De Nuntiis v BP Australia Pty Ltd

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.