Federal Court of Australia|1995-06-23|Before: Cooper J

Re Cosimo Longo Ex Parte: Cosimo Longo [1995] FCA 1324 (23 June 1995)

BANKRUPTCY DISTRICT OF THE STATE OF QUEENSLAND COOPER J

Bankruptcy - Application to set aside bankruptcy notice - whether court should go behind a judgment entered by compromise in the Queensland Building Tribunal and registered in the District Court of Queensland - must be substantial reasons for questioning whether there is in truth and reality a debt owing - substance of complaint that judgment creditor would have received lesser amount if claim had not been compromised - no unilateral mistake by judgment debtor.

Bankruptcy - Whether judgment debtor had counterclaim, set off or cross demand within s.40(1)(g) Bankruptcy Act 1966 (Cth) - claim deposed to inconsistent with statement of claim filed by judgment debtor in proceedings in Supreme Court of Queensland - claim could have been set up in Queensland Building Tribunal or by transfer to District Court of Queensland - no separate claim for a debt but a joint and several claim against judgment creditor in a partnership capacity.

Wren v. Mahony [1972] HCA 5; (1972) 126 CLR 212 - Appl.

Corney v. Brien [1951] HCA 31; (1951) 84 CLR 343 - Appl.

Oliveri v. Stafford (1989) 24 FCR 413 - Appl.

Re: Brink Ex parte Commercial Bank Co. of Sydney Ltd. [1980] FCA 78; (1980) 44 FLR 135 -

Re Wedd; Ex parte Wedd (Applicant); Parker (Respondent) (1961) 19 ABC 36 - Appl.

Woorabinda Aboriginal Council v. Ealesrose Pty. Ltd. (ACN 010 378300)

Trading as NK Builders (Unreported, 22 November, 1993, No. 109 of 1993) -

Ex parte Banner; In re Blythe (1881) 17 Ch.D. 480 - Dist.

Re Frazer Ex parte Central Bank of London (1892) 2 QB 633

Simon v. O'Gormon Pty. Ltd. [1979] FCA 75; (1979) 27 ALR 619

Re David Ex parte Lahood (1979) 26 ALR 306

Petrie v. Redmond (1942) 13 ABC 44

Re Vojnovski (1970) ALR 355

In re A Debtor (1929) 1 Ch. 125

Wilkinson v. Osborne [1915] HCA 92; (1915) 21 CLR 89

Re Riviere; Ex parte Original Mont de Piete Ltd [1919] NSWStRp 56; (1919) 20 SR (NSW) 77

Deputy Commissioner of Taxation v. Chamberlain (1990) 26 FCR 221

Re: Rochela Ex parte Antonios [1980] FCA 132; (1980) 49 FLR 423

Re Franks Ex parte GIO Holdings Ltd. (1990) 24 FCR 398

1. The application filed 2 March 1995 is dismissed.

2. The applicant pay the respondent's costs of and incidental

to the application, including reserved costs if any, to be

taxed if not agreed.

Note: Settlement and entry of orders is dealt with in Rule 124 of the Bankruptcy Rules.

COOPER J The applicant, Mr. Cosimo Longo, brings an application seeking the following orders :-

"1. An Order that the Bankruptcy Notice filed 2 February

1995 be set aside; or in the alternative,

2. A Determination by the Court that Cosimo Longo 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

could not have set up in the action or proceeding in

which the order was obtained."

The alternative orders sought can be conveniently dealt with in turn.

2. The bankruptcy notice in question, issued on 2 February 1995, was founded on a consent judgment in the sum of $40,000.00 obtained against the applicant in the Queensland Building Tribunal ("the Tribunal") in favour of a Mr. Paul Cavaliere on 3 October 1984. A certified copy of the Tribunal's order was registered in the District Court at Southport on 27 January 1995 :-

"UPON HEARING MR McGHEE ON BEHALF OF THE APPLICANT AND MR

WALSH ON BEHALF OF THE RESPONDENT OF THE ABOVE APPLICATION

THE QUEENSLAND BUILDING TRIBUNAL MAKES THE FOLLOWING ORDERS

BY CONSENT.

THIS ACTION IS SETTLED ON THE FOLLOWING BASIS:

1. THAT THE RESPONDENT SHALL PAY TO THE APPLICANT THE SUM

OF $40,000 PLUS THE APPLICANT'S COSTS OF THIS

APPLICATION, INCLUDING RESERVED COSTS TO BE AGREED, OR

FAILING SUCH AGREEMENT, TO BE DETERMINED BY THE

TRIBUNAL AT A HEARING AFTER WRITTEN SUBMISSIONS ARE

FILED IN THE REGISTRY AND EXCHANGED BY THE PARTIES

(HEREINAFTER REFERRED TO AS 'THE SETTLEMENT SUM').

2. THAT THE RESPONDENT, COSIMO LONGO WARRANTS THAT HE IS

A PARTY TO A JOINT VENTURE AGREEMENT WITH KIRRALEE PTY

LTD IN RESPECT OF LOT 67, KURANDA DRIVE, ROBINA ISLAND

IN THE STATE OF QUEENSLAND.

