Boylan v Farthing
[1999] FCA 267
•23 March 1999
FEDERAL COURT OF AUSTRALIA
Boylan v Farthing [1999] FCA 267
BANKRUPTCY – validity of bankruptcy notice – whether document lodged in support of the application for the issue of bankruptcy notice met the requirements of rule 7 of the Bankruptcy Rules– whether inclusion of the words “costs to be taxed” in the certificate of judgment rendered bankruptcy notice a nullity – construction of rule 101.02(1) Supreme Court Rules 1987 (SA) – whether bankruptcy notice misleading – whether Court should go behind judgment on which bankruptcy notice based to inquire into validity of a judgment debt – whether debtor had counter-claim, set-off or cross demand of the kind referred to in s 40(1)(g) Bankruptcy Act 1966 (Cth).
Bankruptcy Act 1966 (Cth), ss 40(1)(g), 41(6A), 41(6C)
District Court Act 1991 (SA), s 42Supreme Court Rules 1987 (SA), r 101.02(1)
Bankruptcy Rules, r 7, 10(4) (former rules)Donald Campbell & Co v Pollak [1927] AC 732 cited
Re H (No.2) [1970] 1 All ER 287 cited
Copping and Perball Pty Ltd v ANZ McCaughan Limited & Others (No. 1) (1995) 179 LSJS 439 applied
Kleinwort Benson Australia Limited v Crowl (1988) 165 CLR 71 cited
Corney v Brien (1951) 84 CLR 343 referred
Bourke v Beneficial Finance Corporation Limited (1994) 124 ALR 716 referred
Olivieri v Stafford (1989) 24 FCR 413 referredFRED BOYLAN v STEPHEN FARTHING & ALEGNA PTY LTD
NO. SG 124 OF 1998
VON DOUSSA, BRANSON & SUNDBERG JJ
ADELAIDE
23 MARCH 1999
IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY
SG 124 OF 1998
BETWEEN:
FRED BOYLAN
AppellantAND:
STEPHEN FARTHING & ALEGNA PTY LTD
(ACN 008 286 306)
RespondentsJUDGES:
VON DOUSSA, BRANSON & SUNDBERG JJ
DATE OF ORDER:
23 MARCH 1999
WHERE MADE:
ADELAIDE
THE COURT ORDERS THAT:
The appeal be dismissed with costs.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY
SG 124 OF 1998
BETWEEN:
FRED BOYLAN
AppellantAND:
STEPHEN FARTHING & ALEGNA PTY LTD
(ACN 008 286 306)
Respondents
JUDGES:
VON DOUSSA, BRANSON & SUNDBERG JJ
DATE:
23 MARCH 1999
PLACE:
ADELAIDE
REASONS FOR JUDGMENT
THE COURT
This is an appeal from a decision of a single judge of this Court, Mansfield J, delivered on 23 October 1998. His Honour dismissed with costs two applications made by the appellant, Fred Boylan, in consequence of the service on him of a bankruptcy notice by the respondents on 26 November 1996.
The first application was commenced by affidavit filed by Mr Boylan to the effect that he had a counter-claim, set-off or cross demand of the kind referred to in paragraph 40(1)(g) of the Bankruptcy Act 1966 (Cth) (the Act). That application was referred into Court under r 10(4) of the Bankruptcy Rules then in force to determine whether Mr Boylan had such claim.
The other application was one brought by Mr Boylan to have the bankruptcy notice set aside on the ground that it was a nullity and alternatively for an order that the time for compliance with the bankruptcy notice be further extended pending his “current appeal to the High Court”.
This matter has a long history. A dispute between the parties arose out of a business relationship which had existed between them from 1992 until January 1994. Mr Farthing is the nephew of Mr Boylan. For many years Mr Farthing had operated a used car business, and from 1 July 1991 had done so through Alegna Pty Ltd (Alegna) of which he and his wife were the shareholders and directors. The business was operated firstly at premises at Reynella and subsequently also at premises at Christies Beach in South Australia. On about 1 May 1992 an arrangement was come to whereby that part of the business conducted at the Reynella premises would be operated under a form of joint venture between Mr Boylan and Mr Farthing and Alegna. From 1 September 1992, or thereabouts, it was also agreed that part of the business conducted at the Christies Beach premises would be included in the joint operation. Mr Boylan asserted that it was part of the arrangement from 1 September 1992 that he would be a one third shareholder in Alegna. However, no shares were issued to him. Disputes then arose. On 17 January 1994 a meeting took place as a result of which Heads of Agreement were written up and signed both by Mr Boylan and Mr Farthing agreeing terms on which they would part company. The general intent of the Heads of Agreement was that they would separate on a one third two thirds division of everything with Mr Boylan retaining the part of the business being conducted from the Christies Beach premises and Mr Farthing through Alegna retaining the business being conducted from the Reynella premises. The Heads of Agreement provided for the splitting of stock, accounting for it, and generally as to financial aspects of the termination of their joint operations. In February 1994 a further dispute arose as to whether the Heads of Agreement were being implemented in accordance with their terms. An issue agitated in subsequent litigation was whether the agreement reached on 17 January 1994 had been repudiated by one side or the other, and if so whether the repudiation had been accepted so that the agreement was no longer in place.
