Watts v Adelaide Bank Limited

Foster J's reasons 6 Foster J (at [1]) recorded that the statutory demand claimed $122,570.17 being the balance of the debt outstanding pursuant to a judgment entered against BMG on 3 April 2006 in the Supreme Court of New South Wales in proceedings no 13204 of 2005. 7 The judgment to which the statutory demand related was obtained by default. Foster J recorded the circumstances leading to the granting of the default judgment in [8]-[52] of the reasons for judgment. His Honour's findings included the following: (1) BMG financed the purchase of an investment property by two loans from the Bank dated 19 February 2004 and 2 July 2004. Security for the loans was given in the form of a mortgage over the property and guarantees by Mr and Mrs Watts. (2) BMG defaulted in its repayments on 25 February, 29 March and 26 April 2005. (3) The Bank, via its lawyers, served a notice requiring repayment of the amount then in default on 11 May 2005. (4) BMG did not remedy the default in the time stipulated by the notice. (5) The Bank was then entitled to claim repayment of the loans in full and BMG was so notified. In a later letter, of 19 July 2005, the Bank's solicitors advised BMG and Mr and Mrs Watts that the Bank intended to commence proceedings in respect of the defaults but may be prepared to defer legal action if conditions were met. (6) The Bank commenced proceedings in the Supreme Court on 22 July 2005 against BMG as the principal debtor and Mr and Mrs Watts as guarantors. (7) The Bank served the statement of claim on BMG and Mrs Watts on 26 July 2005 and on Mr Watts on 3 August 2005. (8) BMG and Mr and Mrs Watts did not file a notice of appearance or take any other step to defend the proceedings in the Supreme Court. The Bank applied for and obtained a default judgment on 3 April 2006 by which the Bank was given possession of the property and BMG and Mr and Mrs Watts were ordered to pay the Bank $1,028,725.29. (9) On 16 May 2006 the Bank applied for a writ of possession which the Supreme Court granted on 22 May 2006. (10) The Sherriff issued a notice to vacate on 1 June 2006 scheduling eviction for 15 June 2006. Mr and Mrs Watts were aware of the default judgment by this time. (11) At Mrs Watts' request, the Bank deferred taking possession of the property to allow BMG to sell the property. The property did not sell at an auction on 1 July 2006. The Bank took possession on 1 November 2006. (12) By this time, November 2006, BMG asserted that it had secured a sale of the property for $1,075,000. In mid to late 2006 many communications took place between BMG, Mr and Mrs Watts and the Bank in which the Bank was willing to forbear from selling the property itself if certain conditions were satisfied. Those conditions were not satisfied. (13) On 2 April 2007 the Bank entered into a contract for sale of the property to the same purchaser to whom BMG intended to sell the property for $1,000,000. Before doing so the Bank obtained three valuations for the property ranging from $750,000 to $900,000. (14) The contract for sale was completed on 24 May 2007. After all relevant deductions, the net proceeds of sale were $993,480.86. (15) The Bank served the statutory demand on BMG on 27 August 2007. (16) On 4 October 2007 BMG and Mr and Mrs Watts applied to the Supreme Court to set aside the default judgment. McCallum J dismissed that application on 12 February 2008 (Adelaide Bank Limited v BMG Poseidon Corp Pty Limited [2008] NSWSC 68). (17) BMG and Mr and Mrs Watts sought leave to appeal against McCallum J's decision. The New South Wales Court of Appeal dismissed the leave application on 6 August 2008. BMG and Mr and Mrs Watts applied to the High Court for special leave to appeal. The High Court dismissed this application on 11 February 2009. 8 BMG made three primary arguments before Foster J which his Honour recorded in [53] of the reasons for judgment as follows: (a) There is a genuine dispute between BMG and Adelaide Bank about the existence and the amount of the debt to which the Statutory Demand relates (see s 459H(1)(a) of the [Corporations] Act); (b) BMG has an offsetting claim equal to or exceeding the amount claimed in the Statutory Demand (see s 459H(1)(b) of the Act); and (c) The Statutory Demand should be set aside because of a defect in the Demand or for some other reason (see s 459J of the Act). 9 Section 459H(1) of the Corporations Act 2001 (Cth) provides for the setting aside of a statutory demand if the Court is satisfied that: (a) "there is a genuine dispute between the company and the respondent about the existence or amount of a debt to which the demand relates"; and (b) "the company has an offsetting claim". 10 In [63]-[66] of the reasons Foster J identified in conventional terms the principles applicable to the setting aside of a statutory demand on this basis. His Honour rejected the Bank's estoppel argument based on the Supreme Court proceedings (at [72]). His Honour was satisfied (at [73]) that he had "the power to go behind a judgment in appropriate circumstances, even if the judgment was obtained by default and even if the debtors have unsuccessfully made application to set the judgment aside". Nevertheless, Foster J (at [80]) considered that the first argument should be rejected as: The reality of the matter is that the Supreme Court at two levels has decided that BMG had no arguable defence to the claims of Adelaide Bank made in that Court and that some of the unsuccessful contentions and arguments made by BMG in the Supreme Court have been reasserted here in precisely the same way as they were asserted in that Court. 11 Section 459H(1)(b) refers to the existence of an "offsetting claim" which s 459H(5) of the Corporations Actdefines as: …a genuine claim that the company has against the respondent by way of counterclaim, set off or cross demand (even if it does not arise out of the same transaction or circumstances as a debt to which the demand relates). 12 Foster J (at [88]-[90]) rejected BMG's argument that the Bank had sold the property at less than its true value as: [88] BMG tendered no evidence to support its contention that the property was sold at an undervalue. Adelaide Bank, on the other hand, tendered the three valuations which it had obtained. The valuers were not cross-examined. Their opinions were not challenged at all. In addition, Mr Watts' anecdotal recounting of the casual offer made to BMG in mid 1996 of $850,000 tended to support the valuations which Adelaide Bank had obtained. [89] Furthermore, the obvious difficulties which BMG had encountered in selling the property in 2006 and early 2007 and in procuring sufficient funds to refinance its debts to Adelaide Bank in the same period provide additional support for the conclusion that the property was not likely to have commanded a price much above $850,000-$900,000 viewed from the perspective of a seller looking forward in late 2006 and early 2007. 13 Foster J also rejected BMG's contention that the Bank acted in breach of an arrangement not to take enforcement action. His Honour was satisfied that BMG had not complied with the conditions set by the Bank for any form of forbearance (at [91]-[98]). 14 For these reasons Foster J rejected the submission that BMG had any offsetting claim. 15 Section 459J of the Corporations Actprovides that on an application under s 459G the Court may set aside a statutory demand if satisfied that: (a) "because of a defect in the demand, substantial injustice will be caused unless the demand is set aside"; or (b) "there is some other reason why the demand should be set aside". 16 Foster J distinguished the decision in IFA Homeware Imports Pty Ltd v Shanghai Jerrys Candle Co Ltd [2003] FCA 533, in which Tamberlin J held that the failure on the part of the creditor to make a statement on oath verifying that the creditor believed that there was no genuine dispute about the existence or the amount of the debt was fatal to the validity of the statutory demand. Foster J (at [102]) referred to the fact that s 459E(3) of the Corporations Act excludes a judgment debt from the requirement for verification. As a result his Honour rejected BMG's claim that the statutory demand was invalid (at [104]). Foster J (at [105]) also rejected the argument that the statutory demand was issued for an improper purpose as this argument was not supported by any evidence or argument. His Honour (at [116]) rejected BMG's third claim relating to s 459J (an assertion that the amount of the debt in the statutory demand was overstated) on the basis that the amount owed was approximately $135,000 being more than the statutory demand for $122,570.17. As the statutory demand claimed less than the amount owed his Honour did not consider that there was substantial injustice from the misstatement in the demand. Finally, at [120]-[121] Foster J noted that BMG's asserted entitlement to damages had not been established. For these reasons Foster J dismissed BMG's application in its entirety (at [122]).

