Coomber v Butler

Case [2019] FCA 1674

FEDERAL COURT OF AUSTRALIA

Coomber v Butler [2019] FCA 1674

File number: NSD 470 of 2019
Judge: GRIFFITHS J
Date of judgment: 11 October 2019
Catchwords: BANKRUPTCY – review of a Registrar’s decision dismissing an application to set aside a bankruptcy notice – no prima facie case of sufficient strength to warrant setting aside the bankruptcy notice – application for review dismissed, with costs
Legislation:

Bankruptcy Act 1966 (Cth) s 40

Agricultural Tenancies Act 1990 (NSW) ss 11, 20
Cases cited:

CFB18 v Reader Lawyers & Mediators [2018] FCA 611; 16 ABC(NS) 26

Coshott v Prentice (No 2) [2016] FCA 1531

Croker v Commonwealth [2011] FCAFC 25; 9 ABC(NS) 44

Deputy Commissioner of Taxation v Vasiliades [2015] FCA 1190

Jageev Pty Ltd v Deane (1997) 72 FCR 398

Zdrilic v Hickie [2016] FCAFC 101; 246 FCR 532
Date of hearing: 9 October 2019
Registry: New South Wales
Division: General Division
National Practice Area: Commercial and Corporations
Sub-area: General and Personal Insolvency
Category: Catchwords
Number of paragraphs: 41
Counsel for the Applicants: The applicants appeared in person
Counsel for the Respondent: T Fishburn
Solicitor for the Respondent: Stacks Law Firm

ORDERS

NSD 470 of 2019
BETWEEN:

RONALD GEORGE COOMBER

First Applicant

WENDY GAI COOMBER

Second Applicant
AND:

JULIE ANNE BUTLER

Respondent

JUDGE:

GRIFFITHS J

DATE OF ORDER:

11 OCTOBER 2019

THE COURT ORDERS THAT:

1.The application for review dated 21 May 2019 be dismissed.

2.The applicants pay the respondent’s costs, as agreed or taxed.

3.Order 6 of the orders made on 9 July 2019 is set aside. 

Note:   Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.


REASONS FOR JUDGMENT

GRIFFITHS J:

  1. By an application dated 21 May 2019, the applicants (Mr and Mrs Coomber) seek a review of the Registrar’s decision dated 1 May 2019 in which he dismissed the Coombers’ application to set aside a bankruptcy notice issued on 25 February 2019 and which had been served on them on 5 March 2019 (BN 235326).  The applicants contend that they have a counter-claim equal to, or higher than, the sum claimed under the bankruptcy notice (which is in the amount of $24,426.43, being a judgment debt based on a costs order made against the Coombers in proceedings in the Supreme Court of New South Wales). 

  2. The respondent has filed a creditor’s petition seeking an order for sequestration against the Coombers (NSD804/2019).  Those proceedings are currently stayed pending this proceeding. 

  3. The proceeding has a long and somewhat complex procedural history which is not confined to the proceeding in this Court. 

    The Registrar’s decision

  4. As noted above, the Coombers’ application to set aside the bankruptcy notice was based on a claim that they had a counter-claim under s 40(1)(g) of the Bankruptcy Act 1966 (Cth) equal to, or exceeding, the amount claimed in the bankruptcy notice and that they could not have set up that counter-claim in the action or proceeding in which the judgment or order in respect of which…

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Coomber v Butler [2019] FCA 1674
Case
[2019] FCA 1674
Decision Date

CaseChat Overview and Summary

In the matter of Coomber v Butler, the applicants sought to set aside a bankruptcy notice issued against them by the respondent. The case was before the Federal Court of Australia, where the applicants argued they had a counter-claim under s 40(1)(g) of the Bankruptcy Act 1966 (Cth) that equalled or exceeded the amount claimed in the bankruptcy notice. The applicants contended that they could not have set up this counter-claim in the action or proceeding in which the judgment or order in respect of which the bankruptcy notice was issued was obtained. The legal issues before the court involved determining whether the applicants had established a prima facie case of sufficient strength to warrant setting aside the bankruptcy notice, and whether the claims made by the applicants were genuine and bona fide. The court considered the evidence provided by the applicants, which included a bundle of documents and affidavits, and also the objections raised by the respondent regarding the admissibility and relevance of the evidence. The court concluded that the applicants had not demonstrated a valid off-set or counter-claim as required by the relevant legislation, and that the claims made by the applicants were not of a kind that it was just to allow the bankruptcy proceedings to await their determination. The application for review was dismissed, with the applicants to pay the respondent’s costs.

