Goh v First Industries Corp - [2004] FMCA 98

FEDERAL MAGISTRATES COURT OF AUSTRALIA

GOH v FIRST INDUSTRIES CORP

[2004] FMCA 98

BANKRUPTCY – Whether counter-claim, set-off or cross-demand – whether Bankruptcy Notice should be set aside – s.40(1)(g) of the Bankruptcy Act.

Bankruptcy Act 1966 (Cth), s.40(1)(g)
Trade Practices Act 1974 (Cth), s.51AC, 52, 82, 87

Re Brink; Ex parte Commercial Banking Company of Sydney Ltd (1979-80)
44 FLR 135
Sellers v Adelaide Petroleum (1992-1994) 179 CLR 332 at 349
Commonwealth v Amman Aviation Pty Ltd (1991) 174 CLR 64
Pollnow v Queensboro Pty Ltd & Ors (Unreported FCA Burchett J 19 October 1988
Re A Debtor (1958) 1 Ch 81
Ebert v Union Trustee Co of Australia Ltd (1960) 104 CLR 347
Wardley Australia Ltd v Western Australia (1992) 175 CLR 514
Finucane v NSW Egg Corporation (1988) ATPR 40-863
James v Abrahams (1981) 34 ALR 657

Applicant Debtor:

BEAN SAN GOH

Respondent Creditor:

FIRST INDUSTRIES CORP

File No:

WZ 115 of 2003

Delivered on:

3 March 2004

Delivered at:

Melbourne

Hearing Date:

14 August 2003

Date of Last Submissions:

18 August 2003

Judgment of:

McInnis FM

REPRESENTATION

Solicitor for the Applicant Debtor:

Mr M McPhee

Solicitors for the Applicant Debtor:

Michell Millar & McPhee

Counsel for the Respondent Creditor:

Mr O Feinauer

Solicitors for the Respondent Creditor:

Feinauer & Associates

ORDERS

The Application for Review filed 11 July 2003 be dismissed.
The Applicant Debtor pay the Respondent Creditor’s costs including reserved costs if any to be taxed in default of agreement pursuant to Order 62 of the Federal Court Rules.
Any further proceedings arising out of the subject Bankruptcy Notice be stayed until 12 March 2004.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
PERTH

WZ 115 of 2003

BEAN SAN GOH

Applicant Debtor

and

FIRST INDUSTRIES CORP

Respondent Creditor

REASONS FOR JUDGMENT

This is an application by Bean San Goh (the debtor) seeking to set aside an order made by a registrar on 4 July 2003 whereby the following orders were made:
“1.The applicant’s application to set aside the Bankruptcy Notice issued on 12 December 2002 and served on 10 March 2003 be dismissed.
2.The Applicant pay the Respondent's costs of the application.”
The orders made by the registrar effectively meant that the debtor's application to set aside the bankruptcy notice was dismissed and he was ordered to pay the costs of First Industries Corp (the creditor).
In the application for review filed in this court on 4 August 2003 the debtor now seeks orders in lieu of the registrar's orders as follows:
“…
(a) the said Bankruptcy Notice be set aside;
(b) the Respondent pay the Applicant's costs of the application to set aside the Bankruptcy Notice and the Application for Review.”
A further interlocutory order was sought seeking a stay of the order made by the registrar.
The parties have both relied upon written submissions. The debtor filed an outline of submissions dated 1 August 2003. Pursuant to an order made by the court on 4 August 2003, the debtor further filed "applicant's supplementary outline of submissions" on 5 August 2003, together with a list of authorities.
The respondent filed "Submissions in support of opposition to review of decision of Registrar Stanley not to set aside bankruptcy notice dated 4 July 2003" on 12 August 2003. The debtor then sought to rely upon further submissions which were filed on 13 August 2003 entitled "Applicant's Answering Submissions to the Respondent's Submissions dated 12 August 2003". The respondent then filed what is described as "Respondent's further submissions in response to the applicant's answering submissions to the respondent's submissions dated 12 August 2003”. In those submissions the respondent asserted that the debtor did not have leave to file answering submissions to the respondent's submissions dated 12 August 2003. They then acknowledged if the court was inclined to receive the debtor's answering submissions, then it would rely upon those further submissions.
On 14 August 2003 a video-link hearing was conducted and the parties were then given a further opportunity to file submissions in relation to the issue of quantum of the alleged counter-claim, cross-demand or set-off raised by the debtor. Accordingly, the respondent relied upon submissions which appear to have been faxed to the court on

