In the matter of Sylvia Amos Amos, Sylvia v Lillyman, Joanne Catherine

[1998] FCA 1725

FEDERAL COURT OF AUSTRALIA

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

In the matter of Sylvia Amos

NG 8326  of   1997

BETWEEN:	SYLVIA AMOS APPLICANT
AND:	JOANNE CATHERINE LILLYMAN RESPONDENT
JUDGE:		WHITLAM J
DATE OF ORDER:		1 JULY 1998
WHERE MADE:		SYDNEY

THE COURT ORDERS THAT:

1. The application is dismissed with costs.

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

In the matter of Sylvia Amos

 NG 8326 of 1997

BETWEEN:	SYLVIA AMOS APPLICANT
AND:	JOANNE CATHERINE LILLYMAN RESPONDENT

JUDGE:	WHITLAM J
DATE:	1 JULY 1998
PLACE:	SYDNEY

REASONS FOR JUDGMENT (EX TEMPORE)

This is an application to set aside a bankruptcy notice served on 31 October 1997.  The bankruptcy notice is dated 24 October 1997 and, in accordance with the prescribed form, paragraph 2 of the notice refers to an attached copy of the order relied upon by the creditor.

The background to the present application may be briefly described. The applicant debtor is the owner of premises at 26 Douglas Street, Stanmore.  The respondent creditor lives next door at number 28 Douglas Street.  On 27 March 1997 the applicant commenced proceedings no. 1859 of 1997 in the Supreme Court of New South Wales against the respondent creditor by filing a summons in the Equity Division. In that originating process the applicant debtor claimed final relief by way of an order in the nature of a mandatory injunction requiring the respondent creditor to carry out specified work on the property at 28 Douglas Street. In addition, the applicant debtor sought a permanent injunction restraining the respondent creditor from carrying out building work at 28 Douglas Street and an order that the respondent creditor pay damages to the applicant debtor for flooding and damp caused by works effected to date. The process also contained a claim for interlocutory relief (described as being by way of ex parte relief) in the form of an order restraining the respondent creditor from carrying out further building work at 28 Douglas Street, Stanmore. That summons came before Young J on 18 April 1997 and, whilst the precise terms of the orders made by his Honour on that occasion are not in evidence, it seems clear that an order was made against the applicant debtor that she pay the costs of the claim for interlocutory relief incurred by the respondent creditor.

The respondent creditor then made an application for the assessment of party/party costs under the Legal Profession Act 1987 (NSW). In accordance with the prescribed form, that application was entitled in the Common Law Division. When lodged, it became proceedings no. 91633 of 1997. In due course a costs assessor, Mr M L Brabazon, issued on 5 September 1997 a certificate of determination of costs under s 208J of the Legal Profession Act. Mr Brabazon certified the amount payable under the order made by Young J as $15,042.43. That certificate is attached to the bankruptcy notice. The certificate shows on its face that it relates to the order made in proceedings no. 1859 of 1997 in the Equity Division.

The solicitor for the applicant debtor has read four affidavits in support of the present application: two affidavits sworn by the applicant debtor and two sworn by Evangelos Petakos, a solicitor.  This evidence reveals the existence of a dispute between the applicant debtor and her former solicitors who acted in the proceedings in the Equity Division and the assertion by those solicitors of a lien in relation to their papers in those proceedings. However, most importantly it emerges that proceedings no. 1859 of 1997 were subsequently discontinued by the applicant debtor on the advice of her counsel. 

In her second affidavit sworn on 2 June 1998 the applicant debtor says that she was originally  not aware of her “entitlement to file a cross claim”.  I find that a puzzling statement, and it may be that in this respect her affidavit was somewhat loosely settled by her solicitor.  She says in that affidavit that she has filed further proceedings in the Supreme Court, and there has been received in evidence a copy of a summons in fresh proceedings in the Equity Division no. 2357 of 1998. In that process, the applicant debtor claims against the same respondent creditor relief expressed in these terms:

“1.  An order that the Defendant cause remedial and restorative work to be carried out upon her property located at 28 Douglas Street, Stanmore, in accordance with the description of work set out in the report of A N M Grieve dated 22 January, 1998.

2.  Damages in both nuisance and negligence.”

The report referred to in paragraph 1 of that summons is a report by Mr Anthony Grieve who has prepared a report dated 17 November 1997 which is annexed to the first affidavit of the applicant debtor.  In that report Mr Grieve describes work that had been carried out at the adjacent property at number 28 Douglas Street and makes an assessment of the cost of what he describes as “rectification work which will be required as a result of damage occasioned by the work at 28 Douglas Street in order to rectify 26 Douglas Street”. He puts a cost of about $35,000 on that work.  It will be seen, therefore, of course, the sum of $35,000 exceeds the sum of $15,042.43 in respect of the costs certificate.