General 17 In support of the notice of appeal Mr Watts handed up a list of errors said to have been made by Foster J, an outline of written submissions with appeal book references and extracts from cases and texts. Mr Watts relied on these documents and, in his oral submissions, reiterated that Foster J had erred in his approach to the question of the existence of a genuine dispute about the debt. 18 The notice of appeal and the list of asserted errors raise numerous issues of fact and law said to undermine Foster J's decision. 19 Having regard to the specificity of the claims in the list of errors we will deal with the notice of appeal first (as supported by the written submissions) and the list of errors second.

Notice of Appeal 20 The Bank accurately summarised the grounds in the notice of appeal as follows: (a) Grounds 1 to 4 (which together have some 45 points described as "particulars") amount to a root and branch challenge to each of the findings of fact of the primary judge and the conclusions reached on each of the three bases of the application; (b) Ground 5 contends the primary judge erred in having regard to the grounds and contentions relied on by the appellant when seeking to set aside the default judgment in the Supreme Court proceedings; (c) Ground 6 appears to contend that the primary judge erred in embarking on an extended enquiry to determine whether there was a genuine dispute as to the debt; (d) Ground 7 contends that the primary judge erred in distinguishing the decision of Tamberlin J in IFA Homeware Imports Pty Ltd concerning the requirement for the Statutory Demand to be verified by affidavit. 21 The general difficulty for BMG in the appeal is that the primary judge (at [63]-[66]) correctly identified the principles to be applied in assessing the existence of a genuine dispute about the amount or existence of the debt. The primary judge also correctly identified (at [73]-[75]) the principles relevant to the question of going behind the judgments of the Supreme Court and Court of Appeal. Having identified the relevant principles the primary judge applied them to the evidence and, on that basis, was not satisfied as to the existence of a genuine dispute. Mere assertions of error or that a contrary conclusion should have been reached are insufficient to found the appeal grounds in these circumstances. The particulars to appeal grounds 1 to 4 do not rise above mere assertion of this character. 22 Some of the grounds of appeal refer to BMG's submissions or arguments. Some refer to BMG having established certain matters. Others refer to the primary judge having "a bias against" BMG. As a general answer to the first category, submissions and arguments are not a substitute for evidence. As to the second category, an assertion that a matter has been established is not the same as in fact establishing the matter by evidence. As to the third category, we do not understand BMG to put a case of actual or apprehended bias in the legal sense but that the alleged errors led to the primary judge finding against BMG. If we are incorrect in this understanding we should record that there is no basis in any of the material to suggest any form of bias on the part of the primary judge. If we are correct in this understanding the category depends on findings of other errors by the primary judge.

