Singh v Fobupu Pty Ltd, in the matter of Singh

Federal Court of Australia (Full Court)|2021-02-03|Before: Stewart JJ

Counsel for the Appellant: The appellant appeared in person

Solicitor for the Respondents: McGrath Dicembre & Co

AND: FOBUPU PTY LTD First Respondent

The appeal be dismissed with costs. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

THE COURT: 1 This is an appeal from orders made by a judge of the Court, who refused to set aside a bankruptcy notice issued on 9 December 2019. The bankruptcy notice was based on two judgments entered by the Local Court of New South Wales in favour of the respondents, Ghulam Akbar Khan, Samina Khan and Fobupu Pty Ltd (the creditors). It required the appellant, Gurjit Singh, to pay the creditors the sum of $28,142.98, or otherwise to make arrangements to their satisfaction for settlement of the judgment debts, in accordance with the provisions of the Bankruptcy Act 1966 (Cth). 2 The two judgments in the Local Court were entered, first, on 16 October 2019 for $1,591 (the first judgment) and, secondly, on 17 October 2019 for $26,551.98 (the second judgment), making the total of the sum set out in the notice. Each judgment was based on costs orders in favour of the three creditors made by the New South Wales Civil and Administrative Tribunal (NCAT), constituted in accordance with the Civil and Administrative Tribunal Act 2013 (NSW) (the NCAT Act).

The legislative scheme 3 Relevantly, ss 40(1)(g), (3) and 41(1)(b) of the Bankruptcy Act provide: 40 Acts of bankruptcy (1) A debtor commits an act of bankruptcy in each of the following cases: … (g) if a creditor who has obtained against the debtor a final judgment or final order, being a judgment or order the execution of which has not been stayed, has served on the debtor in Australia or, by leave of the Court, elsewhere, a bankruptcy notice under this Act and the debtor does not: (i) where the notice was served in Australia - within the time fixed for compliance with the notice; or ii) where the notice was served elsewhere - within the time specified by the order giving leave to effect the service; comply with the requirements of the notice or satisfy the Court that he or she has a counter‑claim, set‑off or cross demand equal to or exceeding the amount of the judgment debt or sum payable under the final order, as the case may be, being a counter‑claim, set‑off or cross demand that he or she could not have set up in the action or proceeding in which the judgment or order was obtained; … … (3) For the purposes of paragraph (1)(g): … (b) a judgment or order that is enforceable as, or in the same manner as, a final judgment obtained in an action shall be deemed to be a final judgment so obtained and the proceedings in which, or in consequence of which, the judgment or order was obtained shall be deemed to be the action in which it was obtained; … … 41 Bankruptcy notices (1) An Official Receiver may issue a bankruptcy notice on the application of a creditor who has obtained against a debtor: … (b) 2 or more final judgments or final orders that: (i) are of the kind described in paragraph 40(1)(g); and (ii) taken together are for an amount of at least $5,000. … (emphasis added. Section 41(1)(b)(ii) has been amended with effect from 25 March 2020 by deleting "$5,000" and substituting "the statutory minimum", but the amendment did not affect the matters in issue in the proceeding below or this appeal)

Mr Singh's case below 4 Before the primary judge, Mr Singh made five substantive challenges to the validity of the bankruptcy notice, namely that, first, it was not based on a final judgment in accordance with s 41(1)(b), secondly, he had a set-off within the meaning of s 40(1)(g), thirdly, he had appealed against the decisions of NCAT, fourthly, the true creditor was not Fobupu, but a trust of which it was trustee, and the trust was a separate legal entity from it, and, fifthly, the bankruptcy notice was defective, should be gone behind and was an abuse of process. Her Honour dismissed each ground, and consequently dismissed Mr Singh's proceeding with costs.

Mr Singh's case on appeal 5 At the commencement of his argument today, Mr Singh said that he had refined the basis of his appeal, which he argued in person with the aid of detailed written submissions, both in chief and in reply. At the conclusion of his submissions in reply, he identified 14 errors of fact and law that he contended summarised his grounds of appeal. 6 Those points can be further summarised as follows, being, namely: (1) her Honour erred in allowing the creditors to elect on which of two bankruptcy notices he had challenged in the proceeding below they wished to proceed (the election issue), (2) the bankruptcy notice could not have been validly based upon decisions of NCAT because they were not able to be registered as, and were not, final judgments (the final judgment issue), (3) her Honour erred in rejecting his claim that he had a cause of action to recover money on the set-off he asserted (the set-off issue), (4) neither of Dr Ghulam Khan or Dr Samina Khan had contributed to, or paid any part of, the costs the subject of the judgment debts, and Fobupu did not have the legal capacity to cause the bankruptcy notice to be issued because the judgment debts were owed to the trust and, therefore, none of them was a creditor entitled to cause the bankruptcy notice to be issued in their names (the capacity issue), (5) her Honour erred in failing to seek further information about what he said were pending proceedings in the Supreme Court in which he sought to challenge the orders of NCAT, including those on which the two judgment debts were based (the information issue), (6) the bankruptcy notice should have been set aside because of the creditors' bad faith (the bad faith issue), (7) the bankruptcy notice was defective because of the failure to include any Australian business number, or ABN, of the creditors in it (the ABN issue), (8) her Honour erred in failing to go behind the judgment debts (the genuine debts issue), and (9) her Honour erred in not allowing Mr Singh to put on further submissions following the conclusion of the hearing (the further submissions issue).

