Re Annette, Edward & Anor [1981] FCA 129

Federal Court of Australia|1981-08-12|Before: McTiernan J, Henchman J, Lockhart J

On page 20 first line of second paragraph amend the

Bankruptcy - - counter-claim, set-off or cross demand - whether affidavit is of type required by ss. 41 (7) and 40 (1)

(g) of the Bankruptcy Act, 1966 - whether Court satisfied

that the debtors have the requisite counter-claim, set-off

Bankruptcy Act, 1966 (Cth.) ss. 40 (1) (g), 41 (5), (6), (7)

RE: EDWARD ANNETTE and GLORIA ANNETTE ACT NO. B 125 OF 1980

ORDERS : JUDGE MAKING ORDERS: LOCKHART J. WHERE MADE: AT SYDNEY DATE OF ORDERS: WEDNESDAY 12 AUGUST 1981

It be declared that the Court is not satisfied that the debtors possess a counter-claim, set-off or cross demand of the type referred to in s. 40 (1) (g) of the Bankruptcy Act 1966; and that the debtors pay the costs of the

IN THE FEDERAL COURT OF AUSTRALIA ) BANKRUPICY DISTRICT OF THE STATE OF A.C.T. No. B 125 of 1980 NEW SOUTH WALES AND THE ; )

REASONS FOR JUDGMENT LOCKHART J. Wednesday 12 August 1981 AT SYDNEY

On 18 October 1980 Edward Annette ("the male debtor") and Gloria Annette ("the female debtor") (Iwill refer to them together as "the debtors") were served with fourteen day bankruptcy notices in identical form issued by a Deputy Registrar in Bankruptcy at the request of Mutual Acceptance Limited ("the creditor"). The bankruptcy notices were based on a judgment signed by the creditor against the debtors in the Supreme Court of the Australian Capital Territory on 5 August 1977 for $3,909.70 ($3,839.70 debt and $70.00 costs).

On 28 October 1980 each of the debtors filed an affidavit sworn on 23 October 1980, in substantially the same form, which states that the judgment obtained against them was obtained also against a company, Wegan Constructions Pty. Limited ("Wegan Constructions"). The affidavit of the male debtor goes on to say:-

1978 whereby an item of machinery was leased to Edwin Annette and Gloria Annette by Mutual

Acceptance and to the purchase value of that machine was added to the total of the judgment, it was a part of that transaction that the judgment be honoured in such a fashion.

The affidavit of the female debtor makes the same statements except for the differences that necessarily arise because she is the deponent,

Before proceeding to the other evidence filed by the parties it is convenient to turn to the contention of the creditor that the two affidavits are not affidavits to the effect that the debtors have a counter-claim, set-off or cross demand of the kind required by ss. 40 (1) (g) and 41 (7) of the Bankruptcy Act 1966 ("the Act") namely, one that they could not have set up in the action in which the judgment was obtained.

The creditor contends that on the face of the affidavits it is manifest that the claim of the debtors is not a counter-claim, set-off or cross demand of the requisite type in that it does not "sound in money".

of this Court, 1 May 1981, unreported, a decision to which I

was a party, it was held that for a counter-claim, set-off or

cross demand to be of the relevant type, it must be "something sounding in money...What the section contemplates is a claim

to the enforcement of a right sounding in money". This was

the view expressed by Latham C. J., with whom McTiernan J. agreed, in Vogwell v. Vogwell (1939) 11 A.B.C. 83 at p. 85.

A similar view was expressed in the earlier case of Re Jocumsen (1929) 1 A.B.C. 82 by Henchman J. of the Supreme Court of Queensland at p. 85 where his Honour commented:

demand as is measurable in amount. An amount must have reference to money."

entitled to a declaration of trust of certain real estate, alternatively an equitable charge over the real estate for a certain amount of money. Deane J. and I held that the debtor's claim was not one for payment by the creditor to him of an amount of money, but was a claim:

",..for the proper administration of the trust which he alleges exists and, one would presume, ultimately for an order for sale or the appointment of a different trustee for sale...Indeed, even if the debtor succeeds in obtaining against the creditor a declaration of trust and, ultimately, an order for sale, that declaration and order would not provide legal justification for a refusal to pay the amount of the judgment debt on account of money ent.

Thus the facts which the debtor asserted in James v.

Abrahams as constituting the requisite counter-claim, set-off

or cross demand were very different from those relied on by the debtors in the present case.

