Chapman v Taylor

[2008] FMCA 280

FEDERAL MAGISTRATES COURT OF AUSTRALIA

CHAPMAN v TAYLOR & ANOR [2008] FMCA 280

BANKRUPTCY – Application to set aside bankruptcy notice – where counterclaim equal to or exceeding amount claimed in notice – where amount not quantified.

Bankruptcy Act 1966 (Cth), s.41(7)

Applicant: DAVID NEIL CHAPMAN

First Respondent: ERNEST TAYLOR

Second Respondent: FREDERICKA TAYLOR

File number: SYG 356 of 2008

Judgment of: Raphael FM

Hearing date: 4 March 2008

Date of last submission: 4 March 2008

Delivered at: Sydney

Delivered on: 4 March 2008

REPRESENTATION

Solicitors for the Applicant: Herbert Weller Solicitors

Counsel for the Respondent: Mr G. Carolan

Solicitors for the Respondent: Bartel Business Lawyers

ORDERS

1. Application dismissed.

2. The applicant debtor shall pay the costs of the respondent creditors to be taxed, if not agreed, in accordance with the Federal Magistrates Court (Bankruptcy) Rules 2006.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
SYDNEY

SYG 356 of 2008

DAVID NEIL CHAPMAN

Applicant

And

ERNEST TAYLOR

First Respondent

FREDERICKA TAYLOR

Second Respondent

REASONS FOR JUDGMENT

1. There comes before me an application to set aside a bankruptcy notice on the grounds contained in s.41(7) of the Bankruptcy Act 1966 (Cth), namely that the recipient of the notice has a counterclaim, set-off or cross-demand that could not be set up in the original action and is equal to or exceeds the amount claimed in the bankruptcy notice. When the application was made to this court on 15 February 2008 there was filed an affidavit of the debtor of the same date. That affidavit exhibited the bankruptcy notice but no other documents. The affidavit told of how the creditors had sued the debtor in the Consumer, Trader and Tenancy Tribunal over a period of years and that how in the middle of those proceedings there was taken up to the Court of Appeal a decision by the Tribunal member concerning the frustration of the original building contract. The debtor deposes to the fact that the Court of Appeal found in his favour and ordered costs against the creditors of both the Court of Appeal hearing and that in the Supreme Court where the matter was heard by Master Harrison.

2. I am given no further information about the Court of Appeal order and regrettably the order itself is not attached to any affidavit by the debtor.  What I do know from the bankruptcy notice is that it is alleged that the debtor owes the sum of $44,046.08 to the creditors pursuant to the registration of the final order of the CTTT.

3. The debtor has filed two further affidavits which purport to go to the matter of the costs that he says he is owed under the Court of Appeal judgment. I accept that the costs orders of the Court of Appeal would constitute a set-off of the type referred to in s.41(7) of the Bankruptcy Act as it is not something which could have been raised in the CTTT proceedings. The difficulty which the debtor has, however, is in establishing that the value of the Court of Appeal judgment is equal to or exceeds the amount of the claim in the bankruptcy notice. The party and party bill of costs has not been prepared for assessment and has not been assessed or taxed. There is no evidence before me of the amount of that bill. There is some indication that a costs assessor might complete the preparation of the original assessment within a few days. But I have not been asked to adjourn the proceedings and on the evidence that is currently before me I am unable to say that the debtor does have a set-off which would equal or exceed the amount of the debt.  To the extent that any estimation was made and contained in the affidavits, that estimation has been struck out either as irrelevant or as unsubstantiated.

4. In the circumstances the application must fail and there is no need for me to decide whether or not the order of the Court of Appeal could be considered to be inchoate and thus not constituting a set-off within the subsection.

5. The applicant debtor asks for some time so that the amount of the cross‑claim can be ascertained and he seeks to do this by way of a stay or extension of time for compliance with the notice.  There are real difficulties facing a court extending time for compliance where it has made a finding that the ground for setting aside the notice does not exist, and I am not prepared to grant the time of extension that would be necessary for the amount of the set-off to be ascertained.  I am of the view that the bankruptcy notice, the time for compliance with which was extended until after today's hearing, should be restored so that compliance would be required by the end of today.  The application is dismissed.  The applicant shall pay the costs of the respondents to be taxed, if not agreed, pursuant to the Federal Magistrates Court (Bankruptcy) Rules 2006.

I certify that the preceding five (5) paragraphs are a true copy of the reasons for judgment of Raphael FM

Associate: 

Date:  11 March 2008