Action taken by Mr Farthing in February 1994 to recover property that he asserted was the property of Alegna, resulted in the institution of proceedings in the District Court of South Australia on 2 March 1994. A trial occurred, and judgment was delivered on 26 July 1994. The judgment favoured Mr Farthing. Mr Boylan appealed to the Full Court of South Australia. The appeal succeeded, and a retrial was ordered.
On 1 November 1996 his Honour Judge Lowrie in the District Court of South Australia delivered reasons for judgment after a second lengthy trial. In the proceedings Mr Boylan was plaintiff and the present respondents were defendants. Judge Lowrie awarded the plaintiff $2,000 on his claim, and the defendants the sum of $92,005.37 on their counter-claim. The award in favour of the plaintiff was set-off against the award in favour of the defendants, and judgment was pronounced for the defendants against the plaintiff in the sum of $90,005.37. The written reasons for judgment make no reference to any consequential order in respect of costs or interest.
The matter was relisted before Judge Lowrie on 8 November 1996. Mr Boylan appeared in person, and the defendants by counsel. The judge invited submissions on the question of interest, and then made a lump sum award of interest of $15,000. Counsel for the defendants sought a declaration to the effect that Mr Boylan had no interest in Alegna. The judge was not prepared to make the order, saying that it was not part of the relief sought in the proceedings. Neither party raised the question of costs, and no order for costs was made at that hearing.
The bankruptcy notice the subject of these proceedings was issued on 21 November 1996. Mr Boylan being dissatisfied with Judge Lowrie’s judgment appealed to the Full Court of South Australia at about the same time. He obtained a stay of execution on the judgment pending the outcome of the appeal to the Full Court after service of the bankruptcy notice. The appeal was dismissed on 23 December 1997.
On 16 June 1998 Mr Boylan filed an application for special leave to appeal to the High Court from the decision of the Full Court of South Australia. The application was filed well beyond the twenty-eight day time limit. Mr Boylan sought a dispensation from that time requirement on the ground that he had been admitted to hospital on 7 January 1997 and because of continuing ill-health had been unable to deal with the application within the prescribed time. The application for special leave to appeal remains to be heard by the High Court of Australia.
Within the prescribed time following the service of the bankruptcy notice Mr Boylan made his application by affidavit to this Court to the effect that he had a counter-claim, set-off or cross demand against the judgment creditors which satisfied the requirements of the bankruptcy notice. Consideration of that application was adjourned in this Court to await the outcome of the Full Court appeal. It was not relisted for hearing until 20 July 1998. The relisting of the application led to Mr Boylan filing the second of his applications on 14 September 1998 seeking an order setting aside the bankruptcy notice.
In the reasons for judgment delivered by Mansfield J dismissing Mr Boylan’s applications, his Honour has addressed no less than eleven separate arguments raised by Mr Boylan in support of his applications. The notice of appeal to this Court, drawn by Mr Boylan who is unrepresented, pleads nine grounds of complaint, and a supplementary notice of appeal raises a further eleven grounds of complaint against the judgment of Mansfield J. There is a measure of overlap in the grounds. Mr Boylan’s written summary of argument filed for the purposes of this appeal, and his oral submissions, have not been structured to follow the grounds of appeal, and we encountered difficulty in relating some of Mr Boylan’s oral arguments to any of the grounds. The written and oral submissions do not deal with several of the grounds, and in the course of argument Mr Boylan informed the Court that he did not seek to re-agitate every one of the matters raised before the primary judge. We propose therefore to concentrate on the written and oral arguments presented by Mr Boylan.
The first argument advanced by Mr Boylan asserts that the bankruptcy notice was issued on a document that was not a true copy of the judgment.
