Cocciolone, F.R. v Quagliata, R.

[1994] FCA 400

4001 9 ~ _

JUDGMENT NO. .. .a . . . . .m "-* -*

U THE FEDEEiL COURT OF AUSTJALU	1	No. QN 1640 of 1993
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NE & R.M. COCCIOLONE

Judgment Debtors

B. o	u	~	~
Judgment Creditor
Drummond 15 June, Brisbane

1.         The judgment debtors, applicants in this application, shall pay the judgment creditor's costs of and incidental to the application filed on 28 April, 1994 up to and including the judgment delivered by Cooper J on 30 May, 1994.

2.         The judgment creditor, respondent in this application, shall pay the costs of the judgment debtors of and incidental to the application from that date, including the costs of today.

1.         The judgment debtors have a counter-claim, set-off or cross demand of a kind referred to in a . 40(l) (g)

the -tcv Act 1966 1CthL.
NOTE:	Settlement and entry of orders is dealt with in Rule
124 of the -tcv  Rules.

OF A U S T W 1 No. QN 1640 of 1993

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P.E. COCCIQIBNE & R . M • COCCIOLONE

Judgment Debtors

Judgment Creditor

c!BAM:  Drummond J

&?&X: Brisbane

m 8 15 June, 1994

This is an application by judgment debtors, who have been served with a bankruptcy notice in respect of a judgment debt for $6,864.00, in respect of the amount of a dishonoured cheque, for a declaration that they have a counter-claim, set- off or cross demand of a kind referred to in s. 40(l)(g) the

Act 1966 ICtu. The evidence before me indicates between the judgment debtors and the judgment creditor. These	that there are Supreme Court proceedings presently on foot
proceedings were commenced in 1992. Certificates of readiness have now been signed and it is anticipated that the action will come to trial probably around the middle of the last half of this year; the trial is not very far away.
The material indicates that the claims made in the Supreme Court action by the judgment debtors, said to give rise to the counter-claim, set-off or cross demand, comprise complaints that the judgment creditor, who held a mortgage over the judgment debtors8 cane farm, breached his duty of care as mortgagee when he sold the property in October 1986 for $380,000.00. Complaints are made that the judgment creditor failed to properly advertise the sale, that the sale took place at an under-value and that the sale took place to a company, the members of which are relatives of the judgment creditor. Damages are sought.
There is valuation evidence before me from the judgment debtors suggesting that the value of the property at the time of the sale was $590,000.00. A major complaint made in relation to the conduct of this sale is said to be the failure of the judgment creditor, in advertising the sale, to draw to public attention the fact that the Burdekin Shire Council had, in a formal way, indicated its willingness to approve a rezoning of the land from Non-urban to Rural Residential 1 and 2, subject to certain conditions set out in
a letter dated 24 January, 1986 from the Council to the judgment debtors' agents. The rezoning conditions appear to
be perfectly normal conditions of the kind one commonly finds
when a council has processed a rezoning application to the stage where it is prepared to approve it and merely wants to enaure that relevant developmental conditions will be met. That seems to me to provide a substantial ground for thinking that the sale may not have been properly advertised. There is, as I have said, the additional factor that the sale was made to a related company.
Criticisms are levelled by the judgment creditor at the extract from the valuation relied upon by the judgment debtors in support of their contentions that their claim in the Supreme Court against the judgment creditor for selling as mortgagee at an undervalue are well founded. The points are made that an extract only of the valuation is exhibited and that the valuation appears to be a valuation of the land as already subdivided. This, however, cannot be completely true because there is allowed in the valuation figure development costs of 20,000-odd dollars, although it is not clear what those development costs are said to cover, and it might be thought that it would cost more than that to meet the conditions imposed by the Council as the price of rezoning.
The judgment debtors point to other evidence of valuation to support the extract, which is all I have before
me, from their valuer's report, fixing the value of the property at $590,000.00. It appears that some months before
the judgment creditor sold the cane farm, the judgment debtors produced a contract of sale which they had entered into, agreeing to sell their farm to certain of their own relatives. The judgment creditor points to the conditions on which this #ale took place, notably that what was offered was only $350,000.00, $270,000 of the purchase price being payable in cash on settlement and $80,000 being payable within five years of completion. The land, as I have said, was sold by the mortgagee some months later for $380,000 cash. The judgment creditor says that this is the only evidence of value that the judgment debtors have put before the Court: it tends to confirm the reasonableness of what the judgment creditor sold the farm for.
However, the judgment debtors say that when the contract that they entered into with their own relatives is properly analysed, it is clear that it provides evidence that the land in the early part of 1986 was worth something very
like what the valuation evidence suggests it was worth. The .
judgment debtors point to the fact that there is expressly reserved from the sale of the land proposed by them to their relatives the standing cane crop; no attempt is made to identify what the value of that is but it must, one would have thought, be worth some tens of thousands of dollars. Perhaps more usefully for the judgment debtors, it is also pointed out that there is expressly reserved from the sale of the property
and there is evidence that that was worth something of the proposed by them the judgment debtors' sugar cane assignment,
order of about $130,000.00.
In a matter such as this, to meet the terms of S. 40(1) (g) the =tcv Act 1964 that the judgment debtor has a counter-claim, set-off or cross demand of the kind referred
to, it is accepted that it is for the debtor to satisfy the
Court that he has a genuine demand, and that the demand has a