Grounds 1, 5, 6 and 7 23 Grounds 1, 5, 6 and 7 of the notice of appeal each involves the approach his Honour took to the decision of the Supreme Court dismissing the application to set aside the default judgment in the Bank's favour and of the Court of Appeal refusing leave to appeal against that decision. Foster J saw those decisions as disclosing the "reality of the matter" that, despite BMG's best efforts, the default judgment had not been set aside because the Supreme Court and the Court of Appeal decided that BMG had no arguable defence to the Bank's claims (at [80]). 24 In Richardson v Leonard Cohen & Co [2008] FCA 1392 Gilmour J considered a similar issue albeit in the context of the making of a sequestration order. At [12]-[14] Gilmour J summarised the relevant principles as follows: [12] The Court, considering the petition, may, in its discretion, accept a judgment as satisfactory proof, or not, of the petitioning creditor's debt. Such a judgment is prima facie evidence of the antecedent debt. The discretion is not well exercised where substantial reasons are given for questioning whether behind that judgment there was in truth and reality a debt due to the petitioner: Wren v Mahony (1971) 126 CLR 212 at 224-5 per Barwick CJ with whom Windeyer and Owen JJ agreed. [13] The Court will not go behind a judgment as a matter of course, but where a judgment is obtained by default the Court in bankruptcy will more readily look behind the judgment than it would if the judgment were obtained following a hearing on the merits: Wolff v Donovan (1991) 29 FCR 480 at 486 per Lee and Hill JJ. At 487 their Honours said: [T]he true position is that there is a shifting onus. Once the judgment is proved, and it is prima facie evidence of the existence of the underlying debt, there is a tactical onus on the debtor to show that there are circumstances which make it appropriate to go behind the debt to see whether the judgment was in truth and reality a true debt. The overall onus of proof of the existence of a real debt underlying a judgment, however, remains always with the petitioning creditor. [14] It is not necessary for a respondent debtor to prove that they are not, in truth and reality, indebted to the petitioning creditor. All that is required of a respondent debtor was to show that there was "substantial reason for questioning whether there is … a debt": Joosse v Deputy Commissioner of Taxation (2004) 137 FCR 576 at 579 [6] per North and Finkelstein JJ. 25 Having regard to these principles Gilmour J (at [21]) was satisfied that it was open to the primary judge in that matter not to go behind the judgment. 26 We consider that the same conclusion applies to the present case. Foster J accepted that he had power to go behind the judgment of the Supreme Court. His Honour considered that BMG's broad contentions in the matter before him were the same as or similar to those considered and rejected by McCallum J in the Supreme Court. On this basis, his Honour concluded that the judgments of the Supreme Court and the Court of Appeal disclosed the lack of an arguable defence. It was open to Foster J to reach this conclusion. No error is apparent in his Honour's approach to the relevance of the decisions of the Supreme Court and Court of Appeal. 27 In its written submissions BMG said that the primary judge erred in not applying the reasoning in Tokich Holdings Pty Ltd v Sheraton Constructions (NSW) Pty Ltd (in liq) (2004) 185 FLR 130; [2004] NSWSC 527 at [22] that "(a)lthough the mere assertion that a debt is denied will be insufficient, evidence in the form of conclusions as to primary facts which would be inadmissible as proof of the relevant facts either pursuant to the opinion rule in s 76 of the Evidence Act 1995 (NSW), or under s 135 of the Evidence Act, may be admissible as evidence that there is a dispute as to the existence or amount of the debt, and as to whether that dispute is genuine". 28 We can see no basis for the submission that the primary judge adopted an approach contrary to that described in Tokich Holdings at [22]. Although his Honour did not refer to Tokich Holdings, the principles extracted in [63]-[66] of the reasons for judgment are consistent with the approach in that case. Indeed, at [70] the primary judge expressly found that BMG's submissions did "not rise above the mere assertion of a dispute". In Tokich Holdings at [22] White J said that such a mere assertion is insufficient to establish a genuine dispute. 29 A similar response must be given to the submission that the decision of the Court of Appeal refusing leave to appeal supports a finding of the existence of a genuine dispute about the debt. The Court of Appeal did not acknowledge the existence of a genuine dispute. It noted that BMG's submissions alleged that the Bank had prevented BMG from obtaining refinancing by demanding exorbitant fees (at [14]) and then observed that this allegation lacked any detail and did not disclose a defence to the claim, as it "at most may, if properly articulated as it is not at the moment, form the basis of some claim against the bank" (at [15]). The allegation in the submissions in the current appeal also lacks detail and has not been properly articulated. It does not rise above mere assertion. The Court of Appeal's observations about the position being the same before it do not support BMG's case about the existence of a genuine dispute. Foster J's conclusions are not affected by any error in this regard. 