3. THAT THE SETTLEMENT SUM BE PAID TO THE APPLICANT ON 31

DECEMBER 1994 OR ON THE SETTLEMENT OF THE SALE OF LOT

67, KURANDA DRIVE, ROBINA ISLAND, WHICHEVER IS THE

EARLIER.

4. THAT THE RESPONDENT AND GEORGIA SYLVIA LONGO AGREE NOT

TO DELIVER A CERTIFICATE OF READINESS IN RESPECT OF

THE PROCEEDINGS COMMENCED BY SUPREME COURT WRIT NO.

528 OF 1994 UNTIL PAYMENT OF THE SETTLEMENT SUM OR 31

DECEMBER 1994, WHICHEVER IS THE EARLIER.

5. THAT THE SAID SUPREME COURT PROCEEDINGS BE STAYED

PENDING PAYMENT OF THE SETTLEMENT SUM IF THE

SETTLEMENT SUM IS NOT PAID BY 31 DECEMBER 1994.

6. THAT ALL MONIES PAYABLE TO THE RESPONDENT UPON THE

SALE OF LOT 67, KURANDA DRIVE, ROBINA BE PAID INTO THE

TRUST ACCOUNT OF THE SOLICITORS FOR KIRRALEE PTY LTD.

7. THAT THE RESPONDENT WITHIN SEVEN DAYS GIVE AN

IRREVOCABLE AUTHORITY TO THE SOLICITORS FOR KIRRALEE

PTY LTD TO PAY TO THE TRUST ACCOUNT OF MESSRS PRICE and

ROOBOTTOM THE SETTLEMENT SUM FORTHWITH UPON SALE OF

LOT 67, KURANDA DRIVE, ROBINA ISLAND, A COPY OF SUCH

AUTHORITY TO BE PROVIDED TO MESSRS PRICE and ROOBOTTOM

UPON ITS BEING GIVEN.

8. THAT PAUL CAVALIERE ON THE FIRST PART AND COSIMO LONGO

AND GEORGIA SYLVIA LONGO ON THE SECOND PART EXECUTE A

DEED OF SETTLEMENT IN THE ABOVE TERMS.

9. THAT BOTH PARTIES ARE GRANTED LIBERTY TO APPLY TO THE

TRIBUNAL UPON THE GIVING OF FOUR DAYS NOTICE TO EACH

OTHER."

3. By virtue of section 91 of the Queensland Building Services Authority Act 1991 (Qld) ("the Building Services Act") a determination by the Tribunal, once registered in the District Court, has the same force and effect as if the determination had been originally given as a judgment of the District Court and entered on the day of registration.

4. In order to understand the circumstances giving rise to the consent judgment and the basis that the applicant contends the bankruptcy notice ought to be set aside, it is necessary to set out something of the dealings between the parties.

5. On 8 February 1993 the applicant purchased from the developer of Robina Island, Lot 67 Kuranda Drive, Robina, Queensland ("Lot 67") on what the applicant calls "builders terms". I take that to mean that the purchase price of the land was to be paid out of the proceeds of the sale of the land and a dwelling to be constructed on it. The applicant deposes to an oral agreement between he and Mr. Cavaliere (a licensed builder) that the applicant would pay $6,000.00 cash to Mr. Cavaliere for the use of his Builders Licence and for supervision of construction of a dwelling on Lot 67. The applicant deposes that the agreement was conditional on Mr. Cavaliere's regular sub-contractors being used on the project.

6. On 30 September 1993 an Housing Industry Association ("HIA") building agreement between the applicant as owner and Mr. Cavaliere as builder was registered with HIA. The "Price of Works" was to be $39,500.00, which was to be paid in one sum at "lock-up stage". On the same day, the Albert Shire Council granted approval for the project.

7. The applicant deposes that Mr. Cavaliere approached him just before Christmas 1993 with a document, which is annexed to an affidavit of the applicant, headed "Housing Industry Association Specification". The document sets out, item by item, the elements of a building project, a brief description and the amount allowed for each item. Owners and builders simply "fill in the blanks". In this case the specification has been completed in handwriting and appears to have been done with some haste. Further, the "amount allowed" column is not filled in. Rather, for each item, the blank space left on the standard form specification has been filled by :-

"owner to supplies (sic)"

"builder no responsible, owner to pay all bill (sic)"

"owner to supplies (sic) labour"

"owner to employed (sic) plumber"

"builder to supplies (sic) at owners choice, owner to pay for

tiles"

8. On the tenth and final page of the document in the space between the last standardised item and the signatures of the client and builder, the following has been inserted in typewritten form :-

"The builder will receive the sum of $39500.00 for

supervision, this payment will be devided (sic) into

installments (sic), $20000 on sign (sic) the contract and

specification, $19500 on completion, lock up stage. The

owner will be responsible to pay for all material and

labour, the owner can use the account facilty (sic) of the

builder, the account must be paid in full after 30 days and

20% administration fees will be paid to the builder on

termination of this contract. The owner will be responsible

for payment to the taxation department for P.P.S. forms for

payments collected by the owner.

