James v Abrahams

[1981] FCA 49

Re: FAY JUNE JAMES
And: RONALD ABRAHAMS (1981) 51 FLR 16
No. G85 of 1980
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Deane(1), Fisher(2) and Lockhart(1) JJ.

CATCHWORDS

Bankruptcy - Appeal against orders to extend time for compliance with Bankruptcy notice - Power of Court to extend time - nature of "counterclaim, set-off or cross demand equal to or exceeding the amount of the judgment debt" - claim sounding in money - constructive trust - personal claim against creditor - act of bankruptcy.

Bankruptcy Act, 1966 s.40(1)(g); s.41(6A), s.41(7).

Bankruptcy (Amendment) Act 1980

Bankruptcy - Bankruptcy notice - Debtor purporting to establish counterclaim, set-off or cross demand - Nature of such counterclaim, set-off or cross demand - Debtor claiming declaration of trust or charge against creditor - Whether personal claim against creditor - Whether debtor committed act of bankruptcy notwithstanding existence of action against creditor - Bankruptcy Act 1966 (Cth), ss. 40(1)(g), 41(7).

Bankruptcy - Bankruptcy notice - Time for compliance - Extension of time for compliance with bankruptcy notice - Power of court - Bankruptcy Act 1966 (Cth), ss. 33(1)(c), 41(6A).

HEADNOTE

On 21st May, 1980, at the request of the appellant a bankruptcy notice issued addressed to the respondent, which was served on him on 2nd June, 1980. The time fixed for compliance with the notice expired on 17th June, 1980. On 13th June, 1980, the respondent filed an affidavit alleging that he had a counterclaim, set-off or cross demand against the appellant. He set out the facts supporting his contention, making out a prima facie case that the appellant held certain land in trust for herself and the respondent. He annexed to his affidavit the statement of claim and statement of defence in an action commenced by him in the Equity Division of the Supreme Court of New South Wales against the appellant in which he sought a declaration of trust or an equitable charge over the land.

In proceedings before McGregor J. to decide whether the court was satisfied that the respondent had "a counterclaim, set-off or cross demand equal to or exceeding the amount of the judgment debt being a counterclaim, set-off or cross demand that he could not have set up in the action or proceeding in which the judgment . . . was obtained", his Honour found that the respondent had filed an affidavit as referred to in s. 41(7) of the Bankruptcy Act 1966 but his Honour considered that it was more appropriate to await the outcome of the Supreme Court proceedings rather than attempt to resolve the issues raised in the affidavit. He therefore extended the time for compliance with the bankruptcy notice on terms (as set out in the judgment of Deane and Lockhart JJ.). He subsequently purported to extend the time for compliance with the bankruptcy notice by the respondent on two further occasions.

On appeal against the judgment and orders of McGregor J.,

Held: (1) Per Deane and Lockhart JJ. - (a) Once a bankruptcy notice has been served on a debtor and an affidavit has been filed purportedly showing that the debtor has a counterclaim, set-off or cross demand of the type mentioned in s. 40(1)(g) of the Act, the time for compliance with the notice is automatically extended until the court determines whether the affidavit does establish that the debtor has such a counterclaim, set-off or cross demand. No order of the court is required to extend the time limited for compliance with the bankruptcy notice prior to the determination of this issue. (b) No general inherent power could be implied by which the court could extend the time for compliance with the requirements of a bankruptcy notice because: (i) such a power was expressly excluded from the general powers conferred by s. 33(1)(c) of the Act; (ii) by s. 41(6A) in certain specified circumstances the court has express power to extend this time limit.

(2) Per Deane and Lockhart JJ. - (a) Any counterclaim, set-offs or cross demand within s. 40(1)(g) of the Act must be a claim for a money sum, whether liquidated or unliquidated, or for the immediate delivery of a specific chattel of ascertainable value. Re Jocumsen (1929), 1 ABC 82; Vogwell v. Vogwell (1939), 11 ABC 83; Re A Bankruptcy Notice, (1934) 1 Ch 431; Re A Debtor, (1958) 1 Ch 81, referred to.

