Jones v Bank of Western Australia
[2006] FMCA 680
•2 May 2006
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| JONES & ANOR v BANK OF WESTERN AUSTRALIA | [2006] FMCA 680 |
| PRACTICE & PROCEDURE − Affidavits − admissibility of − where affidavit relating to Supreme Court proceedings sought to be filed with no reference to present proceedings in Federal Magistrates Court − whether applicant creditor would be prejudiced by admission − whether appropriate to grant adjournment to allow affidavit to be filed. |
| BANKRUPTCY − Where respondent debtor claiming cross-claim, cross-demand or set-off equal to or exceeding amount of judgment debt − where debtor claimed receivers appointed by bank committed waste on property − where failure to file valuation evidence such that no evidence of amount of counter-claim, set-off or cross-demand before the court − whether failure to conform with R3.02 of the Federal Magistrates Court (Bankruptcy) Rules 2006 − whether cross-claim correctly brought against creditor bank − whether fault in bankruptcy notice. |
| Bankruptcy Act 1966 ss.40(1)(g), 49(1)(g) Federal Magistrates Court (Bankruptcy) Rules 2006 R.3.02 |
| Applicant: | DONALD LLOYD JONES AND SANDRA JEAN JONES |
| Respondent: | BANK OF WESTERN AUSTRALIA ABN 22 050 494 454 |
| File number: | SYG723 of 2006 |
| Judgment of: | Raphael FM |
| Hearing date: | 2 May 2006 |
| Date of last submission: | 2 May 2006 |
| Delivered at: | Sydney |
| Delivered on: | 2 May 2006 |
REPRESENTATION
| For the Applicants: | Applicant in person |
| Counsel for the Respondent: | Mr P Dowdy |
| Solicitors for the Respondent: | Henry Davis York |
ORDERS
Application dismissed.
Applicants to pay the respondent’s costs which shall be taxed if not agreed in accordance with the Bankruptcy Rules including reserved costs.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG723 of 2006
| DONALD LLOYD JONES AND SANDRA JEAN JONES |
Applicants
And
| BANK OF WESTERN AUSTRALIA LIMITED ABN 22 050 494 454 |
Respondent
REASONS FOR JUDGMENT
The application to admit certain evidence
The proceeding before me today was specially fixed for hearing when the matter was last before me. It involves an application to set aside a bankruptcy notice on the grounds that the debtors have a cross-claim, cross-demand or set-off equal to or exceeding the amount claimed under the bankruptcy notice. The amount claimed under the bankruptcy notice is some $3.5 million pursuant to a judgment entered on 7 July 2005 in the Supreme Court of New South Wales Equity Division Commercial List. The cross-claim arises out of an allegation by the debtors, the first of whom is the owner of the property and the second of whom is his wife, that the creditor, a bank as mortgagee of the property, has committed waste thereon. The time granted by me between the first hearing and today was to enable the debtors to file some evidence of the amount of that waste.
It was intended that the evidence that was proposed to be filed would be evidence of an expert. The expert has not yet produced his report. There is a dispute between the parties as to whose fault this is but the fact is that it does not exist and another fact is that it was meant to be here by today.
Instead the debtor wishes me to allow to be read in these proceedings an affidavit filed on 19 April 2006 in the Supreme Court Equity Division in relation to some other proceedings that are going on there. The letter serving that affidavit was dated 28 March 2006, it refers to an affidavit sworn on 24 March which is the affidavit I have just mentioned. The heading in the letter is:
“Supreme Court Commercial List case number 50015 of 2006.”
And the letter states:
“We enclose by way of service affidavit of Donald Lloyd Jones sworn 24 March 2006.”
There is no reference in this letter to the proceedings in this court. The date of 19 April to which I have referred is the date upon which this affidavit was filed in this court. It should not have been filed as the cover sheet clearly shows it is not an affidavit relating to proceedings in this court.
