FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Edmonds v Barrington Winstanley Group Pty Ltd [2023] FedCFamC2G 785
File number(s): BRG 273 of 2022 Judgment of: JUDGE LAING Date of judgment: 30 August 2023 Catchwords: BANKRUPTCY - application seeking review of a decision of a Registrar dismissing an application to set aside a Bankruptcy Notice – whether the applicants have a counter-claim, set-off or cross demand within the meaning of s 40(1)(g) of the Bankruptcy Act 1966 (Cth) that is equal to or exceeds the amount of the judgment debt – whether any such claim(s) could not have been set up in the proceeding in which the judgment or order was obtained – whether the Court should go behind the judgment – application dismissed Legislation: Bankruptcy Act 1966 (Cth)
Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)
Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW)
Felons (Civil Proceedings) Act 1981 (NSW)
Cases cited: Barrington Winstanley Group Pty Ltd v Edmonds [2022] NSWSC 531
Boensch v Pascoe [2019] HCA 49; (2019) 268 CLR 593
Naumovic v District Council of Coober Pedy [2023] FedCFamC2G 125
Palaniappan v Westpac Banking Corporation [2017] FCAFC 121; (2017) 252 FCR 486
Division: Division 2 General Federal Law Number of paragraphs: 78 Date of last submission/s: 23 August 2023 Date of hearing: 21 August 2023 Place: Sydney Solicitor for the Applicants: Mr L Smits of Murray Laws Pty Limited Counsel for the Respondent: Mr M Pesman SC Solicitor for the Respondent: Ark Legal ORDERS
BRG 273 of 2022 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: SANDRA HENRI EDMONDS
First Applicant
DAVID JAMES EDMONDS
Second Applicant
AND: BARRINGTON WINSTANLEY GROUP PTY LTD
Respondent
order made by:
JUDGE LAING
DATE OF ORDER:
30 AUGUST 2023
THE COURT ORDERS THAT:
1.The application filed on 4 November 2022 for review of the decision made on 30 August 2022 by a Registrar be dismissed.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
JUDGE LAING:
Before the Court is an application seeking review of a decision of a Registrar of this Court dismissing an application to set aside a Bankruptcy Notice.
For the following reasons, the application will be dismissed.
BACKGROUND
On 20 May 2022, orders were made by the Supreme Court of New South Wales (NSW) in proceedings 2021/00112414 (Supreme Court Proceedings) including that judgment be entered for the respondent in these proceedings against the applicants in the…
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Details
- Case
- [2023] FedCFamC2G 785
- Decision Date
CaseChat Overview and Summary
In the Federal Circuit and Family Court of Australia, the matter of Edmonds v Barrington Winstanley Group Pty Ltd was heard, involving a dispute over a bankruptcy notice issued against the applicants. The applicants had previously lost a case in the Supreme Court of New South Wales, resulting in a judgment debt of approximately $801,000. Following this, a bankruptcy notice was served, prompting the applicants to seek a review of the decision to set aside the notice. The applicants argued that they had a counter-claim, set-off, or cross-demand that could potentially exceed the amount of the judgment debt and that this claim could not have been set up in the original proceedings.
The court was tasked with determining whether the applicants' counter-claim met the criteria for setting aside a bankruptcy notice under section 40(1)(g) of the Bankruptcy Act 1966. This required the applicants to demonstrate the existence of a prima facie case with a reasonable probability of success, and that the claim could not have been raised in the original litigation. The applicants bore the onus of proving these elements, which the court considered in its review.
Upon review, the court found that the applicants had not provided sufficient evidence to establish the required elements. The applicants had failed to show that their counter-claim had a reasonable probability of success, and the court concluded that the notice should not be set aside. The applicants' application for review was dismissed, and they were ordered to pay the respondent's costs. The court's decision was based on the applicants' inability to meet the stringent requirements for setting aside a bankruptcy notice under the Bankruptcy Act.
The court was tasked with determining whether the applicants' counter-claim met the criteria for setting aside a bankruptcy notice under section 40(1)(g) of the Bankruptcy Act 1966. This required the applicants to demonstrate the existence of a prima facie case with a reasonable probability of success, and that the claim could not have been raised in the original litigation. The applicants bore the onus of proving these elements, which the court considered in its review.
Upon review, the court found that the applicants had not provided sufficient evidence to establish the required elements. The applicants had failed to show that their counter-claim had a reasonable probability of success, and the court concluded that the notice should not be set aside. The applicants' application for review was dismissed, and they were ordered to pay the respondent's costs. The court's decision was based on the applicants' inability to meet the stringent requirements for setting aside a bankruptcy notice under the Bankruptcy Act.