(3) Per Deane and Lockhart JJ. - The present cross-claim as deposed to in the affidavits of the respondent was not for a money sum or the delivery of a specific chattel; it could therefore not be a "counter-claim, set-off or cross demand" within s. 40(1)(g).

(4) Per Fisher J. - The facts deposed to by the respondent did not establish that the appellant was under any personal liability to the respondent by reason of his claim. Therefore it was not established that the counterclaim, set-off or cross demand was in the same right as the personal claim of the appellant upon which the bankruptcy notice was based, being a judgment debt for money lent.

Re Anderson; Ex parte Alexander (1927), 27 SR (NSW) 296; Re Wedd; Ex parte Wedd (1961), 19 ABC 36, followed.

Vogwell v. Vogwell (1939), 11 ABC 83, referred to.

National Westminster Bank v. Halesowen Presswork & Assemblies Ltd., (1972) AC 785, referred to with approval.

HEARING

Sydney, 1981, February 19; May 1. #DATE 1:5:1981

APPEAL.

Appeal from the judgment and orders of McGregor J.

R. D. Giles, for the appellant.

R. W. Cameron, for the respondent.

Cur. adv. vult.

Solicitors for the appellant: Robert T. Dunn & Co.

Solicitor for the respondent: G. M. Coyne.

D. LEVIN

ORDER

1. THAT the appeal be allowed.

2. THAT the orders extending the time for compliance with the bankruptcy notice be set aside.

3. THAT it be declared that the Court is not satisfied that the debtor possesses a counter-claim, set-off or cross demand of the type referred to in s.40(1)(g).

4. THAT the respondent pay the costs of the proceedings at first instance and before this Court.

Appeal allowed.

JUDGE1

On 21 May, 1980, a bankruptcy notice directed to the respondent ("the debtor") issued at the request of the appellant ("the creditor"). The notice was a fourteen day notice and was based on a New South Wales District Court judgment obtained by the creditor against the debtor for money lent by the creditor to the debtor. The bankruptcy notice was served upon the debtor on 2 June, 1980. 1980. The 16th June being a public holiday, the time fixed by the notice for compliance with its terms expired on 17 June, 1980.

On 13 June, 1980, an affidavit was filed by the debtor in which he alleged that he had a counter-claim, set-off or cross demand against the creditor which exceeded the amount of the judgment debt. The affidavit set out in some detail the alleged factual basis of the counter-claim, set-off or cross demand, stated that proceedings in respect of it had been instituted in the Supreme Court of New South Wales in its Equity Division and annexed a copy of the Statement of Claim and Statement of Defence that had already been filed on behalf of the debtor and creditor respectively in those proceedings. It will be necessary, subsequently, to make some detailed reference to the alleged facts from which it is said that the counter-claim, set-off or cross demand arose.

The affidavit filed on behalf of the debtor was plainly intended to raise for determination a question under s.40(1)(g) of the Bankruptcy Act, 1966 ("the Act"). That question was whether the Court was satisfied by the debtor that he had "a counter-claim, set-off or cross demand equal to or exceeding the amount of the judgment debt . . . being a counter-claim, set-off or cross demand that he could not have set up in the action or proceeding in which the judgment . . . was obtained". The matter was set down and given a hearing date of 26 August, 1980.

Section 40(1) of the Act, provides, for present purposes, that a debtor:
". . . commits an act of bankruptcy . . . :-

(g) if a creditor who has obtained against the debtor a final judgment or final order, being a judgment or order the execution of which has not been stayed, has served on the debtor in Australia . . . a bankruptcy notice under this Act and the debtor does not --

(i) where the notice was served in Australia - within the time fixed by the Registrar by whom the notice was issued; . . .

