Khera, Jaswant v L R Allen & Co Ltd [1995] FCA 1136

WILCOX J: The matter before the Court is an appeal from a decision of Sheppard J declaring that the affidavit of Jaswant Khera, the appellant, of 27 April 1995 is not an affidavit under s.41(7) of the Bankruptcy Act 1966 which satisfies the Court that the debtor has a cross-claim pursuant to s.41(1)(g) of that Act. The relevance of the declaration is that, if his Honour had made a declaration to the opposite effect, this would have had the effect that no act of bankruptcy was committed by the debtor's failure to pay the amount claimed by the bankruptcy notice.

when he telephoned back later that day. The claim that is made by Mr Khera is that the words attributed to Mr Selvaggio in this note are defamatory; and, in particular, the words, "I would be a bit worried if I was you". He suggests the imputation arising from those words was that he might have difficulty paying Ms Baker's salary; perhaps putting the matter a little broader, that he was undergoing some financial embarrassment at the time and might be unable to pay his debts as they fell due. If this imputation was conveyed by the words, it seems to me it is exactly the message that Mr Khera wished Ms Baker to convey to Mr Selvaggio. This was the justification for the offer to pay the debt by instalments; and it has to be borne in mind that the parties were talking of a debt of only $3,500. The reference to a taxable income of less than $15,000 was no doubt intended to convey to Mr Selvaggio that Mr Khera's income was very low. It seems to me that Mr Selvaggio's comment - and it was no more than that - simply accepted what Ms Baker said and pointed out to her the implication of the imputation she had conveyed on Mr Khera's instructions. Some little time after this conversation, Ms Baker left Mr Khera's employ. There is no evidence from Ms Baker as to the circumstances of her leaving or as to the reason. The suggestion that was raised by Mr Khera before his Honour was that this was because of the conversation with Mr Selvaggio. In the affidavit of 9 June 1995 tendered to his Honour, Mr Khera said that Mr Selvaggio was "deliberately rude to my said employed solicitor". If he means, by this, that Ms Baker left the employment because being there exposed her to deliberate rudeness from Mr Selvaggio, or perhaps other people, it is difficult to see that this is a result of the defamatory imputation. It is not hard to think of any number of reasons why an employed solicitor in Ms Baker's position might have chosen to leave Mr Khera's employment at that time. It seems to me that there is no evidence of a defamatory imputation. There is no evidence that this occasioned any damage to Mr Khera. I accept that there is evidence that, Ms Baker having chosen to leave for whatever reason, he incurred some trouble and, no doubt, expense in replacing her. It may also be correct, as he asserts, that this involved him going over work that she had done and spending time which could not be charged out to the client. That is a fairly normal incident of a change of an employed solicitor. In my view, there is no basis upon which his Honour could have found that there was a prima facie cause of action in defamation creating a liability for damage exceeding the amount claimed in the bankruptcy notice. Consequently, I find it unnecessary to consider two other matters which arise. The first is whether Mr Selvaggio's comment was made by him as agent of his client, so that the client would be liable by way of cross-claim. The second question is whether the cross-claim could have been set up in the proceeding in the Local Court in which judgment was obtained. As his Honour's judgment demonstrates, that is a complex matter. The question has not been argued before us. It is a matter of some general importance. I express no view whatever about it. I do not mean to suggest that his Honour's view on that is incorrect. As the matter has not been argued, I would not wish to express an opinion either way. In my view, the appeal should fail for the reasons that I have given without having to go to that more difficult and important question. HILL J: I agree with Wilcox J, that in this case, the appellant has not shown that he, at any time, had a counter-claim set off or cross demand in the relevant amount, whether or not that counter-claim set off or cross demand could have been set up in the action in which judgment against him was obtained. I should just add this. In the notice of appeal, the appellant alleged that the learned Trial Judge had been in error in "fact and in law" in applying two authorities, these being Re Racheheha ex parte Antonius (1980) 49 FLR 423 and Re Franks ex parte GIO Holdings Limited (1990) 24 FCR 398. On its face, therefore, the notice of appeal sought to argue the correctness of the authorities. I agree for the reasons given by Wilcox J that it is not necessary to decide the matter today. It might be noticed that the appellant did not submit before us that those two cases were incorrectly decided. Rather, before us, he sought to argue that they were distinguishable from the facts and circumstances of the present case. He submitted that the difference was that he did not have sufficient or adequate evidence in his possession at the time that the proceedings in which judgment was attained against him were heard. He said in his written submissions that: "Under the circumstances as existed at the time, mainly the distress Miss Baker had experienced and the same resulting in her leaving my employ, it was not open to me to compel her to come and give evidence. The rules of evidence would have worked against me in forcing her to give evidence against Mr Selvaggio, the very man who caused her the distress in the first place." I have some difficulty in understanding what the appellant means by this submission, but it seems he is saying that the only way he could have proven his case was to call Ms Baker and that he was concerned either for her or for the consequence to his own case in calling her and made a conscious decision for that reason, not to take up the defamation matter in the Local Court. It is, however, quite well established that the words: "...counter-claim set off or cross demand that he could not have set up in the action or proceeding in which the judgment order was obtained..." are not concerned with practical difficulties that might arise in setting up a counter-claim set off or cross-demand. There could be various reasons why a person may prefer not to raise a set off in proceedings. Alternatively, a solicitor might give advice which turns out to be wrong, not to raise a matter in the proceedings, but the cases such as Re Bryant in the Full Court of this court and cases there referred to, make it clear that what the words are concerned with is the legal ability to set up the claim, not the practicalities of whether that claim might or might prove to be difficult to pursue. This provides, in my view, another reason for dismissing the appeal I thus agree that the appeal should be dismissed with costs. WHITLAM J: I agree with Wilcox J and with Hill J and with the order that is proposed. WILCOX J: The order of the court will be that the appeal be dismissed and that the appellant pay the costs of the respondent. I certify that this and the preceding six (6) pages are a true copy of the Reasons for Judgment of the Court. Associate: Dated: 27 November 1995

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Cases Cited (2)