18 August 2003, whilst the debtor likewise relied upon what are described to be "Further submissions as to quantum" also filed

18 August 2003.
In considering the application a court has to consider, to the extent that it is necessary, on a hearing de novo the material which had been previously filed in application WZ54 of 2003, which was the application whereby the registrar's order was made. In support of the application to set aside the bankruptcy notice the debtor had relied in those earlier proceedings upon an affidavit sworn by him on 28 March 2003 and a "supplementary affidavit in support of application to set aside bankruptcy notice" sworn by Marnie Elisabeth Farrant sworn

3 April 2003 which relates to currency exchange rates.
In earlier proceedings the respondent creditor had filed a notice of intention to oppose the application on 31 March 2003 and in support relied upon an affidavit in opposition sworn by Charmaine Tsang sworn 31 March 2003. The debtor had further relied upon an affidavit sworn by him on 6 May 2003. The application in the earlier proceedings sought to set aside a bankruptcy notice which had been issued on 12 December 2002 and served upon the debtor on 10 March 2003. The ground relied upon to set aside the bankruptcy notice was based upon a claim that the debtor had a cross-demand of a kind referred to in s.40(1)(g) of the Bankruptcy Act 1966 (Cth) (“the Act”).
The bankruptcy notice had claimed that the debtor owed the creditor $US517,745.42 and attached a copy of the judgment relied upon against the debtor obtained in the Supreme Court of Western Australia by order made on 28 June 2002 in Proceedings CIV 1301 of 2002 wherein the creditor was plaintiff and the debtor the first-named defendant. The total debt said to be owing under the bankruptcy notice of $US51745.42 comprised the amount of the judgment in the proceedings to which I have referred being $US504,961.88, together with interest of $US12,783.54. The interest referred to in note 1 to the bankruptcy notice and note 2 provided what is said to be a conversion rate into the then Australian dollar equivalent on 29 November 2002, being the sum of $917,988.33.
Prior to the order being made in the Supreme Court of Western Australia on 28 June 2003 an order had been made granting a Mareva injunction on 15 March 2002 upon application being made by the creditor. The injunction granted in the usual terms provided that the debtor would be permitted to draw and expend from a bank account or other source the sum of $5,000 per month for living expenses and in addition legal expenses in relation to the conduct of the action and action CIV 1301 of 2002. By order made on 23 December 2003 the Mareva injunction was extended until the creditor obtained a sequestration order against the debtor.
In the debtor's affidavit sworn 28 March 2003 he refers to a cause of action to be relied upon as constituting a cross-demand being a claim for damages pursuant to s.51AC of the Trade Practices Act 1974 (Cth) (the Trade Practices Act) relating to what is said to be the supply of services; namely, refinancing of a loan and the unconscionable conduct of the creditor supplying that future service. He relied upon an affidavit sworn by him on 27 April 2002 in opposition to an application for summary judgment in the Supreme Court of Western Australia. He claims that affidavit set down in detail the evidence claimed to be related to the cross-demand. He further refers to submissions made by his solicitors then acting on his behalf in opposition to the application for summary judgment. Orders were made in the Supreme Court of Western Australia in application CIV 1301/2002 on 26 March 2003 by consent whereby the creditor had leave to file a Statement of Claim in the third party proceedings in that matter with consequential orders for the filing of defence and reply together with orders for discovery.
The Debtor notes that in the reasons for decision of the learned Master of the Supreme Court a summary judgment was entered and the claim for unconscionable conduct dismissed. The reasons for decision of the learned Master refers to numerous affidavits filed by the parties which included reference to two agreements. Essentially, the dispute is referred to as one relating to two agreements. The first agreement claimed to be entered into on 10 April 2001 at Perth whereby the defendants, including the debtor, had executed a deed of acknowledgment of debt and undertakings pursuant to which the debtor acknowledged that he had borrowed from the creditor the sum of $US329,000 referred to as "the first loan".
