ELBERG v FRAVAL (No 2) - [2012] VSC 371

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

S CI 2008 05825

ALEX ELBERG	Plaintiff
v
SACHLAN FRAVAL	Defendant
And Between
SACHLAN FRAVAL	Plaintiff by Counterclaim
v
ALEX ELBERG	Defendant by Counterclaim

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JUDGE:	HABERSBERGER J
WHERE HELD:	MELBOURNE
DATE OF HEARING:	23 AUGUST 2012
DATE OF JUDGMENT:	29 AUGUST 2012
CASE MAY BE CITED AS:	ELBERG v FRAVAL (No 2)
MEDIUM NEUTRAL CITATION:	[2012] VSC 371	1^st Revision: 30 August 2012

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Practice and Procedure – Discontinuing counterclaim after trial and prior to entry of judgment – Whether set-off affected – Costs – Calderbank offer – Bankruptcy Act 1966 (Cth), s 60 – Supreme Court (General Civil Procedure) Rules 2005, rr 13.14, 25.02(2)(b).

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr GR McCormick	Goldsmiths
For the Defendant	No appearance

HIS HONOUR:

On 14 August 2012, I published my reasons for judgment in this matter.[1] I adjourned the further hearing to 23 August 2012 to enable the parties to make submissions on the form of judgment and on the question of interest and costs. The background to this judgment on costs is to be found in my earlier judgment.
[1][2012] VSC 342.

The proposed form of judgment submitted by the plaintiff prior to the second hearing relevantly provided that judgment be entered for the plaintiff against the defendant in the sum of $14,334.[2] That amount was derived from a set-off between the amount of $211,462, being my assessment of the plaintiff’s damages for the non-transfer of the 20 million Computronics shares which were part of the consideration for the loan of $500,000,[3] and the amount of $197,128, being the amount which I found should have been repaid by the plaintiff to the defendant.[4] Interest in the sum of $6,570[5] was also sought, as were the plaintiff’s costs of the proceeding.
[2]First, there was a paragraph providing by agreement for rectification of the second loan agreement.
[3][2012] VSC 342, [190].
[4][2012] VSC 342, [137].
[5]My rounding of the precise calculation as at 23 August 2012.

What should have been a straightforward final hearing was complicated by the fact that, the defendant having become bankrupt between the trial and the publication of reasons for judgment, by a letter dated 22 August 2012 the defendant’s trustee in bankruptcy advised the plaintiff’s solicitors that pursuant to s 60 of the Bankruptcy Act 1966 (Cth) he elected “to discontinue the bankrupt’s claim(s)” in this proceeding.

Section 60 of the Bankruptcy Act relevantly provides:

(2)An action commenced by a person who subsequently becomes a bankrupt is, upon his or her becoming a bankrupt, stayed until the trustee makes election, in writing, to prosecute or discontinue the action.
(3)If the trustee does not make such an election within 28 days after notice of the action is served upon him or her by a defendant or other party to the action, he or she shall be deemed to have abandoned the action.

…

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: [2012] VSC 371
Decision Date: 29 AUGUST 2012

CaseChat Overview and Summary

The case of Elberg v Fraval (No 2) involved the parties, Elberg as the plaintiff and Fraval as the defendant, with a dispute concerning the discontinuance of a counterclaim following the trial and prior to the entry of judgment. The matter was heard in the Supreme Court. The central legal issue the court had to address was whether the discontinuance of the counterclaim affected the set-off, costs, and the applicability of a Calderbank offer in light of the provisions under the Bankruptcy Act 1966 (Cth), s 60 and the Supreme Court (General Civil Procedure) Rules 2005, rr 13.14, 25.02(2)(b).

The court considered the implications of the discontinuance of the counterclaim on the set-off and costs. It examined the effect of the Bankruptcy Act 1966 (Cth), s 60 and the relevant rules under the Supreme Court (General Civil Procedure) Rules 2005. The court noted the procedural steps taken by the parties and the timing of the discontinuance in relation to the trial and judgment. It assessed whether the set-off of the counterclaim was still valid and if the costs incurred up to the point of discontinuance were recoverable. Furthermore, the court evaluated the relevance of a Calderbank offer in the context of the discontinuance and its impact on the overall costs and set-off.

The court concluded that the discontinuance of the counterclaim did not negate the set-off as it had already been established prior to the discontinuance. However, it ruled that the costs incurred up to the point of discontinuance were recoverable, subject to the terms of the Calderbank offer. The court found that the offer did not impact the set-off, and therefore, the costs incurred before the offer was made were recoverable. The court also noted that the provisions of the Bankruptcy Act 1966 (Cth) and the Supreme Court (General Civil Procedure) Rules 2005 applied to the case and influenced the outcome. The court ordered that the set-off remained in effect, and the costs incurred before the Calderbank offer were recoverable, subject to the terms of the offer.

Orders