Vicini, Aldo v E.A. Sealey & Company [1982] FCA 156

Federal Court of Australia|1982-08-03|Before: Fisher J

Bankruptcy - - - bankruptcy notice - affidavit under

s.41(7) ~ whether counter-claim could have been set up -

non-suit by consent - counter-claim in fact set up.

) ) BANKRUPTCY DISTRICT OF THE STATE OF ) No. 284 of 1982 ) )

ORDER JUDGE MAKING ORDER 3 Fisher J. WHERE MADE : Adelaide DATE : 3 August 1982

There be no deemed extension of time to comply with the requirements of the bankruptcy notice.
The applacation under s.41(7) be dismissed.

The judgment debtor pay the costs of the judgment creditor.

) ) BANKRUPTCY DISTRICT OF THE STATE OF ) No. 284 of 1982 . ) )

On 6 April 1982 Mr. Aldo Vacini ("the debtor") was served with a bankruptcy notice issued by the Registrar at the request of E.A. Sealey & Co ("the creditor"). The bankruptcy notice was based on a judgment obtained by consent by the creditor against the debtor in the Local Court of Adelaide on 19 November 1981 for $16,998.98 (being $14,787.35 judgment debt, $180.28 interest and $2,031.35 costs). The bankruptcy notice required compliance with the terms thereof within 14 days of its service upon the

On 20 April 1982 the debtor filed an affidavit sworn on the preceding day wherein he contended that he had a counter-claim, set off or cross demand ("a counter-claim") for $17,235 against the creditor which he could not have set up in the action in which the creditor obtained its judgment against him. For the purpose of determining whether I should be satisfied that the

debtor possesses a counter-claim of the type referred to in

s.40(1)(g) of the Bankruptcy Act 1966 ("the Act") it is

necessary to recount the course of the proceedings in the

Local Court. Both the creditor and the debtor filed affidavits, which disclosed no conflict of fact and neither of them was required to undergo cross-examination. I place no reliance

upon paragraph 8 of the affidavit of Geoffrey Phillip Trite filed by the creditor the contents of which was objected to by counsel for the debtor. Nor was any reference made or point taken on the

apparent discrepancies in the sums of money variously claimed.

On 22 August 1979 the creditor caused a summons to be issued out of the Local Court of Adelaide claiming $10,687.35 being the balance outstanding for goods sold and delivered by the creditor to the debtor. On 18 September 1979 an appearance was entered on behalf of the debtor and on 17 December of that year a defence denying indebtedness was filed. A Judge of the Local Court granted leave on 12 August 1981 to the debtor to file an amended defence and counter-claim in the action. The counter-claim repeated certain paragraphs of the defence wherein the debtor pleaded that he relied upon the skill and judgment of the creditor to supply goods reasonably fit for a particular purpose or alternatively that there was an implied condition that the goods would be of merchantable quality. Each of these conditions, the debtor alleged, had been breached by the creditor and in consequence he had suffered loss. At this time the loss was quantified as follows:

Damages claimed and retained by Bourbon Etancheite,

Reunion Islands $15,000.00 Warehouse Charges, Reunion Islands $ 1,035.00 Defendant's return air-fare to Reunion Islands $ 1,200.00 Defendant's return air-fare Sydney-Adelaide $ 433.60

On 19 November 1981 a Judge of the Local Court of Adelaide

(1) by consent, judgment for the plaintiff (creditor) on the claim in the sum of $10,687.35 plus a lump sum of $4,100 in lieu of interest together with costs to be taxed on the scale applicable to the judgment sum.

(2) by consent, the defendant (debtor) was non-suited on his counter-claim pursuant to Section 136(2) of the Local and District Criminal Courts Act 1926 as amended and was ordered to pay the costs of the plaintiff

(creditor) on the counter-claim to be taxed on the scale applicable to a judgment of $16,768

It thus appears that the debtor had at least raised the matter of a counter-claim before the Local Court, but was given, in effect,leave to discontinue in such manner as did not prejudice

his right subsequently to pursue the counter-claim.

In reliance upon a certificate of judgment for the amount of its claim,costs and interest as abovementioned the creditor served a bankruptcy notice. Before the time fixed for compliance with the requirements of that notice the debtor filed with the Registrar an affidavit alleging that he had a counter-claim of the kind required by the combined effect of s.40(1)(g) ana s.41(7) of the Act, namely one that he could not have set up in the action in which the judgment was obtained. In this affidavit the debtor recited the circumstances in which he claimed to have a counter-claim, which circumstances were both in substance and form the same as pleaded in his amended defence and counter- claim. The consequential loss however had been increased to - $25,649.21 in that the item "Defendant's return air-fare Sydney- Adelaide $433.60" was amended to "Miscellaneous Expense (Detail

Available)" and the amount increased to $8,414.21. The reasons

why the counter~-claim could not have been set up in the action

"(a) Prior to the 17th day of November 1981 I used my

best endeavours to obtain factual and expert evidence from the Reunion Islands to establish the matters

(b) By reason of geographical problems and the fact that I was not personally in the Reunion Islands to further the enquiries I was unable to do so and therefore unable to set up the counterclaim or set off or cross demand referred to in paragraph 2 hereof.