Background 7 In one proceeding before NCAT, Fobupu sought possession of certain retail premises leased to Mr Singh and or one or more of his companies at one or more times in the past. In a separate proceeding in NCAT, Mr Singh made claims against the creditors. Both of those proceedings in NCAT were protracted. 8 On 24 September 2019, during the course of the NCAT proceedings, it ordered that Mr Singh pay a lump sum of $1,400 in respect of costs, the exact circumstances of which are not evident in the material before her Honour or in this appeal. That order was the basis of the first judgment. Under s 78 of the NCAT Act, such an order is able to be enforced in the following way: 78 Recovery of amounts ordered to be paid (1) Recovery of non-penalty amounts For the purposes of the recovery of any amount ordered to be paid by the Tribunal (including costs, but not including a civil or other penalty), the amount is to be certified by a registrar. (2) A certificate given under this section must identify the person liable to pay the certified amount. (3) A certificate of a registrar that - (a) is given under subsection (1), and (b) is filed in the registry of a court having jurisdiction to give judgment for a debt of the same amount as the amount stated in the certificate, operates as such a judgment. (4) Recovery of civil or other penalty amounts A civil or other penalty ordered to be paid by the Tribunal (other than for a contravention of a civil penalty provision of this Act) may be registered as a judgment debt in a court of competent jurisdiction and is enforceable accordingly. (emphasis in original) 9 The judgment sum in the first judgment comprised the amount of the NCAT order of $1,400 and the Local Court filing fees of $191. 10 The basis of the second judgment was an order for costs that NCAT had made earlier, on 25 May 2018, following its dismissal of Mr Singh's application for leave to bring an internal appeal. Under ss 70 and 71 of the Legal Profession Uniform Law Application Act 2014 (NSW), orders for costs are enforceable in the following way: 70 Certificate as to determination of costs to parties (1) On making a determination of costs, a costs assessor is to issue a certificate that sets out the determination and includes - (a) the amount of costs determined (including any GST component the costs assessor determines is payable), and (b) the amount of any costs of the costs assessment determined under section 78 of this Act or section 204 of the Legal Profession Uniform Law (NSW), and (c) any interest on those amounts - (i) determined under section 81 of this Act, or (ii) payable under section 101 of the Civil Procedure Act 2005. … (4) In the case of an amount of money specified in a certificate that has been paid, the amount (if any) by which the amount paid exceeds the amount specified in the certificate may be recovered as a debt in a court of competent jurisdiction. (5) In the case of an amount of money specified in a certificate that has not been paid, the certificate is, on the filing of the certificate in the office or registry of a court having jurisdiction to order the payment of that amount of money, and with no further action, taken to be a judgment of that court for the amount of unpaid money. The rate of any interest payable in respect of that amount of money is the rate of interest in the court in which the certificate is filed. … 71 Certificate as to determination of costs of costs assessor and Manager, Costs Assessment (1) On making a determination of costs, a costs assessor is to separately determine - (a) the amount of the costs incurred by the costs assessor and the Manager, Costs Assessment, and (b) the costs related to the remuneration of the costs assessor, and (c) by whom those costs are payable and the extent to which they are so payable. (2) On making a determination under this section, a costs assessor is to issue a certificate that sets out the determined costs. (3) The certificate is, on the filing of the certificate in the office or registry of a court having jurisdiction to order the payment of that amount of money, and with no further action, taken to be a judgment of that court against the party to the assessment by whom the costs are payable in favour of - (a) a party to the assessment that has paid some or all of the amount to the Manager, Costs Assessment - for that amount, and (b) the Manager, Costs Assessment - for any amount of unpaid money. 11 The second judgment comprised two separate assessments of costs, the first, under s 70 of the Legal Profession Act, was for the creditors' costs of Mr Singh's failed application for leave to file the internal appeal, and the second was for the costs of the cost assessor and the manager, cost assessment, which came to a total together of $26,360.90. The second judgment included that sum together with the Local Court filing fee of $191. 12 In the course of the NCAT proceeding that Mr Singh initiated, he pleaded points of claim against the three creditors. In those, he asserted an entitlement to damages from them by reason of their failure to issue tax invoices for rental payments for the retail premises at which he either himself, or through one of his several corporate vehicles, appears to have conducted a restaurant business. He claimed that he had made rental payments for the premises to Dr Ghulam Khan, principally in cash, over the course of the 11 or so years in which he or his companies were in possession of them. 13 In his submissions today, Mr Singh clarified that this claim included the set-off that he relied on before the primary judge, being the equivalent of 47 per cent of what he or his companies had paid in rent. He calculated that sum on the basis of the maximum marginal rate of taxation applicable at the relevant times when he or his companies made the cash payments. He said that he had been entitled to retain, but had not retained and now could claim repayment of, 47 per cent of the rental payments, because Fobupu had failed to provide tax invoices and its ABN in accordance with s 12-190(1) of Sch 1 of the Taxation Administration Act 1953 (Cth) (the TAA), which provided, relevantly, that: 12‑190 Recipient does not quote ABN (1) An entity (the payer) must withhold an amount from a payment it makes to another entity if: (a) the payment is for a *supply that the other entity has made, or proposes to make, to the payer in the course or furtherance of an *enterprise *carried on in Australia by the other entity; and (b) none of the exceptions in this section applies. … 14 Mr Singh asserted that the value of this claim totalled over $470,000 and supported his challenge to the bankruptcy notice because it fell within the meaning of s 40(1)(g) of the Bankruptcy Act, even though he had made this same claim in the NCAT proceedings. 15 NCAT found that because Mr Singh was not a party to any lease of the retail shop, it had no jurisdiction to deal with that claim. It also found that the original lease to Anmol Holdings Pty Ltd, a company controlled by Mr Singh, was for three years with two five-year options. NCAT found that Anmol was the lessee until it was deregistered at some time in 2012, and that Mr Singh had guaranteed Anmol's obligations under the lease. From the time of Anmol's deregistration, the identity of the lessee, if any, of the premises until at least late 2017, was unclear both to NCAT in the proceedings in which it made the costs orders and her Honour, as it is to us. In late 2017, Fobupu began issuing tax invoices addressed to Mr Singh, using the ABN of the Khan Family Trust No 2. The initial tax invoices that Fobupu issued made no reference to it acting in the capacity of trustee, albeit that, apparently, it used the trust's ABN on those invoices. From early 2018, Fobupu issued tax invoices with the same ABN that identified it as trustee of the trust.