30 We can also see no basis for the claims of error by the primary judge by reason of the Bank apparently having served its evidence after 3 October 2008 and having sought more adjournments than BMG. Even if these claims were supported they relate to the procedural history of the case and not the merits of the substantive claim by BMG that a genuine dispute existed as to the debt. In this regard, it is relevant to note, as the Bank did in para 8 of its written submissions, that (consistent with the position in the Supreme Court) BMG did not dispute the contractual entitlement of the Bank to charge default interest and late payment fees but contended that the Bank had acted harshly and unfairly. The former proposition is apparent from the primary judge's observations in [67]-[68]. The primary judge rejected the latter proposition in [108]. 31 BMG's submissions particularised in ground 7 of the notice of appeal and based on IFA Homeware Imports,are also misplaced. The primary judge, at [101]-[103], explained why the reasoning in IFA Homeware Imports has no application to the present case. The section on which the decision in IFA Homeware Imports depends expressly excludes debts which are judgment debts. The present case, unlike IFA Homeware Imports, involves a judgment debt. It follows that Foster J was correct to conclude that the reasoning in IFA Homeware Imports is inapplicable in the present case. 32 BMG's submissions about the statutory demand being issued for an improper purpose and thus constituting an abuse of process are equally ill-founded. The matters to which BMG referred in support appear to relate to the sequence of events which the primary judge considered in detail in that part of the reasons dealing with the alleged offsetting claim (at [81]-[99]). In those paragraphs the primary judge provided cogent reasons for rejecting BMG's contentions that the Bank sold the property at less than its true value or acted contrary to an arrangement to forebear from exercising its rights with respect to the property. We can see no error in his Honour's reasons in this regard and no evidentiary basis which would support contrary findings as urged by BMG. Specifically, Mr Watts' apparent "strong belief" that the Bank had acted improperly is not evidence establishing that to be so. As the primary judge found in [98] of his reasons, the Bank "exercised its rights to the full but the mere fact that it has done so does not give rise to any cause of action". Nor, might it be said, does it give rise to any sustainable claim of the Bank having acted for an improper purpose or in abuse of process. Insofar as this claim of improper purpose related to other matters as summarised by the primary judge in 59 of the reasons for judgment, his Honour was correct to reject the claim (at [105]) as one not supported by evidence or argument. 33 BMG's written submissions, presumably as part of the abuse of process claim, allege that the Bank "blocked" a refinancing proposal with the Commonwealth Bank and issued the default notice "out of sheer vendetta". Part of the context of these claims is BMG's assertion that it had complied with all of the Bank's conditions of the forbearance as identified in the letter from the Bank's solicitors of 19 July 2005. The primary judge was aware of the letter of 19 July 2005 (at [17]). The Bank commenced the proceedings in the Supreme Court after this date, on 22 July 2005. It obtained judgment in its favour. The primary judge recorded the various communications between the parties for the following two years and, in so doing, found that: - (i) the conditions of the Bank's offer of 11 September 2006 were not met (at [28] and [94]), (ii) BMG had not obtained refinancing as foreshadowed in the email from Mr Watts of 14 March 2007 (at [32]), and (iii) the conditions imposed by the Bank in its communications with BMG and its representatives in January and March 2007 were never met (at [96]). In these circumstances the submission that BMG complied with the requirements of the communication from the Bank's solicitors of 19 July 2005 is of no assistance to BMG. First, the primary judge describes the letter as offering to defer taking legal proceedings if conditions are met. Second, the Bank took legal proceedings thereafter presumably on the basis that it was not satisfied that the conditions had been met. Third, even if that is not so, nothing suggests that the Bank was bound not to take proceedings. 34 To the same effect we do not accept the submission that the Bank breached an agreement represented by its offer of 11 September 2006. Foster J (at [94]) found that a number of the conditions of the agreement were not satisfied, including the fact that a contract for sale was not exchanged within the required time. This finding was correct on the evidence. The Bank was entitled to take possession of the property when it did. Its actions in so doing cannot legitimately be described as unjust and unreasonable in any legal sense. 35 Against this background it can safely be said that nothing supports the allegation that the Bank "blocked" a proposed refinancing arrangement. As the primary judge found at [98] the Bank exercised its full rights but it had no obligation to do otherwise. It did not "block" any alternative arrangements sought to be made as the correspondence of 17 January 2007 described by the primary judge in [29] discloses. Nor is the evidence capable of supporting any inference that the Bank issued the statutory demand as part of a vendetta. The submission simply lacks any evidentiary foundation. 36 BMG's references to the Supreme Court judgment having been obtained "clandestinely" cannot be accepted in the face of the sequence of events which the primary judge recorded (at [18]-[20]). BMG's calculation of the debt owed to the Bank ($22,800.43) disregards the primary judge's calculations of the debt at [115]-[116]. As his Honour found (at [116]) the debt exceeded the amount claimed in the statutory demand, it followed that the misstatement of the debt could not be considered as causing any substantial injustice to BMG (at [117]). We cannot see any error in this reasoning process. 