The Bankruptcy Rules which governed the issue of the bankruptcy notice were those in force immediately before amendments effected to the Act by Schedule 1 of the Bankruptcy Legislation Amendment Act 1996 (No. 44 of 1996). That Act was assented to on 25 October 1996 but Schedule 1 did not commence until 16 December 1996. Rule 7(2) of the Bankruptcy Rules provided that when applying for the issue of a bankruptcy notice, a judgment creditor:
“(a)file one of the following documents in respect of the final judgment or final order in relation to which the bankruptcy notice is to be issued:
(i)an office, sealed or certified copy of the judgment or order;
(ii)a certificate of the judgment or order under the seal of the court or under the hand of an officer of the court;
(iii)a copy of the entry of the judgment or order certified by an officer of the court to be a true copy of that entry;
(iv)if the judgment or order has been registered in a court under section 21 of the Service and Execution of Process Act 1901 – an office or sealed copy of the certificate produced for the purpose of registering the judgment or order; or
(v)if the judgment or order is an award referred to in paragraph 40(3)(a) of the Act – a copy of the award certified to be a true copy of the award by a person who had compared the copy with the original award…”
In the present case the document filed in support of the application to issue the bankruptcy notice was in the following terms:
“CERTIFICATE OF JUDGMENT IN THE
DISTRICT COURT OF SOUTH AUSTRALIA
Title of suit and date of commencement No. 237 of 1994
Between:
FRED BOYLAN
– Plaintiff
– and –
STEPHEN FARTHING
– First Defendant
– and –
ALEGNA PTY LTD
– Second Defendant
2nd day of March, 1994.Form or nature of suit Damages for Breach of Agreement Name and addition of party to whom payment is to be made or in whose favour judgment is given or made Stephen Farthing and Alegna Pty Ltd both 45 Main South Road, REYNELLA in the State of South Australia 5161 Name and addition of party ordered to pay money or to do or not to do any act Fred Boylan of 18 Kirby Street VICTOR HARBOR in the State of South Australia 5211 Date of Judgment The 1st day of November, 1996 – interest fixed by the Court on the 8th day of November, 1996 Abstract of judgment stating amount (if any) ordered to be paid, the rate of interest (if any) payable thereon, and the date from which it is payable, and particulars of any act ordered to be done or not to be done Judgment for $90,005.37 and costs to be taxed. Costs have yet to be taxed. Interest fixed at $15,000.00. Date of trial and amount of verdict (if any) 8th March, 1996, 12th March, 1996 to 15th March, 1996, 22nd July, 1996 to 30th July, 1996, 5th August, 1996, 21st August, 1996, 28th October, 1996 and 1st November, 1996 $90,005.37 plus interest fixed at $15,000.00 plus costs. I CERTIFY that this certificate correctly and fully sets forth the particulars of a judgment given in this Court on the 1st day of November, 1996 in a suit wherein Fred Boylan was plaintiff and Stephen Farthing and Alegna Pty Ltd were defendants.
DATED this 14th day of November, 1996.
(Sgd)
DEPUTY REGISTRAR
(Seal Affixed)”
Mr Boylan contends that the certificate of judgment is not a true copy of the judgment. That is so, and it does not purport to be a copy of the judgment such that it would comply with r 7(2)(a)(i) or (iii). It is a certificate of judgment of the kind referred to in r 7(2)(a)(ii). It is in a form which closely follows a form for a certificate of judgment prescribed by the Service and Execution of Process Act 1901 (Cth): see s 20 and the Third Schedule. In our opinion the document lodged in support of the application for the issue of the bankruptcy notice in this case meets the requirement of r 7(2)(a)(ii). It purports to be a certificate of the judgment. It was duly signed and sealed by a Deputy Registrar of the District Court, and it stated in summary form the essential particulars of the judgment pronounced in the action to which it related.
Mr Boylan further argues that the certificate was defective because it incorrectly stated the date of judgment, and that the judgment included “costs to be taxed”. Before the primary judge Mr Boylan added a third complaint, namely that the backsheet to the certificate of judgment showed, after the names of the first and second defendants the words “– and – Patricia Barbara Boylan – Third Party”.
