Harris ex parte Niemann
[1979] FCA 7
•19 December 1979
Re: WINIFRED ANNE MADELAINE HARRIS
Ex parte: ERNEST HARDING NIEMANN
No. P859 of 1979
Bankruptcy Act 1966
COURT
IN THE FEDERAL COURT OF AUSTRALIA
GENERAL DIVISION
BANKRUPTCY DISTRICT OF THE STATE OF VICTORIA
Sweeney J.
CATCHWORDS
Bankruptcy Act 1966 - ss.41(7) and 40(1)(g). "Affidavit as to Counterclaim, Set-Off or Cross Demand" alleging a partial set-off or cross-demand against the petitioning creditor, held not an affidavit of the kind contemplated by the sections; order of sequestration made on creditor's petition.
HEARING
MELBOURNE
#DATE 19:12:1979
JUDGE1
The petitioning creditor issued a petition returnable on 23 October 1979 in which it was alleged:
"1. The debtor was at the date of the commission of the act of bankruptcy specified in paragraph 4 of this petition personally present in Australia.
The debtor is justly and truly indebted to the creditor in the sum of $5,023.06c for
(a) an Order obtained by the creditor in the Supreme Court of Victoria on 31/5/1979 for $4,025.08c;
(b) an Order obtained by the creditor in the Supreme Court of Victoria on 25/6/1979 for $447-98c; and,
(c) an Order obtained by the creditor in the Supreme Court of Victoria on 26/7/1979 for $550-00c.
I do not, nor does any person on my behalf, hold any security over the property of the debtor, or any part of it for the payment of the amount specified in the last preceding paragraph.
The debtor, within six months before the presentation of this petition, committed the following act of bankruptcy namely that she failed on or before the 17th day of September, 1979, either to comply with the requirements of a bankruptcy notice served on her on the First day of September, 1979, or to satisfy the Court that she had a counter claim, set-off or cross demand equal to or exceeding the sum specified in paragraph (a) of the bankruptcy notice."
The evidence, including an affidavit by the debtor, established that the bankruptcy notice referred to in the petition was served on the debtor on 1 September, 1979.
The debtor caused to be filed in the Bankruptcy Registry an affidavit sworn 17 September 1979 and headed "Affidavit as to Counterclaim, Set-Off or Cross Demand" in the following form:
"1. I am the debtor named in the Bankruptcy Notice which is annexed to this my The said Bankruptcy Notice was served upon me on the evening of Saturday the 1st day of September, 1979.
2. I am not indebted to the judgment creditor in the sum claimed in the Bankruptcy Notice. The amount referred to in the said Bankruptcy Notice was obtained by the creditor against me on the taxing of a bill of costs before the Taxing Master, Supreme Court on the 25th day of July, 1979.
3. The costs which are the subject matter of this action were awarded against me pursuant to the Order of Mr. Justice King of the Supreme Court of Victoria on the 31st day of May, 1979, on the hearing of an application brought by me and the part hearing of appeals from the Orders of Master Brett and Master Barker by the said Ernest Harding Niemann in October and November, 1978.
4. The order for costs against me arose out of the application No. 9511 of 1976 in the Supreme Court of Victoria, which concerned a company known as G. & S. Taylor Pty. Ltd., which until its dissolution was a company duly incorporated pursuant to the laws of Victoria. At a meeting of creditors of the said company on or about the 18th day of October, 1974, it was duly resolved that the said company be voluntarily wound up in accordance with the Companies Act 1961. At the said meeting a Mr. Lewis Luckins was appointed liquidator of the said company.
5. On the said date the company was indebted to me in respect of arrears of wages and holiday pay and I had a claim in damages against the said company for wrongful dismissal. On the 28th day of November, 1974, I served on the liquidator a statutory declaration as to the proof of the said debt and claim in accordance with the Companies Act 1961. Annexed hereto and marked with the letter "B" is a true copy of the said statutory declaration.
6. By a notice dated the 20th day of March, 1975, the said liquidator rejected my proof of debt. The said liquidator on or about the 10th day of April, 1975, admitted my proof of debt in part as a preferential debt in the sum of $2,500. On or about the 24th day of January, 1976, the liquidator died and Mr. Ernest Harding Niemann was appointed liquidator of the said company to fill the vacancy on or about the 25th day of February, 1976.
7. On or about the 10th day of January, 1977, I verily believe that Ernest Harding Niemann admitted my proof of debt in part as to a preferential debt of $2,500.