I accept the argument put by Mr Dowdy that if the debtors wished to read this affidavit in these proceedings they should have told him or his instructing solicitors. They should also have sought leave to read the affidavit and to file it; they did not do that either. Mr Dowdy tells me, and I accept, that his instructing solicitors did not consider that the affidavit was going to be read in these proceedings and he was not provided with a copy nor has he had an opportunity to consider it.
I do not know why proper steps were not taken to ensure that any evidence contained in the affidavit of 24 March was not properly put before me but I do not think that it is fair to require the creditor to respond to this lengthy document on the run. By the same token I do not think that it is reasonable that the application which was specifically set down for hearing today should be further adjourned because of the actions of the debtors in relation to this affidavit. This court will not be able to hear the application until at least July if an adjournment was granted. Given the amount of the debt it seems to me that this is not an appropriate case in which to grant an adjournment and therefore I decline to accept the affidavit purportedly filed in this court on 19 April 2006 and I return it to the debtor.
Mr Lloyd Jones has argued that having allowed paragraph 6 of his affidavit of 10 March in I should look at the folder of photographs which was also annexed or exhibited to the affidavit of 24 March that I declined to allow to be read. Unfortunately that folder did not form part of the affidavit that was filed in this court nor, as I understand it, was it served upon the debtor's solicitors as part of the affidavit of 10 March 2006 and in those circumstances I cannot allow it to be looked at.
The substantive application
This proceeding is an application by the debtors to set aside a bankruptcy notice numbered NN650/06 and dated 17 February 2006 on the grounds that they have a counter claim, set-off or cross-demand equal to or exceeding the amount of the judgment debt or a sum payable under the final order being a counter claim, set-off or cross-demand that they could not have set up any action or proceeding in which the judgment or order was obtained s.40(1)(g) Bankruptcy Act 1966 (the “Act”). The cross-claim or cross-demand that the debtors claim to have relates to the manner in which a farming property owned by the first applicant Mr Donald Lloyd Jones has been treated by the receivers appointed by the bank, the creditor.
It is clear that a claim of this nature if it arose after the original judgment and consequent upon the appointment of receivers, would be a proceeding that was covered by s.40(1)(g) of the Act.
The second applicant Ms Sandra Jean Jones has not appeared today and it is not entirely clear whether Mr Donald Lloyd Jones speaks for her. She had, however, filed an affidavit dated 9 March 2006 in which she sought leave to refer to her husband's affidavit. Mrs Lloyd Jones is not the registered proprietor of the property. She is involved in these proceedings by virtue of her being guarantor of the loan which Mr Lloyd Jones took out and pursuant to the loan agreement a copy of which is annexed to the affidavit of Mark Robert John Thomas dated 20 March 2006, her liability is joint and several (Clause 19.8).
Mr Dowdy argues that Mrs Lloyd Jones cannot possibly have a cross-claim in relation to waste committed upon a property which she does not own. This argument has some superficial attraction. However, I do not propose to make a finding in that regard because I think firstly that these are arguments which could be put against the submission and secondly I do not believe it is necessary. In the absence of Mrs Jones I do not propose to make unnecessary findings.
The manner in which an application to set aside a bankruptcy notice can be dealt with is governed by the Federal Magistrates Court (Bankruptcy) Rules 2006 R.3.02. That rule is in the following form
“ (1) An application to set aside a bankruptcy notice must be accompanied by:
(a) a copy of the bankruptcy notice; and
(b) an affidavit stating:
(i) the grounds in support of the application; and
(ii) the date when the bankruptcy notice was served on the applicant; and
(c) a copy of any application to set aside the judgment or order in relation to which the bankruptcy notice was issued and any material in support of that application.
(2) If the application is based on the ground that the debtor has a counter- claim, set-off or cross demand mentioned in paragraph 40 (1) (g) of the Bankruptcy Act, the affidavit must also state:
(a) the full details of the counter-claim, set-off or cross demand; and
(b) the amount of the counter-claim, set-off or cross demand and the amount by which it exceeds the amount claimed in the bankruptcy notice; and
(c) why the counter-claim, set-off or cross demand was not raised in the proceeding that resulted in the judgment or order in relation to which the bankruptcy notice was issued.
