Moree Plains Shire Council v Goater

THE COURT: 1 On 21 August 2015, Shirley Goater filed an application in the Federal Circuit Court to set aside a bankruptcy notice that the appellant, Moree Plains Shire Council, had served on her on 30 July 2015. The bankruptcy notice required Mrs Goater to pay the balance, of $6,822.97 outstanding, from a judgment debt for unpaid burial fees entered in the Local Court of New South Wales on 21 September 2012. The original judgment was entered for an amount of $10,712.60 inclusive of costs. The schedule of post-judgment interest calculation in the bankruptcy notice recorded that, between 1 July 2013 and 23 December 2013, the principal sum outstanding on the judgment debt had reduced to $5,312.44. 2 In substance, Mrs Goater contended that the bankruptcy notice should be set aside because she had a counter-claim, set-off or cross-demand equal to or exceeding the amount of the sum then payable under the Local Court order that she could not have set up in the Local Court proceeding in which that judgment had been obtained within the meaning of s 40(1)(g) of the Bankruptcy Act 1966 (Cth). It was common ground that the cause of action on which Mrs Goater relied for this purpose was not one which she could have set up at the time of the Local Court judgment, because it did not then exist. That was because the claim on which Mrs Goater relied arose or occurred sometime in November 2013 and thereafter in the circumstances explained below. 3 The trial judge found that the claim against the Council on which Mrs Goater relied under s 40(1)(g) was a genuine dispute with a reasonable prospect of success. He set the bankruptcy notice aside and ordered the Council to pay Mrs Goater's costs. The Council has appealed against those orders.

The legislative scheme 4 A debtor commits an act of bankruptcy by force of s 40(1)(g) if a creditor who has obtained a final judgment or order against the debtor, the execution of which has not been stayed, serves the debtor with a bankruptcy notice and, the debtor does not: comply with the requirements of the notice or satisfy the Court that he or she has a counter-claim, set-off or cross demand equal to or exceeding the amount of the judgment debt or sum payable under the final order, as the case may be, being a counter-claim, set-off or cross demand that he or she could not have set up in the action or proceeding in which the judgment or order was obtained; (emphasis added) 5 If the debtor applies to the Court for an order setting aside the bankruptcy notice before the time fixed for compliance on the ground that he or she has a counter-claim, set-off or cross demand of the kind specified in s 40(1)(g), then s 41(7) deems that the time for compliance with the notice is extended up to the day that the Court decides whether it is satisfied as to the existence of the debtor's claim.

Background 6 Mrs Goater and her husband, Terry, ran a funeral business. Their residential and business premises were adjacent to each other in Moree and were registered in Mr Goater's name. Mrs Goater claimed in her affidavit sworn on 20 August 2015 in support of the application to set the bankruptcy notice aside, from which we have taken most of the matters referred to below, that she and her husband had entered into a business loan agreement with the Commonwealth Bank of Australia that was secured by a first registered mortgage over the two properties. She said that in about 2011 and 2012 she and her husband experienced financial difficulties and that in October 2012 her husband received a default notice from the bank in respect of the loan. They filed a dispute claim with the Financial Ombudsman Service concerning the bank's claim. That dispute was not resolved until 18 October 2013. 7 On 26 August 2013, the Council cut the water supply to Mr and Mrs Goater's home using a restrictor device, because by that day their arrears in payment of water rates totalled over $4,500. They had not made any payment for water rates for about two years. They were also in arrears of their Council rate payment obligations on that day to the tune of $14,653.27. In addition, Mrs Goater remained indebted to the Council for over $6,800 on the judgment debt. 8 Mrs Goater said that on 2 September 2013 she requested that Suzie Treloar, the rates officer of the Council who had been dealing with their accounts, make a payment arrangement because she and her husband could not bring their accounts up to date immediately. She said that Ms Treloar said that the Council would accept $500 per month to pay the debt off and that, because of the inconsistent payment history of Mr and Mrs Goater, it would not remove the restrictor blocking their water supply until they had paid half the water rates outstanding. Ms Goater said that about one hour later "I received an email from Suzie with the bank account details and details of our arrangement". 9 Ms Treloar wrote that the restrictor had been placed on the meter "due to the fact that there has been no money paid to your water bill since 21/09/2011 and prior to that 21/10/2010". The email recorded that the Council and its solicitors had sent reminder letters but that they had received no satisfactory proposal to pay. Accordingly, Ms Treloar wrote, the Council would not remove the restrictor until it received at least half of the $4,535.05 owing in respect of the water debt. The email recorded that Mrs Goater had said that she would pay $500 per month to reduce that debt. 10 On 3 September 2013, Mrs Goater wrote an email to Ms Treloar saying: "Suzie just paid $2,270.00 on our water account [sic] could you please let me know when we will have water, also will pay $500.00 a month till paid, thanking you. 11 On 4 September 2013, Ms Treloar wrote back acknowledging receipt of the $2,270 payment and saying that the arrangements had been made to remove the restrictor. She said that the proposal to pay the water rates off at $500 per month was acceptable to the Council, but that, if a payment was missed, the restrictor would be put back on at another cost of $450 adding: I've also noted that you have paid $500 off the rates. Have you spoken to SR Law [the Council's debt recovery solicitors] at all about an arrangement? 12 The Council's bank statements in evidence showed that the two payments had been made on 3 September 2013, the larger recording the source "T & S Goater" and the smaller having a notation "1882 rates", being the Council's rate notice number for Mr Goater's properties. The appearance of the latter notation on the Council's bank statement indicated that whoever arranged the payment of the $500 sum had the capacity to allocate the account or debt to which the Council should credit the payment. This is significant because as will appear, the subsequent electronic fund transfer payments made by Mr and Mrs Goater did not allocate on the recipient Council's bank statements any debt or account to which they were to be credited. 