8. On or about the 19th day of October, 1976 I made application to the Supreme Court of Victoria pursuant to Section 279 of the Companies Act 1961 to reverse the said rejection of the balance of the said debt and claim.
9. On or about the 1st day of December, 1977, I and a Mr. Loewenstein of Counsel on behalf of the said Ernest Harding Niemann agreed to compromise the said application on the following terms:
(a) That the said Ernest Harding Niemann would admit me to prove as a creditor in addition to the debt admitted and paid of $2,500 as follows: -
(i) as an unsecured creditor for the sum of $11,042;
(ii) as a preferential creditor for the sum of $1,175.
(b) That the said Ernest Harding Niemann and myself would consent to an order in the terms set out in paragraph (a) hereof.
10. On the 1st day of December, 1977, the Honourable Mr. Justice Harris (in Chambers) with the consent of myself and Mr. Loewenstein on behalf of Mr. Niemann, ordered in respect of the balance of the Plaintiff's claim rejected by the Defendant over and above the sum of $2,500 admitted and paid by the Defendant, and the Defendant, Ernest Harding Niemann be directed to admit myself to prove as a creditor of the company as follows: -
(a) as an unsecured creditor for the sum of $11,042;
(b) as a preferential creditor for the sum of $1,175.
11. Between the date of the said order and in or about June 1978, Ernest Harding Niemann distributed and disposed of the assets of the property of the company to its creditors. In or about September 1978, the said company was dissolved.
12. In purported payment of my said entitlement the said Ernest Harding Niemann paid in addition to the sum of $2,500 already paid to me the sum of $1,766.90 only and has failed and/or neglected and/or refused to pay me the balance of $2,500 to which I am entitled.
13. In or about the month of August 1978 and after having instructed my solicitor to make demand upon the said Ernest Harding Niemann for the said sum of $2,500 and there being neglect and/or refusal to so pay the said sum I thereupon caused to be issued through my solicitors Writ No. 5087 of 1978.
14. I am informed and verily believe that my solicitor was able to enter judgment against the said Ernest Harding Niemann and an application was made by the said Ernest Harding Niemann to set aside judgment and this matter came on for hearing before Master Brett on the 11th October, 1978. Master Brett reserved his decision and it was agreed that the Defendant would have leave to defend and the Defendant would have to pay the costs of the application. The costs of $280.00 were awarded against the Defendant.
15. The said Ernest Harding Niemann by his solicitors then made an application pursuant to Order 14A of the Rules of the Supreme Court to have my writ struck out for want of a cause of action. This matter came on for hearing before Master Barker who dismissed Mr. Niemann's application and made an order for costs of $250 in my favour. Mr. Niemann then lodged Notices of Appeal in respect of the orders of Master Brett and Master Barker and this matter subsequently came on for hearing before his Honour Mr. Justice King on or about the First day of May, 1979. On the hearing of these appeals I made application pursuant to Order 28 Rule 11 of the Rules of the Supreme Court or alternatively within the exercise of the inherent jurisdiction of a Court to amend its orders in the event of an error to alter the consent order before his Honour Mr. Justice Harris on the 1st day of December, 1977. At the end of the hearing of this matter his Honour Mr. Justice King ruled against me and ordered that I pay the said Ernest Harding Niemann's taxed costs. The questions of the appeals from Master Brett and Master Barker did not come before the Court as his Honour Mr. Justice King had to leave on circuit. This matter is therefore part heard and the amount of $530.00 being costs awarded to me have not yet been paid by the said Ernest Harding Niemann.
16. A notice of appeal has been lodged by myself and Appeal Books have now been settled. I verily believe that this matter will be heard on the 1st October, 1979, against the order of his Honour Mr. Justice King.
17. I verily believe that I have a partial set-off and counterclaim against the said Ernest Harding Niemann."
By an application dated 26 September 1979 the debtor sought the following orders:
"1. That the time specified in Bankruptcy Notice No. 1497 of 1979 as the time for compliance with the Notice be enlarged to the 19th day of September 1979 or alternatively, until the expiration of two clear days after the decision of the Full Court of the Supreme Court of Victoria in respect of the judgment debtor's appeal from the order the subject of the said Notice.
2. Alternatively, a declaration that the affidavit of the judgment debtor sworn the 17th day of September, 1979 was filed on the 17th day of September 1979.
