Elkateb v Lawindi

[1999] FCA 1803

FEDERAL COURT OF AUSTRALIA

Elkateb v Lawindi [1999] FCA 1803

BANKRUPTCY – No question of principle

Bankruptcy Act 1966 ss 41(7) and 52

MOHAMED SAFWAT ELKATEB v WASFY LAWINDI

N 7926 OF 1999

HELY J

15 NOVEMBER 1999

SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 7926 OF 1999

BETWEEN:	MOHAMED SAFWAT ELKATEB APPLICANT
AND:	WASFY LAWINDI RESPONDENT
JUDGE:	HELY J
DATE OF ORDER:	15 NOVEMBER 1999
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1.        The application is dismissed with costs

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 7926 OF 1999

BETWEEN:	MOHAMED SAFWAT ELKATEB APPLICANT
AND:	WASFY LAWINDI RESPONDENT

JUDGE:	HELY J
DATE:	15 NOVEMBER 1999
PLACE:	SYDNEY

REASONS FOR JUDGMENT

1. I have before me an application under s 41(7) of the Bankruptcy Act 1966 (“the Act”) to set aside a bankruptcy notice which was served on the applicant on 28 July 1999. The bankruptcy notice claims a debt of approximately $32,000 and is based on a judgment of the Local Court given on 30 June 1999. The applicant claims that he has a counter claim for damages and defamation against Mr Lawindi, the respondent to the present application, based on a letter sent by Turner Freeman, solicitors, to a Mr Ben Perlman on 27 November 1998. Turner Freeman are a firm of solicitors who acted for the respondent in some arbitration and associated proceedings.

2. There is no evidence as to when Mr Elkateb came to learn of this letter, but it was sent to a person described by Mr Elkateb as being a long time friend, and it seems reasonable to infer that the probabilities are that Mr Elkateb would have become aware of the fact of sending this letter shortly after its date. 

3. Under cover of a letter bearing date 2 August 1999, the applicant sent to the respondent a summons for preliminary discovery in connection with the alleged defamation.  There is no evidence of any prior complaint in relation to the alleged defamation.  On 16 August 1999 the applicant filed a statement of claim in the defamation list claiming damages, including aggravated damages, for this alleged defamation.  It appears from the statement of claim that the applicant did not seek an apology for the alleged defamatory letter of 27 November 1998 until 2 August 1999.

4. The defamation proceedings came on for directions before Levine J of the Supreme Court and were stood down to 19 November 1999 for further directions, in connection with an application made or to be made by the defendants to those proceedings, to strike out the imputations.  The defendants have not filed a defence to the defamation proceedings although the time for the filing of the defence was fixed by orders of the Supreme Court.

5. I am satisfied on the evidence before me that this was due to a misunderstanding by Turner Freeman as to whether a defence needed to be filed before the issue as to the imputations was resolved.  The partners in that firm are also defendants in the defamation proceedings and it was obviously inappropriate for them to act, or to continue to act, for the present respondent in those proceedings.  The evidence is that there was a change of solicitor last week and that the defamation proceedings are to be defended by the present respondent.

6. It is not sufficient in order to set aside a bankruptcy notice for the applicant to show that he has instituted proceedings, or even that the proceedings which he has instituted plead a cause of action known to the law.  I have to be satisfied that there is a reasonable probability that the applicant will succeed in his claim and that he will receive a sum, equal to or in excess of, the judgment debt.  A delay in instituting the claim may bear upon the question of whether the debtor has a viable case which has been propounded bona fide.

7. The evidence establishes that the applicant may experience difficulty in succeeding in the defamation claim.  Questions will, or may, arise as to whether the respondent is legally responsible for the letter sent by his solicitors.  There may also be questions as to whether the defence of qualified privilege is available or whether there is malice which would displace what might otherwise be the availability of that defence.

8. I am not in a position to resolve those difficulties in these proceedings nor to express any view as to the likelihood that Mr Elkateb will be successful in overcoming them.  Issues will also arise in those proceedings as to the quantum of damages and there is an obvious importance in this issue of quantum because the onus lies on Mr Elkateb to satisfy me that there is a reasonable likelihood that he will succeed in recovering an amount equal to or in excess of the judgment debt.

9. Ms Gibson is a member of the New South Wales bar.  She is experienced in the field of defamation.  She has sworn an affidavit of 3 September 1999, which adverts to the difficulties which the applicant will have to overcome if he is to be successful in his defamation claim.  On the issue of damages, Ms Gibson states at par 10:

   “Mr Elkateb has estimated that his damages for this publication would be $250,000.  This is manifestly in excess of any verdict he could ever receive, even if he were wholly successful, by reason of the very small circulation, his delay in commencement, his failure to plead special damages, the unavailability of punitive damages in New South Wales and, most importantly, the impact of section 46A.”

10. In par 15 of her affidavit, Ms Gibson expresses her conclusion.  The reasons for coming to the conclusion which she expresses appear from the body of her affidavit and there is no utility in setting them out here.  Par15(a) states:

    “Mr Elkateb has no prospect of recovery of a sum equal to or greater than the amount he owes to Mr Lawindi, in that the damages likely to be awarded for a publication to one person, particularly where there has been delay in commencement of the proceedings, is likely to be well under $10,000.”

11. Mr Elkateb has sworn in his affidavit that he anticipates that the damages which he is entitled to recover in the defamation proceedings is at least $250,000 but he provides no basis or foundation for that anticipation.

12. In the light of Ms Gibson's evidence, I cannot be satisfied that the applicant has a cross-claim equal to, or exceeding, the judgment debt.  Further, the delay in making the defamation claim and the fact that the complaint of the defamation appears to have been first made on 2 August 1999 after service of the bankruptcy notice, at least calls into question whether the claim is made bona fide or whether the reason for making it is to provide the appearance of a ground for resisting the bankruptcy proceedings.

13. In those circumstances, I am not satisfied that Mr Elkateb has discharged the onus which the section places upon him, and the application should be dismissed with costs.  I want to make it plain in the light of some comments made by Mr Elkateb during the course of submissions, that all that I have decided is that I am not prepared to set aside the bankruptcy notice on the basis of the evidence before me. 

14. If a petition is filed, it will be for the court which hears the petition to decide whether a sequestration order should be made in the light of the evidence which is then before it, and that court, of course, has to take into account the matters referred to in s 52 of the Act. Nothing that I have said in this application indicates any prejudgment so far as issues which might arise at a hearing of the petition are concerned.

15. As I have indicated the application should be dismissed with costs.

I certify that the preceding fifteen (15) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Hely.

Associate:

Dated:             20 December 1999

The applicant represented himself
Counsel for the Respondent:	B Townsend
Solicitor for the Respondent:	Turner Freeman
Date of Hearing:	15 November 1999
Date of Judgment:	15 November 1999