Dealing with the last matter first, Mrs Boylan’s name was inappropriately added to the backsheet, presumably in consequence of an application which had been taken in the proceedings when a Mareva injunction was sought against the property of Mrs Boylan. However the backsheet did not form part of the body of the certificate of judgment which correctly described the plaintiff and defendants, and made no reference to Mrs Boylan. The primary judge was plainly right in rejecting the contention that the inappropriate addition of Mrs Boylan’s name to the backsheet affected the validity of the certificate of judgment.
The argument that the certificate incorrectly stated the date of judgment was based on the fact that Judge Lowrie on 21 August 1996 announced interim findings on many disputed issues which had been canvassed by the parties. However, it is plain from his reasons for judgment that he did not purport to enter a final judgment on that day. On the contrary, he issued directions permitting Mr Boylan to obtain further accounting evidence, and fixed a date for the resumption of the hearing for the purpose of allowing the accountant witnesses to give further evidence. The awards on the claim and counter-claim, and the resultant judgment in favour of Mr Farthing, were pronounced on 1 November 1996. The certificate of judgment is correct in that regard. The certificate of judgment also correctly states the date on which the award of interest was made.
A point not argued by Mr Boylan, however, flows from the certificate of judgment insofar as it gives different dates for the principal judgment and the award of interest. The preamble to the bankruptcy notice was in the following terms:
“WHEREAS ALEGNA PTY LTD A.C.N. 008 286 306 and STEPHEN FARTHING both of 45 Main South Road, Reynella in the State of South Australia, Second Hand Motor Vehicle Dealers (hereinafter referred to as ‘the judgment creditors’) have claimed the sum of $90,005.37 plus interest in the sum of $15,000.00, the total sum of $105,005.37 is due by you to the judgment creditors under a final judgment obtained by the judgment creditors against you in the District Court of South Australia on the 1st day of November 1996, being a judgment the execution of which has not been stayed. THEREFORE TAKE NOTICE…”
The notice went on to require Mr Boylan to pay, or to secure payment of, the sum of $105,005.37 within fourteen days, and gave notice that on failure to do so, or to satisfy the Federal Court of Australia that he had a counter-claim, set-off or cross demand equal to or exceeding the sum claimed which could not have been set up in the action in which the judgment was obtained, he would commit an act of bankruptcy.
The preamble asserts that the total sum claimed, being both the judgment and the interest, was the sum due under a final judgment obtained on 1 November 1996. Insofar as this is an inaccurate description, it could not have given rise to any misunderstanding or confusion on the part of Mr Boylan as to the amount sought by the bankruptcy notice. At all times he was fully aware of the amount of the judgment, and was present on 8 November 1996 when the lump sum for interest was fixed. Section 306 of the Act provides that proceedings under the Act are not invalidated by a formal defect or an irregularity, unless the court before which the objection on that ground is made is of the opinion that substantial injustice has been caused by the defect or irregularity and that the injustice cannot be remedied by an order of the Court. In this case, not only is the point not taken, but it could not be argued that any injustice flowed from the misdescription.
The argument based on the inclusion in the certificate of judgment of “costs to be taxed” is one of more substance. The evidence before this Court does not disclose that any order for costs was pronounced either on 1 November or 8 November 1996 by Judge Lowrie. Mansfield J rejected Mr Boylan’s argument that costs were incorrectly included in the certificate. His Honour held that r 101.02(1) of the Supreme Court Rules 1987 applied so as to result in an order for costs against Mr Boylan even in the absence of any order to that effect being made by a judge. Rule 101.02(1) provides that, subject to the rules, the costs of and incidental to a proceeding shall follow the event unless the court otherwise orders. Contrary to the submission of Mr Boylan, his Honour did not err in applying a provision of the Supreme Court Rules to a District Court matter. Part II of The Civil Division – General Procedures Rules of the District Court of South Australia provides that, with some exceptions not presently relevant, the Supreme Court Rules in force from time to time should apply mutatis mutandis to all actions commenced or continued in the Civil Division of the District Court as if the rules had been made pursuant to the rule-making power in the District Court Act 1991 (SA).
Section 42(1) of the District Court Act provides:
“Subject to subsection (2) and the rules, costs in any civil proceedings will be in the discretion of the Court.”
Subsection 2 is not presently relevant. The rules include r 101.02(1).
Historically, the general rule in civil litigation is that costs are in the discretion of the court, and in the exercise of that discretion costs will normally follow the event. However, under this general rule, it was clearly established that a successful party had no right to costs until the court actually made an order to that effect in exercise of its discretionary power: Donald Campbell & Co v Pollak [1927] AC 732 at 809 and Re H (No.2) [1970] 1 All ER 287. His Honour’s construction and application of r 101.02(1) so as to impose, by force of the rule, an obligation to pay costs on the unsuccessful party at trial, would mean that r 101.02(1) reverses that position.