Deane J. and I referred to a possible modification of the views expressed by Latham C. J. and Henchman J. as to the requisite nature of a relevant counter-claim, set-off or cross demand namely, where there is a claim for immediate delivery of a specific chattel of an ascertainable value: see In Re A Bankruptcy Notice 1934 1 Ch. 431 at p. 441 and in Re A Debtor 1958 1 Ch. 81.

In the present case the debtors assert that they could seek a declaration from the Supreme Court of the Austrdian Capital Territory where the judgment was obtained against them, that no money is due by them to the creditor because the creditor agreed to release them from payment of the amount of the judgment debt. There are perhaps various ways in which the claim of the debtors could be formulated (a plea of release, or discharge or accord and satisfaction); but whichever it be I am satisfied that, if the facts are as alleged by the debtors in their affidavits, they would have a cross demand which they could not have set up in the original

action. See Re Brink; ex parte The Commercial Banking Co, of

Sydney Limited (1980) 30 A.L.R. 433, especially at p. 436 as to the meaning of the words "counter-claim, set-off or cross

demand"; James v. Abrahams and Eastick v. A.N.Z. Banking Group Ltd

a judgment of the Full Court of this Court, 19 June 1981

The cross demand of the debtors would be one "sounding in money" in the sense that it would provide legal justification for a refusal to pay the amount of the judgment debt.

The present case is thus distinguishable from James

v. Abrahams. Alternatively, if the claim of the debtors is not one that readily answers the description of a claim "sounding in money," it should be treated as a further modification to the expression used by Latham C.J. in Vogwell v. Vogwell and Henchman J. in Jocumsen.

I am satisfied therefore that the affidavits filed by the debtors within the period of fourteen days of service of the bankruptcy notices upon them answer the description of affidavits of the kind required by ss. 41 (7) and 40 (1) (g).

I turn to the next question namely, whether I am satisfied that the debtors have the requisite counter-clain, set-off or cross demand (see s. 41 (7) ).

To establish that they have the requisite counter-clain, set-off or cross demand, debtors must satisfy the Court that they have a prima facie case: see Re Brink (supra); Ebert v. The Union Trustee Co. of Australia Limited (1960) 104 C.L.R. 346 at p. 350; and Eastick v. A.N.Z. Banking Group Ltd.

It is now necessary to turn to the whole of the evidence adduced before me and not only the two affidavits of the debtors to which I have referred. It is, of course, only those affidavits that may be considered for the purpose

of dealing with the first contention of the debtors because no

other evidence was filed within the time required for compliance with the requirements of the bankruptcy notices.

The debtors are directors of Wegan Constructions, and the male debtor is its managing director. The female debtor played no active role in its affairs.

From the early 1970's, Wegan Constructions carried on business as an engineering contractor principally in the earthmoving business in the Albury/Wodonga area.

On 6 April 1974 Wegan Constructions leased from the creditor a back hoe; and the debtors guaranteed the repayments under the lease.

During 1975 Wegan Constructions decided to dispose of certain equipment and to acquire a new item of equipment called a Davis Trencher to replace it.

On 3 November 1975 Wegan Constructions entered into an agreement with the creditor for lease of a Davis Trencher. The agreement provided for thirty-six monthly rental payments of $621.50 each from 3 November 1975 until 3 October 1978.

The residual value of the equipment was fixed at $8,000.00. On 3 November 1975 the debtors signed a written guarantee in favour of Mutual Acceptance guaranteeing performance by Wegan Constructions of its obligations under the lease.

When the lease of the Davis Trencher was entered into, Wegan Constructions was leasing other items of equipment from other finance companies.

During 1976 building activity in the Albury/Wodonga

area slowed down and Wegan Constructions found it difficult

to find new business. Early in 1977 Wegan Constructions ceased to make the monthly payments of rental to the creditor under the two leases (but it was always at least one month late) presumably because it was short of funds. Wegan Constructions was also in arrears with rental payments under leases with other finance companies.

In July 1977 the creditor retook possession of the Davis Trencher. :

The judgment creditor commenced proceedings in the Supreme Court of the Australian Capital Territory against Wegan Constructions and the debtors for recovery of the moneys due under the leases and the guarantee (one proceeding in respect of each lease). Appearances were entered by a solicitor on behalf of Wegan Constructions and the debtors but no defences were filed. Judgment was signed by default on 5 August 1977 by the judgment creditor against Wegan Constructions and the debtors in the proceeding relating to the Davis Trencher in the sum of $3,839.70 togetter with $70.00 costs being the amount that formed the basis of the bankruptcy notices in this case. On the same day judgment was entered against Wegan Constructions and the debtors for $3,265.83 and $70.00 costs in the proceeding relating to the back hoe.