13 At the outset of the hearing of the appeal we admitted further evidence, by consent, pursuant to s 27 of the Federal Court of Australia Act 1976 (Cth) as to the nature of the arrangements in place for the payment of rates that was not before the trial judge: see Wills v Australian Broadcasting Corporation (2009) 173 FCR 284 at 294-295 [52]-[55] per Rares J with whom North J at 287 [8] and Emmett J at 287 [15] agreed. This material included an email that Ms Treloar had sent to Mrs Goater subsequently on 3 September 2013 thanking her for her email and saying that, until the Council confirmed receipt of the payment, it could not remove the restrictor. The email said that the Council agreed to Mrs Goater's proposal to pay the remainder of the debt for water in instalments of $500 per month and continued: On a separate issue pertaining to your rates, we have just been advised by our debt recovery solicitors, SR Law, that you failed to attend court on 29th August for the Examination Order. Please contact them as a matter of urgency … an arrangement needs to be made to pay outstanding arrears as soon as possible. (emphasis added) 14 Within half an hour on 3 September 2013, Mrs Goater responded in an email asking: "Can you send account number for rates please". That explained why the separate electronic funds transfer was made on 3 September 2013 for the rates with the appropriation noted on the Council's bank statement of the purpose of that payment of $500. Mr and Mrs Goater also appear to have contacted SR Law on or soon after 3 September 2013. 15 Mrs Goater referred in her affidavit of 20 August 2015 to her and her husband attending at Moree Court on 19 September 2013. However, at the hearing of the appeal, it was common ground that this had occurred on 5 September 2013. Mrs Goater said that she and her husband met Ms Treloar and another person from the Council at the Court in relation to the rates owing to the Council and its legal action against them and that they all went into a room and discussed the debts. Ms Treloar asked Mr and Mrs Goater if they had brought their financial documents. Mrs Goater replied that they had not done tax returns in years and that matters had been quite tough for them as a result of Mr Goater's bankruptcy. She said that Ms Treloar asked about the funeral business and told Mr and Mrs Goater that they needed to provide the Council with their income details including any BAS (Business Activity Statement) documents. Mrs Goater said she responded: "For the last year there has been a bit of a funeral drought". 16 In her affidavit, Mrs Goater said on this occasion Ms Treloar asserted that Mr and Mrs Goater owed the Council just over $4,000 for water rates and asked how much they could afford to pay adding "you said $500 per month when we put the restrictor on" and that Mrs Goater had replied that they could pay $500 per month if that was acceptable to the Council. She said that Ms Treloar had handed paperwork to Mr and Mrs Goater to sign and they did so. 17 It appears that Mrs Goater's recollection of this meeting was inaccurate. The documents tendered before us included a form about their financial circumstances that Mr Goater signed. It was common ground that this occurred at Moree Court on 5 September 2013. Under the question in the form, "What arrangements are you prepared to make to satisfy this debt?", the following appeared in handwriting: "$500 pm on both rates and water - pay extra when possible (3rd monthly)". 18 On 9 September 2013, SR Law emailed Mrs Goater confirming that the firm acted on behalf of the Council and stating: We are advised by our clients that a possible arrangement was entered to pay the arrears off your rates account by instalments of $500.00 per month. Please advise if this is correct and we will update our records accordingly. (emphasis added) Mrs Goater responded promptly: "Yes, that is right". 19 On 3 October 2013, Mr and Mrs Goater caused $500 to be paid to the Council. However, while their building society statement showed that they had allocated this for their water rates debt, they did not put any purpose for the payment in the electronic funds transfer instructions to the Council so that the Council's bank statement did not record any account to which the $500 received from Mr and Mrs Goater should be allocated. 20 On 17 October 2013, Mr and Mrs Goater paid the Council $4,823.75. On Mr and Mrs Goater's building society statement for that payment no allocation appeared in the printed text of the statement, but Mr or Mrs Goater had written in by hand that the payment was allocated as to $2,520.75 for water and $2,303.00 for funeral. There is no evidence of the Council's bank statement or receipt of that money, but it is not in dispute that it was received by the Council. The Council's records do not record that any part of that sum was allocated to the payment of either the outstanding Council rates, which at that time exceeded $14,000, or the outstanding water rates, which at that time exceeded $2,400. 21 On 18 October 2013, the bank and Mr and Mrs Goater entered into a resolution and release agreement (the FOS agreement) that resolved the dispute before the financial ombudsman. The FOS agreement provided that, without admissions and to finalise the complaint, the parties agreed to a resolution on terms that included that: Mr and Mrs Goater would assist the bank in obtaining "any relevant information from Moree Council as necessary"; the bank could request them to provide that evidence or authorise the Council to provide the information to the bank; the bank would confirm with the Council that: a repayment arrangement plan has been agreed between them [scil: the Council and Mr and Mrs Goater] and they are maintaining the agreed payments. If Moree Council does not provide this information due to privacy issues, the Bank may request the customer to provide this evidence or authorise Moree Council to provide this information to the Bank. The Bank will require this information by 25 October 2013. if the bank received any notice of a judgment or garnishee order against Mr and Mrs Goater and if it did not receive written evidence that an arrangement had been reached between them and relevant creditor(s) within 30 days from the notice, Mr and Mrs Goater would be in default of the FOS agreement and it could proceed to start the realisation process after giving them 14 days' notice. 