3. Such further or other orders directions or relief as to the Court may seem fit."
On 8 October the debtor's application was by consent adjourned until 23 October, the return day of the petition, on which day by consent the application and the petition were stood out of the list generally, liberty being reserved to either party to apply to the Registrar for relisting on a day which would permit the giving of seven days notice to the other party.
Both matters were re-listed on 8 November when Mr Beaumont of counsel appeared for the petitioning creditor and Mr Walker, solicitor, announced that he had been acting for the debtor, who was present. Mr Walker stated that the Australian Legal Aid Office had notified him that legal aid would no longer be made available, that he had advised the debtor that he had ceased to act for her and that she agreed that this was so.
The debtor then stated that she knew nothing of the application in her name until 3 October when she was asked to withdraw it and refused "to have anything to do with it". She sought an adjournment of the hearing of the petition to enable her to prepare her case. Counsel for the petitioning creditor opposed any adjournment and an application by Mr Walker that he be excused from further attendance.
The debtor gave evidence in support of her application for adjournment. Mr Walker was excused from further attendance and the petition and the debtor's application were adjourned to 22 November.
On that day the petition and the debtor's application were, by consent, heard together. Mr Beaumont appeared for the petitioning creditor and the debtor appeared in person.
In opening, Mr Beaumont conceded that there were two outstanding orders for costs made by Masters in inter-locutory proceedings in the Supreme Court against his client in favour of the debtor in the amounts of $250 and $280, in respect of which orders the appeals of the petitioning creditor had not yet been heard. Mr Beaumont submitted that the affidavits of service of the bankruptcy notice, and the debtor's own admission in her affidavit proved due service of the bankruptcy notice upon her. He then turned generally to the affidavit filed by the debtor and headed "Affidavit of Counter-Claim, Set-Off or Cross Demand" and submitted that it was not "an affidavit to the effect that" she had a counterclaim, set-off or cross demand equal to or exceeding the amount payable under the final order that she could not have set up in the action or proceeding in which the orders were obtained. He conceded that she could not have set up the claim referred to in her affidavit in the action but based his submission that it did not answer the statutory description given in s.41(7) and s.40(1)(g) of the Bankruptcy Act 1966 on the fact that it did not contain any allegation of a counter-claim, set-off or cross demand equal to or exceeding the amount payable under the final order, but only referred to a claim for a lesser amount. Miss Harris conceded this fact and the Court, applying the test laid down in Ebert v The Union Trustee Company of Australia Ltd. (1960) 104 C.L.R. 346 at p. 350, upheld Mr Beaumont's submission.
The Court then heard the debtor's application for enlargement of time for compliance with the bankruptcy notice and dismissed it on the ground that it was not made until after the expiration of that time, and accordingly could not affect the commission of the act of bankruptcy alleged (see Re Grace; ex parte Castling (1931) 3 A.B.C. 131).
Mr Beaumont then read the affidavits verifying the matters stated in the petition, the service of the petition and the fact that the debts on which the petitioning creditor relied were still owing.
By Notice dated 15 November 1979 the debtor stated that she intended to rely upon the following grounds of opposition:
"(a) I do not recognise the Creditor's signature as being his usual signature.
(b) I deny having committed the act of bankruptcy referred to in paragraph 4 of the Petition.
(c) I deny being indebted to the creditor in the sum of $5,023.06."
In an affidavit sworn on the same day, the debtor deposed as follows:
"1. I strongly oppose the Petition which I firmly believe is being used for an improper motive.
2. The evidence I shall produce to the Court in support of counter claim, set off or cross demand will be as follows:
(a) $2,500 balance of wages as per compromise reached on 1st December 1977.
(b) $250 costs ordered by Master Barker 22/11/78
(c) $280 costs ordered by Master Brett 17/10/78
(d) Overcharged costs taxed on 17/2/78
(e) Superannuation as stated on proof of debt 18/10/74 and requested by letter dated 28/1/1977."
The debtor also wished to rely upon a second affidavit sworn by her on the same day, dealing with the steps taken by her and her then solicitor to file her "affidavit as to counter-claim, set off or cross demand". The contents of this affidavit had no bearing on the petition, for the reasons earlier stated in relation to it.
The debtor in the course of the presentation of her case on 22 November raised a further ground that the petition was presented for what she described as "an improper motive and that improper motive is to stop me from going to trial". She also claimed to be entitled to recover damages against the petitioning creditor, because when she entered into a compromise of a Supreme Court action on 1 December 1977, his counsel, Mr Loewenstein "failed to direct Mr Justice Harris to a material fact".
