M v The Queen

In the matter of M v The Queen, Ms M applied to the court to set aside a bankruptcy notice issued by Mr R, and to extend the time for compliance. Ms M contended that she possessed a counter-claim, set-off, or cross demand against Mr R, arising from alleged liabilities under the Child Support (Registration and Collection) Act 1988 (Cth), which equalled or exceeded the judgment debt specified in the bankruptcy notice. Mr R disputed this, arguing he had no such liability, or if he did, it was owed to the Commonwealth and not Ms M, and further, that Ms M had not provided sufficient evidence to establish the existence or quantum of any such liability.

The central legal issue before the court was whether Ms M had a valid counter-claim, set-off, or cross demand within the meaning of s.40(1)(g) of the Bankruptcy Act 1966 (Cth) at the time of the hearing for the application to set aside the bankruptcy notice. This required the court to consider the nature of liabilities that could arise under the Child Support (Registration and Collection) Act 1988 (Cth) and the Child Support (Assessment) Act 1989 (Cth), and the procedural steps necessary for such liabilities to be established and enforceable.

The court reasoned that for a counter-claim, set-off, or cross demand to be relied upon to set aside a bankruptcy notice, it must be a legally enforceable right that exists at the time of the hearing. Ms M's claim for child support was based on an assertion that Mr R was the father of her child, a fact Mr R disputed. The Child Support Agency had been unable to accept her application for assessment due to insufficient evidence of parentage. While Ms M had commenced proceedings seeking a declaration of parentage under s.106A of the Assessment Act, these proceedings were ongoing, and parentage testing results were not yet available. Consequently, at the date of the hearing, no liability under the relevant child support legislation had been established or determined, and therefore, Ms M did not possess a counter-claim, set-off, or cross demand that met the requirements of s.40(1)(g) of the Bankruptcy Act 1966 (Cth).

The application to set aside the bankruptcy notice was dismissed.