22 Next, on 1 and 3 November 2013 Mr and Mrs Goater made two separate electronic transfers to the Council of $250 and $500 respectively. Their building society statement recorded that the larger sum was for "water" and the smaller for "rates". The Council's bank statement for 1 November 2013 recorded an appropriation for the $250 payment for the rates arrears by using the account number that Ms Treloar had provided on 3 September 2013. Of course, that account number was the Council's number for both the council rates and water rates. However, the Council's bank statement for 4 November 2013 did not record any payer's appropriation when it credited the $500, although it recorded the payers' details as "T & S Goater", which were the same as the ambiguous details accompanying the payment of $2,270 on 3 September 2013. The Council appropriated both payments to reduce the outstanding arrears for Council rates. Thus, as at 5 November 2013, the Council's ledgers recorded that $13,348.95 was owing for "rates", and $2,461.86 was owing for "water rates". Those Council ledgers also recorded that no payment had been received in respect of the water rates outstanding after the $2,270 had been paid on 5 September 2013 and that the Council had received two payments on 5 September 2013 and 5 November 2013, each of $500, and a further payment of $250 on 4 November 2013 in respect of Council rates. 23 On about 5 November 2013, Mrs Goater said that she received a phone call from a bank officer, Rohan Dalal who said that the bank needed to know about Mr and Mrs Goater's repayment arrangement with the Council pursuant to the FOS agreement. He asked her to provide details. She responded: "You can call Suzie Treloar at the Council and she will tell you". Mrs Goater said that Mr Dalal replied: "No, you need to give me something in writing". Mrs Goater said that, after that conversation, she telephoned Ms Treloar and told her of that request from the bank and asked Ms Treloar to speak to Rohan. Mrs Goater said that Ms Treloar replied that she would send him an email. 24 On 6 November 2013, Mrs Goater sent an email to Ms Treloar at 1:57 pm saying: Dear Suzie Please give Rohan from the commonwealth bank whatever information he needs. The email included Mr Dalal's telephone number. That led to Ms Treloar sending the bank an email at 4:28 pm on 6 November 2013 in the following terms (the 6 November email): Hi Rohan As per our phone conversation, and Shirley Goater's authorisation to give you information with us I advise that due to unpaid rates and water (no payments for the last two years), we took legal action against Terry Goater Funerals. They were requested to attend an exam order with us at the Moree Court House on 29th August 2013. They failed to attend. We sent another request notifying them of an arrest warrant to issue if they did not attend. They attended the second request however part of the exam order requests full financial disclosure and information from the rate payer and they are required to bring tax returns, copies of bank statements as well as details of any debts (credit cards, loans etc) with them. They claimed to have not completed a tax return for more than three years, that their only income was Centrelink benefits (for both of them), and they received no income from their business. They have bought a reasonably new vehicle recently which they said was purchased through the business. They did not bring any bank statements to the court house and have so far refused our requests to provide them. We have continually asked for this information, and have so far been stone walled. This means that they have not legally complied with the Exam Notice. They have made an agreement with us (which they signed) to pay off their rates arrears (currently $8,458.87 with another instalment of $1,553.00 due on 02/12/13) to pay $500 per month, which they have complied with since September 2013. They made another agreement with us (which they signed) to pay off their water arrears (currently $2,479.32) at $500 per month (since September). They have so far not complied with this. As you may be aware they are Funeral Directors. They had themselves in a situation where they owed Council $67,000 for unpaid burial costs. Mr Goater then became bankrupt and we are in the process of having to write this debt off. We have current legal action against Mrs Goater for $6,700 for unpaid burial costs. They are in the position now where Council will only take cash for any funerals booked by them which has to be paid before the funeral can occur. Due to non-compliance of the payment of the water debt, the non-compliance of the Exam Order and the current action for unpaid burial costs, our legal action continues. (emphasis added) 25 On 27 November 2013, the bank wrote to Mr and Mrs Goater alleging that they were in default of the FOS agreement and enclosed the 6 November email. The letter asserted that the 6 November email confirmed: (1) that you have failed to comply with the arrangement with Moree Council regarding the outstanding water arrears; and (2) that Moree Council is proceeding with its legal action. Therefore no arrangement currently remains on foot with Moree Council (being the judgment creditors [sic] in [two Local Court proceedings]) 26 The bank's letter asserted that if Mr and Mrs Goater's default in the arrangements with the Council was not remedied within seven days, the bank would continue with enforcement action on 11 December 2013. 27 The bank then proceeded to obtain default judgment against Mr and Mrs Goater and on 13 May 2014 the sheriff executed writs of possession that resulted in Mr and Mrs Goater being evicted from their properties. A judge of the Supreme Court of New South Wales dismissed their application to set aside the default judgment and orders for the writs of possession. 28 However, Mr and Mrs Goater succeeded in their appeal. On 7 November 2014, the Court of Appeal of the Supreme Court of New South Wales held that the obligations imposed on Mr and Mrs Goater by the FOS agreement did not require that payments be made by them to the Council. Accordingly, even if Mr and Mrs Goater had been in breach of an obligation to the Council, that circumstance did not constitute a breach of the FOS agreement: Goater v Commonwealth Bank of Australia (2014) 88 NSWLR 362 at 378 [78]-[79] per Basten JA with whom Gleeson JA and Sackville AJA agreed.

Mrs Goater's s 40(1)(g) claim 29 The counter-claim, set-off or cross demand on which Mrs Goater relied to set aside the bankruptcy notice asserted causes of action that arose from what she claimed was inaccurate information contained in the 6 November email. Mrs Goater claimed that the 6 November email conveyed negligent misstatements and misleading or deceptive representations in contravention of s 18 of the Australian Consumer Law in Sch 2 to the Competition and Consumer Act 2010 (Cth), communicated information in breach of confidence and/or the implied undertaking or obligation not to disclose documents or information provided in litigation under compulsion, and in doing so precipitated the bank's action against her and her husband. Mrs Goater also claimed against both the bank and the Council that she had suffered from depression and emotional upset from the trauma of having to find new premises and being evicted from her residential and business premises.