It is noted that the debtor admitted that the first loan amount was not repaid on the due date and did not challenge the creditor's claim as to the rate of interest and basis upon which it is to be charged arising out of the first loan. On 10 April 2001 a second deed of acknowledgment of debt and undertakings referred to as "the second agreement" was entered into by which it is claimed that the debtor acknowledged that he had borrowed from the creditor a further amount of $US63,500 referred to as "the second loan". The first and second agreements are similar. Repayment was to be made in US dollars on or before 31 December 2001. Interest was to accrue at the rate of 10 per cent per annum calculated and compounded daily.
It was not disputed that the second loan amount had not been repaid and again there was no dispute as to the rate of interest or the way in which it had been calculated. After reciting the facts the learned Master stated, “On the face of it, the plaintiff's claims for judgment appears overwhelming.”
The learned Master then refers to a number of defences of the debtor and relevantly for the present purposes states the following in relation to the debtor who, as indicated earlier, was the first defendant in the Supreme Court proceedings:
“As I have indicated above, the first defendant filed five separate affidavits in opposition to this application. Two of these affidavits were filed to correct slight errors made in an earlier affidavit and one was filed to explain the late filing of another affidavit. The two affidavits upon which the first defendant principally relied were sworn respectively 22 April 2002 and 3 May 2002. In addition to these affidavits, counsel for the first defendant filed submissions which ran to 24 pages. Counsel supplemented these written submissions with over three hours of oral submissions. No-one could suggest that the first defendant's case was not put thoroughly and with great vigour by counsel. Essentially, the first defendant's arguments rely upon the business relationship he had with GJ Goh, and, indirectly, the plaintiff. ... “
The learned Master then analyses the nature of the case put by the debtor and the relationship referred to between him and GJ Goh. The learned Master considered specifically the arguments advanced by the debtor in relation to s.51AC of the Trade Practices Act and relevantly states the following:
“The first defendant sought further to rely on s 51AC of the Trade Practices Act. This section deals with unconscionable conduct in relation to the supply of goods and services. As submitted by counsel for the plaintiff, the term "in connection with" used in s 51AC requires the impugned conduct to "accompany" or "go with" the supply of services. Here the supply of services was the provision of the loan by the plaintiff to the first defendant. There is no allegation made by the first defendant that at that the time he entered into the Loan Agreements there was any unconscionable conduct on the part of the plaintiff. That effectively disposes of any claim under the Trade Practices Act. The act can provide no defence to the plaintiff's claim.”
The learned Master then deals with what was then claimed by the debtor to be the set-off or counter-claim which he ultimately concludes would not impeach the title of the plaintiff's claim and could not provide an answer to the application for summary judgment. Ultimately the learned Master concluded that the debtor had no defence to the application and decided that judgment should be entered against him.
The decision of the learned Master of the Supreme Court of Western Australia was the subject of an appeal to the Full Court of the Supreme Court of Western Australia which delivered a decision on 11 December 2002 dismissing the appeal. In her judgment Wheeler J (with whom Templeman and Rolfe AJ both agreed) reference was made to the s.51AC claim of the debtor in the following terms:
“Alternatively, the appellant submits that the conduct of the respondent was unconscionable conduct in trade or commerce contrary to s 51AC of the Trade Practices Act. It is submitted by the appellant that the conduct was unconscionable in connection with the supply or possible supply of goods or services to another person. It is submitted that the provision of financial accommodation in the form of loans falls within the terms the "supply ... of services" and, as I understand it, it is submitted that the discussions between the appellant and others in relation to the rolling over or extension of the loan was capable of falling within the understanding of the "possible supply" of services.
One difficulty which the appellant faces is that the term "in connection with" used in s 51AC of the Trade Practices Act requires the allegedly unconscionable conduct to accompany or go with the supply of services; see Hurley v McDonald's Australia Ltd (2000) ATPR 41-741, Munroe Topple & Associates Pty Ltd v Institute of Chartered Accountants [2001] ACLR 420. In this case the service to which the agreements relate had already been provided by the respondent some considerable time prior to the conduct alleged. The two current deeds were entered into on 10 April 2001 and fixed the date for repayment, and the amount of interest. There was nothing further for the respondent to do in connection with those financial services.
However, the appellant argues that the potential "rolling over" of the loan was capable of constituting the possible supply of goods and that there was unconscionable conduct in relation to that possible supply. Although it is not easy to discern from the affidavits of the appellant precisely how any such "rolling over" was first raised, and although it is not easy to see what would be in effect a waiver by the respondent of its contractual rights as a possible supplier of services, I accept for the purpose of the present appeal that the question is arguable. However, even if arguable, it is my view that it is not capable of giving rise to a legal or equitable set-off in the circumstances of the present case.
The first difficulty which faces the respondent in arguing any set‑off in the circumstances of this case is that the two deeds upon which the respondent sues each contain a clause to the effect that payment must be made to the lender "without set-off or counter-claim, free and clear of, and without any deductions whatsoever". The clause would not appear to preclude the appellant from bringing a separate action of its own against the respondent in relation to the unconscionable conduct alleged, but in a situation where the parties have expressly agreed that there should be no set-off, it would appear that the appellant is precluded from raising a set-off as a defence to a claim for the amount owing under the deed.
In any event, there is a further obstacle to regard in the potential Trade Practices Act claim as one giving rise to a set-off, which was adverted to by the master. The concept of a set-off was examined in some detail in Westwind Air v Hawker De Havilland (1990) 3 WAR 71 by Murray J particularly at 84-85. The conclusions expressed by his Honour, which in my view are applicable to the present case, are as follows. At law it has always been the case that a claim for an unliquidated sum could not be set off against the liquidated claim. That is what the applicant seeks to do here. So far as equitable set-off is concerned, a defendant could establish it only by bringing forward a claim which "impeaches" that of the plaintiff. It is not sufficient that there be countervailing claims, nor that the claims be mutual, nor even that they arise out of the same transaction. As I have noted, the conduct of which the appellant complains was conduct which arose long after the original loan agreements (in May 1999) and significantly after the date of the April 2001 deeds upon which the respondent now sues. It is "connected" or bound up with those agreements only to the extent that the existence of the obligations to repay appears to have been a factor upon which it is alleged that persons connected with the respondent relied in pressing the appellant to act in a particular manner. In my view, no equitable set-off can arise in those circumstances. It appears to me that the civil conspiracy claim is also incapable of giving rise to any set-off, and for the same reasons.”
In his first affidavit in this Court the debtor referred to instructions to solicitors seeking special leave to the High Court on the point of unconscionable conduct and otherwise foreshadowed that he intended to commence separate proceedings in relation to that claim, although was unable to do so because when funds became available to him, as required, to commence the proceedings through solicitors the expenditure would be prevented by the terms of a Mareva injunction obtained by the creditor against the debtor. That injunction was granted on 15 March 2002 and the debtor claimed that without the funds available to do so he was not able to commence proceedings in respect of a claim for unconscionable conduct. The amount of the debtor's alleged claim is said to be in "the vicinity of $1.2 million".
In a further affidavit sworn 6 May 2003 the debtor annexes a statement of claim in third party proceedings in Supreme Court action CIV 1301 of 2002. The statement of claim has apparently been the subject of an order by the registrar on 3 April 2003. Reference is made to advice that the debtor received from counsel and his solicitor that his claim in the draft statement of claim could proceed with leave of the Supreme Court being obtained to issue a writ for service out of the jurisdiction and then to serve notice of the writ on the overseas defendants subject to the leave of the court being granted to apply financial resources to the legal costs of that action.

