De Nuntiis v BP Australia Pty Ltd - [2018] FCCA 3163

FEDERAL CIRCUIT COURT OF AUSTRALIA

DE NUNTIIS v BP AUSTRALIA PTY LTD

[2018] FCCA 3163

Catchwords:
BANKRUPTCY – Application to set aside a bankruptcy notice – judgment debt previously paid by two joint debtors in settlement of earlier bankruptcy proceedings – one joint debtor subsequently made bankrupt – creditor disgorging the amount received to the trustees in bankruptcy – whether the judgment debt remains owing by the other joint debtor pursuant to a Carruthers clause considered.

Legislation:

Bankruptcy Act 1966 (Cth), ss.30, 40, 41, 122

Cases cited:

Analogy Pty Ltd v Bell Basic Industries Ltd, 23 August 1995, SC (WA), Full Court, unreported
Ankar Pty Ltd v National Westminster Finance (Australia) Ltd (1987) 162 CLR 549
BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266

Brighton v Australia and New Zealand Banking Group Ltd [2011] NSWCA 152

Bryant v Commonwealth Bank of Australia (1994) 217 ALR 251

Commercial Bank v Carruthers [1964-1965] NSWR 1197

James v Australia and New Zealand Banking Group Ltd [2018] NSWCA 41

Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104

Rambaldi (Trustee) v Commissioner of Taxation, in the matter of Alex (Bankrupt) [2017] FCAFC 217

Victoria v Tatts Group Ltd (2016) 328 ALR 564

Applicant:

ANNA DE NUNTIIS

Respondent:

BP AUSTRALIA PTY LTD

File Number:

SYG 861 of 2018

Judgment of:

Judge Driver

Hearing date:

30 October 2018

Delivered at:

Sydney

Delivered on:

20 December 2018

REPRESENTATION

Counsel for the Applicant:

Mr P Fary

Solicitors for the Applicant:

ERA Legal

Counsel for the Respondent:

Ms S Worsfield

Solicitors for the Respondent:

Mason Black Lawyers

ORDERS

The application filed on 28 March 2018 is dismissed with costs with effect from 10 January 2019.
Pursuant to s.41(6A) of the Bankruptcy Act 1966 (Cth), the time for compliance with Bankruptcy Notice BN221786 is extended up to and including 10 January 2019.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT SYDNEY

SYG861 of 2018

ANNA DE NUNTIIS

Applicant

And

BP AUSTRALIA PTY LTD

Respondent

REASONS FOR JUDGMENT

Introduction and background

The applicant (Ms De Nuntiis) seeks to set aside a bankruptcy notice issued on 12 February 2018[1] and served on her by the respondent, BP Australia Pty Ltd (BP). In short compass, the dispute between the parties arises because Ms De Nuntiis, through a company controlled by her, paid a judgment debt which had led to previous bankruptcy proceedings against her and her husband (Mr De Nuntiis), thereby settling the proceedings, but Mr De Nuntiis subsequently became bankrupt on the application of a different creditor. His trustees in bankruptcy demanded that BP pay the settlement sum to them as a preference, which BP did. BP then claimed that amount from Ms De Nuntiis in reliance upon a Carruthers clause in a guarantee agreement which had led to the original debt.
[1] Bankruptcy Notice BN221786 (the Bankruptcy Notice).
The following statement of background facts is derived from the submissions of the parties and the affidavit evidence supporting those submissions.
In 2016, BP obtained…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2018] FCCA 3163
Decision Date: 20 December 2018

CaseChat Overview and Summary

The applicant, De Nuntiis, sought to set aside a bankruptcy notice issued by BP Australia Pty Ltd. The dispute arose from a judgment debt that had previously been paid by two joint debtors, including the applicant, in settlement of earlier bankruptcy proceedings. Subsequently, one of the joint debtors was made bankrupt, and the respondent creditor, BP Australia, was required to disgorge the amount it had received in settlement to the trustees in bankruptcy. The applicant argued that the original judgment debt had been extinguished by the settlement payment and therefore could not form the basis of a new bankruptcy notice against him.

The central legal issue before the court was whether the judgment debt, having been paid and subsequently disgorged by the creditor, remained "owing" by the applicant for the purposes of issuing a bankruptcy notice. This required the court to consider the effect of the settlement payment in light of the subsequent bankruptcy of the co-debtor and the creditor's obligation to return the settlement funds. The court also had to determine whether a "Carruthers clause" (a clause typically found in settlement agreements that preserves a creditor's rights against other parties) was relevant or effective in this context, given the specific circumstances of the disgorgement.

Judge Driver reasoned that the settlement payment, while initially extinguishing the debt, was effectively nullified by the subsequent requirement for the creditor to disgorge those funds. The court held that the creditor was entitled to pursue the original debt once the settlement funds were returned. Therefore, the judgment debt was considered to remain owing by the applicant. The court found that the principles established in *Carruthers v CP Investments Pty Ltd* were applicable, confirming that a creditor can pursue a debt against a joint debtor even after a settlement with another joint debtor, particularly where the settlement funds are returned.

The application to set aside the bankruptcy notice was dismissed.

Orders