The builder will supply tiles to the owner at the cost plus

20% for administration and over heads (sic), this payment

will be due 7 days after the tiles has (sic) been laid.

The builder will supply the owner with bathroom fittings

(FRATELLI FRATTINI) at the cost plus 20% administration and

overheads, this item will be paid 7 days after

installation."

9. On 3 March 1994 Mr. Cavaliere filed an "Application to Commence Proceedings" in the Queensland Building Tribunal claiming to be owed $48,508.35 in respect of the building agreement between he and the applicant. In a letter to the chairperson of the Tribunal, Mr. Cavaliere states that the $48,508.35 comprises a $19,500.00 final payment, an overhead of 20% on $84,909.74 ($16,981.95) plus ceramic tiles to the value of $42,026.40.

10. A preliminary conference was held on 25 May 1994 and a "preliminary conference summary sheet" prepared.

11. The application, listed for hearing on 9, 10 and 11 August 1994, was adjourned on 9 August, until 3, 4 and 5 October 1994.

12. On 3 October 1994 both parties appeared at the Tribunal and were represented by counsel. After lengthy discussion between the respective legal representatives, an agreement was reached. Mr. Cavaliere's solicitor, Mr. Brendan Peace, deposes that he hand-wrote the agreement (a copy of which is annexed to his affidavit) and with the consent of both parties, the handwritten agreement was read into the record of the Tribunal.

13. Consequently the Tribunal made an order in terms of that registered in the District Court at Southport on 27 January 1995.

14. On 31 January 1995 an application for the issue of a bankruptcy notice was filed on behalf of Mr. Cavaliere. A bankruptcy notice to the applicant was issued by a Deputy Registrar of this court on 2 February 1995.

15. The applicant submitted that the court should go behind the District Court judgment and inquire as to whether there is in truth and reality a debt owed by the judgment debtor to the judgment creditor. Alternative grounds were advanced in support of this submission :-

1. The applicant was pressured by his legal advisers to

compromise the claim in order that he avoid any adverse

finding as to his credit which may damage him in other

pending proceedings.

2. The $39,500.00 contract price to "lock-up stage" as appears

in the HIA specification is a "sham" and the "special

conditions" clause in the same document was fraudulently

added by or on behalf of Mr. Cavaliere after execution of

said document.

3. The applicant agreed to the consent judgment in a mistaken

belief that the settlement sum was to be paid on 31 December

1994 or on the settlement of the sale of Lot 67, whichever

was the later, not earlier as appears in clause 3 of the

order.

16. The existence of a judgment is prima facie evidence of a debt (Re Frazer Ex parte Central Bank of London (1892) 2 QB 633 at 636). However a judgment is never conclusive in bankruptcy and the court has a discretion to go behind a judgment to determine whether there is in truth and reality a debt due (Wren v. Mahony [1972] HCA 5; (1972) 126 CLR 212 at 224-225). Before the court will exercise the discretion there must be established substantial reasons for questioning whether there is in truth and reality a debt owing to the creditor; the court will not inquire into the validity of a judgment debt as a matter of course (Simon v. O'Gormon Pty. Ltd. [1979] FCA 75; (1979) 27 ALR 619 at 633; Re David Ex parte Lahood (1979) 26 ALR 306 at 307). The requirement may more readily be met where there has been no adjudication on the merits, for example a default judgment and there exists a bona fide allegation that no real debt lies behind the judgment (Corney v. Brien [1951] HCA 31; (1951) 84 CLR 343 at 357-358; Petrie v. Redmond (1942) 13 ABC 44 at 49; Re Vojnovski (1970) ALR 355 at 359; Oliveri v. Stafford (1989) 24 FCR 413 at 422).

17. The applicant submitted that the judgment in the present case was not one based on an adjudication. Rather, it was a consent judgment based on a compromise. Such a judgment, it was submitted, may be gone behind even where counsel has advised on the compromise where there had been a yielding to an unjust claim in order to avoid giving evidence under oath. In support of this submission the applicant referred to the judgment of Fullagar J in Corney v. Brien where his Honour said (at 357) :-

"Where the party challenging a judgment entered on a

compromise has acted on the advice of counsel, the judgment

will not generally be reopened (see In re a Debtor (1929) 1

Ch 125), but in Ex parte Banner; In re Blythe (1881) 17

ChD 480 a judgment entered in pursuance of a compromise was

reopened although counsel had advised the compromise. It

was held that there had been a yielding to an unjust claim

through fear of disclosures which were likely to be made if

the 'debtor', by resisting the claim, necessarily submitted

himself to cross-examination as to credit."