Rule 101.02(1) was considered by the Full Court of the Supreme Court of South Australia in Copping and Perball Pty Ltd v ANZ McCaughan Limited & Others (No. 1) (1995) 179 LSJS 439. An argument that the provisions of s 40 of the Supreme Court Act 1935 (SA) which, like s 42 of the District Court Act, provides that subject to the rules of court, costs shall be in the discretion of the Court, when read with r 101.02(1), had the effect of fettering the general discretion of the Court as to costs was rejected. King CJ, with whom Mohr and Nyland JJ agreed, at 443 said that if the rule had the effect of fettering the general discretion implicit in s 40, it would probably be invalid, and continued:
“There is a strong presumption against construing the Rule in such a way and it is unnecessary to do so. Where costs are in the discretion of the court, the discretion must nevertheless be exercised judicially. A successful party has a reasonable expectation of obtaining his costs. The judge ought not to exercise his discretion against a successful party on grounds wholly unconnected with the cause of action, Donald Campbell & Co Ltd v Pollak [1927] AC 732. I think that Rule 101.02(1) does no more than express in the Rules that well established principle. The reference to costs following the event is an expression of the general expectation that the successful party will get the costs. The phrase ‘unless the Court otherwise orders’ reflects the unfettered discretion of the judge to fashion the order for costs as he sees fit in the interests of justice.”
This Court should follow the construction placed on the rules of the Supreme Court of South Australia and the District Court of South Australia by the Full Court. If there is no order by Judge Lowrie which awards costs to the defendants in the District Court proceedings, the certificate of judgment is irregular insofar as it states that the defendants in the action recover “judgment for $90,005.37 and costs to be taxed”. Although neither the reasons for judgment delivered on 1 November 1996, nor the transcript of the hearing on 8 November 1996, which are in evidence before this Court disclose that an order for costs was made, the possibility remains that an oral application for costs was made to the trial judge on 1 November 1996 after judgment was delivered, and that the trial judge then made such an order. Without evidence as to this possibility, this Court is not justified in going behind the certificate of judgment, apparently regularly issued by a Deputy Registrar of the District Court. It is not necessary however, for this uncertainty to be resolved. Even if there were no order for costs made by the trial judge, in our opinion the resulting error in the certificate of judgment does not render the bankruptcy notice a nullity, or provide any other ground for setting it aside.
No amount for costs is claimed in the bankruptcy notice. The bankruptcy notice explicitly and unambiguously claims the judgment sum of $90.005.37 plus interest in the sum of $15,000, a total of $105,005.37. Even if there were an order for costs, as the costs were then (and remain) untaxed, no quantified amount was due for costs. The amount claimed accurately stated the amount then due under the judgment and in respect of interest. This is not a case where there has been an understatement of the amount due. Further, even if there were an understatement, that would render the bankruptcy notice defective only if the understatement were objectively capable of misleading the debtor as to what was necessary for compliance with the notice: Kleinwort Benson Australia Limited v Crowl (1988) 165 CLR 71 at 80. In the present case the bankruptcy notice gave rise to no uncertainty as to the amount required to be paid to constitute compliance with the notice.
Before Mansfield J the appellant argued that the bankruptcy notice was also misleading in claiming $15,000 interest, as that sum could not be reconciled with an interest calculation at the rate of eight per cent from the date of the institution of the proceedings to the date of judgment in the District Court. The transcript of the hearing before Judge Lowrie on 8 November 1996 records that counsel for the defendants suggested an interest calculation at the rate of ten per cent, but the judge responded saying that in all the circumstances he thought a rate “more like eight per cent” would be appropriate. However, it is plain from the transcript that the judge did not purport to make a precise calculation, but rather exercised his statutory power to fix a lump sum. That sum is plainly stated in the certificate of judgment and the bankruptcy notice, and there is nothing misleading about either document. The appellant contends before this Court that Mansfield J erred in his conclusion to this effect because in the course of his reasons he said that the lump sum was fixed “when Mr Boylan was present by his counsel”. That was not so. Mr Boylan was present in person without his counsel. However, that factual error has no bearing whatsoever on the conclusion reached by the primary judge.
