Foyster v ANZ Banking Group Ltd - [1999] FCA 1032

FEDERAL COURT OF AUSTRALIA
Foyster v ANZ Banking Group Ltd [1999] FCA 1032
BANKRUPTCY – application to set aside a bankruptcy notice – counter-claim, set-off or cross-demand – effect of s41(7) Bankruptcy Act 1966 – relationship between s41(7) and s40(1)(g) Bankruptcy Act 1966 – whether debtor may rely on quite separate counter claim from that initially asserted in affidavit filed to obtain automatic extension of time under s41(7) Bankruptcy Act 1966.
Bankruptcy Act 1966 (Cth), s41(7), s40(1)(g)
Re Brink, ex parte Commercial Banking Co of Sydney Ltd (1980) 44 FLR 135, considered
Eastick v ANZ Banking Group Ltd (1981) 53 FLR 91, cited
Re James; ex parte Carter Holt Harvey Roofing (Australia) Pty Ltd (1993) 46 FCR 183, considered
LLOYD FOYSTER v ANZ BANKING GROUP LTD
N7702 OF 1999
EMMETT J
27 JULY 1999
SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

N7702 OF 1999

BETWEEN:

LLOYD FOYSTER
Applicant

AND:

AUSTRALIA AND NEW ZEALAND BANKING GROUP LTD
Respondent

JUDGE:

EMMETT J

DATE:

27 JULY 1999

PLACE:

SYDNEY

EX TEMPORE REASONS FOR JUDGMENT (NO. 1)

Objection is taken to the filing of an affidavit on behalf of the Debtor, in which the Debtor seeks to raise a counter-claim or cross-claim which would satisfy the requirements of section 40(1)(g) of the Bankruptcy Act 1966 (Cth) (“the Act”), when added together with other cross-claims or counter claims which have already been the subject of affidavits.
An act of bankruptcy is committed inter alia under section 40(1)(g) where a creditor serves on a debtor a bankruptcy notice and the debtor does not either comply with the requirements of the notice or satisfy the Court that he has a counter-claim, set-off or cross-demand equal to or exceeding the amount of the judgment debt that could not have been set up in the action or proceedings in which the judgment was obtained.
In an ideal world, where a bankruptcy notice is filed and served and a debtor wishes to set up a counter-claim, set-off or cross-demand, the Court would be able to deal with it immediately. In the real world, however, that is not possible. Hence, section 41(7) has been introduced into the Act and provides as follows:
“Where, before the expiration of the time fixed for compliance with the requirements of a bankruptcy notice, the debtor applies to the Court for an order setting aside the bankruptcy notice on the ground that the debtor has a counter-claim, set-off or cross-demand as is referred to in section 40(1)(g), and the Court has not, before the expiration of that time, determined whether it is satisfied the debtor has such a counter-claim, set-off or cross-demand, that time is deemed to have been extended […] until the day on which the Court determines whether it is so satisfied.”
There are thus two quite separate and distinct questions which arise in relation to proceedings involving an alleged counter-claim, set-off or cross-demand. The first is whether the Court is satisfied that the…

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: [1999] FCA 1032
Decision Date: 27 JULY 1999

CaseChat Overview and Summary

Lloyd Foyster, the debtor, applied to the Federal Court of Australia for an order setting aside a bankruptcy notice served on him by ANZ Banking Group Ltd, the creditor. The application was based on the debtor's assertion of a counter-claim, set-off, or cross-demand under section 40(1)(g) of the Bankruptcy Act 1966 (Cth). The primary legal issue in the case was whether the debtor could rely on a counter-claim that was different from the one initially asserted in the affidavit filed to obtain an automatic extension of time under section 41(7) of the Bankruptcy Act. The court had to determine if the debtor could introduce a new counter-claim after the statutory extension of time had commenced, and if such a counter-claim could satisfy the requirements of section 40(1)(g).

Justice Emmett, in delivering the judgment, considered the effect of section 41(7) of the Bankruptcy Act and its relationship with section 40(1)(g). The court held that once the statutory stay under section 41(7) came into play, there was no reason in principle why the debtor should not be permitted to satisfy the court as to any matter within section 40(1)(g). The court referred to the case of Re Brink, ex parte Commercial Banking Co of Sydney Ltd (1980) 44 FLR 135, where Lockhart J indicated that upon the hearing of a matter under section 41(7), the court has before it the initial affidavit which brings section 41(7) into play. The court has the power to permit the debtor to supplement their case with additional evidence if necessary. The initial affidavit filed under section 41(7) operates to extend the time for compliance with the requirements of a bankruptcy notice until the court determines whether it is satisfied that the debtor has the requisite counter-claim, set-off, or cross-demand.

The court allowed the debtor to read the affidavit to which objection was taken, subject to admissibility as a matter of form. The court certified that the preceding ten numbered paragraphs are a true copy of the reasons for judgment.

This case highlights the importance of the interplay between sections 40(1)(g) and 41(7) of the Bankruptcy Act, and the court's discretion in permitting debtors to introduce new counter-claims or cross-demands after the statutory extension of time has commenced.

Orders