18. The statement of his Honour merely acknowledges that there may in some circumstances be an exception to the general rule. However the reference to Ex parte Banner; In re Blythe (1881) 17 ChD 480 demonstrates that the circumstances giving rise to the exception must themselves be special or exceptional. The judgment in Ex parte Banner; In re Blythe was obtained by a former employee of Blythe Brothers who commenced an action against the firm for a money sum. The claim arose out of fraudulent commission arrangements to which the firm and the former employee had been parties. The action was compromised and judgment entered so that the partners of Blythe Brothers would not be exposed in the witness box. The employee sought to prove the judgment in the bankruptcy of the members of the firm. In the Court of Appeal Brett LJ said (at 490-491) :-

"... In my view the judgment in the present case was a

dishonest judgment, obtained by dishonest pressure, not

because there was any doubt about the cause of action, not

even because either party believed that there was any doubt

about the cause of action, but, both parties knowing that

there was no real cause of action, the one endeavoured to

oppress the other by reason of that other's infamy known to

him, and the other yielded, not because he believed there

was, or doubted whether there was, a cause of action, but

because he did not dare to face the consequences of his own

infamy.

Under these circumstances it seems to me that to allow the

other creditors to be ousted of their rights by such a

judgment would be a monstrous conclusion, and one not

warranted by the law. And, if we do go behind the judgment,

it seems to me that there is not and never was any colour or

pretence for saying that there was any debt due from Blythe

Brothers to Sheil. In the beginning this arrangement for

returned commissions was made by Sheil on behalf of Blythe

Brothers, and not on his own behalf at all. But I go

further, and say that, even if it had been made by Sheil on

his own behalf, he could not have retained the money, but it

would nevertheless have belonged to Blythe Brothers.

Therefore, from beginning to end, there never was any

pretence for saying that any part of this money was due from

Blythe Brothers to Sheil."

"In my opinion there is enough to shew that this was not the

money of Sheil, that he knew it was not his money, and that

the entries in the books of Blythe Brothers were made, not

as admitting that he had a just right to the money, but for

another purpose. Then came his action against Blythe

Brothers. They had sworn in the underwriters' action that

this was his money, and there was his opportunity. They

could not resist the claim in his action without admitting

that they had sworn falsely in the former action, and

without swearing exactly in contradiction to what they had

formerly sworn. So that he might well have believed, having

that hold upon them, that he would succeed in his action,

though he knew, as the fact was, that he had no possible

right to the money which he was claiming.

In my opinion, therefore, it is not the case of a plaintiff

bona fide believing he had a right to the money he claimed,

it is not a compromise in which the Plaintiff was acting

bona fide; but both parties knew that Sheil had no right to

the money, and there was a probability of success in the

action, simply in consequence of the Plaintiff and the

Defendants having been parties to a fraud on third persons.

In my opinion it would be positively wrong to allow an order

obtained under such circumstances to stand as against the

creditors of the bankrupts. In my opinion we ought to go

behind the order so obtained and to investigate the claim,

and upon an investigation of the claim I have no hesitation

in saying that Sheil has no right to the money, and cannot

be allowed to prove."

19. The applicant deposes that during the negotiation of the compromise he felt he was under a great deal of pressure by his own legal advisers to settle the matter by agreeing to pay the sum of $40,000.00. He says that he was told by his counsel that if he lost before the Tribunal it would seriously prejudice his claim in the District Court and it was only on that basis that he agreed to the compromise.

20. The circumstances he deposes to do not come within the exception to the general rule noted by Fullagar J in Corney v. Brien. The judgment obtained in Ex parte Banner; In re Blythe was one obtained dishonestly in what amounted to blackmail and as the observations of the Lord Justices show, the circumstances of that case stand in stark contrast to the ones in the instant case. Before a court will look behind a judgment based on a compromise there must be shown in the circumstances of the compromise "such suspicion of unfairness or impropriety as to justify (the) Court in looking behind the judgment to inquire into the consideration for the debt or the propriety of the compromise" (per Astbury J with whom Clauson J concurred in In re A Debtor (1929) 1 Ch 125 at 127).

21. The issues of fraud and sham were issues in the proceedings before the Tribunal and they were compromised in the settlement on the advice of counsel. It is reasonably apparent how the matter was compromised. The claim of the judgment creditor was for $48,508.00 calculated as :-

Contract price $39,500.00

Less paid on account $20,000.00

$19,500.00

Supply of ceramic tiles $12,026.40

Supervision $16,981.95

$48,508.35

22. The payment of the $20,000.00 by the applicant to Mr. Cavaliere is totally inconsistent with the written agreement being a sham and the true agreement being that the applicant would pay only $6,000.00 for the use of the builders' licence. In the settlement negotiations the $19,500.00 has been treated as part of the original price owing by the applicant under the written contract registered 30 September 1993 with the HIA. The tiles were the subject of invoices directed to and signed by the applicant. The contentious matter was the claim for $16,981.95 for supervision under what the applicant alleged was a forged clause to the specification. It is apparent that the parties have compromised the supervision claim by "splitting the difference" 50/50 so that the monies due were :-

Balance contract price $19,500.00

Tiles $12,026.40

Supervision $ 8,490.97

$40,017.37

rounded to $40,000.00.

