Egoroff v Hawkins
[2015] FCCA 2473
•24 September 2015
FEDERAL CIRCUIT COURT OF AUSTRALIA
| EGOROFF v HAWKINS | [2015] FCCA 2473 |
| Catchwords: BANKRUPTCY – Application to set aside bankruptcy notice because of a cross claim or set-off – consideration of whether the cross claim or set-off must have been incapable of being raised in either of two proceedings leading to the judgments supporting the bankruptcy notice. |
| Legislation: Bankruptcy Act 1966, ss.40, 41 Civil Procedure Act 2005 (NSW) |
| Bailey v MCH Buildings Pty Ltd [2011] FMCA 124 Carver v Westpac Banking Corporation [2000] FCA 1517 Glew v Harrowell of Hunt & Hunt Lawyers (2003) 198 ALR 331 Nath v Clipway Pty Ltd [1999] FCA 625 |
| Applicant: | DIMITRI EGOROFF |
| Respondent: | NORMA MURIEL HAWKINS |
| File Number: | SYG 1700 of 2015 |
| Judgment of: | Judge Driver |
| Hearing date: | 9 September 2015 |
| Delivered at: | Sydney |
| Delivered on: | 24 September 2015 |
REPRESENTATION
| Solicitors for the Applicant: | Mr S Nazarian of Oliveri Attorneys |
| Counsel for the Respondent: | Mr M Davis |
| Solicitors for the Respondent: | Bartier Perry |
ORDERS
The application filed on 22 June 2015 is dismissed with costs.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 1700 of 2015
| DIMITRI EGOROFF |
Applicant
And
| NORMA MURIEL HAWKINS |
Respondent
REASONS FOR JUDGMENT
Introduction and background
On 22 June 2015 the applicant, Mr Egoroff, applied to set aside bankruptcy notice BN179991 issued on 27 April 2015, which had been served on him on 1 June 2015. On 30 June 2015, pursuant to orders made by District Registrar Wall, it was noted that the time for compliance with the bankruptcy notice was extended automatically pursuant to s.41(7) of the Bankruptcy Act 1966 (Cth) (Bankruptcy Act). That was confirmed by further orders made by Registrar Segal on 21 July 2015. On 18 August 2015 Registrar Segal made further orders transferring the matter to my docket for hearing.
The application is opposed by the respondent, Ms Hawkins (deceased, who appears through her executors).
Mr Egoroff relies upon his affidavits made on 19 June 2015 and 4 August 2015. He was not required for cross-examination. Ms Hawkins relies upon the affidavit of John Greer, her co-executor made on 11 August 2015. He was also not required for cross-examination[1]. A folder of documents was exhibited to his affidavit.
[1] the other executor is Deanne Hinder-Hawkins
The parties made both written and oral submissions.
Consideration
Ms Hawkins was the owner of a two bedroom unit located at 153 Bayswater Road Rushcutters Bay NSW (Property). From about 1 March 2007 to sometime in June or July 2011, Mr Egoroff was in possession of the Property.
There had been an ongoing dispute between Mr Egoroff and Ms Hawkins since sometime in 2009 with respect to:
a)Mr Egoroff’s possession of the Property; and
b)an agreement Mr Egoroff alleges that he entered into with Ms Hawkins giving him a right to purchase the Property.
On 18 March 2010, Ms Hawkins commenced proceedings in the Consumer Trader and Tenancy Tribunal (CTTT) against Mr Egoroff seeking possession of the Property[2]. The CTTT proceedings were settled and a deed was entered into between Mr Egoroff and Ms Hawkins on 12 August 2010 recording the settlement (Deed). The settlement reached between the parties settled all outstanding issues between them with respect to the Property including the alleged agreement purportedly giving Mr Egoroff the right to purchase the property.
[2] see [6(a)] and [7]-[14] of the affidavit of John Greer sworn 11 August 2015
The Deed implemented a regime whereby after the parties had obtained independent valuations of the Property, Mr Egoroff would be entitled to make an offer to purchase the Property. The Deed also terminated any previous agreement allowing Mr Egoroff to occupy the Property and set out new terms governing Mr Egoroff’s occupation of the Property from the date of the Deed.
Mr Egoroff failed to comply with his obligations under the Deed and as a result Ms Hawkins commenced proceedings in the Supreme Court of NSW against Mr Egoroff on 30 November 2010[3]. The statement of claim sought, amongst other things, an order that the Deed be specifically performed and an order that Mr Egoroff deliver up vacant possession of the Property to Ms Hawkins. These proceedings were settled on the first day of the hearing.
