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[1999] FCA 149
Federal Court of Australia
1999-02-08
Drummond J
Original judgment source is linked above.
1 This is an application to set aside a bankruptcy notice founded on a judgment debt. The judgment was obtained by the judgment creditor in District Court proceedings. The claim was for rent owing under a lease. The cross-claim upon which the debtor, the applicant in the present proceedings, relies to set aside the bankruptcy notice was, in fact, raised by him in those District Court proceedings. It is a claim for damages for misrepresentation and damages based on other causes of action associated with the lease. 2 The judgment creditor's action ultimately came on for hearing before Wensley ADCJ. The terms on which an adjournment of the judgment creditor's judgment summons had been earlier obtained by the present applicant had not been met. Wensley ADCJ gave the present applicant a short further time within which to meet those terms on which the earlier adjournment of the judgment creditor's action had been granted. The present applicant did not meet those terms. He then terminated the retainer of the solicitor who had been appearing before him up to that moment and sought a further adjournment of the proceeding. 3 In one of his affidavits, he explains the basis for his not being able to proceed with his cross-claim, which he raised in those District Court proceedings, as being due to his lack of means to enable to him to secure proper legal and accounting assistance for the prosecution of the cross-claim. In his more recent affidavit, he says that the primary reason why he did not proceed with his cross-claim in those proceedings before the District Court was that the judgment creditor had destroyed certain financial records which were essential to the proof by him of his damages claim. He goes on to explain that accountants originally retained had terminated their retainer, and that he had had to retain new accountants, in effect, to reconstruct the financial proof of the cross-claim. 4 The further adjournment that the present applicant sought from the District Court after he terminated his solicitor's retainer was refused. The District Court proceeded to non suit the applicant on his cross-claim and to give the judgment in favour of the judgment creditor on which the bankruptcy notice is founded. 5 The applicant could have sought leave to appeal the refusal of the adjournment that preceded the giving of the judgment against him. He did not pursue that course. What he did do was commence separate proceedings in the Supreme Court raising the matters the subject of the cross-claim which he had raised in the District Court proceedings. He explains this on the basis that the amount of the damages claimed was in excess of the monetary jurisdiction of the District Court and that, for that reason, he chose to institute proceedings in the Supreme Court rather than to pursue any appeal avenues he may have had in respect of the refusal of the adjournment. 6 There is a long line of authority which establishes, in the context of s 40(1)(g) the Bankruptcy Act 1966 (Cth), that considerations personal to a debtor which prevent him, as a matter of practical reality, from pursuing a cross-claim in proceedings in which judgment is given on which a bankruptcy notice is founded, do not constitute circumstances which entitle the debtor to characterise such a cross-claim as one which he could not have set up in the action or proceeding in which the judgment was obtained. See Re Vicini (1982) 64 FLR 323 and the cases there cited and Re Ling; Ex Parte Ling v The Commonwealth (1995) 58 FCR 129 at 132. The applicant seeks to avoid the inevitable application of this long line of authority, which would require dismissal of the present application, by referring me to a reference in the unreported decision of Johnstone v Guss by Sundberg J on 30 May 1997 to an old New South Wales case, Re Brown; Ex Parte Peisley Brothers (1892) 3 BC (NSW) 13. Manning J, in Brown at 14, said of the words "could not set up" in the New South Wales Bankruptcy Act similar to the present bankruptcy legislation:
… I think I ought to construe the words "could not set up" in the sub-section to mean, "could not set up and enable full justice to be done between the parties". The words of the section must not be narrowed; all that it means is that the debtor is not to lie by with his cross demand, but must prosecute it with due diligence.
7 That approach on the reading which the applicant urges on me is quite inconsistent with the long line of settled authority to which I have referred. But reference to the decision in Brown shows that it was dictum in a case which turned on the particular procedures governing the practice on the common law and the equity side in the New South Wales Supreme Court at the time of that decision. I do not regard it as any authority contrary to what I consider to be settled law. 8 The applicant does not rely, in support of an argument that the cross-claim could not have been set up in the District Court, on the fact that his cause of action, the subject of the cross-claim, is for an amount in excess of the monetary jurisdiction of the District Court. The reason for the applicant's decision not to rely on that as a consideration to urge upon me is no doubt to be found in decisions such as Re Ling where Hill J stated, at 137, that authority establishes:
… that a cross-claim will be one which could be set up in the action [for the purposes of s 40(1)(g) the Bankruptcy Act], notwithstanding that to do so the debtor may need to transfer the proceedings first to another court …
9 In my view, there is no basis upon which the applicant can hope to succeed. The application is dismissed. I certify that the preceding nine (9) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Drummond.
Nath
Clipway Pty Ltd
(1982) 64 FLR 323
(1995) 58 FCR 129