23. The substance of the applicant's complaint is that if he had not compromised the claim the judgment creditor would have received a lesser amount, namely $31,526.40. That however is not the basis upon which the court exercises the jurisdiction to set aside a bankruptcy notice. In Oliveri v. Stafford, Gummow J said (at 429-430) :-

"What is crucial to the present appeal is an understanding

of the basis of the jurisdiction of this Court to set aside

bankruptcy notices. In my view, the Court permits the

debtor to go behind the judgment so as to have the

bankruptcy notice set aside, on the footing that the Act is

not given effect to or not carried out if a bankruptcy

notice has been issued for a debt which is liable to be set

aside or varied such that the creditor does not have a debt

upon which bankruptcy proceedings can be founded. I refer

later in these reasons to authority for that proposition. I

should point out immediately that the appellant in the

present case complains of a trifling amount which would

still leave outstanding a substantial indebtedness."

24. After giving some consideration to the judgment of the High Court in Wilkinson v. Osborne [1915] HCA 92; (1915) 21 CLR 89, Gummow J cites with approval a passage in the judgment of Owen AJ in Re Riviere; Ex parte Original Mont de Piete Ltd [1919] NSWStRp 56; (1919) 20 SR (NSW) 77 at 83-84, where Owen AJ said :-

"Is, then, the fact that a judgment is obtained against a

debtor for a larger sum than is actually due to a creditor a

ground for setting aside a bankruptcy notice issued in

respect of such a judgment, where the debt due to the

creditor as so reduced exceeds L50? In other words, does

the mere fact that a judgment is obtained for too large an

amount vitiate the bankruptcy notice issued in respect of

that judgment?

I think it is clear that where the application is made bona

fide, the Court, on the hearing of an application to set

aside a bankruptcy notice, can, in a sense, go behind, or go

round, a judgment which has been obtained against the

debtor. ...

At the same time, I think it is equally clear that the Court

will only reconsider the judgment in order to ascertain

whether the petitioning creditor's debt, on which the

bankruptcy proceedings have been founded, should be struck

out altogether. ... The Court does not reconsider the

judgment merely with a view to seeing whether the judgment

debt should be reduced, but in order to ascertain whether

the creditor has a debt upon which bankruptcy proceedings

can be founded."

"On the other hand, Wilkinson v. Osborne (supra) was a case

where no debt at all would remain behind the judgment.

In my view, the force of Owen AJ's reasoning is by no means

diminished if it is applied to the present legislation and

to the situation with which this appeal is concerned. As

Sweeney ACJ pointed out in argument, although there will be

no act of bankruptcy for the purposes of s 40(1)(g) where

the debtor satisfies the Court that he has a counterclaim,

set off or cross-demand, this will avail the debtor only if

it is equal to or greater than the amount of the judgment

debt: see also s 41(7). That result of application of the

present legislation is consistent with the approach taken by

Owen AJ in the above passage."

25. The applicant in these proceedings did not contend that if one went behind the compromise there was no debt in reality due or only a debt which was below the statutory minimum and therefore insufficient to sustain a bankruptcy notice.

26. The applicant has not sought to argue before me that there was fresh evidence which was not available to him at the time of the Tribunal hearing. That argument was put to Shanahan DCJ and rejected on the applicant's application to extend the time to appeal against the consent judgment of the Tribunal.

27. The applicant finally sought to have the court go behind the compromise because it was the product of a unilateral mistake on his behalf in that he alleged that "earlier" in paragraph 3 of the consent judgment should read "later". In support of this submission the applicant relied upon an observation of Wilcox J in Deputy Commissioner of Taxation v. Chamberlain (1990) 26 FCR 221 where his Honour said (at 233) :-

"... Where a clerical or arithmetical error is apparent to

the other party at the time of the agreement, or even where

it is made known to that party after the agreement promptly

and before that party has altered its position, equity will

relieve against the terms of the agreement."

28. The mistake in Chamberlain was a clerical mistake in transcription and it was obviously so. The decimal point had been misplaced so that $255,579.20 became $25,557.92. To attempt to take advantage of such a mistake was described by Wilcox J as "a shabby trick and indubitably unconscionable."

29. The instant case is not one of obvious clerical error. The word "earlier" is recorded in the handwritten note of Mr. Peace the solicitor for Cavaliere. It was read into the Tribunal record and was reproduced in the consent judgment on 3 October, 1994. The applicant submitted that when the error was found it was immediately communicated to the solicitors for Mr. Cavaliere. However the facts are that the deed of settlement for execution was forwarded to the applicant's solicitors under cover of a letter dated 6 October 1994. The deed of settlement was not executed by the applicant and his wife until 4 December 1994 when it was returned under cover of his solicitor's letter dated 6 December 1994, which said :-

"We enclose the Deed of Settlement and the Irrevocable

Authority in accordance with paragraphs 7 and 8 of the Deed

of Settlement. You will note that our client has amended

clause 3 of the Deed."