The debtor’s submissions

In an outline of submissions in support of the application to set aside the bankruptcy notice filed 6 May 2003 the debtor had relied upon s.40(1)(g) of the Act. Reference was made to the affidavit material, and in particular of the claimed existence of a cross-demand or counter-claim and the amount of that claim. It was submitted that the Full Court of the Supreme Court of Western Australia had recognised there was an arguable case on the counter-claim, and reliance was placed on the passage from the extract referred to earlier in this judgment. It was submitted that because the counter-claim could not be raised in the subject proceedings on the basis it did not come within the authority which allowed a counter-claim to be raised in the Supreme Court, that this was precisely the situation provided for in the Bankruptcy Act to stay the effective bankruptcy until the counter-claim which could not be raised in the original proceedings is otherwise dealt with in the Supreme Court.
Reference was made to the draft statement of claim to establish what is described as "conspiracy and unconscionable conduct complained of" by the debtor. If leave is granted in relation to matters referred to earlier in this judgment and the current Mareva injunction varied to allow costs to be expended in relation to the counter-claim, then it was submitted the proper course would be to allow the application to set aside the bankruptcy notice or defer a final decision for a reasonable time to allow steps to be taken to progress the proposed counter-claim in the Supreme Court.

In the debtor's outline of submissions dated 1 August 2003 it was noted that the registrar had stated that:
“It is clear that the cross-demand was considered in the proceeding which led to the judgment-
It is quite clear that the cross-demand was set up and dealt with by the Supreme Court.”
It was submitted that the term "cross-demand" is not a technical term and has been held to mean something that would not be described as a set-off, something that could not have been brought in the action, something that still lies outside a counter-claim and that that is of a nature which can be specified and which is of such a nature that it equals or exceeds the amount of the judgment debt.
It was further submitted that it does not only mean a cross-demand strictly amounting to a defence to the claim which led to the judgment on which the bankruptcy notice is based. It was submitted that to give the term such an interpretation would add nothing to the term "counter-claim". It was submitted that the cross-demand could not have been set up in the action or proceedings, does not depend upon whether it could have been set up successfully but whether it could be set up as a matter of law (see Re Brink; Ex parte Commercial Banking Company of Sydney Ltd (1979-80) 44 FLR 135 at 139).
Reference was made to the decision of the learned Master, which has already been set out in this judgment, and passages from the judgment of the Full Court of the Supreme Court of Western Australia. Those passages it was submitted make it clear that the crossclaim which is relied upon by the debtor in the bankruptcy proceedings could not have been raised as a matter of law in the proceedings in which the creditor obtains judgment against the debtor on which it relies in the subject bankruptcy notice.
Accordingly, it was submitted that contrary to the finding of the registrar, the cross-demand was not dealt with by the Supreme Court on its merits and the only determination made was that it was incapable of being determined in the proceedings dealing with the summary judgment application. That then, according to the submissions on behalf of the debtor, brings the matter clearly within s.40(1)(g) of the Act.
It was submitted that the test under that section is simply whether or not the counter-claim, set-off or cross-demand could not have been set up in the action or proceeding in which the judgment order was obtained. It was submitted that the fact that the cross-demand was considered, but only to the extent of a decision that it could not be dealt with in the course of those proceedings leading to summary judgment against the debtor, cannot be a basis for saying that the cross-demand had been dealt with in any substantial way, in particular, on its merits, thereby excluding of the ambit of s.40(1)(g) of the Act.
The supplementary outline of submissions filed on 5 August 2003 essentially repeat the earlier submissions made for and on behalf of the debtor.
An issue arose in relation to the quantum of the claimed counter-claim by the debtor and parties were given an opportunity to provide further submissions in relation to that issue. The debtor relied upon written submissions dated 18 August 2003 which refer to relevant passages in relation to quantum in the affidavit of the debtor sworn 28 March 2003 and submitted that the approach to be taken for assessing the loss of opportunity claimed by the debtor is set out in the High Court decision of Sellers v Adelaide Petroleum (1992-1994) 179 CLR 332 at 349-355. In particular, reference was made to the joint decision of the court where it is claimed that the approach for loss of opportunity and contract tort and contravention of s.52 are the same, with the debtor being required to prove on the balance of probabilities that he or she has sustained some loss or damage and the value of that loss would be ascertained by reference to the degree of probabilities or possibilities. It was submitted there is no basis for distinguishing the method of assessing claims under ss.52 and 51AC of the Trade Practices Act.
Reference was made to Commonwealth v Amman Aviation Pty Ltd (1991) 174 CLR 64. It was submitted that case confirmed that a lost commercial advantage or opportunity is a compensable loss even though there was a less than 50% likelihood that the commercial advantage would be realised. Contingencies as to future employment or termination are only matters to be taken into account and are not definitive according to the submissions on behalf of the debtor.

A broad assessment of the value of the overall commercial position including the notional advantage of having the contract which was lost will be taken. The evidence, it was submitted should be construed benevolently (see Pollnow v Queensboro Pty Ltd & Ors (Unreported FCA Burchett J 19 October 1988). It is submitted that applying a 6% discount as in a personal injury case the amount of damages are approximately $A1.2 million dollars which would exceed the amount of the judgment debt in excess of $US200,000.

The creditor’s submissions

The Respondent’s Notice of Intention to Oppose the application relied upon an affidavit in opposition sworn by Charmaine Tsang on

31 March 2003. In that affidavit the deponent referred to the debtor’s affidavit of 28 March 2003 and otherwise referred to the decision of the Full Court of the Supreme Court of Western Australia. The deponent referred to the fact that there had been no stay of execution of the Supreme Court judgment and indeed that the debtor had not applied for any stay. The deponent further states that as far as she is aware the debtor has engaged in “a series of transactions which were suspicious and involved the transfer of property to the (debtor’s) wife”.
In written submissions filed 12 August 2003 the creditor has submitted that the alleged counter-claim or set-off or cross-demand was dealt with in the Supreme Court proceedings and held not to give rise to a defence to the summary judgment application. It was submitted that the High Court application has a poor prospect of success. The debtor had the opportunity of raising the alleged counter-claim, set-off or cross-demand but failed to successfully oppose judgment being entered. Reference was made to the inactivity of the debtor in instituting fresh proceedings to establish the cross-demand. Further, despite the current hearing being a hearing de novo, it was submitted the debtor has chosen not to bring before this Court updated affidavit material to explain failure to take any positive action. It should be noted that since the submissions were filed further submissions and material have been relied upon by the debtor.
Significantly, it was submitted that the debtor’s application should be dismissed with costs which should include an order for costs against the firm of solicitors pursuant to Rule 21.07 of the Federal Magistrates Court Rules.
In dealing with the merits of the application pursuant to s.40(1)(g) of the Act it was submitted on behalf of the creditor that a judgment has been obtained which remains undisturbed notwithstanding the appeal to the Full Court of the Supreme Court of Western Australia. There is no stay in respect of the judgment and nor has any stay been sought. It was submitted that to be successful under s.40(1)(g) the creditor is required to satisfy the Court that he has a genuine demand and that it must:-
(a)be more than bona fide, and
(b)have a reasonable probability of success.
Reliance was placed upon the decision of Roxburgh J in Re A Debtor (1958) 1 Ch 81. It was further submitted that the evidentiary burden which rests upon the creditor is that of a “prima facie case” (see Ebert v Union Trustee Co of Australia Ltd (1960) 104 CLR 347). The counter-claim, set-off or cross-demand it was submitted must be one that the Debtor was unable to bring due to a legal obstacle and not arising from practical difficulties (see Re Brink Ex parte Commonwealth Banking Corporation of Sydney Ltd (1979-80) 44 FLR 135). The alleged counter-claim, set-off or cross-demand raised by the debtor is a counter-claim, set-off or cross-demand that has been dealt with by the Supreme Court at both instances and has been held not to be of a nature that would prevent the Respondent from obtaining judgment is significant.
The creditor otherwise challenged the value of the cross-claim and made specific submissions in relation to quantum. The submissions in relation to quantum were made under cover of the submission repeated by the creditor that the debtor has in any event failed to show a prima facie case for a counter-claim, set-off or cross-demand. In the circumstances it was submitted that it is not then open to the debtor to show that the alleged claim is equal to or exceeds the creditor’s claim. In any event it was submitted that the debtor has failed to discharge the onus of demonstrating that any claimed loss exceeds the amount claimed by the creditor.
The creditor referred to the draft Statement of Claim relied upon by the debtor wherein reliance is placed upon an action under s.51AC of the Trade Practices Act or alternatively civil conspiracy. In quantifying damages under ss.82 and 87 of the TPA the debtor, it was submitted, is confined to damage suffered as a result of the alleged breach of s.51AC (see Wardley Australia Ltd v Western Australia (1992) 175 CLR 514). The Court it was submitted has “the obligation to award the amount which quantifies the Debtor’s actual loss” (see Finucane v NSW Egg Corporation (1988) ATPR 40-863 per Lockhart J at page 49,346). It was submitted there is no punitive or exemplary damages which would apply in the present case. Damages in the present case would not be calculated by reference to any unfulfilled promise but at least by consequential loss. A further detailed analysis of the quantum was undertaken by the creditor and it is sufficient to note that it was ultimately submitted that the level of loss of the debtor does not eclipse the creditor’s claim.