When the male debtor became aware that these judgments had been entered he instructed his solicitors to determine the

precise amount of the liability of the debtors to the judgment

creditor and to attempt to find a satisfactory means of discharging i

The male debtor says that in mid-September 1977 he was approached by Mr. Warwick Davis, the collection manager of the creditor, who mentioned both judgments to him, and said:-

The male debtor says that he agreed and that he subsequently signed documents which he believed to be "terms of sale and a release of the back hoe". He says that he then handed all documents back to Mr. Davis.

Mr. Davis says that there was a considerable number of conversations and considerable time and effort spent in relation to dealings between the creditor and the male debtor with respect to the back hoe and that he does not recall the specific conversation to which I have just referred.

The male debtor says that in early 1978 he got in touch with Mr. Davis about the Davis Trencher. He asserts that Mr. Davis said that he had been unable to sell it. He says that he subsequently telephoned Mr. Davis about 6 March 1978

The male debtor: "What is happening about the Davis Trencher?" Mr. Davis: "I am unable to sell it."

The male debtor: "Would you like me to try and sell it?"

The male debtor: "How much would I have to ask for it so as

to cover your sale price and the judgment debt I owe you?"

Mr. Davis says that he cannot recall a specific conversation with the male debtor on 6 March 1978. He says that there had been a considerable number of discussions with the male debtor with respect to the Davis Trencher as early as 30 April 1977. He denies that there was any statement by him to the male debtor that the sum of $17,000.00 would satisfy the sale price of the machine and the judgment.

In oral evidence the male debtor said that Mr. Davis told him that the $17,000.00 was made up of the amount owing on the Davis Trencher and the residual value thereof together with the judgment debt in respect of the Davis Trencher.

The male debtor says thatafter this last conversation he made certain enquiries and that, on or about 13 March 1978, he telephoned Mr. Davis when the following conversation occurred: -

The male debtor: "TI think I have a buyer for the Davis Trencher and I may be able to get $20,000.00 for it. The buyer is the Murrumbidgee Shire Council but Ifill have to take the machine down there to demonstrate it to them before they'11 buy it."

Mr. Davis: "We'll agree to that but you must pay the costs of taking the machine down and to keep the transaction legal, you'11 have to lease it for a month."

Mr. Davis said that he could not recall this specific conversation with the male debtor; but he says that there was

a number of conversations "the context of which in general" is

On 20 March 1978, Wegan Constructions and the debtors entered into a deed with the judgment creditor. The deed recites the agreement for lease of the Davis Trencher of 3 November 1975, that the debtors had guaranteed the due performance by Wegan Constructions of its promises, that default had been made in payment of rental, that the creditor had retaken possession of the goods on 16 July 1977; 'that the total of arrears of rent under the lease as at that date "was $5,704.02 of which judgment was obtained in the sum of $3,839.70 together with $70.00 costs", that the debtors desired to assist the creditor in disposing of the goods, and that they and Wegan Constructions requested the creditor to rent the goods to the debtors from the date of the agreement (i.e. 20 March 1978) to 17 April 1978 for the purpose of demonstrating them to the Murrumbidgee Shire Council. The operative part of the agreement provides that in consideration of $600.00 paid by the debtors to the creditor it agrees to rent the goods to them for the period stated subject to the terms of the lease, a copy of which is annexed thereto. Clause 2 of the agree- ment provides that the terms of the agreement shall in no way pregudice:-

demonstrated it to the Murrumbidgee Shire Council; but the

Council decided not to purchase it, so the male debtor returned it to the creditor.

The male debtor says that on 10 May 1978 he telephoned Mr. Davis and the following conversation occurred:-

The male debtor: "My wife and I have obtained some long-term work in Gosford and we are moving there to live. We think . we will have enough money to pay out the Davis Trencher if you will sell it to us. How much will it be for the machine and the judgment debt?"

Mr. Davis: "The total amount outstanding on the machine and the debt adds up to $17,000.00".

The male debtor: "Alright, I'll buy it for that but I have no cash, I'll need to pay it off."

