Thomas v St George Bank Ltd

REASONS FOR JUDGMENT Introduction 1 There is before the Court a motion brought by notice of motion filed 5 February 1999 by the respondent ("the Bank") for summary dismissal of Mr Thomas's application for an order setting aside a bankruptcy notice. The Bank must satisfy the test for summary dismissal, recognised in many cases, of establishing clearly that the proceeding does not deserve a final hearing because it plainly will not succeed. Procedural background 2 The Bank issued a bankruptcy notice on 21 September 1998, No 1895 of 1998 which was based on a judgment in the Local Court at Kogarah for $7,600.88 obtained on 21 July 1998. The amount claimed in the bankruptcy notice was $7,713.95. The debt was a credit card debt. 3 The bankruptcy notice was served on 11 December 1998 and expired on 1 January 1999. On 23 December 1998 Mr Thomas filed his application by which the present proceeding was commenced. The application was returnable on 6 January 1999. At the same time Mr Thomas filed an affidavit in support. Also on 23 December 1998 a Registrar made an order extending the time for compliance with the bankruptcy notice to 6 January 1999, that is, the return date of the application. 4 On 6 January 1999 Mr Thomas consulted solicitors Bruce and Stewart. On that day, over the Bank's objection, I stood over the application to 11 February 1999, but no further order extending the time for compliance was made and the matter has proceeded throughout on the footing that there either was or was not an effective invocation of subs 41(7) of the Bankruptcy Act 1966 (Cth) to which I shall refer further below. 5 On 6 January 1999 I gave the Bank leave to file by 5 February a notice of motion returnable on 11 February seeking summary dismissal. I also directed Mr Thomas to file and serve by 29 January 1999 a document identifying by points of claim the nature of the counter-claim, set-off or cross demand on which he relied and an affidavit in support. Finally, I noted that the Court had not determined as at 6 January whether the Court was satisfied that the debtor had a counter-claim, set-off or cross demand as required by the Act. 6 On 5 February, the Bank filed its notice of motion returnable on 11 February, but on that date, by consent, the hearing was vacated and the motion stood over to be heard on a date to be fixed. The motion was heard on 16 February when counsel appeared for both parties. Background facts 7 It is now appropriate to go to the evidence. The relevant part of Mr Thomas's affidavit filed on 23 December last was as follows: "With the assistance of the Law Society and its members, I am currently finalising a major claim against St George Bank Limited and its servants/subordinates which the relative funds to payout this credit card debt (at the agreed amount) shall be released with pleasure. I confirm I am aware and have always been aware of the credit card debt which fell into Mr Stuart Thomas Cram's so-called management during December of 1997 at the amount of $6,686.29 with accruing interest stopped at the point of claim. I confirm that the hearing in the Federal Court (date yet to be set) shall confirm this matter in its entirety and will extinguish any Bankruptcy Proceedings against myself on behalf of St George Bank Limited and its servants." 8 Copies of various documents were annexed to the affidavit. They show a course of controversy between Mr Thomas and the Bank. On 22 December 1997 Mr Thomas apparently offered to purchase a property which had been mortgaged by him to the Bank. He offered $595,000. This included the bankcard debt. The Bank replied on 30 December 1997 rejecting the offer and asserting that the indebtedness to it was approximately $650,000 which was the figure the Bank was looking to receive either from Mr Thomas or from the sale of the mortgaged property. On the same day, 30 December, Mr Thomas replied asking for particulars of the sum of $650,000. There was also a dispute about the vacating of the property by Mr Thomas. 9 The affidavit did not elucidate the nature of any claim which Mr Thomas might have. However, on 29 January 1999 Mr Thomas's solicitors, Bruce and Stewart, wrote to the solicitors for the Bank asserting "an equitable claim for set-off [sic]". Counsel for Mr Thomas has said that he no longer seeks to support the proposition that the nature of the claim is a set-off; rather, he relies on the language in the Act, "cross demand". The letter from Mr Thomas's solicitors asserted that his house had been sold in July 1988 "substantially under the valuation price". As well, they asserted that certain charges had been debited to Mr Thomas's account at the Bank which had not been itemised, and, in particular, that a sum of approximately $40,000 had been debited to the account and characterised merely as "sundry expenses". 10 In the result, from the solicitors' letter it may be inferred that Mr Thomas's claim relates to the sale of the mortgage property for less than its true value and the possibility that some $40,000 has been debited to his account without justification. 11 On the hearing a statement of account was admitted into evidence which showed the debit balance at 30 June 1998 to be $714,878.71. This was after the entering of various debits including $41,206 on 16 June 1998. Even after that amount is deducted, however, Mr Thomas would have been indebted as at 30 June 1998 for $673,672.71. As I understand it, Mr Thomas's claim would have to be that the Bank should not have debited the sum of $41,206 and that on the sale it should have realised an amount exceeding $673,672.71 by an amount larger than the Bank's judgment debt underlying the bankruptcy notice. Reasoning 12 Subsection 41(7) of the Act provides as follows: