Gittany v Gittany

This matter concerned an application by Charles Gittany to set aside a bankruptcy notice issued by Joseph Gittany. The bankruptcy notice was based on a default judgment of $1,000,721.96 obtained by Joseph against Charles in the Supreme Court of New South Wales. This judgment represented amounts Joseph alleged Charles failed to pay under an agreement made in September 2002. Charles sought to set aside the notice on two grounds: firstly, that the judgment was not supported by a true debt, as he claimed the agreement was with a company, Gittany Constructions Pty Limited, which had repaid the amounts; and secondly, that he possessed a counter-claim, set-off, or cross-demand within the meaning of s.40(1)(g) of the *Bankruptcy Act 1966* (Cth).

The court was required to determine whether Charles had established grounds to set aside the bankruptcy notice. Specifically, it needed to consider whether the default judgment was a final judgment, given that a prior application by Charles to set it aside had been dismissed by Justice McCallum, who found his defence to be a "deliberate confection". The court also had to assess whether Charles had an arguable counter-claim, considering Joseph's submission that there was a lack of mutuality as Charles had not personally paid the amounts he claimed constituted the overpayment.

In reaching its decision, the court noted that a bankruptcy court may go "behind a judgment" in certain circumstances. However, it also considered the principles governing the setting aside of bankruptcy notices based on asserted counter-claims. The court was required to be satisfied that Charles's application was not an abuse of process before it could summarily dismiss it. The underlying dispute stemmed from loans made by Joseph to Charles in November 2002 for a real estate development, pursuant to the September 2002 agreement. The statement of claim alleged Charles was to repay these loans and a further amount of up to $300,000, guaranteeing at least $250,000. Charles allegedly ceased payments in April 2007, leading Joseph to cover the loan instalments.

The court ultimately found that Charles had no reasonable prospect of setting aside the bankruptcy notice. It held that the prior decision of Justice McCallum, which dismissed Charles's application to set aside the judgment and characterised his defence as a "deliberate confection", was binding. Furthermore, the court found that Charles's asserted counter-claim lacked mutuality, as he had not personally made the payments he alleged constituted an overpayment to Joseph. Consequently, the application to set aside the bankruptcy notice was dismissed.