37 A separate aspect of BMG's submissions is that the statutory demand relates to an amount said to be the balance of the debt outstanding pursuant to a judgment entered against BMG in the Supreme Court proceeding. As the Supreme Court ordered BMG and Mr and Mrs Watts to pay the Bank $1,028,725.29 and the Bank received $1,005,924.86 (including $993,480.06 from the sale of the property and $12,444 in interest payments) BMG said that the balance of the debt outstanding pursuant to the Supreme Court's judgment was only $22,800.43. The statutory demand, however, was for $122,570.17. These submissions are a variant of those of BMG made to Foster J referred to at 59 of the reasons for judgment. Foster J dealt with the amount of the debt at [106]-[116]. His Honour rejected the Bank's claim for inclusion of late payment charges after entry of the Supreme Court judgment based on covenants in the loan agreements (at [109]-[112]). However, his Honour also recognised that the Bank's claimed debt included interest charges after the date of entry of the judgment as allowed by the Supreme Court (at [113]). The "debt outstanding pursuant to" the Supreme Court judgment, as his Honour recognised, includes statutory interest on the judgment debt. Such interest is payable unless the Supreme Court orders otherwise (s 101(1) of the Civil Procedure Act 2005 (NSW)). McCallum J in the Supreme Court did not order otherwise. Accordingly, the primary judge's calculation of the debt in [115]-[116] of the reasons (that is, an amount of approximately $135,000) is of the debt outstanding pursuant to the Supreme Court judgment. It also follows from this analysis that, contrary to BMG's further submission, the primary judge did not include an amount of $68,605 in late payment penalties in the "judgment amount". 38 Another claim by BMG is that Foster J erred in rejecting the submission that the Bank sold the property at less than its true value. According to this submission the Bank "played foul" in respect of the three valuations it obtained before the sale. The submission identifies no basis for the allegation. No such basis is apparent. The valuations are identified in the reasons for judgment at [34]. BMG called no expert evidence to the contrary (see the reasons at [35]). The primary judge properly rejected the unsupported allegations about a sale at less than true value at [88]-[90]. Insofar as these claims referred to the valuation of the property in the amount of $1,250,000 at the time of purchase which the primary judge is said to have ignored, the valuation relates to the date 4 December 2003. The three valuations the Bank obtained before exercising its power of sale relate to the value of the property at July 2006, November 2006 and January 2007. The contract for sale is dated 2 April 2007. In these circumstances the relevance of the valuation from 2003 for the purpose of the loans is not apparent. We cannot see any error in his Honour's analysis at [88]-[90] about the value issue merely because there is no reference to the 2003 valuation. 39 Contrary to BMG's submissions Foster J did not err by failing to understand the allegation that the Bank acted unethically and unconscionably by selling the property to the same purchaser as proposed by BMG. As Foster J recorded at [33], the buyer was prepared to pay a maximum of $1,000,000 at the date of sale. Before that the property was passed in at auction on 1 July 2006 (at [22]). BMG also did not manage to achieve an unconditional contract for sale of the property for $1,075,000 (see the reasons for judgment at [25]). This is so despite the fact that BMG had the period between the date of the alleged offer by the purchaser recorded in [24] (being November 2006) and the date nominated by the Bank of 19 March 2007 in which to achieve the sale (at [31]). BMG did not manage to arrange an unconditional sale in this period. The sale at $1,000,000 was above the highest value provided to the Bank by three valuers. From this it followed that BMG's claims of unethical and unconscionable conduct have no proper evidentiary foundation. The primary judge, moreover, did not misstate the law with respect to a mortgagee's power of sale in [86]-[87] of the reasons for judgment. The statements in those paragraphs are orthodox. 40 Orthodox too, and contrary to the alleged error particularised in ground 6 of the notice of appeal, is the primary judge's approach to determining the existence of a genuine dispute. The primary judge did not make an impermissible "extended enquiry" about the debt in order to determine the existence of a genuine dispute (Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd (1997) 76 FCR 452 at 463 citing Mibor Investments Pty Ltd v Commonwealth Bank of Australia [1994] 2 VR 290 at 294-296). The primary judge was required to analyse the facts in order to determine whether the asserted dispute could be described as a "genuine dispute" consistent with the principles relevant to the assessment of that question set out in [63]-[66] of the reasons for judgment. As his Honour found at [70], BMG's claims about a dispute did not rise above mere assertion which is insufficient to meet the statutory test of a genuine dispute. Further, and as his Honour found at [106]-[116] the balance of the debt outstanding pursuant to the judgment entered against the company on 3 April 2006 in the Supreme Court of New South Wales in proceedings no 13204 of 2005 exceeded the amount of the statutory demand. This was so despite his Honour having rejected the Bank's calculation which included amounts payable pursuant to the loan agreements but not the judgment (see at [111]-[112]). 41 The discussion above covers the various matters included within grounds 1, 5, 6 and 7 of the notice of appeal. For the reasons given we do not accept that these grounds or any of the particulars to them provide a basis for challenge to the decision and orders of the primary judge.