(Bourbon Waterproofing) and sundry documents from an engineer Monsuier {sic) Philippe Pancak concerning his

analysis of the said goods. The affidavit and documents support the matters raised in paragraph 2 hereof.

(ad) I am in a position to make the said anformation available to this Court the judgment creditor or its solicitors.

(e) Consequent upon my receipt of the said information I have now instructed my solicitors to issue proceedings out of the Local Court of Adelaide against the judgment creditor seeking damages as aforesaid by reason of the judgment creditor's breaches."

Counsel for the debtor did not deny that the reason why the

debtor could not proceed with his counter-claim was that he did

not have available witnesses and evidence to support his claim.

The only issue before me (apart from a contention that the

judgment of the Local Court in favour of the creditor was not a final judgment, which contention I ruled as raising an issue not before me at this time, which contention in any event on the debtor's argument has little to support it) was whether the debtor could have set up the counter-claim in the proceedings initiated by

the creditor. It was accepted that the debtor had the requisite

The relevant words of the Act were considered by Lockhart J.

in Re Brink; Ex parte Commercial Banking Co. of Sydney Limited

"The words 'that he could not have set up in the action

or proceeding in which the judgment or order was obtained' mean 'which he could not by law set up in the action':

See Re Jocumsen (1929) 1 A.B.C. 82 at page 85; Re a Debtor {1914} 3 K.B. 726 per Avory J. at 730; Re Stokvis (1934)

7 A.B.C. 53, especially per Lukin J. at 57, where his Honour said: 'I take as a counter-claim, set off or cross demand which could not be set up as one which, from point of time, or from its nature, or from absence of empowering provisions, or from positive inhibition so to do, could not be set up

in the particular case in which judgment was obtained... mere failure to take advantage of the opportunity can hardly be said to be inability.'"

In Re a Debtor supra the circumstances were that at the time of judgment the debtor was not the assignee of a debt, which debt he in answer to the bankruptcy notice relied upon as constituting a counter-claim which he could not have set up in the proceedings. Thus at the time of judgment he could not have as a matter of law set up the counter-claim. It was nothing to the point that he might have earlier taken an assignment. At page 730 Avory J. said:

"I think that upon the true interpretation of the section

a debtor is entitled to set up in answer to a bankruptcy notice a counter-claim which rebus sic stantibus he could not in law have set up in the action in which the judgment was obtained, even though he could, if he had chosen, have taken steps which would have rendered the counter-claim

I think it means a counter-claim which as things then stood the debtor could not set up in the action."

In my opinion these statements of principle, which I respect- fully adopt, determine the matter against the debtor. There - was no reason in law why he could not set up his counter-claim in the creditor's proceedings. As 1t happens I would find that

he did "set up" the counter-claim upon which he relies

in his affidavit in these proceedings. He put forward and pleaded this counter-claim in exactly the manner contemplated

by s.79 of the Local and District Criminal Courts Act 1926 which

is as follows: "(1) Subject to subsection (2) hereof, a defendant may set-

off or set-up by way of counter-claim against the claims of the plaintiff, any right or claim against the plaintiff or against the plaintiff and one or more persons jointly answerable, whether such set-off or counter-claim sound in damages or not, and such set-off or counter-claim shali have the same effect as a claim un a cross action, so as to enable the court to pronounce

a final judgment in the same action, both on the claim and on the 'counter-claim."

A counter-claim is set up when a record thereof is placed on the files of the Court. As Scrutton L.J. said in The Saxicava [1924] P.131 at p.138 "It appears to me that setting up a counter- claim must be done by something which is recorded inthe Court." In this present matter the debtor filed his counter-claim as an addendum to his defence. Thereby in my opinion he has set-up a counter-claim, which counter-claim he was as a matter of law entitled to pursue at that time. The fact that he was in the circumstances unable to pursue it because of an inability to bring witnesses and evidence before the Court at that time in no way assists him to establish that as a matter of law he was unable at the time to set up the counter-claim. He was under no legal inhibition and no other matter of law prevented him from litigating his counter-claim. He was able in the relevant sense to set up his counter-claim in the proceedings in which judgment

In the circumstances therefore the affidavit of the debtor doe:

not answer the description of an affidavit required by s.41(7).

The consequence is that there has been no deemed extension of time within which to comply with the requirements of the bankruptcy

notice. The debtor must pay the costs of these proceedings.

| certify that this and the b preceding pages are a true copy of the Reasons for Judgment of Mr. Justice Fisher:

At a glance

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Judgment (67 paragraphs)

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