The hearing before the primary judge 16 At the beginning of the hearing below, her Honour put the creditors to an election about proceeding on one of the two bankruptcy notices that Mr Singh challenged. The earlier bankruptcy notice, issued by the Official Receiver on 16 October 2019, identified only Fobupu as the judgment creditor for debts based on, among others, the amount of first judgment of $1,591, even though that judgment was entered in favour of each of the three creditors. 17 Her Honour reserved her decision. After the hearing, Mr Singh sought by email to make further submissions on the set-off point and on the question whether her Honour had been correct to put the creditors to the election as to whether they wished to proceed on the bankruptcy notice now in issue or on the earlier bankruptcy notice. Her Honour's associate emailed the parties saying that whether the primary judge would require further submissions would depend on the election made by the creditors. After the creditors had made their election to not purse the earlier bankruptcy notice, the associate advised the parties that her Honour did not require further submissions from Mr Singh.

The primary judge's decision 18 The primary judge found that the three costs certificates, on which the two judgment debts which founded the bankruptcy notice were based, were the consequence of orders made by NCAT, that, when assessed and the assessment recorded in a certificate, were capable of being lodged in the Local Court. In the case of the first judgment, that was under s 78 of the NCAT Act, and in that of the second, it was under ss 70 and 71 respectively of the Legal Profession Act. Those certificates, when lodged in October 2019, took effect as judgments of the Local Court within its jurisdictional limits. 19 Her Honour found, in accordance with what Lockhart, Morling and Gummow JJ held in Abigroup Ltd v Abignano (1992) 39 FCR 74 at 80-81, that the Local Court orders were final judgments. That is because a creditor who has obtained a judgment against a debtor, upon which execution has not been stayed, can enforce that judgment by way of execution as a final judgment within the meaning of ss 40(1)(g) and 41(1)(b) of the Bankruptcy Act. Her Honour's reasons were undoubtedly correct in that regard. 20 Moreover, although her Honour cited only the decision at first instance (Sarks v Cassegrain [2014] FCA 972), on appeal Edmonds and Gleeson JJ applied earlier authority to hold that a judgment entered in a court based on a filed certificate was enforceable as a judgment, albeit the filing was a ministerial act: Sarks v Cassegrain (2015) 321 ALR 28 at 38-39 [39]-[41]. Accordingly, her Honour found that both the first and second judgments were final judgments within the meaning of the Bankruptcy Act. 21 Her Honour dismissed Mr Singh's second challenge to the bankruptcy notice. She noted that s 12-190 of Sch 1 of the TAA provided that a debtor could withhold payment of an amount from a creditor where a tax invoice had not been issued in accordance with the relevant legislation. Her Honour assumed in Mr Singh's favour, without deciding (because there was no substantive evidence about the matter), that he (as opposed to the corporate lessor) had been required to retain all of 47 per cent of the sums that he paid or caused his companies to pay to the creditors for rent. But, her Honour concluded, there was no basis for him to assert a right to be reimbursed for those payments due to his original failure to retain the money. She found that Mr Singh had not identified any statutory or contractual right to seek recoupment for his failures to make such a retention at the time of payment. 22 Her Honour assumed, again without deciding, based on Mr Singh's assertion, that whatever the Supreme Court proceedings might be, of which there was no evidence before her Honour or us, they included a challenge to the two costs orders founding the first and second judgments. She said that whatever challenge Mr Singh might have been seeking to bring in the assumed Court proceeding did not affect the immediate enforceability, by way of execution, of the first and second judgments which had not been stayed. She rejected his argument that because each of the costs orders had been made at an interlocutory phase of the proceedings in NCAT, they were not final orders. She found that, because they were enforceable by way of execution, they were final judgments (as has been explained above), and that there was no reason that the creditors could not proceed to enforce them or to act on them in causing the issue of a bankruptcy notice, given that there was no application before any court to stay their effect. 23 Next, her Honour rejected Mr Singh's argument that the trust was a separate legal entity that needed to enforce any orders the subject of the two judgments on which the bankruptcy notice was based as a trustee in its own right. He had claimed to her Honour that s 23C(1)(c) of the Conveyancing Act 1919 (NSW) somehow required that he should be provided with a copy of the trust deed to enable him to pursue this claim. Her Honour rejected that assertion, and his associated claim that Fobupu could not use the trust's ABN on its tax invoices but instead had to use its own ABN and that, because Fobupu did not trade in its own right, it was not entitled to an ABN. 24 Her Honour found that the creditors were the persons entitled to the benefit of the two judgments in their own right. She said that the absence of the ABN and the fact that Fobupu did not trade provided no basis to refuse to enforce the bankruptcy notice. Her Honour dismissed Mr Singh's challenge to the bankruptcy notice based on the absence of the ABN in it because, as she said, the capacity in which it sued, whether as trustee or otherwise, was irrelevant to its ability as legal owner of the judgment debts to enforce the judgments in its own name. She said that Fobupu, as trustee, was the proper party to enforce any rights in respect of the trust's assets. She applied what White JA, with whom McCallum JA agreed, had said in disposing of Mr Singh's summons for leave to appeal from Button J's refusal to require Fobupu to produce the trust deed: Singh v Khan [2019] NSWCA 196 at [25]-[26]. There, White JA said: The primary judge was plainly correct. The applicants' submission seems to assume that a trust is a separate legal entity and they were excused from complying with the conditions of the order by which the respondent was restrained from interfering with their possession of the premises because they could not satisfy themselves that the trust referred to in the invoices existed. Neither contention is arguable. The misconception that a trust is a separate legal entity is common, but wrong. The rent was payable to Fobupo. Section 23C provides for requirements of writing when a person is dealing with or declaring a trust over interest in land. It in no way detracts from Fobupo's entitlements as legal owner of the land to recover rent in respect of it. It is true that for the purposes of taxation laws, trusts can be separately taxed, and it is true that a trust may be treated as a supplier for the purposes of the GST Act. But whether Fobupo is assessable to income tax payable on rent received in its own right or as a trustee, or whether it and not the trust is a supplier for the purposes of GST is irrelevant to the applicants' obligation to pay the rent if it sought to retain the benefit of the injunction restraining Fobupo from taking possession. Nor is a tax invoice invalidated by a supplier's refusal to proffer a trust deed. 25 Last, her Honour refused to go behind the two judgments because there was no reason to question them. In doing so, she applied what the Full Court had said in Rafidi v Commonwealth Bank of Australia [2020] FCAFC 26 at [13]-[14], namely: In Re Briggs; Ex Parte Briggs v Deputy Commission of Taxation (WA) [1986] FCA 512; (1986) 12 FCR 310 at 312, Toohey J explained relevantly: … It seems to me that, however formulated, the grounds upon which a bankruptcy notice may be set aside must relate to the form or content of the notice itself, service of the notice or the existence of the debt upon which the judgment and in turn the notice is founded. Having regard to the language of s 40(1)(g), reference to the existence of a debt must include the existence of a counter-claim, set-off or cross demand equal to or exceeding the amount of the debt. A court hearing an application to set aside a bankruptcy notice is not hearing a petition for sequestration and the provisions of s 52(2), whereby a court may dismiss a petition if satisfied that the debtor is able to pay his debts or that for other sufficient cause a sequestration order ought not be made, cannot be imported into such an application. In my view a court faced with an application to set aside a bankruptcy notice is constrained to look only at the regularity of the notice itself (including service) and otherwise at the circumstances surrounding the existence of the judgment debt and any demand which the debtor may have against the creditor for a comparable amount. In particular, the appellant did not take issue with the primary judge's reliance upon the following passage from Xu v Wan Ze Property Development (Aust) Pty Ltd (in Liquidation) [2014] FCA 461 (2014) 315 ALR 523 ("Xu") at [131]: Except in a clear case, questions of fraud, collusion, lack of good faith and miscarriage of justice, or whether substantial reasons have been shown for questioning whether behind the judgment there was in truth and reality a debt due to the judgment creditor, are more apt to be dealt with after the exhaustion of those remedies and where the Court is dealing with an application to make a sequestration order against the estate of the debtor. No doubt the circumstances in which the Court will go behind a judgment cannot be formulated precisely.

