Ronald Abrahams v Fay June James [1980] FCA 155

The said respondent sought and there was issued at her request by the Registrar a Bankruptcy Notice addressed to the applicant and dated the 21 May 1980 which was served

The Bankruptcy Notice allowed 14 days for compliance with it. After service on the applicant and before the said time had expired, the applicant caused to be filed such an affidavit as he contends answers the

description in the Bankruptcy Act 1966841(7), i.e. -

"......-.an affidavit to the effect that he has such a counter claim set off or cross demand as is referred to in paragraph (g) of sub-section (1) of the last preceding section".

The effect of filing the affidavit, assuming it answers the description in s.41(7), is that time for complying with the said Bankruptcy Notice is automatically extended or

deemed to have been extended immediately before 1ts expiration

until and uncluding the day on which the court determines

whether it is satisfied as required by that sub-section.

basis that the applicant will seek to establish that he:-

1. has such a counter claim set off or cross demand against the respondent equal to or exceeding the amount of the gudgment debt

2. that he could not have set up in the action or proceeding 1n which the judgment was

In support of this application the applicant has alleged in an affidavit dated the 13 June 1980 and filed herein that in 1969 the respondent was the registered proprietor of a property in Balmain which she was desirous of restoring; that he agreed to carry out the necessary works in consideration that she would sell it when this was completed,dividing the proceeds between them. Thereafter he carried out at a cost, exclusive of his time and labour, of about $10,000, restoration work to the said property which he had listed in his affidavit and to which I need make no further reference. However, according to applicant

a further agreement was made, in effect, postponing division

The said property was sold and, according to the applicant, the net proceeds thereof were applied towards the purchase of land at Cromer in respect of wiich, so he says, the parties agreed to build on it for resale at a profit. He further says that between 1972 and 1974 ne /oaused or caused to be carried out or carried out himself construction work necessary to complete a residential dwelling on that land, the cost of which, exclusive of his own time and labour, was $22,000.

Other evidence suggests that some of this work was carried out by a company in respect of which he and his wife and, at some later stage the respondent (in her casefrom 1 July 1969)

were Directors. This was Ronald Abrahams Loaders Pty. Limited.

The said company went into liquidation on the 3 December 1976. Portion of the applicant's evidence is that the cost of the building work on the Cromer property

$8 , 000 - borrowed by Respondent $6,000 - by the Company $5,000 ~ by the applicant

The applicant alleges in his affidavit dated the 8 September 1980 that when the company went into liquidation on the 3 December 1976 he sought to have the money expended by the company on the property recovered; but the liquidator

declined to take action unless he guaranteed the costs.

The applicant further said that 1n 1976 he and the respondent were desirous of selling the Cromer property and of purchasing land near Murwillumbah (in fact at Kingscliff), un respect of which he actually paid a deposit of $800. Thereafter the respondent declined to join in the sale of the Cromer property or to purchase from him the value of his interest in it, to vacate it or to permit him

The applicant claims that because of the conduct of the respondent he has lost the value of work and labour employed on the Balmain property and money spent on the improvements carried out there, the value of the land purchased at Cromer and his work and labour there employed and the value of money spent on the improvements carried out on the said land at Cromer

The applicant's Counsel submitted that a fair construction of the facts which I have but shortly referred to 1s that the expectation created by the respondent was that if the applicant laird out certain money and spent certain time and applied skills in restoring the Balmain property to a habitable condition, then the property would be sold

and he would expect to share in the proceeds equally with

However, those proceeds were then by agreement laid out in the purchase of land at Cromer, The applicant agreed to use and apply labour and skills in constructing upon it a residence. The expectation was that that property would be sold and the net proceeds again shared equally by the applicant and the respondent. He states that it might be said that a third party, namely, the company Ronald Abrahams Loaders Pty. Limited may also be entitled to some portion of these proceeds. I have nuoted his assessment of the cost incurred by the parties individually. In support of this contention he relies upon the case Crabb v. Arun District Council (1975) 3 W.L.R. 847

and, in particular, the passage which is quoted at p.&59 from Lord Kingsdown' speech in Ramsden v. Dyson L.R.1H.L. 129 at 170.