Orders

Orders of the court

1. The application for review dated 21 May 2019 be dismissed.

2. The applicants pay the respondent’s costs, as agreed or taxed.

3. Order 6 of the orders made on 9 July 2019 is set aside.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

The applicants also relied upon a separate bundle of documents, which was described as the material which the Coombers had sought to file in NCAT on 4 October 2019. This constitutes the “fresh proceeding” which the Coombers say they have commenced in NCAT and which they rely upon in support of their counter-claim. Something more will be said about this matter below. It is sufficient to note at this point that the material included not only a copy of a “Declaration of Valuer” dated 9 August 2019 by Mr John Lewis, but a more recent document dated 2 October 2019 by Mr Lewis, which is headed “Addendum for Declaration of Valuer”. The respondent objected to this bundle of material on various grounds, including relevance, the fact that the fresh proceeding in NCAT had not been accepted for filing and was, in any event, an abuse of process, the late receipt of Mr Lewis’ “Addendum for Declaration of Valuer”, his lack of expertise and the absence of any sufficient and detailed explanation by him of how he arrived at the different values for cattle, including the 19 cattle which are the subject of the fresh proceeding in NCAT. The respondent also objected to this material on the basis that it did not conform with the Court’s Expert Evidence Practice Note and that it was evident that the Coombers had sought to influence Mr Lewis by providing him with a statement which recorded their own personal valuation of the cattle. I admitted the material which became Exhibit 2, while noting the respondent’s objection and indicated that I would give my reasons on admissibility in my final reasons for judgment.Respondent’s evidence The respondent relied upon two affidavits sworn by her instructing solicitor, dated 8 July 2019 and 4 October 2019 respectively. The respondent also handed up a helpful “aide-memoire” which summarised the NCAT proceedings commenced by the Coombers from 8 March 2019. The various NCAT proceedings The Coombers have initiated numerous proceedings in NCAT. The following summary draws primarily upon the respondent’s outline of written submissions dated 23 August 2019, together with the “aide-memoire”. As will become apparent, it appears that there are, or were, other proceedings in NCAT involving the Coombers and Ms Butler, the details of which remain unclear. Further information concerning the current status of NCAT proceedings is set out in my summary below of the Coombers’ evidence. Although the Coombers stated in oral address that the only NCAT proceeding they relied upon for the purposes of the present proceeding is the fresh application which was lodged on 4 October 2019, it is desirable to provide some broader context and background to that matter because it could affect the weight and significance which the Court gives to the fresh proceeding. (i) NCAT proceeding COM 19/13488 The Coombers commenced these proceedings in the NCAT against Ms Butler by an application dated 15 March 2019. They sought to re-agitate matters under the Agricultural Tenancies Act which had previously been finalised in other NCAT proceedings, namely COM 17/03827, COM 17/06919, AP 18/09144 and COM 18/33555. The Coombers sought damages in the amount of $31,000 for the impounding and slaughter of 19 cattle on 24 September 2018. They described the matter as an agricultural tenancy dispute. The Coombers claimed that 19 of their cattle had been illegally removed from their leased land by Ms Butler and that the cattle were subsequently sold for “fat” (slaughter) value. The Coombers allege that the real value of the cattle sold was not reflected in the sale price because they were sold for slaughter and not for breeding.

Decision

Reasons for decision

The proceeding has a long and somewhat complex procedural history which is not confined to the proceeding in this Court. The Registrar’s decision As noted above, the Coombers’ application to set aside the bankruptcy notice was based on a claim that they had a counter-claim under s 40(1)(g) of the Bankruptcy Act 1966 (Cth) equal to, or exceeding, the amount claimed in the bankruptcy notice and that they could not have set up that counter-claim in the action or proceeding in which the judgment or order in respect of which the bankruptcy notice has been issued was obtained. The Registrar’s reasons are recorded in a transcript of the hearing before him on 1 May 2019. The Registrar made reference to certain proceedings in the NSW Civil and Administrative Tribunal (NCAT) which the applicants said supported their counter-claim. The Registrar held that he was not satisfied that it was appropriate to allow the NCAT matter to be resolved before the bankruptcy progressed. Having regard to the material placed before him, the Registrar said that it was insufficient to enable him to be satisfied as to the merits of the Coombers’ claims in the NCAT, including the absence of valuation evidence. It was also evident that the Registrar was given little information about the likely timeline for the NCAT proceeding. The Registrar also noted that the bankruptcy notice was only the first stage in the bankruptcy process, and the Coombers would be able to raise the progress of the NCAT claims in response to any creditor’s petition that may be filed subsequently.Case management of the review The review first came before me on 9 July 2019. On that day, orders were made with a view to the matter being ready for a final hearing on 9 October 2019. The orders included direction that the applicants file and serve any evidence on which they intended to rely, as well as a written outline of submissions, by the close of business on 13 August 2019. A deadline was also set for the respondent to file and serve affidavits and an outline of submissions. The Court also ordered that the sequestration proceeding (NSD804/2019) be stayed until further order. As will shortly emerge, the applicants continued to provide material in support of their application up until the day before the hearing. The respondent also sought to rely upon a second affidavit dated 4 October 2019 sworn by her instructing solicitor, which had been served on the applicants on that day but which was not filed until 9 October 2019, i.e. the date of the hearing after the Court granted leave. The applicants’ evidence The applicants filed several affidavits but, in the event, did not read any of them. Instead, they relied upon two bundles of documents which were tendered at the hearing. The first bundle was described as a response to the respondent’s second affidavit. It contained several NCAT documents, a copy of the Working Farm Lease Agreement dated 11 September 2015, extracts from the Agricultural Tenancies Act 1990 (NSW) and an extract from NCAT’s website. This became Exhibit 1 in the proceeding.