It transpired that the debtor had taken proceedings in the Supreme Court seeking to have the consent order of Mr Justice Harris rectified to make it clear that the relief granted to her in that order was in addition to her claim against the petitioning creditor for $2,500. Mr Justice King refused to make the order which she sought and her appeal to the Full Court of the Supreme Court against that refusal was dismissed with costs, after a hearing extending over three days in which both parties were legally represented. The costs so awarded against the debtor had not been taxed to that date.
The debtor called Mr Loewenstein as a witness and questioned him about the compromise made between them on 1 December 1977.
When the hearing resumed on 23 November Mr Rees Jones, solicitor, announced that for the purposes of seeking an adjournment he appeared on behalf of the debtor. The adjournment he sought was for a period of at least fourteen days in order to make an application to the Australian Legal Aid Office on behalf of the debtor, to obtain representation for her, which would not be by him, as he would not be appearing or acting for the debtor under any circumstances.
Mr Rees Jones then gave evidence that he had been consulted on the previous evening by the debtor to seek legal aid on her behalf and had ascertained next morning that the only officer in the Legal Aid Office who had knowledge of the matter was absent interstate. In cross-examination he agreed that legal aid from that office previously given to the debtor had been withdrawn because of advice given by counsel and that an adjournment of the hearing of the petition had earlier been granted on 8 November. On that day the debtor had given evidence that she was making representations to the Attorney-General and to members of Parliament that she should continue to receive legal aid. Mr Rees Jones conceded that it was possible that he did not know the full facts of the matter.
The application for adjournment was opposed by Mr Beaumont who relied on the history of the petition and submitted that, on the view of the facts most favourable to the debtor, there was at all material times an amount owing by her to his client of at least $795.08. He further stated that his client was not prepared to enter into any compromise of the debt owed to him or to accept any arrangement for the payment of it by instalments.
In the light of the history of the case, and the facts which have been outlined above, the application was refused.
When Mr Loewenstein returned to the witness box, the debtor examined him on the contents of an affidavit sworn by him on 8 May 1979 and filed in the Supreme Court proceedings. In the course of that examination Mr Beaumont announced that, for the purposes of the bankruptcy proceedings, he was prepared to concede that the debtor was "entitled to take into account that Mr Niemann may owe her $2,500 and to give her a credit for that $2,500. We do not admit that we owe it, but for the purposes of these proceedings, we are prepared to give her a credit in that sum".
The debtor then made it plain that she was not prepared to conduct her case on the basis of this concession, but wished to establish as a fact that she was entitled to the sum of $2,500.
In answer to Mr Beaumont, Mr Loewenstein said that the contents of his two affidavits were true and correct and Mr Beaumont tendered them in evidence.
The debtor then closed her case and made her final submissions.
In Mr Loewenstein's affidavit of 30 April 1979, he stated:
"I deny that 'the entire settlement negotiations and the agreement reached was in relation to the balance' of Miss Harris' claim 'over and above the amount of $2,500' as set out in paragraph 23 of the Harris affidavit."
In his affidavit of 8 May 1979 he stated that after returning to the Supreme Court, having negotiated a settlement of the appeal by the debtor, in which she was described as "the first named Applicant":
"I recall initially outlining to his Honour the terms and basis upon which the first-named Applicant's appeal had been settled and what orders were being sought. Having recently read the transcript of the proceedings before his Honour Mr Justice Harris in my opinion the terms of the Orders made by him were in the identical terms as I outlined them to him and to which the firstnamed Applicant consented."
I accepted Mr Loewenstein's evidence.
I then stated that I was satisfied with the proof of the matters stated in the petition, with the proof of service of the petition and with the fact that the debt on which the petitioning creditor relied was still owing, in the sense that, at all material times, there had been and still was an available debt within the meaning of the bankruptcy law and that I was satisfied that it was a proper case in which to make an order of sequestration. I was not satisfied that the debtor was able to pay her debts or that for other sufficient cause a sequestration order ought not to have been made. The debtor failed to establish any of the grounds of opposition on which she had relied.
Accordingly an order was made for the sequestration of her estate. It was further ordered that the costs of the petitioning creditor of and incidental to the petition and of and incidental to the debtor's applications, including reserved costs, would be in accordance with the statue.
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