(3) The application and supporting documents must be served on the respondent creditor within 3 days after the application is filed.”
The evidence in support of the application which is required to comply with R.3.02 in this case is the evidence found in an affidavit dated 10 March 2006 sworn by Mr Donald Lloyd Jones and filed in this court on the same day. The affidavit is deficient. At the request of Mr Dowdy I deleted almost the whole of paragraph 5 of that affidavit which purports to state the basis of the application. I gave my reasons for doing so as the objections were made. Put shortly, the paragraph is not a paragraph containing evidence, it is a paragraph containing assertions. As a result of the deletions it could not be said that full details of the counter claim are contained in the affidavit. Even without the deletions there is no indication of the amount of the counterclaim, set-off or cross-demand and the amount by which it exceeds the amount claimed in the bankruptcy notice.
I have already stated that I do not believe there would be any need for the applicants to state why the matter was not raised in the original proceedings.
Even though the affidavit is deficient, when the matter first came before me I extended the applicants time so that they could raise in proper form the allegations relating to the cross-claim. It was intended that this was to be done by way of evidence from a valuer. The evidence from the valuer has not materialised. There is an argument between the parties as to why that occurred but as I said in the first part of this decision I was not prepared to grant any further adjournments and therefore the non appearance of the evidence must tell against the applicants.
The applicants also sought to rely upon an affidavit of Mr Lloyd Jones filed in other proceedings in the Supreme Court of New South Wales, once again this reliance was objected to by the bank. I decided that the affidavit could not be relied on as it was not served on the bank's solicitors as part of these proceedings and the bank had not taken that it was to be. The bank had not considered the document and in my view would be prejudiced by its admission.
In any event the problem with that document was that although it contained a considerable amount of detail concerning alleged waste no valuation could be put upon it. The valuation evidence being evidence that was to be submitted.
Mr Dowdy argues that the ground of the existence of a cross-claim is misconceived. He says that the only persons who might have committed waste would be the receivers of the property. I am satisfied from the consideration of the document found at page 141 of the affidavit of Mr Thomas that Steven James Parbury and Mark Julian Robinson were appointed receivers of this property by the bank. And I am satisfied that by virtue of the provisions of the mortgage, and in particular the provision found under clause 13 at page 28 of the said affidavit, that the receivers, as is common in matters of this nature, are agents of the mortgagor and not of the bank. Thus any proceeding or claim that the mortgagor might have for the conduct of the receivers is an action between the mortgagor and the receivers and not an action between the mortgagor and the bank. Whilst in all probability the receivers will have an indemnity from the bank that is not sufficient to make the cross-claim a claim against the bank.
The debtors submit in paragraph 5(a) of Mr Lloyd Jones’ affidavit that there is a fault in the bankruptcy notice in "naming the debtor does not conform to the form of the order annexed to the bankruptcy notice." There is an order annexed to the bankruptcy notice and that is the order of the Equity Division of the Supreme Court entered on 7 July 2005. The order is addressed to Donald Lloyd Jones as first defendant and Sandra Jean Jones, the second defendant. The bankruptcy notice is addressed to Donald Lloyd Jones and Sandra Jean Jones. I am unable to see the way in which it is suggested that the name in the bankruptcy notice does not conform with the name in the order.
By reason of the applicants’ failure to comply with the terms of R.3.02 and by reason of the other matters set out in this judgment I am unable to be satisfied that the applicants do have a cross-claim, cross-demand or set-off that is equal to or exceeds the amount of the judgment debt and in those circumstances I must decline to set aside the bankruptcy notice. The application is dismissed and I order that the applicants pay the respondent's costs including any reserved costs which shall be taxed if not agreed in accordance with the Bankruptcy Rules.
I certify that the preceding twenty (20) paragraphs are a true copy of the reasons for judgment of Raphael FM
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