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 or sum payable under the final order, as the case may be, being a counter-claim, set-off or cross demand that he could not have set up in the action or proceeding in which the judgment or order was obtained;"

Section 41(7) of the Act provides:
"Where, before the expiration of the time fixed for compliance with the requirements of a bankruptcy notice, the debtor has filed with the Registrar an affidavit to the effect that he has such a counter-claim, set-off or cross demand as is referred to in . . . (paragraph 40(1)(g)) . . . and the Court has not, before the expiration of that time, determined whether it is satisfied that the debtor has such a counter-claim, set-off or cross demand, that time shall be deemed to have been extended, immediately before its expiration, until and including the day on which the Court determines whether it is so satisfied".

The debtor did not, within the time which the notice fixed for compliance with its terms, either comply with the requirement of the notice or satisfy the Court that he had a counter-claim, set-off or cross demand of the type described in s.40(1)(g). The failure to comply with the requirements of the bankruptcy notice constituted an act of bankruptcy unless the provisions of s.41(7) operated to extend the time for compliance. Whether the time for compliance was so extended depends upon whether the affidavit which the debtor filed with the Registrar was, within s.41(7), "an affidavit to the effect that he has such a counter-claim, set-off or cross demand as is referred to" in s.40(1)(g).

The matter came before McGregor J., exercising jurisdiction in bankruptcy, on 26 August, 1980. It was adjourned on a number of occasions and further affidavits were filed. On 1 October, 1980, his Honour delivered a reasoned judgment at the conclusion of which he expressed the following findings and conclusions:
"I find that the applicant has filed within the relevant time an affidavit or affidavits to the effect referred to in s.41(7) of the Act. This court has not, before the expiration of that time or that time as extended, determined whether it is satisfied thatthe applicant has such a counter claim, set off or cross demand. The outcome of proceedings in matter No. 2009 of 1980 in the Supreme Court of New South Wales in Equity will, I expect, significantly or substantially assist this court to be so satisfied or to fail to be satisfied. It is appropriate that this court await the outcome of this suit rather than itself proceed to resolve the issues there raised.

In view of my finding above, though the time for compliance with the bankruptcy notice may be extended by the sub section, the applicant must himself meanwhile proceed with all due diligence to prosecute the Equity suit and, if he can, to discharge the onus he bears of satisfying the terms of s.41(7) of this court in due course.

Were there default on his part in this regard, this court might not be satisfied in terms of s.41(7); or be satisfied to the contrary".
His Honour then ordered:
"Time for compliance with the Bankruptcy Notice herein is extended to 4.00 p.m. on 11 November 1980 or further order, upon condition -

(a) applicant proceeds with expedition to complete all interlocutory proceedings in suit No. B2009 of 1980.

(b) applicant then forthwith applies to the Court for an expedited hearing of the suit".
Costs were reserved.

On 11 November, 1980, the time for compliance with the bankruptcy notice was purportedly extended to 4 p.m. on 10 December, 1980. On 10 December, 1980, the time for compliance with the bankruptcy notice was purportedly extended until further order.

The precise basis upon which his Honour acted in purporting to extend the time for compliance with the bankruptcy notice does not appear from his reasons for judgment. The reason for this is that it appears to have been common ground before his Honour that he did have power to make such an order. There was no discussion of the Court's power to make an order extending time at the time the further orders were made. Upon the hearing of the appeal however, Mr. Giles of counsel, who now appears for the creditor, has submitted that his Honour lacked power to make any order extending the time for compliance with the bankruptcy notice. It is convenient to deal with that question immediately.

Prior to the amendments to the Act effected by the Bankruptcy (Amendment) Act, 1980, there was no specific grant to the Court of a power to extend time for compliance with the requirements of a bankruptcy notice. It had been held, by a single judge of the Court, that the Court possessed a general power to extend the time for compliance with a bankruptcy notice by virtue of the provision of s.33(1)(c) of the Act which conferred a general power to extend "any time limited by this Act for doing an act or thing" (see Lipov v. Alexander Fraser & Son Limited & Anor. (1978) 24 A.L.R. 616).