The election issue 26 Mr Singh argued to us that her Honour should have treated the bankruptcy notice (on which the creditors elected to proceed) as an abuse of process, and should not have required or allowed the creditors to elect which of the two notices they wish to pursue. As Mr Singh had pointed out, the earlier bankruptcy notice contained a material error in the identification of the persons entitled to the benefit of the judgment on which the notice was based. 27 Mr Singh was not able to identify any relevant injustice to him, or any recognisable legal argument as to why her Honour erred, in requiring the creditors to make the election that they made. In Abignano v Wenkart [1998] FCA 1468 at 4-5, Ryan, Heerey and Tamberlin JJ said that: … where the same creditor issues two bankruptcy notices one after the other, the creditor is required to make an election as to which bankruptcy notice it is with which the debtor is required to comply. The possibility of successive bankruptcy notices has been adverted to in several authorities including a judgment of the Court of Appeal in the United Kingdom in Re Fredericke and Whitworth Ex parte Hibbard [1927] 1 Ch 253. In that case, Sargant LJ, in agreeing with the judgment of Lord Hanworth MR, said at page 261: If, while an earlier bankruptcy notice were still available for a petition, a second notice were given in bad faith or to embarrass the debtor, the Court could prevent oppression by declining to act. But in my view there has been nothing of this sort here. The first bankruptcy notice had been withdrawn, objections had been taken to the second notice which had not been conclusively satisfied, and I think that the third notice was served to escape from those objections, and to place the petitioning creditors in a stronger and less challengeable position than they had previously occupied. The failure to comply with this third notice was attributable not to the existence of the second notice, but to the entire inability of the debtors to pay the remainder of the their debt. The petitioning creditors have complied with the statutory formalities necessary to establish the insolvency of the debtors; and I see no sufficient reason for refusing the statutory consequences of the insolvency so established. (emphasis added) 28 It follows that the primary judge was correct to require the creditors to make the election they did. No injustice has been identified or is apparent from her Honour having adopted the course that she did, nor is it clear what submissions Mr Singh could have made, had her Honour granted leave to him to do so, following the making of the election after the conclusion of the hearing as he had sought.