The proceedings before the trial judge 30 At the time of the hearing before the primary judge on 21 September 2015, Mrs Goater's solicitor had prepared and put in evidence a draft statement of claim on her behalf against the Council that was to be filed in the District Court of New South Wales. His Honour reserved his decision on that day and subsequently received further written evidence and submissions. The draft statement of claim alleged that: the Council had been negligent by sending the 6 November email to the bank and so breached its duty of care to Mrs Goater because, among other reasons, first, it had failed accurately to allocate the water rate payments that Mr and Mrs Goater had made since 3 September 2013, secondly, it had failed to make reasonable enquiries to ascertain the accuracy of the information that it provided to the bank, thirdly, it had provided information to the bank that the Council was not authorised by Mr and Mrs Goater to provide (being the information in the email relating to what had happened in relation to the examination order and their asserted non-compliance with their obligations under it) and that it knew that such information would be damaging to them if they were not informed beforehand; by sending the 6 November email, the Council had made representations to the bank that, first, Mrs Goater and her husband "had not paid the monthly $500 for the water rate arrears as required under the Monthly Payment Arrangement" and, secondly, the Council would be pursuing legal action against them. 31 Significantly, the reference to the "Monthly Payment Arrangement" referred to a defined term in par 17 of the draft which pleaded a new arrangement that allegedly varied the two earlier arrangements pleaded in par 14 in the following terms: 14 From about 2 September 2013 to about 10 October 2013, there were correspondence between the parties regarding entering into payment arrangements in respect of water rate and council rate arrears as referred to at the preceding three paragraphs and the parties entered into a payment arrangement for the water rate and council rate arrears, which resulted in an agreement (the Rates Payment Arrangement). Particulars The Rates Payment Arrangement was entered into by communication between the plaintiff and Suzie Treloar and by communication between the plaintiff and the defendant's solicitors, SR Law. Particulars of the payment arrangement in respect of water rate arrears are set out in the email correspondence between Suzie Treloar and Shirley Goater from 2 September to 3 September 2013 negotiating to enter into a payment arrangement whereby the Goaters were required to make monthly repayments of $500 for water rates commencing 3 September 2013 until the debts are paid off. Particulars of the payment arrangement in respect of council rate arrears whereby the Goaters were to make monthly payments of $500 are set out in: An email from Suzie Treloar to Shirley Goater of 2 September 2013 An email from Suzie Treloar to Rohan Dalal of the Bank of 6 November 2013 … 17 On or about 8 October 2013, the plaintiff requested a payment arrangement with respect to burial costs owing as referred to at [13] above and subsequently in the same month the defendant agreed to enter into an arrangement (this payment arrangement and the Rates Payment Arrangement will be referred to hereinafter as the Monthly Payment Arrangement). Particulars Email from Shirley Goater to Suzie Treloar of 8 October 2013 Email from Suzie Treloar to Shirley Goater 9 October 2013 The parties agreed to reduce the council rate payments to $250 per month and burial costs at $250 per month and continue with $500 per month for the water rate arrears. The Goaters were to increase the monthly payments for council rates and burial costs to $500 for each account from January 2014. The particulars are set out in the emails between Suzie Treloar to Jovana Vasiljevic of 20 January 2014 and of 12 February 2014. This was agreed on or about 15 October 2013. Particulars of the initial payment arrangement in respect of burial costs owing are set out in an email correspondence between Suzie Treloar and Shirley Goater from about 2 October 2013 to about 11 October 2013 whereby the parties negotiated and agreed on $250 monthly payments. (bold emphasis added) 32 As is apparent, par 14 in the draft statement of claim recited that the rates payment arrangement involved two monthly payments of $500 each to reduce the arrears of each of the water rates and the council rates. Next, par 17 pleaded a variation of that arrangement that reduced the monthly payments for the council rates to $250 per month and added a payment of $250 per month to reduce the burial cost arrears, while the payments for the water rates arrears were to continue at $500 per month. Significantly, there was no evidence in Mrs Goater's affidavit or subsequently of any discussion recording the arrangement pleaded in par 17 of the draft statement of claim or of any of the documents referred to in the particulars to par 17. 33 Importantly, whatever the evidence, or lack of evidence, in relation to the Monthly Payment Arrangement pleaded in par 17 of the draft statement of claim, the fundamental position remained that Mr and Mrs Goater pleaded that they had arrangements, before and after the making of the "Monthly Payment Arrangement", that they had to pay the Council two or three payments totalling $1,000 each month. 34 The draft statement of claim also pleaded that: the Council owed an obligation of confidence to Mrs Goater, either in accordance with equitable principles or because of the implied undertaking not to use documents or information provided under compulsory court processes otherwise than for the purposes of the proceedings in which that was provided; the information that she provided during the examination "hearing" had, first, been given by her on an understanding that it would only be used by the Council in connection with the proceedings to which the examination order related, except with the leave of the Court, and, secondly, was confidential because it was personal information in relation to her own and Mr Goater's financial affairs and taxation matters that had never entered the public domain; by communicating to the bank the matters relating to the financial and taxation affairs of Mr and Mrs Goater, the Council had breached its obligation of confidence and the implied undertaking. 35 Mrs Goater's account in her affidavit of what occurred when she, Mr Goater, Ms Treloar and the other Council officer had a discussion in Moree Courthouse on what seems to have been 5 September 2013, did not provide any context to suggest that the Council owed Mr and Mrs Goater an obligation of confidence or that the discussion occurred in a situation in which Mrs Goater was being examined under compulsory process. Her evidence described a conversation at the Courthouse where no court or judicial officer was present. There was no evidence as to the precise nature of an examination order in the Local Court or that Court's practice in relation to such an order. 36 On 2 October 2015, the solicitor for the Council, David Simons, swore an affidavit attaching Mrs Goater's email of 6 November 2013 giving authority to Ms Treloar to communicate information to the bank. He also annexed the Council's bank statements recording the payments made by Mr and Mrs Goater which they ascribed to their compliance with the arrangements made in early September 2013, together with the Council's ledgers for Mr and Mrs Goater's council rate and water rate payment history. 37 On 12 October 2015, Estelle Nam, a solicitor acting for Mrs Goater, swore an affidavit that sought to explain Mrs Goater's lack of recollection of the email that she sent to Ms Treloar of 6 November 2013. Ms Nam also said that on about 30 September 2015, her firm had filed a statement of cross-claim in the Local Court on behalf of Mr Goater. She said that they would seek to have those proceedings transferred to the District Court to be consolidated with Mrs Goater's proceedings that were to be filed. She noted that the draft statement of claim was to be amended to deal with Mrs Goater's email to the Council of 6 November 2013. 38 On 13 October 2015, Nigel Hill, the solicitor for Mrs Goater, swore an affidavit saying that he had now caused a statement of claim to be filed in the District Court that followed very substantially the form of the draft. It repeated the allegations referred to above. He added a specific reference to Mrs Goater's email dated 6 November 2013 in the particulars to par 20. In both the draft and final versions of the statement of claim, par 20 alleged that, shortly after receiving a request from the bank to authorise the Council to provide information regarding the Monthly Payment Arrangement (i.e. the arrangement referred to in par 17), Mrs Goater had given the Council that authority. 39 On 6 November 2015, Mr Simons swore a further affidavit. He said that the District Court had made orders on 22 October 2015 transferring Mr Goater's Local Court proceedings to the District Court and consolidating both Mr Goater's and Mrs Goater's proceedings in that court. Mr Simons recorded his submission to Elkhaim DCJ and noted that the two proceedings were in fact a joint proceeding. 40 On 9 November 2015, Mr Hill filed an affidavit in response in which he said that Mrs Goater had submitted to Elkhaim DCJ that it would not be appropriate to consolidate the two matters. Mr Hill said that no consolidation order had been made but the hearings would be heard concurrently. 41 The parties agreed that since that time the District Court proceedings were all transferred to the Supreme Court of New South Wales and are currently progressing in that Court in accordance with its procedures and that Mr and Mrs Goater appeared to be pursuing those proceedings with appropriate diligence.