In effect, he says, that the applicant under a verbal agreement with the respondent and upen the faith of her promise or having an expectation and with the knowledge of the respondent, laid out certain moneys upon the land at Balmain and Cromer and that therefore equity would compel the respondent to give effect to such promise or expectation. He describes this as "proprietary estoppel" (using the phrase of Lord Denning in the same case at p. 853) and relying on his Lordship's statement that such estoppel glves rise to a cause of action, As an alternative he says there could be said to arise here, upon the evidence, a'resulting"trust in the sense that the court will give

effect to an oral agreement as to the manner in which the

beneficial interest in the lands at Balmain and Cromer

should be regarded as being held, by reason of the contributions both of money and of work and labour made by the applicant to the properties in each instance. He claims there was a common intention that the proceeds finally of the Cromer property would be shared upon sale. In this regard he

relies upon Allen v. Snyder (1977) 2 .N.S.W.L.R. at 685.

He submits that there was a relevant common intention between the parties as evidenced from the agreement to which the applicant's evidence goes and that there has

For these reasons, he submits, his client is entitled to equitable relief and that he has, in fact, sought this relief by the commencement of a suit for that purpose.

The Statement of Claim filed is annexed to his client's affidavit. He indicates that it may be necessary to amend that Statement of Claim to make provision for an interest in the company to

For the applicant he argues that by reason of the provisions of the District Court Act as amended s.134(1)(e)

any equitable defence which might have been raised in the District Court proceedings would have been restricted to

$5,000;and that if that matter had been raised by way of

defence to the respondent's claim, he would have been obliged

to waive the excess; and thus by walver would have disentitled himself to, in effect, meet fully the claim of the respondent. He submits that therefore and for these reasons this was a

claim which was, in terms of s.40(1)(g) "a counter claim set off

or cross demand that he could not set up in the action....."

As to the width of the words "counter claim" "set off" and "cross demand", he refers to the judgment of Maugham A.J. in the case of in Re Judd; ex parte Pike (1924) 24 S.R. (N.S.W.) 537 at p.539-540. This authority was most recently referred to in the case of Re Brink; ex parte The Commercial Banking Company of Sydney Limited reported 30 A.L.R. 433, a Judgment of Lockhart J.

The respondent to this application has filed a Statement of Defence in those proceedings. Generally speaking, it could be said she denies the applicant's case; but she admits that applicant did carry out certain construction work on the land at Cromer though she denies

As I understand her Statement of Defence she does not accept that the cost of the work alleged was $22,000 but claims that it was $8,000, Further, she has stated that 1f any benefit was lost as has been alleged by the applicant,

Specifically in her Pleadings she refers to a memorandum

in writing dated the 30 November 1977 said to heave been signed by the plaintiff in which he declared that he had no claim of-any description on the Cromer property. In respect of the last claim, the applicant has given an explanation of the signing of such a document, namely, that it was to protect the respondent from having to submit to an action

on behalf of applicant's wife "for any part of the house at

Respondent has also argued that it would have been possible for applicant to have applied to have District Court claim removed to the Equity Court, rather than now to complain that 1t was not possible to litigate the Equity case in the District Court. Whilst the comment may be correct, the applicant's entitlement under Bankruptcy Act 1966

s.41(7) is not thereby removed; at least as I read sub s.7.

Reference has been made by respondent's Counsel to In re a Bankruptcy Notice 1934 1 Ch. 431. This was a decision of the Court of Appeal (Lord Hanworth, Lord Justices Romer and Maugham.) It is said it resembles the instant case. Yet there the debtor was relying on a claim for a declaration that he was entitled to a charge 9n the proceeds of certain property in the hands of trustees. The suit he

commenced was against the creditor and two of the persons who

The declaration he sought was that on sale of the properties the debtor and creditor were entitled to a share in any profits resulting from the transaction. It did not appear in the report what were the factors which would determine the ascertainment of profits, or to what those profits might amount. The debtor's application was to have a Bankruptcy Notice issued by the creditor set aside, on the ground that

he had by the action referred to above a "cross demand"

against the creditor exceeding the amount claimed against

him. More particularly the debtor claimed, according to

The Registrar set the Bankruptcy Notice aside. The transaction, referred to in the judgment of Lord Hanworth MAR yp. 434 is rather more complex than my short precis describes. The debtor's claim included e.g. a claim that he was entitled to subrogation rights. The Master of the