[3] see [6(c)] and [24]-[32] of the affidavit of John Greer sworn 11 August 2015
Mr Egoroff contends that the bankruptcy notice in these proceedings should be set aside because he has a counter-claim, set-off or cross demand equal to or exceeding the amount of the judgment debt supporting the bankruptcy notice[4].
[4] see s.40(1)(g) of the Bankruptcy Act
Relevantly, for the purposes of the claim Mr Egoroff submits that:
a)he must show that he has a prima facie case[5];
b)the standard may be expressed by saying that the debtor must show that he has a prima facie case, even if then and there he does not adduce the admissible evidence which would make out a prima facie case before a court trying the issues that are involved in his counter-claim, set-off or cross demand[6];
c)the Court must weigh up the merit of the counter-claim with the justice of allowing bankruptcy proceedings to go ahead or be stayed[7]; and
d)the Court looks at whether it is just that the claim should be determined before the bankruptcy proceedings are allowed to continue, ie whether it is a claim which it is proper and reasonable to litigate[8].
[5] Ebert v Union Trustee [1960] HCA 50
[6] Ibid
[7] Guss v Johnstone [2000] HCA 26
[8] Ibid
In this matter, Ms Hawkins’ bankruptcy notice is for an amount of $27,369.78. This amount is based on two judgments, one of the Local Court at Sydney in case no 2014/00110252 (dated 11 April 2014 and entered on 24 April 2015), and the other of the Supreme Court made and entered on 7 July 2011.
The Local Court judgment is based on an order for costs made by the Guardianship Tribunal on 18 September 2011. These costs were thereafter assessed and a certificate of determination issued on 30 January 2013, and this certificate was then registered as a judgment in the Local Court at Sydney.
The counter-claim, set-off and cross demand that is asserted by Mr Egoroff, and deposed to in his affidavits supporting his application, could not have been set up in the CTTT proceedings or the Guardianship Tribunal proceedings as neither Tribunal had the jurisdiction to hear the counter-claim, set-off and cross demand.
Mr Egoroff states that he has expended a considerable amount of money in relation to the property. He incurred that expenditure in order to make the property habitable so that he could rent it. He has instituted proceedings in the District Court asserting a right to compensation for that expenditure.
Could the counter-claim, set-off or cross demand have been set up in the underlying proceedings?
Mr Egoroff needs to satisfy the court that his counter-claim, set-off or cross demand is one that he “could not have set up in the action or proceedings in which the judgment or order was obtained”[9].
[9] Section 40(1)(g) of the Bankruptcy Act
In Massih v Esber[10] at [26]-[32], Flick J provides a useful summary of the law relating to whether or not a counter-claim, set-off or cross demand is one that could have been set up in the relevant underlying proceedings. According to the authorities Mr Egoroff needs to establish that he was legally prohibited from setting up his counter-claim, set-off or cross demand in the underlying proceedings as distinct from a practical bar (such as lack of funds) or a mere failure to take advantage of an opportunity to do so[11].
[10] [2008] FCA 1452 (24 September 2008)
[11] Re Ling; Ex parte Ling v Commonwealth (1995) 58 FCR 129 at [132], [137]; Re Scott; Ex parte Scott v Beneticial Finance Corporation Ltd (1994) 53 FCR 324 per Einfeld J; Nath v Clipway Pty Ltd [1999] FCA 625
It was apparent during oral submissions that Mr Egoroff faces a difficulty in this case. While it is no doubt accurate to say that his claim could not have been raised in the Guardianship Tribunal or CTTT proceedings, or in the costs proceedings in the Local Court which followed them, he is not in a position to dispute that he could not have raised his claim in the Supreme Court proceedings. The judgment debt in those proceedings was an amount of $10,000, of which Mr Egoroff had paid $5,000 leaving a balance of $5,000 which was, in itself, sufficient to support the bankruptcy notice, as an amount of at least $5,000, pursuant to s.41(1)(a)(ii) of the Bankruptcy Act. In my opinion, that difficulty is fatal to Mr Egoroff’s application. In my opinion, where a bankruptcy notice is supported by more than one judgment debt, and either (or any) of them could have individually supported the bankruptcy notice, an applicant challenging the notice pursuant to s.40(1)(g) of the Bankruptcy Act must satisfy the Court that he could not have raised his counter-claim, set-off or cross demand in either (or any) of the proceedings leading to the judgment debts supporting the bankruptcy notice. That Mr Egoroff is unable to do.
It is unnecessary to decide whether the position would be different if the relevant judgment was for an amount of less than $5,000.