The trial judge's reasons 42 The trial judge delivered his reserved decision on 9 December 2015. He briefly described the procedural history of the matter. He summarised the competing contentions of the parties but without analysing the underlying facts. He noted that the Council had asserted that its records showed no payments for water rates but that it had conceded that payments had been made and it had allocated those to reduce the arrears of rates. 43 His Honour correctly noted that Mrs Goater had to establish a prima facie case in the sense described in Ebert v The Union Trustee Company of Australia Limited (1960) 104 CLR 346 at 350. There Dixon CJ, McTiernan and Windeyer JJ had said: The standard may be expressed by saying that the debtor must show that he has a prima facie case, even if then and there he does not adduce the admissible evidence which would make out a prima facie case before a court trying the issues that are involved in his counter-claim, set-off or cross demand. 44 His Honour said that the Court had to weigh up the merit of a counter-claim under s 40(1)(g) with the justice of allowing bankruptcy proceedings to go ahead or be stayed and that it looked at whether it was just that the claim be determined before the bankruptcy proceedings were allowed to continue, namely whether it was a claim that it was proper and reasonable to litigate. He set out the test that Gleeson CJ, Gaudron, McHugh, Kirby and Callinan JJ had specified in Guss v Johnstone (2000) 171 ALR 598 at 606 [39]-[40]. 45 His Honour then summarised in detail the allegations in Mrs Goater's statement of claim in the District Court. He referred to the procedural history of the bank's claim for possession on which it had succeeded before Davies J and the decision of the Court of Appeal reversing his Honour's decision. The trial judge said that Mr Goater's proceedings in the Local Court had been transferred to the District Court and consolidated with Mrs Goater's proceedings. 46 His Honour said that the amount claimed in the District Court proceedings was many times greater than the amount due on the bankruptcy notice. He found that the real questions in the proceedings to set aside the bankruptcy notice were whether the claim in the District Court was a genuine claim which Mr and Mrs Goater were fairly entitled to litigate and whether the claim met the test of mutuality. His Honour found that the District Court claim was a genuine one with a reasonable prospect of success. He said that Mr and Mrs Goater's eviction had been a consequence of the Council providing information to the bank. He held that Mr and Mrs Goater were entitled to litigate their claims against the Council notwithstanding that they were also then claiming damages against the bank in the Supreme Court. (The parties agreed that subsequently the proceedings involving Mr and Mrs Goater had been transferred from the District Court to the Supreme Court and were then being case managed together with the proceedings Mr and Mrs Goater had brought against the bank.) 47 His Honour found that it was likely, that if liability were established against the Council in the proceedings brought by Mr and Mrs Goater, the amount due on the bankruptcy notice would be exceeded by the damages that the Council would be liable to pay Mrs Goater. He held that it was arguable that the representations made to the bank by the Council in the 6 November email had a commercial character so that the Council's conduct in sending the email could be characterised as having occurred in trade or commerce for the purposes of s 18 of the Australian Consumer Law. He also found that Mrs Goater was entitled to allege that the conduct of the Council in sending the 6 November email to the bank had been a cause of her loss or damage notwithstanding that the representations were made to the bank and not to her. 48 His Honour also found that Mrs Goater had claimed damages for personal injury against the Council and that such a claim was not a joint claim notwithstanding that her proceedings may have been consolidated or were to be heard together with her husband's. His Honour set the bankruptcy notice aside and ordered the Council to pay Mrs Goater's costs.

This appeal 49 The notice of appeal raised eight grounds, but these may be grouped together as follows, namely that the trial judge erred: (1) in finding that Mrs Goater had a prima facie case against the Council; (2) in finding that Mrs Goater's claims against the Council were not made jointly with her husband's and lacked mutuality with the debt owed to the Council; (3) in finding that the alleged misleading conduct had occurred in trade or commerce; and (4) in ordering the Council to pay Mrs Goater's costs.