Mr. Davis says that he does not recall that conversation; put he does recall that a considerable number of conversations took place with respect to the male debtor's position from which it became clear that the male debtor considered that he would be able to obtain work near the Goulburn area trading as Goulburn Pipeline Constructions and that he would like to lease the machine back. He says that during these conversations, there never was any indication by him that the machine could be bought for a figure of $17,000.00 which would pay out all the debts of the debtors.

The male debtor says that on or about 1 June 1978 he flew to Canberra to see Mr. Davis, went into his office and Signed a document which he says be believed was an agreement under which he and his wife were to purchase the Davis

Trencher from the judgment creditor by instalments as discussed

by him with Mr. Davis in the conversation to which I have just ~

referred and that the agreement satisfied the judgment debt.

The document dated 1 June 1978 is in fact an agree- ment for lease of the Davis Trencher in terms commonly found in such agreements. Under the agreement the creditor leased the Davis Trencher to the debtors for thirty-six months at a rental of $25,020.00 payable by monthly instalments of $695.00 each. A residual value of $8,000.00 was fixed.

Certain of the monthly instalments referred to in the lease were duly paid in advance; but the last instalment - for March - was made on 5 April 1979.

The male debtor says that on 17 January 1979 he and

Mr. Davis had a telephone conversation in the following terms:>-

Mr. Davis: "If you are interested, I have a buyer in Sydney for the Trencher".

The male debtor: "Tf possible, $20,000.00 but only if

Mr. Davis: "Yes it will and if I can get any more that will be yours,"

Mr. Davis denies that the conversation ever took place. The male debtor says that on 30 March 1979 he had

another conversation with Mr. Davis in these terms:-

Mr. Davis: "The person in Sydney will buy the Trencher for $20,000.00."

The male debtor: "Good, but I have just sent a cheque and you won't need me to pay any more will you?"

Mr. Davis denies that the conversation ever took place.

The male debtor says that he heard no more from Mr. Davis until he telephoned him a few months later when Mr. Davis said:-

"T am sending a truck up for the machine. Will you load it for me?"

Mr. Davis says that he does not recall that conversation, although the creditor was informed of the location of the machine by the male debtor.

The male debtor says that nothing more happened until September 1979 when Mr. Davis telephoned him and said:

"A truck is coming for the Trencher. Will you load it for me?"

He says that a short time later, a truck arrived. He loaded the Davis Trencher onto it and the truck drove away. Mr. Davis agrees that the machine was collected but does not agree that it was collected as described by the male debtor.

The male debtor says that on 21 November 1979, Mr. Davis telephoned him and said:-

Mr. Davis denies that the conversation took place and says that the machine is still held by the judgment creditor in Canberra, has been repaired and is in good working order; but as yet a buyer has not been obtained for it.

The debtors have been in default under the lease of

1 June 1978 since about March 1979. The Davis Trencher was

repossessed about August 1979. The amount recoverable under the lease at 24 November 1980 was $19,440.97 and that amount does not include the residual value of $8,000.00. The creditor claims that in all, the debtors owe it about $28,500.00.

An affidavit was sworn by Mr. D. J. Boyall, a solicitor of Wodonga, who said that his firm was engaged from about 1975 onwards to act for the debtors in various matters including a matter concerning the debts due to the creditor by Wegan Constructions and the debtors.

He said that it was necessary for him from time to time to have discussions with the male debtor and Mr. Davis and with the solicitor for the creditor. When such discussions took place it was his practice to record the details of them on a tape recorder. His secretary then transcribed them.

He produced certain typewritten notes, the material parts of which record that on 19 July 1977 Mr. Davis and he had a discussion, which caused Mr. Boyall to note, inter alia, Item 2 relating to that discussion which reads:-

on instructions from Wegan Constructions in the hands of Mutual Acceptance to sell at a price of $15,000.00 to $18,000.00. Upon payment of the amount of $3,839.70 and $3,107.50 and the $200.00 there will be surplus to revert back to Wegan Constructions."

The reference to $3,839.70 is to the arrears of rental for the Davis Trencher, and the $3,107.50 refers to 5 months

rental for the Davis Trencher from March to July 1977.

The notes record a visit from the male debtor to Mr. Boyall on 15 September 1977 when he informed Mr. Boyall that the creditor had a buyer for the Case back hoe who was prepared to pay $11,000.00; and that, in a form of release he was required to sign with the creditor, there was provision for payment to the repairer of the Case back hoe of $3,360.97, and that he was prepared to sell on that basis.