The Bankruptcy (Amendment) Act 1980 amended s.33(1)(c) by, inter alia, expressly excluding from the power to extend time, "the time fixed for compliance with the requirements of a bankruptcy notice". At the same time, a limited power to extend the time for compliance with the requirements of a bankruptcy notice was conferred upon the Court, in specific terms, by sub-section 6A which the amending Act inserted in s.41 of the Act. That new sub-section reads:
"Where, before the expiration of the time fixed by the Court or the Registrar for compliance with the requirements of a bankruptcy notice --

(a) proceedings to set aside the judgment or order in respect of which the bankruptcy notice was issued have been instituted by the debtor; or

(b) an application to set aside the bankruptcy notice has been filed with the Registrar,

the Court may, subject to sub-section (6C), extend the time for compliance with the bankruptcy notice".

The filing, within the time specified in s.41(7), of an affidavit to the effect that a debtor has a counter-claim, set-off or cross demand of the type mentioned in s.40(1)(g), does not constitute an application to set the bankruptcy notice aside. It operates as an automatic extension of time for compliance with the bankruptcy notice until the Court can determine whether it is satisfied by the debtor that the debtor has a counter-claim, set-off or cross demand of the type referred to in s.40(1)(g). If the Court is so satisfied, it is neither required nor empowered to make an order setting aside the bankruptcy notice. The result of the Court's being so satisfied, within either the time originally fixed by the bankruptcy notice for compliance or the extended time resulting from the operation of s.41(7), is that failure to comply with the requirements of the bankruptcy notice does not constitute an act of bankruptcy. After the Court has been so satisfied, the bankruptcy notice is spent.

After the expiry of the time which the bankruptcy notice itself fixed for compliance with its terms and up until the day on which the Court determined whether it was satisfied that the debtor had a counter-claim, set-off or cross demand of the type referred to in s.40(1)(g), any order purportedly extending time for compliance would be either otiose or futile. If the affidavit filed by the debtor was to the required effect, the time for compliance with the requirements of the bankruptcy notice was automatically extended by the provisions of s.41(7). If the affidavit was not to the required effect, the time for compliance had expired and the act of bankruptcy had been committed.

It follows that the present case was not one in which an application to set aside the bankruptcy notice had been filed with the Registrar. Nor was it one in which proceedings to set aside the judgment or order had been instituted by the debtor. The consequence is that the various orders extending the time for compliance with the bankruptcy notice which were purportedly made were not warranted by the provisions of s.41(6A) of the Act. They were beyond jurisdiction unless the Court has a general inherent power to make such an order or it is necessary to infer a limited power to extend time to give efficacy to the provisions of s.40(1)(g) and s.41(7).

In our view, the express exclusion of a power to extend time for compliance with the requirements of a bankruptcy notice from the general powers to extend time conferred by s.33(1)(c) and the express grant of the power to extend the time for compliance in the specific cases mentioned in s.41(6A) preclude the implication of a general inherent power in the Court to extend the time fixed by the Registrar for compliance with the requirements of a bankruptcy notice.

Nor, in our view, is it necessary to infer any such power to give effectiveness to the procedure envisaged in the joint operation of s.40(1)(g) and s.41(7). As we have said, paragraph (g) of s.40(1) and sub-section (7) of s.41 are self-operating. Provided the requisite affidavit has been filed, sub-section (7) extends time until the Court determines whether it is satisfied as to the issue propounded under paragraph (g): the resolution in a manner favourable to the debtor of the question propounded by paragraph (g) precludes non-compliance with the requirements of a bankruptcy notice from constituting an act of bankruptcy.

In the result, we consider that the orders extending the time for compliance with the requirements of the bankruptcy notice were beyond jurisdiction and should be set aside. This conclusion, however, leaves unaffected the primary question involved in the appeal. That question is whether his Honour's finding that the respondent had filed within the relevant time an affidavit or affidavits to the effect referred to in s.41(7) of the Act was correct.