Mrs Goater's submissions 50 During the course of argument it became clear that the critical issue was whether or not Mrs Goater had established a prima facie case (in the sense explained in Ebert 104 CLR at 350) that the Council made a misrepresentation in the 6 November email as to whether she and her husband had complied with whichever of her several different versions were the actual arrangements in place for payment of the debts that they owed to the Council. 51 Mrs Goater argued that his Honour was correct in deciding that the bankruptcy notice should be set aside for the reasons that he gave. She contended that the arrangement for the payment of $500 per month on both rates and water, which Mr Goater signed on 5 September 2013, was an arrangement for the payment of a total of $500 per month, rather than for two payments each of $500 per month, to satisfy the Council's requirements. She also argued that it was possible to construe the reference in Mr Goater's 5 September 2013 document to "3rd monthly" so as to provide for flexibility in the day for payment during any particular month. 52 She argued that the evidence established that she and her husband had paid $2,270 on 3 September 2013 in respect of water rates, yet, the 6 November email commenced with a statement that they had made no payments for the last two years and falsely said that they had not complied with the arrangement to pay off their water rate arrears at $500 per month since September 2013. She argued that when one took account of the payments she and her husband had made between 3 September 2013 and 3 November 2013, totalling $8,843.75, the 6 November email presented a misleading picture. She accepted that, first, the Council had not been told of allocations that she and her husband had made within their own records after 3 September 2013 and, secondly, there was no evidence of the circumstances in which the $4,823.75 had been paid on 17 October 2013, other than her own evidence in which she said that she had made the sums for "water, council rates and sundry payments". 53 Mrs Goater contended that the Council had made a misrepresentation by silence to the bank in the 6 November email as to the payments that Mr and Mrs Goater had made and their purpose. She also faintly contended that there was a lack of clarity about the nature of the financial arrangements to which the Council wanted them to adhere and that any arrangement should be interpreted contra proferentem the Council because it was up to it, as creditor, to specify what details it wanted and the manner in which the payments should be made. She contended that the Council's emails to her, in which Ms Treloar specified arrangements, were ambiguous. She also argued that the Council had misled her, or breached its duty of care to her, by not telling her, before sending the 6 November email to the bank, that it regarded her and her husband as being in breach of the arrangements. She contended that it was difficult for her to put on precise evidence of what had happened because some of her records had been lost when she and her husband had been evicted by the bank. 54 She contended that his Honour was correct in his findings about the mutuality of the parties' claims, the lack of any joint indebtedness, particularly given that she had made a claim for personal injury, and the Council's breach of its obligation of confidence or the implied undertaking.

Consideration - the prima facie case issue 55 The trial judge correctly identified the principles governing the determination of the question whether he could be satisfied that Mrs Goater, as the debtor, had a counter-claim, set-off or cross demand under s 40(1)(g) of the Act. However, in our opinion, his Honour erred in his consideration and determination of that question. In substance, his Honour considered that Mrs Goater's statement of claim, as filed in the District Court, established a genuine claim with reasonable prospects of success. But he did not consider the legal, and particularly, the factual merit of her claim. Thus, he could not have weighed those considerations with the justice of allowing the bankruptcy proceedings to continue: Guss 171 ALR at 606 [40]. 56 The problem with Mrs Goater's case was that the various versions of arrangements that she alleged that she (and Mr Goater) had with the Council lacked coherence with the material in the evidence in respect of what payments they both had to make, and had made, to reduce the arrears so as to make incorrect what Ms Treloar had written in the 6 November email to the bank. 57 First, Mrs Goater's pleaded case centred on the Council's alleged misrepresentation of her and Mr Goater's default in compliance with an arrangement to pay instalments of $500 to reduce arrears of their water rates. But she gave or relied on evidence of several different versions of the applicable arrangement. In any event, none of those answered the difficulty that no payments that she and her husband had made to the Council, after the $2,270 paid on 3 September 2013, specified to the Council in the electronic funds transfer advice or otherwise any allocation by them. 58 In Cory Brothers & Company Limited v The Owners of the Turkish Steamship "Mecca" [1897] AC 286 at 293, Lord Macnaghten said: When a debtor is making a payment to his creditor he may appropriate the money as he pleases, and the creditor must apply it accordingly. If the debtor does not make any appropriation at the time when he makes the payment the right of application devolves on the creditor. (emphasis added) 59 However, a mere intention to appropriate a payment that the debtor does not communicate to the creditor is not sufficient, and the creditor is free to apply the money, when received, as it chooses: Leeson v Leeson [1936] 2 KB 156 at 161 per Greer LJ, 162-163 per Greene LJ, with both of whom Talbot J agreed. Nonetheless, in Knysh v Corrales Pty Ltd (1989) 15 ACLR 629 at 633-634, Morling, Pincus and Lee JJ explained that the debtor's intention to appropriate a payment can be inferred from all of the circumstances, even though the debtor does not expressly state that intention at the time of making the payment; see too Caltabiano v Electoral Commission of Queensland (No 1) [2010] 1 Qd R 100 at 114-116 [28]-[38] per Muir JA, 130-132 [107]-[110] per Fraser JA, 135 [129]-[130] per Fryberg J. 60 No payment that Mrs Goater and her husband made after 3 September 2013 and before 6 November 2013 specified that they required it to be appropriated to the payment of the water rates arrears. Nor did Mrs Goater point to the availability of any evidence from which such an inference could be drawn. The ambiguous payment notification "T & S Goater" that the Council's bank statement recorded with its receipt of $500 on 3 November 2013 did not amount to an appropriation to any particular account, much less that for water rates. 61 Secondly, even if it were arguable that the Council should have allocated some payments to the reduction of the liability for water rates (which we do not consider that it was), the material on which Mrs Goater relied (assessed liberally, as Ebert 104 CLR at 350 required) did not establish that there was a prima facie case that she (and her husband) had acted in accordance with any version of the arrangements that she alleged. Indeed, the existence of the various alternate arrangements and the circumstances in evidence suggested that the nature of whatever counter-claim, set-off or cross demand on which Mrs Goater relied lacked clarity and coherence. 