Reasoning

In this matter the Court must consider the application on the basis that it is a hearing de novo. Hence the primary task of the Court is to determine whether the debtor has a cross-demand of a kind referred to in s.40(1)(g) of the Bankruptcy Act. It is necessary for the Court to consider the issue of whether the debtor has a counter-claim, set-off or cross-demand equal to or exceeding the amount of the judgment debt of a kind which would attract the operation of s.40(1)(g) in order to determine whether the Bankruptcy Notice should be set aside as requested in the debtors application to review the registrar’s order made on 4 July 2003.
It is clear to me that the judgment of the learned Master in the Supreme Court of Western Australia considered in some detail the reliance now sought to be placed by the debtor upon a claimed breach of s.51AC of the Trade Practices Act. This is not a case where a relevant counter-claim, set-off or cross-demand was one which the debtor could not have set up in the action or proceeding in which the judgment was obtained. In fact quite the contrary the debtor did seek to set up a set-off or counter-claim of a similar kind to that now raised in support of the current application. The fact remains in my view that the learned Master found in clear terms that the set-off or counter-claim would not prevent the creditor from obtaining summary judgment. There was no defence to the application for summary judgment and accordingly judgment was entered. No stay has been sought or obtained in relation to that judgment.
It is equally clear to me that upon a proper reading of the joint judgment of the Full Court of the Supreme Court of Western Australia referred to in part in paragraph 19 of this judgment that although the Court may have referred to an argument offered by those representing the debtor that there was a potential “rolling over” of a loan capable of constituting the possible supply of goods and that therefore there was unconscionable conduct in relation to that possible supply, the reality of the situation is that that question was only regarded as “arguable”. The more important conclusion of the Court of Appeal was that even if “arguable” the proposition was “not capable of giving rise to a legal or equitable set-off in the circumstance of the present case”. I otherwise note and accept what the majority of the Full Court of the Supreme Court of Western Australia stated in relation to the issue as set out earlier in this judgment in the extract at paragraph 19.
On perhaps a most generous view it may be argued that there is now claimed to be an action in third party proceedings for damages against the creditor and other parties. That is not to say however that the debtor did not seek to raise a counter-claim, set-off or cross-demand in the proceeding in which the judgment was obtained. As indicated earlier the debtor did just that and failed to persuade both the learned Master and the Court of Appeal that the relevant counter-claim, set-off or cross-demand would succeed in preventing summary judgment from being entered. It clearly was open to the debtor to raise, as indeed he did raise, the counter-claim, set-off or cross-demand and the fact is that the counter-claim, set-off or cross-demand was considered and rejected. The opportunity to set up that counter-claim, set-off or cross-demand was pursued with vigour by the debtor and he ultimately failed. I do not accept the submission of the debtor that in the circumstances having failed to succeed means that the counter-claim, set-off or cross-demand therefore was not determined by the Court dealing with the summary judgment application. It was dealt with and rejected. I do not therefore accept that the rejection of the counter-claim, set-off or cross-demand therefore brings the matter within the meaning of s.40(1)(g) of the Bankruptcy Act.
I find it difficult to understand how the debtor having failed to persuade the Supreme Court to rely upon the counter-claim, set-off or cross-demand to prevent the entry of judgment can now seek to raise similar arguments in the absence of a stay to prevent that judgment being executed or at least prevent the creditor from issuing a bankruptcy notice and for that bankruptcy notice to remain in full force and effect.