There is in this letter no suggestion that there has been a clerical error. The reason for the amendment is unexplained.

30. On 12 December 1994 Mr. Cavaliere's solicitors replied by letter which said in part :-

"The Deed of Settlement executed by your clients clearly

does not comply with paragraph 8 of the Tribunals Order, in

that paragraph 3 of the operative part of the Deed, as

amended by your clients, is at odds with paragraph 3 of the

Tribunals Order."

31. On 22 December 1994 the applicant's new solicitors wrote to the solicitors for Mr. Cavaliere as follows :-

"Dear Sirs,

RE: LONGO ats CAVALIERE

QUEENSLAND BUILDING TRIBUNAL APPLICATION No. C125-94

We refer to our letter dated 17 November 1994 and confirm we

now act for Mr. Longo in relation to Queensland Building

Tribunal Application Number C125-94.

We are instructed (sic) apply to the District Court to seek

an Order that the matter be referred to the Tribunal for

re-hearing on the basis of fresh evidence.

Enclosed is a copy of a statement, dated 19 December 1994,

from Stephen John Bell. It is anticipated that Raymond

Graham Clark will be providing fresh evidence by way of

affidavit.

We are further instructed, in the alternative, to seek an

extension of two months, with respect to the date on which

the settlement sum is to be paid, on such terms as the Court

may decide and anticipate that any such terms will

incorporate an interest component."

32. Importantly, there is no suggestion that it will be sought to set aside the consent judgment or compromise on the ground of a unilateral mistake of the nature now claimed. Nor was it sought to have the agreement rectified because of a mistake in transcription.

33. The only ground taken in the application to extend time for an appeal filed on 22 December 1994 was fresh evidence. In the affidavit prepared by his new solicitors and sworn by a clerk in their employ in support of the application before Shanahan DCJ, the order of the Tribunal is exhibited as Exhibit "RLJM-2" without any suggestion that it contained an error in paragraph 3 of it. Again in the correspondence passing between the solicitors in January 1995 leading up to the registration of the order in the District Court there is no suggestion that the order is other than a correct recording of the compromise reached.

34. I am not persuaded that the applicant made any unilateral mistake. I am satisfied that the applicant attempted to vary the terms of the agreement by amending the deed and that he failed in his attempt.

35. The applicant has failed to make out any basis for setting aside the bankruptcy notice.

36. In the affidavit in support of his claim to have a counterclaim, set off or cross demand the applicant deposes that he paid at the request of Mr. Cavaliere the following payments for container loads of ceramic tiles :-

28 July 1993 $25,030.39

27 September 1993 $15,589.92

29 October 1993 $18,278.14

$58,898.45

37. This sum, he deposes, Mr. Cavaliere had promised to pay or reimburse to the applicant upon completion of the house at 66 Kuranda Drive, Robina. He alleges that the judgment creditor failed to pay him as promised or at all.

38. As deposed to in his affidavit, the counterclaim, set off or cross demand of the applicant is a simple money count enforceable by plaint proceedings in the District Court between the applicant and Mr. Cavaliere.

39. The claim as deposed to is totally inconsistent with proceedings instituted by the applicant and his wife as plaintiffs in the Supreme Court of Queensland by writ number 528 of 1994 against Mr. Cavaliere, his wife and their daughter, which action has been remitted to the District Court In a statement of claim delivered 25 May 1994 in those proceedings it is alleged :-

"1. In or about March 1993 the Plaintiffs on the one part

entered into a partnership agreement with the

Defendants on the other part.

PARTICULARS

(a) The partnership agreement was oral;

(b) The Plaintiffs on the one part and the

Defendants on the other part were to share

equally in the profits of the partnership.

2. Between in or about March 1993 and February 1994 the

Plaintiffs made monetary contributions to the

partnership particulars of which will be provided

after discovery and inspection.

3. Between in or about March 1993 and February 1994 the

First Defendant, in breach of the partnership

agreement, sold partnership property and applied the

proceeds thereof to his own use further particulars of

which will be provided after discovery.

4. Further or in the alternative on or about 29th July

1993 the Plaintiffs lent the sum of $25,100.00 to the

First Defendant (the loan agreement).

5. It was an implied term of the loan agreement that the

sum of $25,100.00 was repayable on demand.

6. Despite demand the First Defendant had refused or

neglected to pay the sum of $25,100.00 to the

Plaintiffs.

7. There is now due and owing from the First Defendant to

the Plaintiffs in (sic) the sum of $25,100.00.

8. On or about 2nd March 1994 the partnership was

dissolved by mutual agreement.

9. An accounting of what is due and owing to the parties

pursuant to the partnership has not been undertaken.