On behalf of the creditor, it was argued that the matters set out in the affidavits filed by the debtor are not "to the effect that (the debtor) has such a counter-claim, set-off or cross demand as is referred to" in s.40(1)(g). It was argued that the facts appearing from that affidavit do not indicate that the debtor had "a counter-claim, set-off or cross demand equal to or exceeding the amount of the judgment debt". It was further argued that, in any event, any such counter-claim, set-off or cross demand could have been "set up by the debtor in the action or proceeding in which the judgment . . . was obtained". To understand the competing contentions, it is necessary to refer in some detail to the facts appearing from the affidavit filed within the time limited by s.41(7).

According to the debtor's affidavit, the creditor was, in the year 1969, the registered proprietor of a property at Balmain which she was desirous of restoring. The debtor swore that he agreed to carry out all necessary restoration work in consideration that the creditor would sell the property when that work was completed and that the proceeds of sale would be shared between them. Between 1969 and 1972, the debtor carried out or caused to be carried out the restoration work to the Balmain property at a cost, exclusive of time and labour, of $10,000.

When the restoration work was completed, the debtor and the creditor are alleged to have agreed to purchase a vacant block of land at Cromer and to build on it for re-sale at a profit. The Balmain property was sold and the net proceeds were applied towards the purchase of the Cromer property which was purchased in the name of the creditor. Between 1972 and the end of 1974, the debtor claims to have carried out or caused to be carried out construction work necessary to complete the construction on the land of a residential dwelling. The cost of that work, exclusive of the cost of the debtor's time and labour, was said to be $22,000. The creditor is alleged to have subsequently refused to sell the Cromer property, to purchase the debtor's interest in it, to vacate it or to permit the debtor to be on it. The Cromer land and improvements are said to be of a value of $90,000 and are encumbered by a mortgage of $6,000 to a bank.

On the alleged facts set out above, the debtor claims to be entitled to a declaration of trust of the Cromer property. Alternatively, he claims an equitable charge over the Cromer property for an amount equal to the contributions made by him towards the acquisition of the land and the construction of the dwelling house thereon.

The essential facts set out above suffice, in our view, to make out a prima facie case that the creditor holds the Cromer land in trust for the debtor and herself (see, generally, Allen v. Snyder (1977) 2 N.S.W.L.R. 685). The debtor was not cross examined on his affidavit. An affidavit in reply filed by the creditor refers to her statement of defence in the equity proceedings but does not dispute the truth of the above facts to which the debtor deposed. The debtor's statement of claim in the equity proceedings relies on the above facts and on other facts and seeks, by way of primary relief, a declaration of trust. In the alternative, a declaration that the debtor is entitled to a charge over the land, in respect of moneys spent by him, is sought.

There arises for consideration the question whether the debtor's claim that the Cromer land is held by the creditor upon trust for the creditor and the debtor is a "counter-claim, set-off or cross demand equal to or exceeding the amount of the judgment debt" for the purposes of s.40(1)(g) of the Act.

The debtor's claim to a declaration that the Cromer land is held upon trust for the creditor and himself related to property which, on the evidence, is valued at $90,000. If the debtor's claim prevails, the value of his beneficial interest in that property will exceed the amount of the judgment debt against him. His claim is not, however, a claim that the creditor pay him an amount of money. It is not a claim in respect of a money demand, either liquidated or unliquidated. It is a claim for the proper administration of the trust which he alleges exists and, one would presume, ultimately for an order for sale or the appointment of a different trustee for sale.

In Re Jocumsen (1929) 1 A.B.C. 82 at p. 85, Henchman J., of the Supreme Court of Queensland, expressed the conclusion that the counter-claim, set-off or cross demand referred to in s.52(j) of the Bankruptcy Act, 1924, which, for present purposes, corresponded with s.40(1)(g) of the Act, "must be in respect of a money demand, liquidated or unliquidated". He based that view on the requirement that the counter-claim, set-off or cross demand be one which "equals or exceeds the amount of the judgment debt". His Honour commented that "it must be such a claim, set-off or demand as is measurable in amount. An amount must have reference to money".