62 Relevantly, Mrs Goater's assertion that she had sufficiently established a claim for the purposes of s 40(1)(g) depended on two matters. First, she had to establish that the 6 November email was inaccurate in the way she alleged. Secondly, if she did, she had to demonstrate that the inaccuracy had caused the bank to act to assert a legal right it had to take enforcement action against them. However, as the Court of Appeal found, when the bank acted on the 6 November email, it did so in breach of the FOS agreement and its powers as mortgagee. Thus, the bank's action was a breach of contract. It was not entitled to act against Mr and Mrs Goater on the basis of anything that had occurred in the arrangements they had with the Council. Accordingly, the bank's enforcement action had no legal basis regardless of the accuracy of the contents of the 6 November email. 63 Mrs Goater gave evidence in her affidavit that she had made an arrangement with the Council on 2 September 2013 to pay off the remaining water rate arrears by monthly instalments of $500 after the initial payment of $2,270. She annexed Ms Treloar's email of 4 September 2013. That email evidenced that, independently of any arrangement at that time, Mr Goater paid $500 to reduce the council rate arrears and that Ms Treloar had suggested that the couple approach SR Law to make an arrangement about paying off the significant balance of those arrears. 64 Significantly, at no point in her affidavit did Mrs Goater suggest that any other relevant arrangement was in place by 6 November 2013 than the payment of monthly instalments of $500 to reduce the water rates, despite her annexing to it the 6 November email that asserted the existence of a second arrangement of monthly instalments of $500 to reduce the council rate arrears. Instead, she said, without elaboration, that from 3 September 2013 to, relevantly, 3 November 2013 she and her husband had made six payments totalling $6,540.75 in various amounts, for "water, council rates and sundry payments". She said that she and her husband had been paying "$500 per month and whatever extra we could afford … to catch up with the rates owing". 65 Next, in par 14 of her draft statement of claim Mrs Goater alleged, for the first time, that in early September 2013, she and her husband had made two arrangements with the Council to pay separate monthly instalments of $500 to reduce the water rates and Council rate arrears. She then pleaded, in par 17, that an agreed variation to the earlier arrangements had occurred on about 8 October 2013 so that, relevantly (as at 6 November 2013), the second of the $500 monthly instalments would be apportioned as to $250 for council rate arrears and the balance for "burial costs", without giving any particulars of what the burial costs were (e.g. whether the $250 was to reduce the judgment on which the bankruptcy notice was based or to pay for new or other burials). Mrs Goater's pleading then alleged that the 6 November email had wrongly represented that, first, Mr and Mrs Goater had not paid the monthly instalments of $500 for water rate arrears under the 8 October 2013 arrangement pleaded in par 17 and, secondly, the Council would be pursuing legal action against them without a proper basis. Mrs Goater repeated all those allegations in her filed statement of claim. 66 A further version of the arrangements emerged from the evidence tendered in the appeal, namely that on 5 September 2013, Mr Goater agreed in writing to pay "$500 pm [scil per month] on both rates and water". Initially, Mrs Goater argued that the word "both" conveyed that payment of only one amount of $500 each month would satisfy that arrangement and that they could pay at any time within the month. We reject that argument. The reference to "both rates and water" is at best ambiguous on the face of things. In the context of the evidence, however, there is no room for doubt; it means each of rates and water. In the first place, as at 3 September 2013 an arrangement for the payment of the water debt at $500 per month was already in place. Then, Ms Treloar's email of 4 September 2013 set in train a process that resulted in the making of an additional arrangement for payment of the rate arrears on 5 September 2013. On the question of timing, the notion that the arrangements allowed flexibility in the time for payment is both inconsistent with the conduct of Mr and Mrs Goater and inherently unlikely. Mr and Mrs Goater made payments on 3 October 2013 and 3 November 2013 conformably with a requirement to pay on the third day of a month and indicative of their own understanding of the arrangements. It is inherently unlikely that the arrangements were so loose that they allowed Mr and Mrs Goater flexibility as to when in any month they could pay any instalment. That is because commercial common sense requires that the debtor and the creditor alike should know the due date for payment. The reference to "3rd monthly" gave that certainty: viz: the payments were due on the third of each month. 67 Last, the 6 November email itself identified that Mr and Mrs Goater had made two arrangements in September 2013, each requiring a monthly payment of $500, to reduce respectively the arrears for council rates, that had been met, and for water rates, that had not been met. 68 Here, Mrs Goater made an appropriation to reduce the council rate arrears by paying $500 on 3 September 2013 and identifying that purpose in a way that appeared on the Council's bank statement recording receipt of the electronic fund transfer payment. But no appropriation appeared on any of the Council's bank statements after 3 September 2013, albeit that its bank statement recording its receipt on 17 October 2013 of $4,823.75 was not in evidence. Indeed, the corresponding computer entry for the 17 October 2013 payment in Mr and Mrs Goater's building society statement did not contain any appropriation in the computer generated record of that electronic funds transfer to the Council, leaving aside their handwritten notations on that document that did not form part of the electronic funds transfer. Nor did Mrs Goater give evidence or otherwise explain that she or her husband had communicated to the Council an appropriation or appropriations of that payment to the Council at or before the time it was made. 69 On the evidence before the Full Court, in addition to the fact that Mrs Goater still owed about half of the judgment debt for burial fees, there were two arrangements in place. We would infer that, had this occurred, the Council would have understood that a single payment of $500, that was not accompanied by a specific appropriation or direction, made on the third of a month had to be appropriated to satisfy one of the two arrangements for reducing either the water or council rate arrears, and that the Council was not free itself to appropriate such a payment to reduce another debt. But, Mr and Mrs Goater had not appropriated either of the $500 payments that they made on 3 October 2013 and 3 November 2013 respectively. Accordingly, the Council was free to appropriate each payment, as it did, to the reduction of the larger arrears of council rates rather than to the smaller arrears for water rates. The 3 November 2013 payment of $250 was not referrable to any arrangement and the Council was entitled to appropriate it, as it did, to reducing the arrears of council rates. 