10. The Plaintiffs do not require a jury.

AND THE PLAINTIFFS CLAIM:-

(i) against the Defendants an injunction restraining

them from selling, converting, encumbering or

otherwise dealing with certain ceramic tiles

constituting partnership property until trial or

earlier order;

(ii) further or alternatively money owing from the

First Defendant in the sum of $25,100.00;

(iii) an account of what is due and owing to the

Plaintiffs from the Defendants;

(iv) such further or other orders as the Court deems

appropriate;

(v) interest."

40. When confronted with the inconsistency between the counterclaim, set off or cross demand sworn to and the cause of action pleaded and the relief sought in the statement of claim the applicant's counsel submitted :-

"HIS HONOUR: The statement of claim is totally

inconsistent with the affidavit.

MR HAWES: It is, your Honour; I accept that. Your

Honour will understand, of course, that the statement of

claim is in ambit terms - at least I submit that; my

instructions are that it is in ambit terms. The statement

of claim can be amended at cost further down the track.

Your Honour, the facts that - the facts behind both these

disputes: the one before the tribunal and the one subject

to the writ are extremely convoluted, and that is not made

much more easy by some difficulty with language of perhaps -

certainly my client has a difficulty in presenting the

facts, and - but certainly the affidavit that he has deposed

to and that is before the court today is the clearest

explanation of the facts that has come before me."

41. Such a response, although candid, does nothing to instil any confidence in the case mounted by the applicant.

42. The only logical way to test the matter is to consider the claim firstly as a personal claim for a debt and then consider the partnership claim for the joint recovery of a debt of $25,100.00 due to the applicant and his wife and for a winding up and the taking of partnership accounts. In either case the applicant must show that the claim is in the nature of a counterclaim, set off or cross demand contemplated by s.40(1)(g) of the Act and that he could not have set it up in the action or proceeding in which the judgment or order was obtained. It was submitted that the Tribunal did not have jurisdiction to hear and determine the claim for debt alleged by the applicant in the proceedings before it.

43. The jurisdiction of the Tribunal is, so far as is relevant, contained in s.95(1) of the Building Services Act which provides :-

"95(1) The Tribunal may, on application by a

party to a domestic building dispute, make such orders and

directions as may be just to resolve the dispute and any

other matters at issue between the parties."

44. A "Domestic building dispute" is defined in s.4 to mean :-

"'domestic building dispute' means -

(a) a claim or dispute arising between a consumer and a

building contractor in relation to the performance of

domestic building work or a contract for the

performance of domestic building work; or

(b) a claim or dispute arising between 2 or more building

contractors in relation to the performance of domestic

building work or a contract for the performance of

domestic building work; or

(c) a claim or dispute in negligence, nuisance or trespass

related to the performance of domestic building work."

45. The powers of the Tribunal in the exercise of its jurisdiction are contained in s.95(4) which provides :-

"(4) In the exercise of its jurisdiction under this

section, the Tribunal may exercise any 1 or more of the

following powers -

(a) order the payment of a monetary sum found to be owing

by one party to another;

(b) award damages, including exemplary damages and damages

in the nature of interest;

(c) order restitution;

(d) avoid any unjust contractual term, or otherwise vary a

contract to avoid injustice;

(e) avoid a policy of insurance under the statutory

insurance scheme;

(f) order rectification of defective or incomplete

building work;

(g) award costs."

46. Additionally, the Tribunal has power to transfer a proceeding to a court. Section 97(2) of the Building Services Act provides :-

"(2) If the Tribunal is of the opinion that a

proceeding brought in the Tribunal would be more

appropriately brought, wholly or partly, in a court, the

Tribunal may order -

(a) that matters not directly related to a building

dispute be removed to a court; or

(b) that the proceeding be removed in its entirety

to a court."

47. The only consideration of the jurisdiction of the Tribunal which I have been able to find is the judgment of Demack J of the Supreme Court of Queensland in Woorabinda Aboriginal Council v. Ealesrose Pty. Ltd. (ACN 010 378300) Trading as NK Builders (Unreported, 22 November, 1993, No. 109 of 1993). His Honour said (at 6-7 of his reasons) :-

"The principal argument advanced by Mr Britton is that here

the plaintiff has sought a number of declarations and that

declaratory orders are ones that are not specifically said

to be within the power of the Tribunal. Section 95(1) of

the Act says, 'The Tribunal may on application by a party to

a domestic building dispute make such orders and directions

as may be just to resolve the dispute and any other matters

at issue between the parties.' That section gives the

widest of powers to the Tribunal. Subsection 4 of s 95

enumerates some of the powers that the Tribunal has. Mr

Britton submitted that that list is exhaustive. I am not

satisfied that that is so. It seems to me it could be read

as illustrative of the powers given by s 95(1) just as

easily as it can be said to be exhaustive. There does not

seem to me to be any reason to assume that legislature in

subs 4 has cut down the wide powers given in subs 1.

In any case, the declarations that are sought are ones that

are simply part of the process of reasoning that would allow

this Court to reach the point where damages were assessed.