Ratio Decidendi

Legal Principle Established

Ms Butler’s submissions may be summarised as follows:(a)the valuation evidence is irrelevant in circumstances where the material NCAT claims have all been dismissed and two so-called appeals have been filed but are baseless;(b)the valuation evidence is not relevant to any present claim made by the Coombers and is, in any event, inadmissible;(c)the bankruptcy notice is a valid instrument and was validly served on the Coombers, it being based on the non-payment of legal fees by the Coombers to Ms Butler following Darke J’s dismissal of the Coombers’ proceedings against her in NSWSC 2017/80154;(d)the Coombers did not have a valid off-set or counter-claim either on 1 May 2019 or at present;(e)the Coombers attempts to bring further litigation against Ms Butler cannot provide a basis for setting aside the bankruptcy notice and, in any event, those proceedings are baseless;(f)the Coombers have not demonstrated a valid off-set or counter-claim as required by Croker v Commonwealth [2011] FCAFC 25; 9 ABC(NS) 44 at [10]-[25];(g)the Court cannot be satisfied that the Coombers have a prima facie case or genuine or bona fide claim and the Coombers have failed to demonstrate that their claims have any substance;(h)the volume of litigation brought by the Coombers against Ms Butler is a relevant consideration in the exercise of the Court’s discretion. Consideration and determination There is a helpful summary of the relevant principles guiding the Court’s jurisdiction by Colvin J in CFB18 v Reader Lawyers & Mediators [2018] FCA 611; 16 ABC(NS) 26 at [32] to [36]:32.A debtor served with a bankruptcy notice who brings a set aside application within time will not commit an act of bankruptcy in failing to comply with the notice if the debtor satisfies the Court that he or she has a counter-claim, set‑off or cross‑demand equal to or exceeding the amount claimed that he or she could not have set up in the action or proceeding in which the judgment or order for the amount claimed was obtained: s 40(1)(g) of the Bankruptcy Act.33.Where an application is made to set aside a bankruptcy notice on the basis of such an offsetting claim, the Court must weigh up considerations as to the legal and factual merit of the claim relied upon by the debtor and the justice of allowing the bankruptcy proceedings to go ahead or requiring them to await the determination of the claim: Guss v Johnstone [2000] HCA 26 at [40]. The offsetting claim must sound in money and it must be a claim that it is proper and reasonable for the debtor to litigate: Vogwell v Vogwell (1939) 11 ABC 83, 85. It must be raised in the same right as the claim the subject of the bankruptcy notice: Ebert v Union Trustee Company of Australia Ltd (1960) 104 CLR 346, 351‑352. So, for example, a claim made in a trustee capacity can only be met by an offsetting claim against the debtor in the same trustee capacity.34.The various formulations in the cases as to what must be established by the party seeking to set aside the notice were summarised by Lindgren J in Re Glew; Glew v Harrowell [2003] FCA 373 at [9]. They include, the existence of a “prima facie case”, “a fair chance of success” or the party is “fairly entitled to litigate” the claim and that the party is advancing a “genuine” or “bona fide” claim. However, it is not simply a matter of evaluating whether there is a claim with the requisite strength. Rather, the question is whether the claim is of a kind that, in all the circumstances (including the Court's view of the strength of the offsetting claim), it is just to allow the party to pursue rather than face bankruptcy. One aspect of the claim to consider is its strength. A weak claim will not suffice. Otherwise, an assessment of strength is to be considered in the context of other considerations that bear upon the justice of allowing the bankruptcy proceedings to continue without the claim first being determined.35.The claim must be articulated in the supporting affidavit filed with the application to set aside. After reviewing the relevant cases, Bromwich J concluded in Coshott v Prentice (No 2) [2016] FCA 1531 at [40] that:for an application to set aside a bankruptcy notice to be competent and trigger the automatic statutory extension of time for compliance in s 41(7), the offsetting claim must be “effective” or “real” at the time the application is made; it must be bona fide; it must on its face show a relevant offsetting claim. Such a jurisdictional requirement for a competent application cannot be supplemented after the time for compliance has expired because that is too late to engage jurisdiction and trigger an extension of time.36.The claim may then be supplemented by further affidavits relied upon at the hearing of the application to set aside the bankruptcy notice, but new claims cannot be introduced.