Ground 2 42 Ground 2 is based on an apparent misunderstanding of the primary judge's observations in [68] of the reasons. As that paragraph discloses, the primary judge was aware that BMG disputed any entitlement to penalty charges and fees, as well as selling charges. His Honour was also aware that BMG claimed that the sale price should be assumed to be $1,075,000. The particulars to ground 2 otherwise make claims the substance of which has been dealt with and rejected above.

Ground 3 43 Ground 3 also repeats many of the allegations discussed and rejected above. Insofar as that ground suggests some bias in the primary judge's recounting of the facts, the suggestion is unsupported and unsupportable. Insofar as the particulars suggest some erroneous characterisation of the facts, neither any error nor the materiality of the suggested error to the outcome is adequately identified.

Ground 4 44 Ground 4 again repeats (albeit in different terms) many of the allegations discussed and rejected above. The primary judge's conclusion at [16], that it was open to the Bank to call up the full amount owing under the loan agreements, is correct. The letter of 19 July 2005, as noted, cannot be characterised as an agreement binding the Bank. Its terms do not permit that characterisation. Nor do they permit a conclusion that the Bank was entitled to file the statement of claim in the Supreme Court only if the conditions specified in the letter were not met. The Bank was entitled to proceed as it did as foreshadowed in the letter of 19 July 2005. 45 The other matter in ground 4 (the allegation that the statement of claim in the Supreme Court proceedings became stale on 22 January 2006) is not explained in any meaningful way. The Bank served the statement of claim (see the reasons for judgment at [18]) and was entitled to obtain a default judgment given the fact that the defendants did not take any step to prosecute the proceedings. The letter from the Bank's solicitors of 19 July 2005, on which BMG relies in ground 4 to support a number of allegations, said only that the Bank "may be prepared to consider deferring the current legal action" if certain conditions were met. The letter said it did not constitute an offer and that the Bank reserved the right to continue with legal action at any time. In these circumstances the suggestions in ground 4 that BMG and Mr and Mrs Watts relied on this letter as an enforceable promise by the Bank not to take legal proceedings is unsustainable.