The notes also contain reference to a discussion between the solicitor for the creditor and Mr. Boyall on 12 October (it seems from the whole of the evidence it must have been 1977 although the notes do not make this clear) when Mr. Boyall suggested that, in all the circumstances, the best course for the creditor to take would be to refrain from taking proceedings until such time as the case against the Albury/Wodonga Sewerage Authority was determined because Wegan Constructions had no assets to pay its debts and suggested that a formal deed be entered into to that effect.

The fact is that an action was brought by Wegan Constructions against the Albury/Wodonga Sewerage Authority relating to work done by the former for the latter and that final judgment was entered in 1978.

Mr. Davis says that the meeting of 19 July 1977 had been arranged to discuss the giving of an irrevocable authority by Wegan Constructions to the creditor for the payment of arrears of rental; and that discussions with Mr. Boyall may have included the fact that, had full arrears of rental been paid and the Davis Trencher sold promptly for a satisfactory price, the creditor may have negotiated with the debtors for

settlement of the debts. He says that no irrevocable authority

It is common ground that there were discussions between the parties and their solicitors with a view to reaching agreement on the full amount of the indebtedness of Wegan Constructions and the debtors to the creditor so that Wegan Constructions could give to its and to the debtors! solicitors an irrevocable authority to pay that amount to the creditor out of the fruits of the action against the Albury/ Wodonga Sewerage Authority. But the discussions did not result in any agreement.

The convenient starting point to determine the questions of fact involved in this case is the agreement for lease of 1 June 1978 relating to the Davis Trencher. It is consistent with the creditor's case and inconsistent with the debtors' case. It is an agreement for lease of equipment in terms which it is not suggested are otherwise than usual in transactions of this nature. On its face it is inconsistent with the sworn evidence of the male debtor that, at the time he signed the document, he believed he was buying the machine and merely giving effect to an earlier discussion between himself and Mr. Davis to buy it and to include the amount of the judgment debt (for the Davis Trencher) in the purchase price.

That is not to say that the debtors must necessarily fail. They recognise the difficulties in their path created by the terms of the lease; but seek to establish a case of a collateral agreement to the effect that the creditor agreed

with them that the total rent payable under the lease was

fixed on the basis of a purchase price of $17,000.00 representing the value and the amount owing under the judgment signed in respect of that machine. The debtors accept that they bear the onus of establishing their case and that it is not an easy onus to discharge. The female debtor played no role in the discussions at all. She simply signed what her husband gave her to sign. The debtors! case rests largely upon the oral evidence of the male debtor; but it conflicts substantially with the evidence of Mr. Davis. Having seen both Mr. Davis and the male debtor in the witness box and observed their demeanour, I am satisfied that Mr. Davis is a witness of truth and that, where his evidence conflicts with that of the male debtor, I prefer the evidence of Mr. Davis. Notwithstanding that the recollection of Mr. Davis of the details of certain conversations with the male debtor was imprecise and, at times, rather vague; (this is hardly surprising) he firmly denied those aspects of the conversations which the male debtor said took place between them and are obviously critical to the case of the debtors. The male debtor swore that he read the agreement for lease of 1 June 1978 before he signed it; but that he did not read every word and clause in it. He does not suggest that he was misled by anything Mr. Davis said to him at the time he saw Mr. Davis in the latter's office and signed the document. He said that he simply assumed that it was an agreement giving effect to the earlier discussion between

himself and Mr. Davis namely, an agreement to buy the machine.

People, even experienced businessmen, not infrequently sign documents without reading them. beforehand; but even a cursory perusal of the agreement of 1 June 1978 would have revealed to the male debtor that what he was signing was an agreement for lease of a Davis Trencher. He was an experienced businessman and familiar with leases of earthmoving equipment. He was the managing director of Wegan Constructions and had some fifteen years' experience in the earthmoving business. At one stage, according to his own evidence, he or Wegan Constructions had 21 machines in use, they having been either purchased or leased from various finance companies. I do not accept that when he signed the lease of 1 June 1978 he did not realise the true character of the agreement he was signing.

The case for the creditor is more consistent with the inherent probabilities than the case for the debtors. Wegan Constructions had defaulted in its obligations under the lease of the Davis Trencher; but the creditor retook possession in July 1977. The creditor wished to dispose of the machine. It was in good order, but difficult to sell as only a limited market was available. The attempt to sell it to the Murrumbidgee Shire Council in March/April 1978 failed. The male debtor represented to te creditor that he would be able to obtain work near the Goulburn area trading as Goulburn Pipeline Constructions and would like to lease the machine back. It was this that lead to the lease of 1 June 1978 from the creditor to him. It must be remembered that it was as far back

as early 1977 that Wegan Constructions ceased to pay rentals

to the creditor and other finance companies under leases of various items of equipment, so plainly it was no candidate for a lease in June 1978.

