-22.
31 Brott v Shtrambrandt & Ors [2009] VSC 467, as cited by the Friggers, referred to the Victorian Code, not the National Credit Code. This may explain the mis-referencing to the 'Consumer Credit Code', as opposed to the National Credit Code. The Victorian Code has no present relevance.
32 In Geeveekay v Director of Consumer Affairs (Vic) [2008] VSC 50, Bell J provided a comprehensive consideration, but again, of the Victorian Code. Specifically the Friggers refer to the following (at [38] and [56]-[57]):
38 The definition also significantly departs from the approach adopted in the money lenders legislation. For example, the Money Lenders Act 1958 defined "loan" to include various kinds of payment or advance, the forbearance to require payment and "every contract (whatever its terms or form may be) which is in substance or effect a loan of money". The latter component of the definition gave rise to its own complex jurisprudence. The review of that jurisprudence in the principal Australian text is proof positive that a different approach had to be adopted.
…
56 As to paragraph (a), deferring the payment of a debt owed covers at least the case of forbearance. It may not cover much else, but that will be revealed through the decided cases over time. What is deferred is the time for the payment (see below). Such a transaction is not a loan as such, and creates no new amount of debt, because the debt is already owed. Paragraph (b) does not include such a case, because there is no incurring of debt. The deferring of the payment of an existing debt, if contractual, comes within paragraph (a).
57 It has been suggested that paragraph (a), looked at alone, might also cover credit sales and loans, that is, if "debt" is read as including a debt created by the contract itself. But s 4(1)(a) and (b) has to be read as a whole. The scheme is clear enough from the language used. The debt referred to in paragraph (a) is described in the past tense. It picks up cases where payment "of a debt owed... is deferred". By contrast, the debt referred to in paragraph (b) is described in the present tense. It picks up cases where the debtor "incurs" a deferred debt. If the intended coverage of the Code with respect to credit sales and loans depended on it, I could see how paragraph (a) might be widely interpreted to encompass debts created and payments deferred in the one document, but it does not. Paragraph (b) is perfectly apt to pick up such transactions. It seems to me to be an unnecessary complication, and a distraction, to ponder whether such cases can be squeezed into paragraph (a) as well. I will leave further discussion of that subject for cases, if any, where it actually matters.
(citations omitted)
33 It may be that the Friggers are seeking to argue for an expansive reading of the credit regime, but the contract in contention in that case was a contract for sale of a property which contained provision for the balance to be paid in instalments. It is entirely different in nature. In any event, the legislation has no present application.
34 But the short answer to any potentially relevant credit legislation is that agreements such as that under consideration are expressly excluded from the relevant credit regime. The State codes on which these decisions were based were repealed and replaced by the National regime on which the Friggers purport to, but cannot, rely. Regulation 24 of the National Consumer Credit Protection Regulations 2010 (Cth), made pursuant to the National Consumer Credit Protection Act, relevantly provides:
Subdivision 1.2 - Activities exempt from being credit activities under the Act
24 Activities exempt from being credit activities
(1) For paragraphs 110(b) and (c) of the Act, this regulation:
(a) exempts certain credit activities, or classes of credit activities, from all of the provisions to which Part 2-6 of the Act applies; and
(b) modifies specified provisions for the purposes of the exemption mentioned in paragraph (a).
Note: Section 108 of the Act identifies the provisions to which Part 2-6 of the Act applies.
(2) Subject to subregulation (3), the following credit activities are exempted:
(a) the providing of credit assistance by a lawyer in his or her professional capacity in relation to matters of law, legal interpretation or the application of the law to any facts;
(b) the providing of any credit assistance not mentioned in paragraph (a) by a lawyer in the ordinary course of activities as a lawyer that is reasonably regarded as a necessary part of those activities.
(3) For subregulation (2), the credit activity is exempted only if the lawyer providing the credit assistance does not hold out or advertise to consumers that he or she is able to provide credit services.
(4) A credit activity, other than the provision of credit assistance mentioned in subregulation (2), is exempted if it is engaged in by a lawyer in the following circumstances:
(a) the lawyer is acting:
(i) on the instructions of a client, an associate of the client or a relative of the client; and
(ii) in his or her professional capacity; and
(iii) in the ordinary course of his or her activities as a lawyer;
(b) the credit activity can reasonably be regarded as a necessary part of those activities;
(c) the lawyer has not received, and will not receive, from the client or from another person on behalf of the client a benefit in connection with those activities other than:
(i) the payment of professional charges in relation to those activities; and
(ii) reimbursement for expenses incurred or payment on account of expenses to be incurred on behalf of the client, an associate of the client or a relative of the client;
(d) the lawyer does not hold out or advertise to consumers that he or she is able to provide credit services.
…
35 For at least five reasons then, the arguments advanced by the Friggers on credit codes must be rejected. The first three of the reasons apply also to the arguments under the Legal Profession Act:
(1) the validity of the caveats has already been determined by the Supreme Court in litigation between these parties;
(2) the arguments raised could have been raised in the proceedings in the Supreme Court. It is now now open, by virtue of s 40(1)(d) of the Bankruptcy Act 1966 (Cth) to raise those arguments;
(3) under ordinary principles of conducting litigation, it is inappropriate to raise such arguments on a drip feed basis when it was open to raise them before by virtue of principles relating to Anshun estoppel: Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589;
(4) the consumer credit provisions relied upon by the Friggers do not now apply; and
(5) to the extent the Friggers rely upon national legislation, the conduct of the solicitors are expressly exempted from that legislation.
36 As to the abuse of process argument, this is entirely without foundation. Mr De Silva has deposed to the fact that he intends to petition the Court for a sequestration order in the event of non-compliance by the Friggers with the Bankruptcy Notice. The simple fact that the Friggers may contemplate or may have commenced some other proceeding does not, of itself, justify a conclusion that it is an abuse to proceed with the Bankruptcy Notice. It is evident they do so quite frequently. As is clear from the comments of Master Sanderson as to the reasonableness of the conduct of Murfett Legal, there cannot possibly be an abuse.