Ultimately, the only issue between the parties is money. To

determine who is the one who owes the other money, a large

number of issues must be determined, all of which relate to

the construction of this group of houses. It seems to me

that the Tribunal is well placed to decide all of those

issues and at the end of the day it will decide whether some

rectification of defective work is to be done and if so

whether this to be at the defendant's cost or by the

defendant's hand. However, at the end of the day there will

certainly be a sum of money to be paid by one side to the

other. That seems to me to be an action that may properly

be brought in the Tribunal and that pursuant to s 97(1) this

action should be transferred to the Tribunal."

48. I agree with his Honour that a broad construction of both the jurisdiction and the powers of the Tribunal ought to be taken. Where the claim in the Tribunal is for the price payable under a building contract, the issue before the Tribunal is whether or not a money sum is due and payable under the contract. It is always open to allege a set off by way of defence at law to a claim for a money sum due under a contract. Similarly in my view it is open to contend that a money sum is due on another account by the original claimant and to seek to offset the money sum against the original claim. That is, to seek to have the Tribunal deal with both claims in a way which would enable them to be finally and conveniently disposed of between the parties. This would involve the adoption of an approach similar, for example, to rule 96 of the District Court Rules (Qld) which provides :-

"96.(1) A defendant may raise by way of set-off, or set

up by way of counterclaim against the claim of the

plaintiff, or any of the plaintiffs if more than one, any

right or claim recoverable in the Court whether such set-off

or counterclaim sound in damages or not or exceeds the

amount of the claim or not and such set-off or counterclaim

shall have the same effect as a cross-action so as to enable

the Court to pronounce a final judgment in the same action

both on the original claim and on the cross-claim.

(2) But the Court or a Judge may strike out a

defence by way of set-off or a counterclaim if, in the

opinion of the Court or Judge, such set-off or counterclaim

cannot be conveniently disposed of in the pending action or

ought not to be allowed or may order that it shall be

disposed of separately.

(3) Any such defendant shall be entitled to recover

in such action the amount (if any) by which the debt or

demand so set-off or counterclaimed and proved exceeds the

debt or demand claimed and proved by the plaintiff, and

shall have judgment and execution for the same accordingly."

49. I come to that view with the aid of the decision of Demack J, the statutory object in s.3(c) of the Building Services Act and having regard to the requirement in s.97(1) that a court must transfer to the Tribunal on the application of a party an action arising wholly or partly from a domestic building dispute. It was not, in my view, the intention of Parliament to fragment proceedings by having part only of the dispute transferred to the Tribunal. Rather the jurisdiction and powers are framed in broad and flexible terms to give the Tribunal the scope to resolve finally matters of this nature.

50. In my opinion a counterclaim, set off or cross demand which a party to a domestic building dispute wishes to set up as either a defence or a claim giving rise to an amount to be offset in satisfaction of the price is a claim within the phrase "and any other matters at issue between the parties" and within the jurisdiction of the Tribunal. It was therefore open as a matter of law to the applicant to raise the claim for debt in the proceedings before the Tribunal. The applicant therefore fails to show that he had a claim "that he could not set up in the action or proceeding in which the judgment or order was obtained" (Re: Brink Ex parte Commercial Bank Co. of Sydney Ltd. [1980] FCA 78; (1980) 44 FLR 135 at 139).

51. If I am wrong and the applicant's claim for money due on account of the alleged loans to the judgment creditor did not fall within s.95(1) of the Building Services Act, then it was open to the applicant to apply to have the proceedings transferred to the District Court to enable him to bring his counterclaim. His failure to do so prevents him from contending that he could not bring the cross claim (see Re: Rochela Ex parte Antonios [1980] FCA 132; (1980) 49 FLR 423; Re Franks Ex parte GIO Holdings Ltd. (1990) 24 FCR 398).

52. The applicant, if he had a claim for $58,898.45, elected not to pursue it in the Tribunal or, if necessary, to transfer the proceedings to the District Court to pursue it.

53. If in fact the applicant has no separate claim for debt but is a joint and several claimant with his wife against Mr. Cavaliere, his wife and their daughter in respect of the causes of action pleaded in the existing District Court proceedings, then the proceedings do not constitute a counterclaim, set off or cross demand within the meaning of s.40(1)(g) of the Act (Re Wedd; Ex parte Wedd (Applicant); Parker (Respondent) (1961) 19 ABC 36 at 38).

54. The applicant has failed to make out any ground for the relief claimed in the application filed 2 March 1995. The application must be dismissed with costs.

1. The application filed 2 March 1995 is dismissed.

2. The applicant pay the respondent's costs of and incidental

to the application, including reserved costs if any, to be

taxed if not agreed.

Building Services Authority Act 1991

Re Cosimo Longo Ex Parte: Cosimo Longo [1995] FCA 1324 (23 June 1995)

At a glance

Court

Decision date

Before

Source

Judgment (96 paragraphs)

Re Cosimo Longo Ex Parte: Cosimo Longo [1995] FCA 1324 (23 June 1995)

Legislation Cited (1)

Cases Cited (10)