The final judgment issue 29 Mr Singh argued that her Honour erred in finding that the two judgment debts could be enforced as final judgments. He contended that, somehow, the provisions of r 42.7 of the Uniform Civil Procedure Rules 2005 (NSW) applied to costs orders made by NCAT. That rule provided that, unless a court otherwise ordered, the costs of any application or other step in any proceedings were to be paid and otherwise dealt with in the same way as the general costs of the proceedings and did not become payable until the conclusion of the proceedings. However, r 1.5 of the Uniform Procedure Rules provided that those rules applied only to each court specified in column 1 of schedule 1, being State courts properly so called. That schedule did not specify other bodies, such as administrative tribunals like NCAT. 30 We see no basis for concluding that the Uniform Civil Procedure Rules had anything to do with the enforceability of costs orders made by NCAT at any stage in the proceedings involving Mr Singh and the creditors before it. The two first and second judgments in the Local Court were made into judgments that were immediately enforceable by operation of law pursuant to the provisions of s 78 of the NCAT Act and ss 70-71 of the Legal Profession Act. As Edmonds and Gleeson JJ held in Sarks 321 ALR at 38-39 [39]-[41], the entry of a judgment pursuant to the filing of a certificate in accordance with s 368(5) of the Legal Profession Act 2004 (NSW), an analogous provision to s 78 of the NCAT Act and ss 70-71 of the Legal Profession Act, had the effect of making the costs assessments, on their filing in the Local Court, judgments of that court that became immediately enforceable. 31 Mr Singh accepted, as he had before her Honour, that he had been able to participate in each of the stages of the NCAT proceedings in which it made the costs orders, and he also had participated in the processes of the costs assessment for the second judgment. After a hearing, NCAT itself made the lump sum costs order that was the basis of the first judgment. 32 He contended that the ministerial act involved in the Local Court converting each certificate into a judgment was not a judicial proceeding, and at no point had any court made any determination involving his legal rights or liabilities on which he had been able to be heard. He submitted that the first and second judgments were not, relevantly, final judgments within the meaning of ss 40(1)(g) or 41(1)(b) of the Bankruptcy Act. 33 That submission must be rejected. It is in the teeth of Sarks 321 ALR at 38-39 [39]-[41], and the express terms of the legislation under which the certificates were issued. The scheme of both s 78 of the NCAT Act and ss 70 and 71 of the Legal Profession Act is designed to ensure that a creditor in NCAT, or who had any form of costs order assessable in accordance with the earlier Legal Profession Act 2004 (NSW), is able to obtain a means of enforcing those orders. That means is through a statutory procedure that the New South Wales legislature has selected, namely, the conversion of the certificate, by a creditor's act of filing it in a competent court, into a judgment enforceable as a final judgment, including by way of execution, under the rules and processes of the court in which the costs order or assessment is filed. 34 There is nothing before us to suggest that there was any reason why execution on the first and second judgments could not have occurred against Mr Singh's assets. They were final judgments, enforceable according to their tenor. Thus, Mr Singh's argument on the final judgment issue must be rejected.

The set off issue 35 In considering Mr Singh's argument on the set off issue, it is important to bear in mind that s 40(1)(g) of the Bankruptcy Act provides that, once served with a bankruptcy notice, the debtor has the onus of satisfying the court that he or she has a counter-claim, set-off or cross demand equal to or exceeding the amount of the judgment debt or sum payable under a final order, as the case may be, being a counter-claim, set-off or cross demand that he or she could not have set up in the action or proceeding in which the judgment or order was obtained. 36 There are two components to that obligation. The first component is that the debtor has to establish the existence of what he or she claims can amount to a cause of action or right to found the counter-claim, set-off or cross demand. That is, the debtor has to satisfy the Court that he or she has a prima facie case of a counter-claim, set-off or cross demand even if the debtor does not adduce admissible evidence to support its existence. But, it is not enough for the debtor to make a mere assertion that such a case exists, as Dixon CJ, McTiernan and Windeyer JJ held in Ebert v The Union Trustee Company of Australia Limited (1960) 104 CLR 346 at 350. The debtor must show sufficiently that he or she has a claim that has reasonable probability of success to enliven the Court's power to allow that claim to be litigated in separate proceedings, so that the Court will not require compliance with the bankruptcy notice. That does not involve, necessarily, proving as at a trial that the creditor has the claimed liability. But, it does mean that the Court must be satisfied that the debtor has some form of legal claim of sufficient substance to warrant the Court not requiring the bankruptcy notice to be enforced, until that contestable issue is resolved in another proceeding on a final basis. Relevantly to this component, we find no error in the primary judge's findings that, even assuming all facts in Mr Singh's favour, Mr Singh did not have a relevant claim because there was no basis for the contention that Mr Singh's non-compliance with any withholding obligation created a right pursuant to which Mr Singh can seek reimbursement from the creditors of the amount that was not withheld. Mr Singh did not identify any statutory or contractual right to any such reimbursement. 37 The second component of s 40(1)(g) is that the debtor must satisfy the Court that the relevant counter-claim, set-off or cross demand could not have been set up in the proceeding in which the judgment or order was obtained. Here, Mr Singh asserted his set-off in what appear to have been the NCAT proceedings in which NCAT made the orders the basis of the first and second judgments. He sought to recover, in the NCAT proceedings, 47 per cent of the total payments of rent paid over 11 years, including during a period in which one or other of his companies whose debts he had guaranteed was the lessee. If one or other of his companies owed the rent, only it, and not Mr Singh, could have had the supposed right of retention. There was no clear evidence in the NCAT proceeding in which it made the costs orders or before her Honour, to which we were referred, as to exactly when, with whom as tenant or how the tenancy or occupation arrangements were structured after Anmol was deregistered in 2012. 38 It was for Mr Singh to establish to her Honour's satisfaction, under s 40(1)(g), a prima facie case that he had a relevant counter-claim, set-off or cross demand. NCAT found that the reason that Mr Singh personally could not claim the set-off money was that NCAT had no jurisdiction to determine his claim to reimbursement of money paid as rent if he was not a party to the lease in respect of which a rental payment was made. 39 What Mr Singh claimed was the source of "his" right to withhold or retain payments of rent was, therefore, unclear. While Anmol had been the lessee, at least for the period until its deregistration in 2012, any such right or duty under s 12-190(1) of Sch 1 to the TAA had to have been Anmol's, not Mr Singh's. What happened afterwards depended on identifying what arrangements were in place, whether there was a retail lease or not and who the lessee was. Those were matters for Mr Singh to establish sufficiently to discharge his onus under s 40(1)(g) to show that he had a claim that he could maintain in some other proceeding, being a counter-claim, set-off or cross demand, of the kind he sought to assert. 40 The only relevant material bearing on this claim before her Honour were statements in the reasons of NCAT, together with the assertions that Mr Singh made without any particularity about the nature of any lease, as to who the lessee or lessees was or were and or how each lease was formed. We are in the same position. 41 Moreover, the evidence shows that Fobupu issued to Mr Singh tax invoices that included an ABN. That fact, prima facie, appears to mean that Mr Singh was not required to deduct any money in order to comply with s 12-190(1) of Sch 1 of the TAA in respect of any payments he made of those invoices. 42 It follows that her Honour was entitled not to be satisfied that Mr Singh (as opposed to any of his companies) had a relevant entitlement to withhold money, or a legally recognisable claim that he could enforce against the creditors, or one or more of them, to make out that he had a right to claim a set-off, cross-claim or cross demand under s 40(1)(g). For these reasons, Mr Singh's second challenge to her Honour's decision fails.