List of alleged errors 46 BMG contended that the primary judge erred in [6] of the reasons for judgment in dealing with BMG's claims for additional monies. The primary judge was correct in describing the additional money claims as not being made pursuant to s 459G of the Corporations Act. That section provides that a company may apply to set aside a statutory demand served on the company. Consistent with the terms of the section, and as described by Foster J, BMG claimed two orders in the application filed on 11 September 2007: first, an order setting aside the statutory demand; and second, an order for the payment of moneys said to be the monies owed on account of "the difference between the fair market value" and the "forced sale price" of the property, the "excessive interest and charges" and other losses by reason of the "illegal and unfair actions" of the Bank. As Foster J observed in [6], the general basis of these allegations specified in the application does not articulate the causes of action by which they are said to be supported. The references on which BMG relies in its contention of error amount to no more than mere assertions. 47 BMG contended that the primary judge erred in [12] of the reasons for judgment in describing BMG's total borrowings as substantially exceeding the purchase price of the property. The matters on which BMG relies do not establish any error by the primary judge in this regard. The primary judge is referring to the purchase price of the property of $1,060,000 and comparing it to the total borrowing of $1,150,000. It is immaterial that BMG expended more than the moneys borrowed (taking into account interest for delayed settlement, legal costs and stamp duty). Nothing in this finding by the primary judge affects any other part of his Honour's reasoning. BMG's contention that this finding somehow taints the balance of the judgment or is evidence of bias is unfounded. 48 The primary judge's reasons at [15] do not disclose error. Despite the assertions to the contrary BMG did not remedy the defaults on the mortgage payments by 11 June 2005 as required by the notice requiring payment of $6,174.20. The payments on which BMG relies to support its contention were made after 11 June 2005 and thus were not in compliance with the notice as the primary judge found. This is presumably the reason for the primary judge's emphasis in [15] on the time for compliance being 11 June 2005. 49 For the same reasons his Honour's reasons in [18] do not disclose error. The facts that BMG contends the primary judge ignored are its payments after the expiry of the notice. Those late payments do not undermine the primary judge's description of the underlying facts or related findings. 50 BMG's claims about errors in [19] of the reasons for judgment merely repeat the suggestion of incompleteness by reference to the Supreme Court proceedings having been commenced "clandestinely". The reasons at [20] merely record the fact of commencement of the Supreme Court proceedings. BMG's allegations about clandestine conduct on the part of the Bank are unfounded, for the reasons already given above. 51 The primary judge's summary in [25] of the reasons for judgment is concise but not materially incomplete. BMG's claims that the Bank scuttled the sale of the property are precisely that - claims. They are not primary facts but allegations to be proved by evidence. Accordingly, it was not necessary for the primary judge to record them in this part of the reasons. BMG's claims of inappropriate conduct by the Bank are identified by his Honour in [56] of the reasons for judgment. 52 The same answer must be given to the allegations of error in [28]-[30], [34]-[35] and [88] of the reasons for judgment. As to the former, the material on which BMG relies does not alter the fact that it did not meet the conditions of the Bank's letters of 11 September 2006 or 17 January 2007. BMG did not achieve exchange of a contract for sale or refinancing as required. As to the latter, the valuation of $1,250,000 relates to the date 8 December 2003 some three years earlier. The Bank had three valuations relating to the time of sale (or within six months of that time) none of which exceeded $900,000. BMG's submissions that those valuations were flawed were made without evidence to that effect. For the same reason the assertion of error in [88] of the primary judge's reasons, relating to the valuation evidence, is unfounded. 53 The primary judge's description of the reasons given by the Court of Appeal of New South Wales for refusing leave to appeal in [47] of the reasons for judgment does not disclose error. Allsop P said that the matters which BMG raised lacked detail and did not disclose a defence to the claim. If BMG is relying on the last sentence of the observations of the Court of Appeal as quoted in [46] of the reasons for judgment, it is apparent that the observations are qualified and conditional. It does not in any way undermine the primary judge's correct characterisation of the Court of Appeal having described those matters as not amounting to a defence to the claim. 54 The error asserted in [62] of the reasons, that the debt should be calculated as nil, appears to relate to a different paragraph as [62] simply recites the relevant legislative provisions. Be that as it may, the claim that the debt should be calculated as nil was identified by his Honour in 59 of the reasons for judgment and rightly rejected thereafter. 55 Contrary to BMG's submissions nothing in [63]-[66] and [70] of his Honour's reasons suggests any misunderstanding or incorrect application of relevant authority. The same conclusion must be drawn about the claims of error in [80]. This repeats the allegation that the debt referred to in the statutory demand is not pursuant to the judgment of the Supreme Court. The decisions on which BMG relies do not support its approach to this issue which we have considered and rejected at [40] above. 56 The primary judge's approach to the question of a mortgagee's duty on the sale of a mortgaged property at [87] does not disclose any error. On the available evidence his Honour reached the proper finding that the property was not sold at less than its true value. BMG's assertion that the Bank recklessly sacrificed BMG's interest in the sale for $1,075,000 does not reflect the facts. BMG did not manage to secure an unconditional sale at that amount between early November 2006 (when it asserted that it had procured a sale at that price) and 14 March 2007 (when BMG was meant to have secured refinancing). The Bank finalised a sale to the same purchaser for $1,000,000 on 2 April 2007 because the purchaser was not willing to pay more at that time. 57 Nothing in [95]-[99] of the primary judge's reasons shows an error of misunderstanding the facts and drawing the wrong conclusions. We are satisfied that his Honour was correct to identify the letter of 11 September 2006 as the only one capable of amounting to an agreement to forebear from taking action if certain conditions were met. As his Honour found at [94], however, the conditions were not met. None of the other communications between the Bank and its agents and BMG or Mr and Mrs Watts is capable of amounting to an agreement not to take action. It follows that his Honour's conclusion at [99] (that BMG had failed to make out an offsetting claim) was sound on the available evidence. 58 No error is apparent from the primary judge's reasons in [101]-[103]. The matters set out therein, relating to the process of distinguishing IFA Homeware Imports from the present case involving a judgment debt, are correct. For this reason the rejection of BMG's first contention in respect of s 459J in [104] was also correct. The primary judge also rightly rejected the second contention relating to s 459J, of improper purpose and abuse of process. We have considered and rejected these arguments above on much the same basis as the primary judge, namely, lack of any evidentiary support or cogent argument. 59 BMG's complaints about the primary judge's findings in [106]-[117] also cannot be accepted. We agree with the primary judge's approach in those paragraphs and the reasons his Honour gave for adopting that approach to the calculation of the amount of the judgment debt when the statutory demand was issued. 60 The claims of error in [118]-[119], being the primary judge's rejection of the attempt to set aside the statutory demand, is dependent on BMG identifying some material error elsewhere in the reasons for judgment. BMG has not identified any such error. 61 The primary judge's conclusion in [120]-[121] that BMG had not made a serious attempt to make good its claim for damages against the Bank (rather than attempting to establish that BMG did not owe the Bank any money) does not disclose error. BMG did not, by any recognisable or conventional means, identify or support a cause of action against the Bank for damages.

Conclusions 62 BMG has not made out any of its grounds of appeal against the orders of Foster J. It follows that the appeal against his Honour's orders of 24 April 2009 must be dismissed. Costs should follow the event.