The remaining submissions made by the appellant in support of his contention that the primary judge erred in not setting aside the bankruptcy notice involve in one form or another an attempt to go behind the judgment on which the bankruptcy notice was based. These submissions include that the primary judge erred in not allowing the appellant to tender selected pages of the transcript from the trial in support of an argument that Judge Lowrie’s preference for the evidence of Mr Farthing over that of Mr Boylan was wrong. Mr Boylan submits that both Judge Lowrie and the Full Court of South Australia were wrong in the conclusions reached by them that Mr Boylan, by his conduct, repudiated the agreement of 17 January 1994, and that the repudiation was accepted by Mr Farthing. Mr Boylan’s submissions also attack the findings made by Judge Lowrie based on accounting evidence given by witnesses at the trial.
Mansfield J refused to go behind the judgment on which the bankruptcy notice was founded. His Honour acknowledged the power of this Court in bankruptcy proceedings to inquire into the validity of a judgment debt in appropriate circumstances: Corney v Brien (1951) 84 CLR 343 and Bourke v Beneficial Finance Corporation Limited (1994) 124 ALR 716. However, his Honour held that as the judgment had been given after a full hearing in the District Court, and had been upheld on appeal, the Court should not do so in this case. His Honour applied the following observations of Beaumont J in Olivieri v Stafford (1989) 24 FCR 413 at 424:
“As has been said, a court of bankruptcy is concerned to inquire into the ‘reality’ of the matter in hand. Here the ‘reality’ of the matter is that the merits of the respondents’ claim have been demonstrated to the satisfaction of one judge of the District Court and another judge of that Court has declined to disturb the judgment. As a matter of substance, it is appropriate, in all the circumstances, for a court of bankruptcy to treat what happened in the two hearings in the District Court as a trial of the merits of the respondents’ claim. That is to say, a court of bankruptcy should, I think, accept that a process of adjudication in the District Court has established that the underlying transactions created a true debt which could, in turn, provide a proper foundation for the entry of a judgment in respect of which a bankruptcy notice could properly issue.”
and the further passage at 426:
“It is one thing to look behind a judgment obtained in default of the taking by a defendant of a procedural step. In such a case, there has been no adjudication of the merits of the dispute. It is a different thing to ask a bankruptcy court to embark upon an investigation of all the details of the underlying transactions between these parties where the matter has already been the subject of an adjudication in the District Court on two occasions.”
In the present case the dealings between Mr Boylan, Mr Farthing and Alegna have been comprehensively canvassed at a long trial in the District Court (following an earlier long trial and appeal). The findings of the trial judge were then subject to a searching attack in the Full Court, on substantially the same grounds as Mr Boylan sought to agitate before Justice Mansfield. The Full Court upheld the judgment at trial. The arguments raised by Mr Boylan before Mansfield J, and again before this Court, were to the effect that on the material adduced in evidence by the parties at trial, the trial judge, and the Full Court of South Australia, arrived at the wrong result. The arguments do not deny that the issues between the parties were fully litigated. The grounds of dissatisfaction with the result now expressed by Mr Boylan provide no reason for this Court to consider afresh the matters that have already been resolved in the earlier litigation. The observations of Beaumont J in Olivieri v Stafford were correctly applied to the present case.
In our opinion the application by Mr Boylan to set aside the bankruptcy notice was correctly dismissed by Mansfield J, and the arguments to the contrary advanced by Mr Boylan to this Court fail.
We turn now to the appeal against the finding of Mansfield J that Mr Boylan did not have a counter-claim, set-off or cross demand of the kind referred to in s 40(1)(g) of the Act.
In his affidavit filed to assert the counter-claim, set-off or cross demand Mr Boylan deposed:
“The claim against me in this action is based on a notional liquidation at 9/1/94.
I am a one third shareholder of Alegna Pty Ltd and the company has continued to trade at all times since 9/1/94.
During the course of the action on which the notice is based, the first defendant Stephen Farthing has consistantly (sic) claimed that Alegna Pty Ltd is worth between $250K and $280K.
My proportional share is therefore in the sum of $84K to 93K.
I believe that Stephen Farthing has taken drawings from profits on future profits of the company the sum of $178K since 9/1/94.
Proportionaly (sic) the profits due to me are in the sum of $60K plus interest.
These issues could not have been raised by me during the action in which the debt claimed against me was made for the following reasons.