The capacity issue 43 Mr Singh argued that her Honour erred in not finding that the trust was a legally separate and distinct entity to Fobupu as its trustee, and that only the trust could enforce payment of the first and second judgments. The flaw with that argument was exposed by her Honour and her citation of the decision in Singh [2019] NSWCA 196 at [25]-[26]. The trust of which Fobupu is trustee has no separate legal personality from Fobupu. 44 A trust exists when a trustee holds the legal title to real or personal property, either for the person (individual or corporate) who is the beneficial owner of that property or for the purpose of applying that property to benefit the objects of the trust: cf. Hardoon v Belilios [1901] AC 118 at 123-125; Heydon JD and Leeming MJ, Jacobs' Law of Trust in Australia (7th ed, LexisNexis Australia, 2006) at [101]. A trust is established pursuant to the principles of equity requiring a person, be it an individual or corporation, to hold assets and rights on its behalf in order to distribute them and apply them in accordance with the terms of whatever trust instrument or other obligation attaches in equity to the conscience of the trustee in administering that property. 45 In Chief Commissioner of Stamp Duties for New South Wales v Buckle (1998) 192 CLR 226 at 245-247 [47]-[51], Brennan CJ, Toohey, Gaudron, McHugh and Gummow JJ explained that a trustee's right to indemnity and reimbursement was a beneficial interest in the trust property. Moreover, in Carter Holt Harvey Woodproducts Australia Pty Ltd v Commonwealth (2019) 368 ALR 390 at 403 [29], Kiefel CJ, Keane and Edelman JJ cited with approval the following passage in Scott AW and Fratcher WF, Scott on Trusts (4th ed Vol 3A, Aspen Publishers, 1988) at 345 [246]: Where the trustee acting within his powers makes a contract with a third person in the course of the administration of the trust, although the trustee is ordinarily personally liable to the third person on the contract, he is entitled to indemnity out of the trust estate. If he has discharged the liability out of his individual property, he is entitled to reimbursement; if he has not discharged it, he is entitled to apply the trust property in discharging it, that is, he is entitled to exoneration. (emphasis added) 46 Kiefel CJ, Keane and Edelman JJ also said (368 ALR at 404 [32]): where a trustee has legal title, as well as equitable or statutory powers of indemnity that are concerned with ways in which the legal title can be used, the legal title is not independent of those powers of indemnity. The legal title held by the trustee has thus been described as subject to an equitable charge or lien in favour of the trustee to secure the powers of indemnity. (footnote omitted) 47 Thus, the right of exoneration and reimbursement entitles the trustee, as legal owner of the trust property, to recoup any expense that the trustee incurs or has to incur to acquire or maintain the trust property or perform the trustee's duties under the terms of the trust from the very property the trustee is otherwise holding for the beneficiaries or purpose of the trust. 48 For those reasons, even if Fobupu was acting in its capacity as trustee in whatever dealings Mr Singh asserts it had with him or his companies. It was the only person in law that could be the lessor and the tenant had to pay rent to Fobupu. It was entitled to enforce the first and second judgments in its own right, regardless of whether it was or was not a trustee. If it was a trustee, it could use any beneficial interest that the trust had in the costs orders the subject of the first and second judgments to exonerate, or reimburse itself for, its personal inability to pay the legal fees it had incurred, if any, on behalf of the beneficiaries or in protecting the trust property. 49 Moreover, the first and second judgments were made in Fobupu's name, without reference to its capacity as trustee. That was in consequence of Mr Singh having sued Fobupu in its own right, and not in its capacity as trustee, in his pleaded case before NCAT.