A similar view of the effect of s.52(j) was expressed by Latham C.J., with whom McTiernan J. agreed, in Vogwell v. Vogwell (1939) 11 A.B.C. 83 at p. 85. His Honour said:
" The words of the section are that the debtor must satisfy the court that he has "a counter-claim, set-off or cross demand which equals or exceeds the amount of the judgment debt". In the first place it is accordingly clear that the counter-claim, set-off or cross demand must be something sounding in money.
. . . . . . . . . . .
What the section contemplates is a claim to the enforcement of a right sounding in money".
As we understand his Honour's reference to "something sounding in money", it is to a claim, set-off or demand which, if ultimately established, will result in an order for the payment of a sum of money by the judgment creditor to the judgment debtor.

It is arguable that the above comments of Latham C.J. and Henchman J. should be modified to include a claim for immediate delivery of a specific chattel of an ascertainable value in what constitutes a counter-claim, set-off or cross demand of the type referred to in paragraph (g). (See, In re a Bankruptcy Notice (1934) 1 Ch. 431 at p. 441 and In re a Debtor (1958) 1 Ch. 81). Subject to that possible qualification, the views expressed by Latham C.J. and Henchman J. as to the requisite nature of a relevant counter-claim, set-off or cross demand are, as we see the matter, both well-founded and in point.

The debtor's claim against the creditor for a declaration of trust in the present case is neither a claim which sounds in money nor a claim for immediate delivery of a specific chattel. Indeed, even if the debtor succeeds in obtaining against the creditor a declaration of trust and, ultimately, an order for sale, that declaration and order would not provide legal justification for a refusal to pay the amount of the judgment debt on account of money lent. It follows that the debtor's primary claim in the present matter is not a counter-claim, set-off or cross demand of the relevant type. We note that our conclusion in that regard derives support from the judgments of Lord Hanworth M.R., Romer L.J., and Maugham L.J., in In re a Bankruptcy Notice (supra). It is, in the circumstances, unnecessary for us to consider whether the debtor's claim against the creditor is not, in any event a counter-claim, set-off or cross demand of the type referred to in s.40(1)(g) for the reason that it lies against the creditor in her alleged capacity as trustee (see, Vogwell v. Vogwell, per Starke J., supra at p. 89; re Anderson (1927) 27 S.R. (N.S.W.) 296; and the judgment of Fisher J. in the present appeal).

We have mentioned that both the affidavit and the statement of claim propound, as an alternative to the primary claim for a declaration of trust, a claim for a declaration of charge in favour of the debtor. The facts deposed to by the debtor in his affidavit negative the existence of any such charge in that, as we have said, those facts if accepted establish the existence of a trust. It could not be said that the reference to this alternative basis of claim could either constitute an assertion of a cross demand of the relevant type or satisfy the Court of the existence of such a cross demand.

In the result, the affidavit or affidavits filed on behalf of the debtor fail to assert that the debtor has, for the purposes of paragraph (g), a counter-claim, set-off or cross demand equal to or exceeding the amount of the judgment debt. That being the case, the affidavit filed within the time fixed for compliance with the terms of the bankruptcy notice, was not, for the purposes of s.41(7), "an affidavit to the effect that (the debtor) has such a counter-claim, set-off or cross demand as is referred to in paragraph 40(1)(g)". It follows that the time for compliance with the bankruptcy notice was not extended by the provisions of s.41(7) and that the Court could not, on the evidence, be satisfied that the debtor had a counter-claim, set-off or cross demand of the kind mentioned in s.40(1)(g). The time for compliance with the bankruptcy notice not having been extended, the debtor committed an act of bankruptcy on the expiry of 17 June, 1980 by having failed to comply with the requirements of the notice.