Orders
Orders of the court
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Background
Background to the litigation
For the following reasons, the application will be dismissed.BACKGROUND On 20 May 2022, orders were made by the Supreme Court of New South Wales (NSW) in proceedings 2021/00112414 (Supreme Court Proceedings) including that judgment be entered for the respondent in these proceedings against the applicants in the sum of $801,116.89 (including interest) (Judgment Debt). Those orders followed judgment being handed down by Darke J on 4 May 2022 in Barrington Winstanley Group Pty Ltd v Edmonds [2022] NSWSC 531 (SC Judgment). The Supreme Court Proceedings arose out of two agreements involving the applicants, a company associated with the applicants, and the respondent. The first was an Exclusive Mandate and Fee Agreement entered into on 3 November 2017 (Agreement). The second was a Deed of Acknowledgment of Debt entered into on 27 April 2018 (Deed) by which the applicants acknowledged the existence of a debt in the sum of $240,520 and undertook to pay it to the respondent. The respondent’s claim under the Deed for judgment in the sum of $240,520 was upheld in the Supreme Court Proceedings, which together with interest resulted in the Judgment Debt. The balance of the respondent’s claims, including under the Agreement, were dismissed. On 3 June 2022, a Bankruptcy Notice was issued to the applicants in respect of the Judgment Debt. Service was not contested in these proceedings. On 30 June 2022, the applicants filed an application with this Court seeking to set aside the Bankruptcy Notice. On 30 August 2022, the following orders were made by Registrar Morgan: 1. The application to set aside Bankruptcy Notice BN256386 issued on 3 June 2022 be dismissed.2. The Applicants pay the Respondent’s costs of and incidental to the application fixed in the amount of $25,856.86. On 3 September 2022, the respondent in these proceedings filed a creditor’s petition in proceedings MLG2012/2022 seeking sequestration of the applicants’ estates. Those proceedings are ongoing. On 4 November 2022, the applicants filed an application seeking an extension of time in which to seek review of Registrar Morgan’s decision. The first court date in this matter was listed on 16 December 2022. On that occasion, the matter was listed for hearing and timetabling orders were made. However, in January 2023, the Court was asked to make, by consent, orders adjourning the hearing of this matter until determination of NSW Supreme Court of Appeal No. 2022/00305853 (Appeal Proceedings). Orders to this effect were made on 17 January 2023. On 24 July 2023, judgment was handed down in the Appeal Proceedings dismissing the applicants’ appeal from the SC Judgment (Appeal Judgment). On 31 July 2023, orders were made setting this matter down for hearing and providing timetabling for any further evidence and submissions. At the hearing of this matter on 21 August 2023, an extension of time was granted without objection. RELEVANT LAW A review of a decision made by a Registrar is conducted by way of a hearing de novo: r 21.04(1) of the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
Evidence
Evidence Before The Court
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Decision
Reasons for decision
On 24 July 2023, judgment was handed down in the Appeal Proceedings dismissing the applicants’ appeal from the SC Judgment (Appeal Judgment). On 31 July 2023, orders were made setting this matter down for hearing and providing timetabling for any further evidence and submissions. At the hearing of this matter on 21 August 2023, an extension of time was granted without objection. RELEVANT LAW A review of a decision made by a Registrar is conducted by way of a hearing de novo: r 21.04(1) of the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth). Section 40(1)(g) of the Bankruptcy Act 1966 (Cth) (Bankruptcy Act) provides:BANKRUPTCY ACT 1966 - SECT 40Acts of bankruptcy(1) 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 for compliance with the notice; or(ii)where the notice was served elsewhere--within the time specified by the order giving leave to effect the service;comply with the requirements of the notice or satisfy the Court that he or she 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 a counter-claim, set-off or cross demand that he or she could not have set up in the action or proceeding in which the judgment or order was obtained… The requirements for setting aside a bankruptcy notice on the ground that there is a counter-claim, set-off or cross demand as contemplated under s 40(1)(g) of the Bankruptcy Act were summarised by Judge Riley in Toyne v Stokes [2021] FedCFamC2G 148 at [7]-[8]:7.In Singh v Fobupu Pty Ltd [2021] FCAFC 14, the Full Court of the Federal Court explained the requirements for a counter-claim, set-off or cross demand, for the purposes of s.40(1)(g) of the Act, as follows:35. ... s 40(1)(g) of the Bankruptcy Act provides that, once served with a bankruptcy notice, the debtor has the onus of satisfying the court that he or she has a counter-claim, set-off or cross demand equal to or exceeding the amount of the judgment debt or sum payable under a final order, as the case may be, being a counter-claim, set-off or cross demand that he or she could not have set up in the action or proceeding in which the judgment or order was obtained.36. There are two components to that obligation. The first component is that the debtor has to establish the existence of what he or she claims can amount to a cause of action or right to found the counter-claim, set‑off or cross demand. That is, the debtor has to satisfy the Court that he or she has a prima facie case of a counter-claim, set-off or cross demand even if the debtor does not adduce admissible evidence to support its existence. But, it is not enough for the debtor to make a mere assertion that such a case exists, as Dixon CJ, McTiernan and Windeyer JJ held in Ebert v The Union Trustee Company of Australia Limited [1960] HCA 50, (1960) 104 CLR 346 at 350. The debtor must show sufficiently that he or she has a claim that has reasonable probability of success to enliven the Court’s power to allow that claim to be litigated in separate proceedings, so that the Court will not require compliance with the bankruptcy notice. That does not involve, necessarily, proving as at a trial that the creditor has the claimed liability. But, it does mean that the Court must be satisfied that the debtor has some form of legal claim of sufficient substance to warrant the Court not requiring the bankruptcy notice to be enforced, until that contestable issue is resolved in another proceeding on a final basis. ...37. The second component of s 40(1)(g) is that the debtor must satisfy the Court that the relevant counter-claim, set‑off or cross demand could not have been set up in the proceeding in which the judgment or order was obtained. ...8.That is, for the purposes of setting aside the bankruptcy notice on the ground relied on by Ms Toyne:(a) the onus is on Ms Toyne;(b) Ms Toyne must satisfy the court that she has a prima facie case of the counter-claim, set-off or cross demand;(c) the counter-claim, set-off or cross demand must exceed the amount of the judgments in the Supreme Court proceeding;(d) the counter-claim, set-off or cross demand must have a reasonable probability of success; and(e) the counter-claim, set-off or cross demand could not have been set up in the Supreme Court proceeding.
Ratio Decidendi
Legal Principle Established
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