Rolls after speaking somewhat sceptically of the debtor's claim, said (p.435) -

that Chancery action there is no claim against the present creditor in respect of any

His judgment proceeds to reject the debtor's claim as able to be described correctly as a "set off" or counter claim".

Then there was considered the import of "cross demand",

"I do not desire to say what "cross demand" may include, but it is not difficult to say it

"I cannot accede to the suggestion that the words are satisfied if the judgment debtor is claiming to have an interest in something in the hands of and properly retained by a third party ranking in priority to the interest in that thing claimed by the judgment debtor,"

Significantly, in my view, the jgucgments emphasize the necessity for the claim by the debtor to be against the creditor (i.e. mutual) rather than one which eventually may enure to the

Further, in my view, the claim of the debtor in that

case is considerably less well defined than is that of

the applicant here. I do not regard that case as determining this matter but rather as an exposition or example of what may or may not fall within the meaning

of "cross demand". The case is analysed in In re a Debtor 1 Ch. 81.. in which Jenkins LJ. dissented. There,

there are but two persons involved, debtor applicant

even allowing for the entitlement in the company in

Respondent's Counsel also relied upon two authorities from which he argued that 1t was necessary for the applicant in the circumstances such as these to give some evidence of the existence of his counter

He referred to Re Cox 7 A.B.C. 98 and Vogwell v. Vogwell 11 A.B.C. 83 . In both those cases the question of availability of evidence was considered. In the first instance it seems that the only attempt to satisfy this requirement was to annex the copy of the Statement of Claim to proceedings; and, in the second, the Judge who heard

the matter at first instance was not satisfied,on the evidence anyway, that there was a claim. He had the assistance of cross examination of the applicant. It seems to me

these cases do not give great assistance to respondent's argument, in a situation as here, where the applicant has positively deposed in his affidavit to certain arrangements said to have been arrived at with the respondent.

Though he annexed a copy of the Statement of Claim to his affidavit he has not done that only. I note that no

challenge to the evidence in the affidavit was attempted

In my view whilst passing no opinion on the ultimate success or failure of debtor's suit, which may well depend on credibility, the claim he raises 1s sufficiently supported in his evidence to entitle him to litigate it, and meanwhile to nave extended the Bankruptcy Notice but upon terms of

expedition being sought by him, This course is preferable

I consider that the end result of the current equity proceedings 1s that there could be recovered by the present applicant a sum of money, albeit possibly after enforcement of a charging order, from and against the respondent.

The date to which I adjourn the further hearing is to be for mention only, and so that any further extension may be considered, if e.g. the applicant can show that he has complied with the condition imposed

I find that the applicant has filed within the relevant time an affidavit or affidavits to the effect referred to in s.41(7) of the Act.

This court has not, before the expiration of that time or that time as extended, determined whether it is satisfied that the applicant has such a counter claim, set off or cross demand, The outcome of proceedings in matter No. 2009 of 1980 in the Supreme Court of New South Wales in Equity will, I expect, significantly or substantially assist this court to be so satisfied or

to fail to be satisfied. It is appropriate that this court await the outcome of this suit rather than itself

In view of my finding above, though the time for compliance with the bankruptcy notice may be extended by the sub section, the applicant must himself meanwhile proceed with all due diligence to prosecute the Equity suit and, if he can, to discharge the onus he bears of satisfying

Were there default on his part in this regard, this court might not be satisfied in terms of s.41(7); or

1. Time for compliance with the Bankruptcy Notice herein is extended to 4.00 p.m. on 11 November 1980

or further order,upon condition - (a) applicant proceeds with expedition to

(b) applicant then forthwith applies to the Court for an expedited hearing of the

aes "ye or

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