Nor must it be forgotten that the debtors made monthly payments of rental under the lease of 1 June 1978 until March 1979. Although it is theoretically possible that they were made on the basis that they were instalments of purchase price, I cannot accept, in all the circumstances of this case, that the male debtor failed to appreciate that what he was paying was rental.

The circumstances surrounding the litigation between Wegan Constructions and the Albury/Wodonga Sewerage Authority provide cogent evidence of the reasons why the creditor regarded that litigation as a possible source of payment of the judgment debts in respect of both the Davis Trencher and the Case back hoe and why it did not seek to enforce the judgment in respect of the Davis Trencher for so long. The information available to the creditor from various sources, including its own accountants, the solicitor for Wegan Constructions and the debtors themselves, was that Wegan Constructions had no assets save a contingent asset namely, the action against the Albury/ Wodonga Sewerage Authority. The creditor and the male debtor had been negotiating, as had their solicitors, to obtain an irrevocable authority in favour of the creditor and directed to the solicitors for Wegan Constructions and the debtors to

enable them to have recourse to any moneys that might result

from a judgment against the Authority. Indeed, there were attempts by the creditor to enforce the judgment against

Wegan Constructions in respect of the Davis Trencher by having it transferred from the Supreme Court of the Australian Capital Territory to the Supreme Court of New South Wales in order to levy execution against assets, if any, in New South Wales;

but the creditor had great difficulty in achieving this result so it decided not to pursue it.

I do not see inherent probability in the evidence given by Mr. Davis as to how the rental payable under the lease of 1 June 1978 was calculated. He said the creditor took the figure of $17,000.00, not as the market value of the machine, because the only offer that had been received for it was about $4,500.00; but it was treated as the capital value on which the leasing transaction was negotiated. It was the principal sum on which interest was calculated and the interest rate was about 33% simple interest. The reason for such a high rate, was, no doubt, because of the creditor's view of the debtors! financial position.

I see no good purpose in referring further to the evidence of the male debtor to indicate why I prefer the evidence of Mr. Davis where their evidence conflicts, except to say that the evidence given by the male debtor in his affidavit of 23 October 1980 (paras. 2 and 3 in particular) does not lie easily with his later evidence, notwithstanding

the allowance that I make for the fact that the affidavit of

23 October 1980 was doubtless sworn in haste as so often is the case with affidavits filed for the purposes of s. 41 (7).

I am not satisfied that the debtors have such a counter-claim, set-off, or cross demand as is referred to in s. 40 (1) (g) of the Act. Indeed, I am satisfied positively that they do not have one.

The debtors have also filed a separate application which was heard by consent together with the matter under s.41 (7). to set aside the bankruptcy notices. They are described in fact as applications that the bankruptcy notices be "struck out"; but I shall treat them as if they were applications to set aside the notices, Counsel for the debtors informed me that this was for the purpose of enabling arguments to be based on s. 41 (5) and (6). In view of my findings with respect to s. 41 (7), it is not necessary to consider these alternative claims because each of them is based on the assumption that the amount claimed by the creditor in the bankruptcy notices as being due to it exceeds the amount in fact due. The conclusion I have reached with respect to s. 41 (7), which incidentally may require a lesser standard of proof than that required by sub-sections (5) and (6), is necessarily inconsistent with that assumption namely, that nothing is due by the debtors to the judgment creditor. In other words, having reached the conclusion that the debtors have no prima facie case, it appears to me that the arguments based on s. 41 (5) and (6) must necessarily fail.

those sub-sections would avail the debtors even if I had

reached a conclusion in their favour with respect to sub-s. (7); but I need not pause to consider the matter further.

The Court orders that it be declared that the Court is not satisfied that the debtors possess a counter-claim, set-off or cross demand of the type referred to in s. 40 (1) (g) of the Act; and that the debtors pay the costs of the proceedings

1 cerify that ih.s and tre twenty-one Caf) presec ng pacts avs a rue ceny cf ihe Reasons fer ducgmort horen cf his Moneur

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Judgment (146 paragraphs)