D ~ C V

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reasonable probability of success. I was referred to Re Rvan:

Darte Rvan v Juter's Manaae- (1992) 38 P.C.R.

127 at 131.

It seems to me that there is little doubt on the material before me that the judgment debtors have a genuine demand. On the face of things, their case that the judgment creditor breached his duty as mortgagee in selling the property is one that cannot be said to be by any means lacking in any substance and, on the material before me, it cannot be dismissed as one that does not have a reasonable probability of success. And, indeed, as I understand the submissions of counsel for the judgment creditor, he did not seek really to contest those propositions; he focused rather on the proposition that the quantum of the claim made had not been proved to even the relatively low degree of cogency required to entitle the judgment debtors to the relief they claim, so that I cannot be satisfied, even if there was a breach of duty by the judgment creditor as mortgagee, that that caused the

judgment debtors any loss. He refers in this regard to the

fact that this is the best evidence that, it should be assumed, the judgment debtors can produce on this issue of the quantum of their claim, given that, when they initially made the application that is now before me on much less extensive evidence, they got an indulgence from Cooper J in the form of an adjournment of their application to provide further evidence; and this, so counsel for the judgment creditor submits, should be taken to be the best they can do.

Notwithstanding those submissions, it seems to me, for the reasons I have mentioned, in particular the fact that there was, on the face of things, a clear failure on the part of the judgment creditor in advertising the mortgagee sale to draw attention to the existence of the very significant planning status of the property, and having regard to the evidence concerning the sale arranged by the judgment debtors to their relatives when properly analysed, that the judgment debtors have crossed the threshold of showing, to the requisite degree of cogency, that they have a cross demand of the kind contemplated by the section sufficient to entitle them to the relief they claim.

It was submitted by counsel for the judgment

creditor in reliance upon re Judd: Ex Darte Sidnev E-

(1924) 24 S.R.(N.S.W.) 537 that, if I were to grant the declaration sought, it should be on the condition that the judgment debtors bring into Court the amount of the judgment debt. I was reminded that the judgment debt was for the

the justification for imposing the conditions referred to in	amount of a dishonoured cheque. However, it seems to me that
J u a was the Court's concern at the long period of unexplained delay on the part of the judgment debtor in pursuing the action, said to be based upon the cross demand, that was there relied on to meet the bankruptcy proceedings. The report at page 541 indicates that the judgment debtor ultimately made an offer to pay the amount of the judgment debt into Court and it was against that background that the relief sought there was granted upon the condition as to payment in. There is, in my view, a satisfactory explanation, based upon the longstanding impecuniosity of the judgment debtors, for the delays that have occurred and the tribulations they have encountered in getting their action against the judgment creditor to the stage it has presently reached. I do not think there is any justification for imposing a condition of the kind sought and I will therefore grant a declaration in terms of paragraph 1 of the application filed 28 April, 1994.
I certify that thia and the preceding
six pages are a true copy of the reasons for judgment herein of the Honourable Mr. Justice Drununond.

Associater	&z &&y
Date:	15 June, 1994