It is not within the jurisdiction of the District Court to remove me as a shareholder of the company, or to deny me a share of profits on future profits of the company since 9/1/94…”
Other evidence before Mansfield J disclosed that whilst Alegna had current and non-current assets of the order referred to by Mr Boylan, the company also had current and non-current liabilities of almost the same amount so that the net assets of the company were about $10,000 to $12,000. Even if it were otherwise arguable that Mr Boylan retained a one third interest in Alegna which he could raise by way of counter-claim, set-off or cross demand to the judgment debt entered in favour of the judgment creditors, the amount of that counter-claim, set-off or cross demand would fall far short of equalling the judgment debt. Mansfield J was plainly correct in his finding that he was not satisfied that the claim asserted by Mr Boylan was of an amount exceeding the judgment debt. That finding alone is sufficient to uphold the conclusion that Mr Boylan did not have a counter-claim, set-off or cross demand of the relevant kind.
However, Mansfield J also based his finding on the ground that the claim asserted by Mr Boylan did not meet the requirement that the claim be one that could not have been set up in the action in which the judgment was obtained. On the contrary, Mansfield J held that the claim was actually set up in the proceedings, and had been taken into account by Judge Lowrie in arriving at the judgment.
It was central to Mr Boylan’s case at trial that from September 1992 he would have a one third interest in the joint venture to be conducted with Mr Farthing and Alegna. Judge Lowrie relevantly found that “… bearing in mind all these matters, it was agreed that as of September 1992, Mr Boylan would be a one third owner of the company”.
By the Heads of Agreement entered into on 17 January 1994 Mr Boylan and Mr Farthing agreed to dissociate themselves, and terms were agreed to bring about a financial separation. The clear intent of the agreement was that there would be a one third, two thirds division of everything, and that in consideration of Mr Boylan receiving one third, he would have no continuing interest in Alegna.
A major issue at trial between the parties was whether Mr Boylan repudiated the agreement of 17 January 1994 as alleged by Mr Farthing, or whether, on the contrary, the agreement was broken by Mr Farthing as Mr Boylan asserted. This issue was resolved against Mr Boylan. However, the consequence of the finding that Mr Boylan repudiated the agreement was not carried through to the accounting exercise which was carried out at trial, and which resulted in the judgment in favour of Mr Farthing and Alegna.
Mr Boylan is much aggrieved by the finding that he repudiated the agreement. His complaints in that regard were aired at length before the Full Court of South Australia, and were urged again before this Court. However, as Perry J, delivering the judgment of the Full Court of South Australia, explained, the finding of repudiation is not one which had any influence on the amount of the judgment. Perry J said:
“It seems to me that there can be no doubt that the actions of Mr Boylan, having regard to the findings of fact made by the learned trial Judge, and in particular as to Mr Boylan’s conduct in failing to adhere to the agreement, amounted to a repudiation of it. Equally, I do not think that it could seriously be suggested that the actions of Mr Farthing on 25 February 1994 could be characterised as other than an acceptance of the repudiation which he perceived (rightly, as the trial Judge found) had been committed at that stage by Mr Boylan.
But if the agreement was to be regarded as repudiated by Mr Boylan and the repudiation was accepted by the appellant, the basis upon which any final accounting between the parties should proceed, and the associated question of damages between them for damage of contract, would become problematic.
But the trial did not go forward on that basis. Instead, it was accepted by both sides that there should be an accounting drawn up on the footing of the application of the agreement of 17 January 1997. (sic)”
Perry J went on to give examples from written submissions and argument on the appeal which he considered illustrated adherence to the position that the agreement of 17 January 1994 was to govern the final accounting between the parties. Before this Court Mr Boylan sought to argue that one of the examples given by Perry J did not support the conclusion drawn from it. On the limited information that this Court has about the course of conduct of the appeal before the Full Court of South Australia it would be impossible for us to assess that submission if it were relevant. However, it is beside the point. The indisputable fact is that the agreement of 17 January 1994 has been applied and that the judgment represents an accounting between the parties on that basis. Mr Boylan’s continuing arguments, even if correct, that the finding of repudiation was wrong provide no basis for challenging the judgment.
It also follows from the fact that the accounting between the parties took place on the basis of the agreement of 17 January 1994 that the value of Mr Boylan’s one third interest in Alegna has been taken into account and extinguished by the judgment. Mr Boylan’s assertion that he has a continuing one third interest in Alegna is for that reason untenable.
