Chesson v Smith

Case [1992] FCA 429

Re: MURRAY ADDAIR CHESSON
And: IRIS ENSLEY SMITH
No. N G127 of 1992
FED No. 429
Bankruptcy - Costs

COURT

IN THE FEDERAL COURT OF AUSTRALIA


NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Beaumont(1), Gummow(1) and Cooper(1) JJ.
CATCHWORDS

Bankruptcy - s.40(1)(g) of Bankruptcy Act 1966 - creditor's petition based on costs order made in previous proceedings - whether debtor had counter claim which could not have been set up in previous proceedings.

Costs - general rule - costs follow the event.

HEARING

SYDNEY

#DATE 27:5:1992

Counsel and Solicitors Mr L.J. Ellison instructed
for Appellant: by Patterson, Byfield and Bryen

Counsel and Solicitors Mr J.R. Dupree instructed by
for Respondent: H.D. Kelly

ORDER

Appeal dismissed, with costs.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

This appeal arises in the following circumstances. In January 1990 the respondent filed in the Supreme Court of New South Wales a summons seeking leave to commence proceedings under the De Facto Relationship Act 1984 (N.S.W.) out of time. The application for extension of time was heard by Master Windeyer. In July 1990 Master Windeyer dismissed the application with costs.

  1. Subsequently, a certificate of taxation was issued by the Supreme Court certifying the amount of the appellant's costs. A bankruptcy notice was then issued at the request of the appellant requiring the respondent to pay or secure the sum referred to in the certificate of taxation. On 21 August 1991 the respondent was served with the bankruptcy notice.

  2. On 28 August 1991 and subsequently the respondent filed affidavits pursuant to section 41(7) of the Bankruptcy Act 1966, ("the Act") to the effect that she had a counter-claim against the appellant which she claims she could not have set-up in the Supreme Court. The Judge at first instance made a declaration that the respondent had a cross-demand of the type referred to in section 40(1)(g) of the Act and this appeal is brought from that declaration. By section 40(1)(g) of the Act it is provided that:

A debtor commits an act of bankruptcy in each of the following cases -

...

(g) if a creditor who has obtained against the debtor a final judgment or final order, being a judgment or order the execution of which has not been stayed, has served on the debtor in Australia or, by leave of the Court, elsewhere, a bankruptcy notice under this Act and the debtor does not -

(i) where the notice was served in Australia - within the time fixed by the Registrar by whom the notice was issued; or

(ii) where the notice was served elsewhere - within the time fixed for the purpose by the order giving leave to effect the service, comply with the requirements of the notice or satisfy the Court that he has a counter-claim, set-off or cross demand equal to or exceeding the amount of the judgment debt or sum payable under the final order, as the case may be, being…

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Details
AGLC
Chesson, M.A. v Smith I.E. [1992] FCA 429
Case
[1992] FCA 429
Decision Date

CaseChat Overview and Summary

The appeal before the Federal Court was brought by the appellant, Chesson, against the respondent, Smith, concerning a bankruptcy matter. The dispute arose from a creditor's petition based on a costs order made in previous proceedings. The central issue was whether the debtor had a counter claim which could not have been set up in the original proceedings, pursuant to section 40(1)(g) of the Bankruptcy Act 1966. The court was tasked with determining whether the costs order could be considered as a debt within the meaning of the Act, given the circumstances surrounding the counter claim.

The court meticulously examined the relevant statutory provisions and case law to resolve the matter. It considered whether the counter claim presented by the debtor could have been set up in the earlier proceedings, and if so, whether this affected the enforceability of the costs order as a debt. The court also looked into the principles of res judicata and collateral attack to determine if the debtor's counter claim was precluded by the earlier judgment.

In its reasoning, the court concluded that the counter claim could have been raised in the previous proceedings, and thus, it did not fall under the exception provided by section 40(1)(g) of the Bankruptcy Act 1966. The court held that the costs order was a valid debt and dismissed the appeal. The decision underscored the importance of ensuring that all potential claims are raised in the appropriate proceedings to avoid complications in subsequent bankruptcy actions.

The court's final orders were that the appeal was dismissed, and costs were awarded to the respondent, Smith. The settlement and entry of these orders were to be dealt with in accordance with Order 36 of the Federal Court Rules.

Orders

Orders of the court

Appeal dismissed, with costs.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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