I should add for the sake of completeness that I otherwise accept the submissions made for and on behalf of the respondent that in any event any appeal to the High Court of Australia from the decision of the Full Court of the Supreme Court of Western Australia does not appear likely to succeed. On the material I cannot see any evidence of a miscarriage of justice of a kind which might encourage special leave to be granted. The Court should not in my view accept the arguments advanced for and on behalf of the debtor relying upon s.40(1)(g) of the Bankruptcy Act in circumstances where effectively there is a separate potential claim which may be brought, albeit in somewhat vague terms, against the creditor and others, rather than proceedings described as mutual or due in the same right (see James v Abrahams (1981) 34 ALR 657).
In the present case whilst further submissions were made on behalf of the debtor that effectively the learned Master in the Supreme Court of Western Australia gave leave to the debtor to raise the counter-claim, set-off or cross-demand, it is clear to me that there was no such refusal to grant leave but rather rejection of the arguments advanced on behalf of the debtor. It is not a question of either granting or refusing leave but rather considering the merits of the counter-claim, set-off or cross-demand in the context of whether summary judgment should be entered. The fact remains that money was advanced by the creditor to the debtor and was not repaid in accordance with the agreement. That then led to summary judgment and a rejection by the Supreme Court of arguments advanced on behalf of the debtor that he was able to resist the summary judgment which now forms the basis of the Bankruptcy Notice by raising a counter-claim, set-off or cross-demand. In my view in those circumstances it would be inconsistent with the purpose of s.40(1)(g) to allow the arguments to be revisited by the debtor in such a way that would defeat the basis of the Bankruptcy Notice namely the judgment entered without any application for a stay.
In the circumstances I am not prepared to set aside the Bankruptcy Notice as I do not find that there is a counter-claim, set-off or cross-demand of a kind which would attract the operation of s.40(1)(g) of the Bankruptcy Act. Further, I am not satisfied on the material before me having regard to the delay by the debtor in pursuing any other claims which may be made against the creditor that it is appropriate in the present case to grant any extension of time for compliance with the Bankruptcy Notice. Steps could have been taken earlier to vary the Mareva injunction which is in existence to enable the debtor to pursue other proceedings with greater vigour and expedition.
In the event that I am in error in rejecting the submission that the debtor’s counter-claim, set-of or cross-demand has not been dealt with by the Supreme Court then to the extent that it is necessary I further find that I have significant doubts regarding the merits in general of the action now sought to be pursued by the debtor against the creditor.

I further do not accept that in relation to quantum that there is a prima facie argument which can be advanced by the debtor that any amount claimed by him against the creditor would be in excess of the judgment debt. In the circumstances I otherwise accept the criticism made of the potential claim set out in the Statement of Claim relied upon by the debtor to the extent that that claim includes a number of vague pleadings which may raise issues of concern to the debtor but do not appear in my view to be arguable causes of action.
It follows that the application for review filed 11 July 2003 should be dismissed with costs. Submissions were made that the costs should include indemnity costs against the solicitor acting for and on behalf of the debtor. In my view there is insufficient material before the Court which would justify an order of that kind which is usually made in exceptional or rare circumstances. I cannot see on the material before me any basis upon which it could be suggested that there is conduct of a kind by the solicitor acting for the debtor which would attract an order for indemnity costs personally against the lawyer in this instance. Hence, the usual order will be made in relation to costs.
Having dismissed the application for review of the registrar’s order it may not be necessary for me to make a further order that the application to set aside the Bankruptcy Notice issued on 12 December 2002 be dismissed though I am prepared to do so if required. I will hear the parties in relation to the form of orders.

I certify that the preceding fifty (50) paragraphs are a true copy of the reasons for judgment of McInnis FM

Associate:

Date: 3 March 2004