Mr Boylan argues that the fact that Judge Lowrie refused on 8 November 1996 to make a declaration that he had no continuing interest in Alegna established that the judgment did not extinguish his interest in the company. That submission misunderstands what occurred before Judge Lowrie on 8 November 1996. The declaration was refused simply on the procedural ground that it was not one of the reliefs that had been sought by the defendants in their cross claim.
Mr Boylan has failed to make out his challenge to the finding that he did not have a counter-claim, set-off or cross demand of the kind referred to in s 40(1)(g) of the Act.
Mansfield J refused to extend time for compliance with the bankruptcy notice under s 41(6A) of the Act until Mr Boylan’s application for special leave to appeal to the High Court is determined.
Mansfield J correctly observed that the power to extend time under s 41(6A) is discretionary. The general discretion is subject to s 41(6C), but that subsection had no relevant application on the findings made by Mansfield J that the application to the High Court had been instituted bona fide, and there was no submission made that the application was not being prosecuted with due diligence. His Honour said:
“On the material before me, Mr Boylan has made no application for a stay of the decision of the Full Court. No explanation has been proffered for having not pursued that course. There is no evidence that he has assets to meet the judgment, nor any proposal to provide security in respect of it. The refusal of this application will not affect his status, although he will as a result probably commit an act of bankruptcy. I know nothing of any other creditors. Although the order sought would delay the commission of any act of bankruptcy, and so delay the time from which the six months period relating to that may run, Mr Farthing and Alegna have not put anything to indicate any particular significance by reason of that matter. Their apparent delay in having the matter relisted following the Full Court decision does not indicate any critical timing considerations on their part.
On balance, however, I do not think it appropriate to exercise my discretion in the manner sought by Mr Boylan. The balancing of the considerations does not lead me to do so. There are no special circumstances identified by Mr Boylan which warrant the exercise of that discretion.
I am confirmed in that conclusion by my consideration of the prospects of Mr Boylan obtaining special leave to appeal to the High Court. I have carefully considered the application for special leave itself, and the summary of argument apparently filed in support of that application containing amongst other things the proposed notice of appeal. In my view Mr Boylan has little prospect of succeeding on that application. There is no particular matter of public importance identified. What is apparent is that the District Court decision and the Full Court decision involve a careful and detailed analysis of a complicated series of arrangements between Mr Boylan and Mr Farthing and Alegna over a period of some two years, and the determination of facts as to the nature of those arrangements from time to time and the consequences of them. The decision is very much a decision on the facts of the particular case. There is no issue of general application to which the decision would apply. Furthermore, the decision of questions of fact, to large measure turned upon issues as to credit as between Mr Boylan on the one hand and Mr Farthing on the other.”
As we understand the submissions made by Mr Boylan before this Court, he did not seek to challenge the exercise of the discretion by Mansfield J, although he offered criticisms about aspects of Mansfield J’s reasons for judgment which dealt with this aspect of his applications. He argued that Mansfield J appeared to be mistaken about the existence of medical evidence on the file to account for his delay in applying to the High Court, and that his Honour had misdescribed the number of complaints which Mr Boylan made about the Full Court decision which would justify the grant of special leave. Further, one ground of appeal, not the subject of submissions before us, is that Mansfield J erred in saying that the application to the High Court was not accompanied by the appropriate documents. In case we have misunderstood Mr Boylan, and it was his intention to challenge Mansfield J’s exercise of discretion under s 41(6A), we record our view that the criticisms of his Honour’s reasons for judgment made by Mr Boylan do not show that the discretion was wrongly exercised. As to the complaint about medical evidence, his Honour said expressly that he decided the matter without reference to Mr Boylan’s prospects of having the time requirement for the application dispensed with. His Honour’s reasons indicate that the discretion was exercised without regard to Mr Boylan’s prospects of success on the application. His Honour’s discussion of those prospects was merely by way of reinforcement of a conclusion already reached. His Honour in that discussion said that he had considered the application for special leave and the summary of argument filed in support of it. Those documents set out all the grounds on which special leave was sought, and also the proposed grounds of appeal. Whatever the appropriate number of grounds, it is plain that his Honour had regard to all of them. We do not consider that anything emerges from the grounds of appeal or the oral and written submissions made by Mr Boylan which suggest any ground to challenge the exercise of the discretion by Mansfield J.
In our opinion the appeal should be dismissed with costs.
I certify that the preceding forty-nine (49) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Court. Associate:
Dated: 23 March 1999
The Appellant appeared in person The First Respondent appeared in person for both Respondents Date of Hearing: 5 March 1999 Date of Judgment: 23 March 1999
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