Edwards, M.L. v The Bank of New Zealand
[1992] FCA 987
•16 DECEMBER 1992
Re: MALCOLM LESLIE EDWARDS
And: THE BANK OF NEW ZEALAND
No. N N4360 of 1992
FED No. 987
Number of pages - 4
Bankruptcy
COURT
IN THE FEDERAL COURT OF AUSTRALIA
BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES
GENERAL DIVISION
Beaumont J.(1)
CATCHWORDS
Bankruptcy - whether counter-claim, set-off or cross-demand that debtor could not set up in earlier proceeding - Bankruptcy Act 1966 s.40(1)(g)
HEARING
SYDNEY
#DATE 16:12:1992
Counsel and Solicitors for Debtor: Mr. J. Dowd QC with
Mr M. Podleska instructed by Price Bent
Counsel and Solicitors for Creditor: Mr D. Robinson instructed
by Freehill, Hollingdale and Page
ORDER
THE COURT DECLARES:
1. The counter-claim, set-off or cross-demand described in para. 11
of the debtor's affidavit sworn 18 November 1992 is not a
counter-claim, set-off or cross-demand within the meaning of s.40(1)(g) of the Bankruptcy Act.
THE COURT ORDERS:
2. That up to and including Friday 18 December 1992, the debtor be
restrained from disposing of any of his assets, except in the ordinary course of his ordinary business.
3. That the operation of the declaration be suspended up to and
including Friday 18 December 1992.
4. That the debtor pay the creditor's costs of the present
application including the earlier hearings of the application.
Note: Settlement and entry of orders is dealt with in Rule 124 of the Bankruptcy Rules.
JUDGE1
BEAUMONT J. Some of the background to this matter appears in my ex-tempore reasons for judgment given in these proceedings on 1 December 1992. Since orders were made on that date, the matter has been listed on several occasions for further hearing. In the course of these subsequent hearings, I have been candidly informed by Mr Dowd Q.C. that the debtor does not now seek an extension of time for compliance with the bankruptcy notice incidental to any application to set aside that notice.
That is to say, the debtor's remaining claim is that at all material times he had 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, being a counter-claim, set-off or cross-demand that he could not have set up in the action or proceeding in which the judgment or order was obtained. (See s.40(1)(g) of the Bankruptcy Act 1966 ("the Act").
A number of arguments, adjectival and substantive, have been foreshadowed before me. However, for present purposes it is sufficient to address only one of those arguments.
The judgment creditor argues that there was not at any material time a counter-claim, set-off or cross-demand of the kind referred to in s.40(1)(g) of the Act. This is said because, even if contrary to submissions otherwise made on behalf of the judgment creditor there was a counter-claim, set-off or cross-demand available to the debtor, that counter-claim, set-off or cross-demand could have been set up in the action or proceeding in which the judgment was obtained.
The final judgment referred to in the bankruptcy notice was obtained in proceedings in the commercial division of the Supreme Court of New South Wales on 4 September 1992. The debtor asserts a counter-claim, set-off or cross-demand along the following lines. He says (and for the purposes of the present argument I am prepared to assume this in the debtor's favour) that at all material times there was available to him a claim against the creditor bank for unliquidated damages for breach of contract.
It is further said (and again I am prepared to assume this for the purpose of the present argument) that the debtor, at all material times, held an indemnity from Essington Ltd. upon which he could have called, but that this company was being wound up and for practical and other reasons it was not possible for the debtor to call up that indemnity.
In my opinion, either of these claims (that is the claim for unliquidated damages for breach of contract against the bank, or any claim on the indemnity alleged to have been given by Essington Ltd.) could have been set up in the proceedings in the commercial division of the Supreme Court of New South Wales. The meaning of the phrase "that he could not have set up action or proceeding in which the judgment or order was obtained" in s.40(1)(g) was considered by Lockhart J. in Re Brink; Ex parte the Commercial Banking Company of Sydney Ltd. (1980) 44 FLR 135. At 139, his Honour interpreted the phrase to mean a claim which the debtor could not by law have set up in the action.
That approach has been followed on many occasions in this Court: see e.g. Re Vicini; Ex parte E.A. Sealey and Co (1982) 64 FLR 323 at 326; Re Franks; Ex parte GIO Holdings Ltd. (1989) 101 ALR 504 at 508; Re Willats; Ex parte Nissan Finance Corporation Ltd. (1991) 104 ALR 361 at 366; and most recently in the Full Court in Chesson v Smith (1992) 35 FCR 594.
It follows, in my view, that the relevant inquiry for present purposes focuses on the scope of the jurisdiction of the Supreme Court of New South Wales. That jurisdiction is, of course, unlimited in subject matter and amount. Either of the claims that have been foreshadowed on behalf of the debtor could have been set up in that action, assuming that the causes of action relied on had accrued by the date of the judgment, namely 4 September 1992.
That is to say, I would accept that if the cause of action did not accrue or may arguably not have accrued until a date after judgment was obtained in the Supreme Court, it may have been open to the debtor to contend that the provisions of s.40(1)(g) were satisfied in the present case. However, the claims he foreshadows, on any view, accrued before 4 September 1992.
Since the inquiry is then confined to the scope of the jurisdiction of the Supreme Court, it is plain that either or both of the counter-claims foreshadowed could have been set up in that Court. It follows that the provisions of s.40(1)(g) have not been satisfied. I make that finding and express that conclusion independently of several adjectival arguments which have been raised by counsel and upon which I do not express any view.
In the circumstances, I declare that the counter-claim, set-off or cross-demand described in paragraph 11 of the debtor's affidavit sworn on 18 November 1992 is not a counter-claim, set-off or cross-demand within the meaning of s.40(1)(g) of the Act.
I order that up to and including Friday 18 December 1992, the debtor be restrained from disposing of any of his assets, except in the ordinary course of his ordinary business. I further order that the operation of the declaration that I have made, with respect to the counter-claim, set-off or cross-demand alleged, be suspended up to and including Friday 18 December 1992.
I order that the debtor pay the judgment creditor's costs of the present application, including the earlier hearings of this application.
0
4
0