The information issue 50 Contrary to Mr Singh's argument, her Honour had no obligation to make any further inquiries about what cause of action Mr Singh might have had in the Supreme Court. It was common ground in the appeal that Mr Singh has not yet been able to file proceedings in the Supreme Court, in which he wishes to challenge NCAT's findings, including those founding its orders the subject of the first and second judgments. This is because he applied to the Supreme Court, so he told us, for an exemption from paying the filing fees to commence that case. He has not served the creditors with even a draft of any such claim, now more than a year after the proceeding in NCAT concluded. 51 Given that the two judgments in the Local Court have not been stayed, there was no reason for her Honour not to act on those as final judgments. Mr Singh has put nothing before us by way of evidence about any matter that could suggest that her Honour erred in not seeking further information.

The bad faith issue 52 Mr Singh asserted that the creditors had acted in bad faith, or that there had been some form of abuse of process. We are wholly unable to understand any basis on which that assertion could be established on the material before her Honour.

The ABN issue 53 Mr Singh argued that the bankruptcy notice was defective in substance because it did not include an ABN. However, the prescribed form for a bankruptcy notice under reg 4.02 of the Bankruptcy Regulations 1996 (Cth) requires the inclusion of the creditor's name, and either an ABN or an Australian company number, or ACN. As counsel for the creditors pointed out in his submissions, the ACN of Fobupu is included in the bankruptcy notice. Accordingly, the bankruptcy notice complied with the requirements of the Regulations and did not need to include an ABN. This challenge must be rejected.

The genuine debts issue 54 Next, Mr Singh argued that her Honour erred in failing to go behind the judgment debts. Having regard to the reasons that her Honour gave, and the authorities to which she referred in Rafidi [2020] FCAFC 26 at [13]-[14], this argument had no basis. Moreover, there was nothing suggestive of any conduct such as would entitle the Court to go behind the two judgment debts for costs, which were awarded by NCAT after, as Mr Singh acknowledged, he had had every opportunity to make submissions and address, first, NCAT on the making of each order and, secondly, the costs assessor on the quantification of the costs. This ground must be rejected.

The further submissions issue 55 For the reasons we have given, her Honour was entirely correct to require the creditors to make the election, which they did, and was entitled to proceed as she did. 56 Mr Singh had no right, once her Honour had reserved her decision, to make any submissions following the conclusion of oral argument in the hearing. In NT Power Generation Pty Ltd v Power and Water Authority (2004) 219 CLR 90 at 159 [192], McHugh ACJ, Gummow, Callinan and Heydon JJ said: … It is impermissible to file further submissions without leave, and this cannot be evaded by adding on to submissions filed with leave other material for which leave should have been obtained. (footnotes omitted) 57 Their Honours applied what Mason J had said in Carr v Finance Corporation of Australia Limited (No 1) (1981) 147 CLR 246 at 258, namely: We have to say once again, firmly and clearly, that the hearing is the time and place to present argument, whether it be wholly oral or oral argument supplemented by written submissions. 58 Accordingly, Mr Singh had no entitlement to file further submissions, and her Honour did not have to grant him leave to do so after the hearing concluded. In any event, we are unable to see any injustice, or way in which he could have improved his position, had he been given leave to file further submissions. He made all the further submissions to us that he could have made to her Honour, had he been granted that leave, and those arguments could not have affected the result.

Conclusion 59 For these reasons, we are of opinion that the appeal should be dismissed with costs. I certify that the preceding fifty-nine (59) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Rares, Farrell and Stewart.

Legal Profession Act 2004(NSW)s 368(5)

Bankruptcy Act 1966(Cth)ss 40(1)(g), 40(3), 41(1)(b)

Conveyancing Act 1919(NSW)s 23C(1)(c)

At a glance

Court

Decision date

Before

Source

Judgment (22 paragraphs)

Parties

Legislation Cited (8)

Cases Cited (16)

Cited By (11)