The only evidence offered by Mr Egoroff on this issue is to be found at [14] of his affidavit made on 19 June 2015 and at [6] of his affidavit made on 4 August 2015. The relevant part of those paragraphs are identical and say:
The proceedings to be lodged in the District Court provide a counter-claim, set-off or cross demand, which could not have previously been brought in the earlier proceedings in the CTTT and or the Guardianship Tribunal which resulted in the judgment or orders in relation to which the bankruptcy notice was issued.
Mr Egoroff is silent on the Supreme Court proceedings in which one of the judgments relied upon in the bankruptcy notice was obtained.
The Supreme Court proceedings were procedurally governed by the Civil Procedure Act 2005 (NSW) (Civil Procedure Act) and the Uniform Civil Procedure Rules 2005 (NSW).
Section 21 of the Civil Procedure Act provides a defendant with a right to set-off. The relevant subsections read as follows:
(1) If there are mutual debts between a plaintiff and a defendant in any proceedings, the defendant may, by way of defence, set-off against the plaintiff’s claim any debt that is owed by the plaintiff to the defendant and that was due and payable at the time the defence of set-off was filed, whether or not the mutual debts are different in nature.
(2) This section extends to civil proceedings in which one or more of the mutual debts is owed by or to a deceased person who is represented by a legal personal representative.
Section 22 provides a defendant with a right to cross claim and reads:
(1) Subject to subsection (2), the court may grant to the defendant in any proceedings (“the first proceedings”) such relief against any person (whether or not a plaintiff in the proceedings) as the court might grant against that person in separate proceedings commenced by the defendant for that purpose.
(2) Relief may not be granted under this section against a person who is not a plaintiff in the first proceedings unless the relief relates to, or is connected with, the subject of the first proceedings.
There is no reason provided by Mr Egoroff as to why he did not bring his cross claim or set-off in the Supreme Court proceedings, nor is it the case that he would have been legally barred from doing so.
The cross claim or set-off could and should have been raised by Mr Egoroff in the Supreme Court proceedings and he cannot now rely on this claim for the purpose of having the bankruptcy notice set aside.
That is sufficient for the application to be dismissed, but in case I am wrong I have considered the balance of the issues between the parties.
Does Mr Egoroff have a counter-claim, set-off or cross demand?
Mr Egoroff has commenced new proceedings against Ms Hawkins by way of statement of claim filed in the District Court of NSW on 22 June 2015 and says this represents his counter-claim, set-off or cross demand.
In the statement of claim Mr Egoroff alleges that he entered into an agreement with Ms Hawkins in February 2007 whereby Ms Hawkins agreed to sell the Property to Mr Egoroff. Mr Egoroff says the agreement to sell the Property has not been honoured and that he is entitled to damages.
Mr Egoroff also alleges that he performed works to repair the Property for which he has not been paid and claims an amount of $115,000 for those works.
In order to satisfy the Court that he has a counter-claim, set-off or cross demand, Mr Egoroff needs to show that[12]:
a)he has a prima facie case in the District Court;
b)he is fairly entitled to litigate the District Court claim and that it has a fair chance of success; and
c)he is advancing a genuine or bona fide claim.
[12] Glew v Harrowell of Hunt & Hunt Lawyers (2003) 198 ALR 331. See also Bailey v MCH Buildings Pty Ltd [2011] FMCA 124
Ms Hawkins has filed a defence to the statement of claim in the District Court and raises the Deed in defence of the entirety of Mr Egoroff’s statement of claim.
Relevantly the Deed contained terms by which:
a)the parties to the Deed agreed that the covenants in clause 3 of the Deed were in full and final settlement of all Claims between them and each of the parties to the Deed released and discharged the other for all Claims that they had or which, but for the Deed, could, would, or might have had, at the date of the Deed (clause 4.1);
b)a “Claim” as referred to in clause 4.1 of the Deed included a claim for damages arising out of or in connection with the Right to Purchase (clause 1.1(b)); and
c)a release in favour of a party under the Deed may be pleaded as a full and complete defence by that person to any suit, action or proceedings commenced by another party in connection with, or arising out of any matters released under the Deed (clause 5.1).
Mr Egoroff disputes the validity of the deed in these proceedings and it is anticipated he will do the same in the District Court proceedings.
The validity of the Deed was put in issue by Mr Egoroff by way of notice of motion filed by him in the Supreme Court proceedings[13]. In the notice of motion, Mr Egoroff sought an order that the Deed be declared “null and void” and an order that the option to purchase be reinstated. That was ultimately not pursued.