Buchanan J's reasons 63 Buchanan J's reasons for judgment (at [1]) record the fact that the bankruptcy notice which the Bank served on Mr and Mrs Watts concerned an amount of $64.561.19 founded on the judgment of the Supreme Court identified above. 64 After recording the background to the matter (at [2]-[7]), Buchanan J recorded (at [8]) Mr and Mrs Watts' claims that: - (i) no real debt lay behind the default judgment of the Supreme Court or the orders of that Court on which the Bank relied, (ii) the Bank was misusing the bankruptcy notice procedure to put undue pressure on Mr and Mrs Watts, and (iii) the Bank acted unreasonably in commencing the proceedings in the Supreme Court and later taking possession of the property. 65 Buchanan J accepted that he had power to go behind the Supreme Court's judgment (at [10]) but declined to do so for reasons given in [11]-[13]. His Honour's reasons for declining to do so were that: - (i) both the Supreme Court and Foster J had engaged in detailed examinations, and (ii) Mr and Mrs Watts had not identified an adequate cause to do so. 66 Buchanan J (at [14]) noted the "separate claims" for losses and thus concluded that there was no counter-claim, set-off or cross-demand within the meaning of s 41(7) of the Bankruptcy Act 1995 (Cth). In [15]-[18] his Honour dealt with the abuse of process allegation. Referring to Brunninghausen v Glavanics [1998] FCA 230 and Killoran v Duncan, in the matter of Killoran [1999] FCA 1574, Buchanan J was satisfied that Mr and Mrs Watts' claims did not rise above mere assertion of unreasonable conduct by the Bank. In Brunninghausen there was a proper evidentiary foundation for finding that the bankruptcy notice was intended to put pressure on the debtor to pay the debt rather than to invoke the Court's insolvency jurisdiction. In Killoran the facts did not permit that inference to be drawn. In the present case Buchanan J considered that "none of the features in Brunninghausen" were present. 67 For these reasons Buchanan J dismissed the application to set aside the bankruptcy notice.

Discussion of Appeal Grounds 68 As noted, Mr and Mrs Watts relied on their submissions in the BMG proceeding in order to support this appeal. We have considered and rejected those submissions above. 69 The specific grounds of appeal in the Watts proceeding can be summarised as follows: (1) Buchanan J erred in the exercise of his Honour's discretion in concluding it was not necessary or appropriate to go behind the judgment of the Supreme Court to determine whether a real debt existed (grounds 1 and 2). (2) Buchanan J erred in confining his reasons for judgment to the first two issues identified in the appellant's written submissions (ground 3). (3) Buchanan J erred in concluding that there was no counter-claim, set-off or cross-demand (grounds 4 to 6). (4) Buchanan J erred in concluding that the facts could not be characterised as an abuse of process (grounds 7 to 10). 70 As to grounds 1 and 2, we consider that Buchanan J was correct to decline to go behind the judgment of the Supreme Court. His Honour did not err in concluding that no adequate reasons had been demonstrated by Mr and Mrs Watts to warrant him in so doing. 71 As to ground 3, Buchanan J was entitled to rely on the written submissions as presented. Those submissions filed in Court on 22 April 2009 do not refer to the contention about the Bank having acted unreasonably in commencing the proceedings in the Supreme Court and later taking possession of the property. In any event, his Honour was plainly aware of the decision of Foster J to which he refers at [12] and the facts relating to the commencement of the Supreme Court proceedings and taking of possession of the property (at [2]-[6]). Foster J rejected an argument to the same effect and on the available evidence no other reasonable conclusion was open. 72 As to grounds 4 to 6, Buchanan J was correct to conclude that there was no counter-claim, set-off or cross-demand. As the Bank submitted, the evidence did not rise above a mere assertion of a proposal to initiate separate claims for alleged losses. The proposed claims remained unformed and unarticulated. 73 As to grounds 7 to 10, we agree with Buchanan J's conclusion that the facts could not be characterised as involving any abuse of process. Brunninghausen was properly distinguished on its facts. As in Killoran, and contrary to Mr and Mrs Watts' particulars in support of ground 10 of the notice of appeal, there was no evidence of any collateral purpose being exercised by the Bank.

Conclusions 74 Mr and Mrs Watts have not made out any of their grounds of appeal against the orders of Buchanan J. It follows that the appeal against his Honour's orders of 29 April 2009 must be dismissed. Costs should follow the event. I certify that the preceding seventy-four (74) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Lindgren, Gilmour and Jagot.

Bhoji Watts and Gambhir Watts v Adelaide Bank Limited ACN 061 461 550 (proceeding NSD 419 of 2009) The second appellant appeared in person and on behalf of the first appellant

Counsel for the Respondent: Mr T Mehigan

Solicitor for the Respondent: Gadens Lawyers

BMG Poseidon Corp Pty Limited v Adelaide Bank Limited ACN 061 461 550 (proceeding NSD 421 of 2009) The second appellant in proceeding NSD 419 of 2009 appeared with leave of the Court on behalf of the appellant in proceeding NSD 421 of 2009

Counsel for the Respondent: Mr T Mehigan

Solicitor for the Respondent: Gadens Lawyers