The bankruptcy jurisdiction is of course a notoriously technical jurisdiction and it is quite usual and proper for legal practitioners appearing for debtors to take what are essentially technical points. Two such technical points have been taken today by the solicitor for the applicant debtor.  They relate to the form of the bankruptcy notice. The form of a bankruptcy notice is prescribed in Schedule 1 to the Bankruptcy Regulations. Paragraph 10 of the prescribed form requires that there be set out the address and telephone number of the relevant Federal Court Registry for the State or Territory in which the debtor is located. Mr Churchill points out that the particulars in paragraph 10 of the bankruptcy notice in the present case record wrongly the level at which the Registry of this court is located for the New South Wales District and also omits any reference to a telephone number.  He also relies on what he says is a further defect in the form of the bankruptcy notice, namely, that the Schedule in the bankruptcy notice is not headed “Schedule” as required by the prescribed form.

As to the first of those defects I do not consider it is likely to mislead the debtor.  These proceedings have been commenced in good time and for the purposes of the present application I think no importance can be assigned to the error made.  The omission of the heading “Schedule” is in a different category because paragraph 1 of the notice refers to the debt “shown in the Schedule” and, unless one can readily locate the Schedule, the notice may be calculated to mislead a debtor upon whom such a bankruptcy notice is served. Nonetheless, notwithstanding the omission of the heading “Schedule”, I think that the Schedule may be readily identified in this bankruptcy notice. Again, this omission may be disregarded.

A preliminary ground of challenge by the solicitor for the applicant debtor was one not notified in the grounds in support of the present application but it has, nevertheless, been advanced without objection by the solicitor for the respondent creditor. It concerns the question whether the applicant debtor could have set up a counter-claim, set-off or cross demand in the proceeding in which the order attached to the bankruptcy notice was obtained. In the present case that order is the determination of costs by Mr Brabazon on 5 September 1997. This leads Mr Churchill to the submission that in those proceedings, that is the application for the assessment of the costs, the claim that the applicant debtor makes for damages against the respondent creditor could not be set up.  That may be so but the costs certificate relates to the very proceedings in which the costs order was made by Young J. This initial submission is rejected.

That brings me to the substantial ground relied on in support of the application to set aside the bankruptcy notice, that is that the applicant debtor has a counter-claim, set-off or cross demand such as is referred to in s 40(1)(g) of the Bankruptcy Act 1966. That provision has, of course, been the subject of much judicial discussion.  The breadth of the key expression “could not have set up in the action or proceeding” has been explained by Hill J in Re Ling; Ex parte Ling v Commonwealth of Australia (1995) 58 FCR 129. Here the claim asserted by the applicant debtor could, and indeed was, set up in proceedings no. 1859 of 1997.

Mr Anderson for the respondent creditor has conceded that authority suggests that, where such a claim constitutes the claim for final relief in proceedings and that claim remains undetermined after a costs order has been made in interlocutory proceedings in the same matter, it may be asserted as being a claim that meets the specification in s 40(1)(g). But he points out by way of distinction that in the present case that proceeding was discontinued on 3 November 1997. I think that is a valid point of distinction and it would be a valid point of distinction even if it be the case that the applicant debtor was advised by her counsel that in view of the quantum of damages she was seeking she would be at risk in respect of costs by continuing to proceed in the Supreme Court. As Hill J explains in Ling that kind of consideration would not make it a claim that could not be set up in the proceeding.  Indeed, plainly here it was. The matter remains, in my opinion, unaffected by the institution after the present application was filed on 20 November 1997 of the fresh proceedings no. 2357 of 1998 in the Supreme Court.

By way of dealing comprehensively with the matters in the affidavit I should say too that the second affidavit of the applicant debtor deposes to her financial position.  Not surprisingly, Mr Churchill did not develop that material in support of the present application to set aside the bankruptcy notice.  I do not say such material can never be utilised in support of such an application but plainly that course reflected an assessment on his part that it was not appropriate at this stage. If, as a consequence of the bankruptcy notice not being set aside a creditor’s petition were to be filed, then of course the question of the solvency of the applicant debtor may become very relevant. Mr Churchill has shown considerable ingenuity in his submissions in support of the application to set aside the bankruptcy notice, but for the reasons I have given I remain unpersuaded that he has made out a case. The application will be dismissed with costs.

I certify that this and the preceding four (4) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Whitlam

Associate:

Dated:             1 July 1998

Solicitor for the Applicant:	Mr Churchill of Larry Noble & Associates
Solicitor for the Respondent:	Mr D J Anderson of Carbone Anderson
Date of Hearing:	1 July 1998
Date of Judgment:	1 July 1998