[13] See Exhibit JG1 to the affidavit of John Greer sworn 11 August 2015 (pages 284-285) and Annexure “A” to the affidavit of Dimitri Egoroff sworn 4 August 2015
The judgment/order entered in the Supreme Court proceedings largely granted the relief sought by Ms Hawkins in her statement of claim[14] and ordered Mr Egoroff to deliver up vacant possession of the Property to Ms Hawkins.
[14] The statement of claim is at tab 10 of exhibit JG1 to the affidavit of John Greer sworn 11 August 2015 (pages 275-282) and a copy of the judgment/order is at tab 13 of exhibit JG1 to the affidavit of John Greer sworn 11 August 2015 (pages 286-287)
The validity of the Deed is an issue that has already been raised in the Supreme Court proceedings and it is arguable that Mr Egoroff is estopped (either by the doctrine of issue estoppel or res judicata) from re-litigating the issue either in this Court or the District Court.
Further, the Supreme Court in its judgment/order confirmed Ms Hawkins’ rights under the Deed and any judgment in the District Court granting Mr Egoroff the relief sought in his statement of claim in the face of the Deed would seem to be inconsistent with the Supreme Court order.
It is true that the Supreme Court judgment/order was made as a result of an agreement of the parties rather than after a fully contested hearing. In Re South American and Mexican Co, ex parte Bank of England[15] Lord Herschell LC said:
a judgment by consent is intended to put a stop to litigation between the parties, just as much as is a judgment which results from the decision of the court after the matter has been fought out to the end. And I think it would be very mischievous if one were not to give a fair and reasonable interpretation to such a judgment and were to allow questions that were really involved in the action to be fought over again in a subsequent action.
[15] [1895] 1 Ch 37 CA, 50 as referred to in Spencer, Bower and Handley, Res Judicata, 4th ed at Chapter 2 at [2.16]
Whilst not expressly raised in Ms Hawkins’ defence in the District Court proceedings, it seems to me that the claim brought by Mr Egoroff in the District Court may also be estopped by the doctrine of Anshun estoppel[16].
[16] Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589
In Bryant v Commonwealth Bank of Australia[17] the Federal Court was required to consider the application of Anshun estoppel to a claim that arguably should have been raised by way of cross claim in earlier proceedings. At [42] the Court referred to the formulation by Priestley JA in Rahme v Commonwealth Bank of Australia[18] where his Honour said that the question to be asked was whether the current claim:
a)could have been raised in the previous proceedings; and
b)raised matters so clearly part of the subject matter of the previous proceedings that it was unreasonable not to have raised them in those proceedings.
[17] [1995] FCA 1299
[18] (20 December 1991, not reported)
Priestley JA went on to say that the answer to (b) should not be answered by reference to any verbal formula but that the Court should ask itself “was it unreasonable for the claimant to have refrained from raising the claim now made in the previous proceedings”. If this question was answered in the affirmative it was said that the claim should then be barred. The Court in Bryant was of the view that the approach taken in Rahme should be followed.
The Court in Bryant was also of the view that where a defendant has a claim that is “intimately connected with that of the plaintiff, in the sense that each arises, substantially, out of the same matters of fact, there is every reason to require that both be litigated at the one time; thereby minimising costs and avoiding the possibility of inconsistent judgments”[19].
[19] [1995] FCA 1299 at [44]
The claim raised by Mr Egoroff in the District Court proceedings could have been raised in the Supreme Court proceedings. Indeed, it arguably was in the notice of motion[20].
[20] As to claims made and not pursued see Carver v Westpac Banking Corporation [2000] FCA 1517
I accept Ms Hawkins’ submission that given:
a)the claim brought by Ms Hawkins in the Supreme Court proceedings sought to determine the rights of Mr Egoroff and Ms Hawkins both with respect to the Property and the Deed;
b)there are no new or different facts now relied upon by Mr Egoroff; and
c)the claim now raised by Mr Egoroff in the District Court could lead to a judgment that is inconsistent with the Supreme Court judgment/order
it was unreasonable for Mr Egoroff not to have raised his current claim in the Supreme Court proceedings, to the extent that he did not in fact do so.
For these reasons I conclude that Mr Egoroff does not have a fair chance of success in his District Court claim, nor is he fairly entitled to litigate the claim.
Conclusion
Mr Egoroff has failed to establish that he has a counter-claim, set-off or cross demand that could not have been set up in the Supreme Court proceedings leading to a judgment supporting the bankruptcy notice. Accordingly, the application should be dismissed with costs. In any event, in my opinion, the proceedings instituted in the District Court have poor prospects of success, based upon the material before me, and he should not receive the relief he seeks.
I certify that the preceding forty-seven (47) paragraphs are a true copy of the reasons for judgment of Judge Driver
Associate:
Date: 24 September 2015
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