70 In those circumstances, although Ms Treloar could have expressed the 6 November email to the bank more carefully, Mrs Goater did not establish a prima facie case that it conveyed a negligent or misleading representation as to Mr and Mrs Goater having, first, failed to comply with the arrangement for payment of arrears of council rates and, secondly, since making the September 2013 arrangement, not having made any payment to reduce their arrears of water rates. There was no material before the trial judge or us to show any inaccuracy in what Ms Treloar had written in respect of the unpaid judgment debt or the Council's entitlements to enforce its legal rights, or its stated intention that it would pursue "legal action" in respect of that judgment debt. 71 The trial judge made no analysis of the legal or factual merit of what Mrs Goater's claim was, having regard to the material in evidence before him. Rather, his Honour simply accepted that the filed statement of claim was genuine and, apparently on that basis only, found that it had a reasonable prospect of success. 72 In our opinion, that finding was erroneous. The nature of Mrs Goater's claim was that the substance of the 6 November email misrepresented the position as to their compliance with arrangements that she and her husband had made with Council. 73 As we have found, the material in evidence, and Mrs Goater's various inconsistent assertions about the nature of both the arrangements and their compliance, or lack of compliance, with them suggested that Mrs Goater's claim lacks sufficient legal or factual merit to justify setting aside the bankruptcy notice under s 40(1)(g) of the Act: Guss 171 ALR at 606 [39]-[40]. 74 Nor did Mrs Goater's claim based on a breach of confidence or of the implied undertaking have sufficient legal or factual merit to justify his Honour's decision to set aside the bankruptcy notice. 75 Mrs Goater's email to the Council of 6 November 2013 (which we infer that she sent with her husband's authority on behalf of both of them), told Ms Treloar to "give Rohan from … [the] bank whatever information he needs". Ms Treloar's subsequent 6 November email to the bank commenced with the words "As per our phone conversation, and Shirley Goater's authorisation to give you information with us". There was no evidence to suggest that Mr Goater had not authorised Mrs Goater to give that authority to the Council on his behalf in the circumstances where both of them had a joint obligation under the FOS agreement to provide information to the bank. The whole of the circumstances suggest that he did give that authority. Accordingly, in our opinion, Mr and Mrs Goater authorised the Council to make the disclosures in the 6 November email to the bank of all of the information that they had or may have provided earlier under compulsion. 76 If we are wrong in that conclusion, we offer the following observations about difficulties with the way in which Mrs Goater made this claim. If a party to litigation (or a third party to it) who discloses documents or information under compulsion by reason of a rule of court (such as the rules relating to discovery or subpoenas), a specific order or otherwise (such as a request to a party seeking taxation of a bill of costs to produce documents to the taxing officer to support a claimed expense: Bourns Inc v Raychem Corp [1999] 3 All ER 154 at 170 at h-j per Aldous LJ with whom Brown P and Thomas LJ agreed), the party obtaining disclosure cannot use the documents or information, without leave of the Court, for any purpose other than that for which it was given unless it is received into evidence (Hearne v Street (2008) 235 CLR 125 at 154-155 [96]-[97], 158-160 [106]-[108] per Hayne, Heydon and Crennan JJ with whom Gleeson CJ at 131 [3] and Kirby J at 142-143 [46]-[49] agreed) or if the person making the disclosure consents to or authorises such a use of the documents or information so disclosed for another purpose. 77 Ordinarily, a statement in open court by a party obliged to give discovery or by a person answering a subpoena to produce that the party or person has no documents of a particular description to discover or produce might not be thought to attract an obligation constraining the further use of such a statement on any person present in the court room. 78 Mrs Goater's claim that the Council breached any obligation of confidence or the implied undertaking is inconsistent with her express authorisation, which appears to have been given also on Mr Goater's behalf, on 6 November 2013 for Ms Treloar to give the bank whatever it needed. 79 There was no evidence that as at 6 November 2013 either the Council or Ms Treloar was aware of the terms of the FOS agreement, and in particular, its provisions relating to the information concerning the financial arrangements that Mr and Mrs Goater had with the Council and their degree of compliance with them. It may not be a defence to an allegation, in a charge of contempt of court, that the Council's disclosure was a breach of the implied undertaking, for such a charge is one of strict liability. However, when Mrs Goater gave her written authority to Ms Treloar to give the bank whatever information it needed, Ms Treloar had Mrs Goater's express authority (and that of Mr Goater) to disclose to the bank matters relating to the Local Court proceedings, including information obtained by the Council from Mr and Mrs Goater under compulsion in the course of those proceedings, if the bank asked for that information. 80 Moreover, the cause of the bank's actions leading to the eviction of Mr and Mrs Goater being wrongful was, as the Court of Appeal held, the bank acting outside its legal rights. Thus, if there were arguably any wrongful communication of information by the Council in the 6 November email about matters that Mr and Mrs Goater disclosed at Moree Courthouse, (as opposed to the Council rate arrears and their lack of compliance with payment arrangements) it is unlikely that they would be awarded any substantial equitable compensation based on the disclosure to the bank of confidential information that would equal or exceed the amount claimed in the bankruptcy notice. In addition, it is difficult to think (but not necessary further to discuss) that any confidentiality or implied undertaking applies to subsequent disclosure or use of the fact that a person subpoenaed or required by a court order to produce documents described in the subpoena or order answered the subpoena or requirement by stating that the person had no such documents. 81 There was no material in evidence to demonstrate any, let alone a prima facie, case that the Council had gone beyond giving the bank the information that it wanted, including whatever might have been discussed between Ms Treloar and Mr [Rohan] Dalal, in accordance with the authorisation in Mrs Goater's earlier email. While it is not necessary to adduce "the admissible evidence which would make out a prima facie case before a court trying the issues that are involved in [the] counter-claim …": Ebert 104 CLR at 350, the material in evidence before us is insufficient to support the case on which Mrs Goater founded her claim under s 40(1)(g). 82 For these reasons, the trial judge erred in setting the bankruptcy notice aside. We are not satisfied, having regard to the material before his Honour, as supplemented by the further evidence of the arrangement that we admitted by consent on the appeal, that the claim relied on by Mrs Goater has sufficient legal or factual merit to justify, in all of the circumstances, setting aside the bankruptcy notice under s 40(1)(g) of the Act: Guss 171 ALR at 606 [39]-[40]. 83 It is not necessary in the circumstances to deal with the other grounds of the Council's appeal.

Conclusion 84 The appeal should be allowed with costs and the orders made by the trial judge should be set aside. The time for compliance with the bankruptcy notice should be extended by 21 days and Mrs Goater should be ordered to pay the Council's costs of the proceedings below. I certify that the preceding eighty-four (84) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Rares, Katzmann and Markovic.