In the circumstances, it is unnecessary that we deal with the other contentions advanced on the hearing of the appeal on behalf of the creditor. These contentions were that the evidence adduced by the debtor was inadequate to warrant the Court being satisfied of the existence of any claim against the creditor and that, in any event, any cross demand of the debtor against the creditor could have been set up in the action or proceeding in which the creditor's judgment was obtained. It should be noted that, by an affidavit filed outside the time limited by s.41(7), the debtor concedes that $11,000 of the money which he previously claimed to have contributed himself was, in fact, contributed by a proprietary company. He indicates that his claim should be modified to admit that the proprietary company has a charge over the Cromer land in respect of that $11,000.

The appeal should be allowed. The orders extending the time for compliance with the bankruptcy notice should be set aside. In lieu thereof, there should be a declaration that the Court is not satisfied that the debtor possesses a counter-claim, set-off or cross demand of the type referred to in s.40(1)(g).

In the ultimate result, it is possible that the creditor's victory may be a pyrrhic one in so far as the particular bankruptcy notice is concerned since any act of bankruptcy constituted by failure to comply with its terms was committed more than six months before the hearing of the appeal. The creditor has, however, succeeded on the issues argued before the Court and the debtor should be ordered to pay the costs of the proceedings both at first instance and in this Court.

JUDGE2

I have had the opportunity of reading in draft form the reasons for judgment of Deane and Lockhart JJ. I agree with their conclusion that the appeal must be allowed and I adopt their statement of the relevant facts. Apart from the fact that I would for my part prefer not to base my ultimate conclusion on a finding that the debtor's claim does not sound in money, I am in general agreement with their reasons.

Although I would be inclined on balance to accept the view that in the circumstances of this matter the debtor's claim is not to the enforcement of a right sounding in money, it is my opinion that the more satisfactory ground upon which to base our decision is that the creditor is not under a personal liability to meet the debtor's claim. Such a personal obligation is in my view essential in that the debtor's liability is to her personally. Her obligation to the debtor, if established, is so to administer the property subject to the constructive trust as to provide from such property or the proceeds of sale thereof, to the extent possible, the amount of the debtor's claim. She is under no personal liability if there be a shortfall.

If the creditor's claim against the debtor was not a personal claim, for the reason that the debt was due to her in her capacity for example as a trustee of the property, I would be concerned if the result of our decision was that the debtor had no valid cross demand, particularly if a foundation had been laid for characterising it as the enforcement of a charge. It might well be proper to construe the enforcement of a charge against a property as the "enforcement of a right sounding in money", which money claim would be capable of quantification.

My concern is reinforced by the fact that I agree it is necessary to modify the terminology used by Latham C.J. and Helsham J. and to add the further category of claims involving the immediate delivery of a chattel. My concern is also reinforced by the division of opinion of the Court of Appeal in Re a Debtor (1958) Ch.48 81 on whether the claim of a husband brought under s.17 of the Married Women's Property Act was a claim to enforcement of a right sounding in money.

To my mind the clear answer to the judgment debtor's claim in this matter is that of Long Innes J. in Re Anderson (1927) 27 S.R. (N.S.W.) 296 at 299 which, apart from the exact quantification of the debtor's claim, can be equally applied in the present matter:
"The judgment debt of 81.5s.7d. pounds, upon which the bankruptcy notice is founded, is admittedly due to the respondent in his own right. The question remains whether the respondent is personally liable to the applicant in respect of the cross demand for 250 pounds, which, for present purposes, I must assume to constitute a valid claim, or whether he is liable only as executor or trustee, that is to the extent of the assets in the trust estate and without personal liability."

The contention of the respondent in Re Anderson was that the "cross-demand" was not one which could be taken into consideration because it was not due from the respondent in the same right as that in which the judgment debt was due to him. Prior to applying this principle to the cross-demand in question, in the words abovementioned, Long Innes J. had this to say on page 298:
"It was decided by the Court of Appeal in Re Molesworth (51 Sol. Jo. 653) that when a judgment debtor applies to set aside a bankruptcy notice on the ground that he has a counter-claim or cross-demand which equals or exceeds the amount of the judgment on which the bankruptcy notice is founded, such counter-claim or cross-demand must be mutual and due in the same right - e.g. in answer to a judgment obtained against him by executors the debtor cannot set up a claim against their testator's estate. The same principle was previously applied by Manning J. in Re Davison and Farmer (3 B.C. 28), although the judgment in Re Molesworth suggests at least a doubt as to whether the principle was applicable in the earlier case."

This principle was applied by Virtue J. in Re Wedd 19 A.B.C. 36 when dealing with a cross-demand against a partnership of which the judgment creditor was a member. At page 38 he said:
". . . I would have considered in the absence of authority that a claim against the judgment creditor personally in his own right was necessary and that a claim against him as a partner or in another right would not be sufficient. There are a number of authorities dealing with the case of claims against the judgment creditor in another right which clearly show that these cannot be relied on under the section, but Mr. Gunning has also referred me to another case, that of Re E.J. Brown (1923), 40 W.N. (N.S.W.) 73, which seems directly in point. This was a decision of Street C.J. in Equity. The question before the court was as to whether a debtor could rely on a claim against his judgment creditor and the latter's wife jointly as being a cross-demand in excess of the judgment debt mentioned in a bankruptcy notice. The court had no hesitation in concluding that such a claim could not be relied on. Street C.J. says: 'I do not think it was ever contemplated by the legislature that a judgment creditor should be compelled to hold his hand while his debtor prosecutes a claim which he has against him and some other person jointly'. I consider the reasoning in Brown's Case, with which I respectfully agree, applies equally to an attempt to rely on a claim against a partnership of which the judgment creditor is a member as a cross-demand within the meaning of s.52(j)."

The reasons for judgment of the Court of Appeal in Re Molesworth supra were shortly stated by Cozens Hardy M.R. as follows:
"The debtor here is asserting a claim for damages against the testator's estate by virtue of a contract by the testator to leave him a certain amount of money by his will, and he has sued the executors. The executors, on the other hand, have an ordinary judgment for costs against the debtor based upon an order of the Probate Division. The executors' judgment is personal, they sued as individuals, whereas the debtor's claim is not against them as individuals, but is against their testator's estate. What he claims is not due from them in the same right, and I am therefore of opinion that he has no counterclaim at all . . . "

Starke J. referred to this principle in Vogwell v Vogwell (1939-40) 11 A.B.C. 83 at page 89 as follows:
"Further I think it could be found upon examination that the counterclaim which the appellant puts forward is against her brother as an executor, whilst his claim is upon a judgment debt due to him in his own right. In order that debts or claims may be set off they must be due respectively in the same right."

In the House of Lords, Lord Kilbrandon in National Westminster Bank Ltd. v Halesowen Press Work Ltd. (1972) A.C.785 at 821 noted the necessity for debts to be in the same right when he said:
"In all these cases the funds may be said to have been impressed with quasi-trust purposes and that is sufficient to destroy the mutuality which is a prerequisite of the right to set off arising, since it is necessary that the debts were between the parties in the same right, a condition which the holding of a sum as trustee would destroy: see Lee v Chapman's case (1885) 30 Ch.D. 216."

In the circumstance I prefer to base my conclusion on the above grounds, in which case it is unnecessary to make a final decision whether the claim sounded in money. The twin authorities of Re a Debtor (1958) 1 Ch.81 and Re a Bankruptcy Notice (1934) 1 Ch.431 can each be seen as illustrating the application of the principle that the cross-demand must be in the same right in that in the former case there was whilst in the latter there was not a personal liability upon the judgment creditor in relation to the cross-demand alleged. Likewise the debtor's claim to a charge fails not only for the reasons stated by Deane and Lockhart JJ. but also because it imposes no personal liability upon the creditor.