Maher v CBA
[2008] FMCA 1004
•28 July 2008
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| MAHER v CBA & ORS | [2008] FMCA 1004 |
| BANKRUPTCY – A determination of whether the debtor has a counterclaim set off or cross demand equal to or exceeding the amount of the judgment debt that could not have been set up in the action or proceeding in which the judgment was obtained. |
| Bankruptcy Act 1966 (Cth) Federal Magistrates Court (Bankruptcy) Rules 2006 Trade Practices Act 1974 |
| Bhagat v Global Custodians Limited [2002] FCAFC 51 Crimmins v Glenview Home Units [1999] FCA 515 Eastick v Australia and New Zealand Banking Group (1991) 53 FLR 91 Evans v Bartland [1937] AC 473 James v Hill [2005] FCA 981 Maher v Commonwealth Bank of Australia [2004] FCA 248 Maher v Commonwealth Bank of Australia (CBA) [2005] FMCA 1097 Maher v CBA & Ors supra Port of Melbourne Authority v AnshunPty Ltd (1981) 147 CLR 589 |
| Applicant: | DENNIS MAHER |
| First Respondent: | COMMONWEALTH BANK OF AUSTRALIA |
| Second Respondent: | GREG FIRTH |
| Third Respondent: | GRAY & JOHNSON (A FIRM) |
| File Number: | MLG 264 of 2008 |
| Judgment of: | Burnett FM |
| Hearing date: | 21 May 2008 |
| Date of Last Submission: | 28 May 2008 |
| Delivered at: | Brisbane |
| Delivered on: | 28 July 2008 |
REPRESENTATION
| Counsel for the Applicant: | Mr Richard Cook |
| Solicitors for the Applicant: | A.J. Mullumby Solicitors |
| Counsel for the Respondent: | Mr R.D. Shepherd |
| Solicitors for the Respondent: | Commonwealth Bank Group |
ORDERS
That the application be dismissed.
In default of any application for costs orders within seven (7) days of today, I order that the applicant pay the respondent’s costs of and incidental to the application including reserved costs to be assessed on the standard basis.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MLG 264 of 2008
| DENNIS MAHER |
Applicant
And
| COMMONWEALTH BANK OF AUSTRALIA |
Respondent
REASONS FOR JUDGMENT
Introduction
On 15 April 2008 Burchardt FM dismissed an application by the Applicant debtor to set aside a bankruptcy notice served upon him by the Respondent creditors. His Honour dismissed the application pursuant to Rule 13.03A of the Federal Magistrates Court Rules 2001 for default of appearance by the debtor upon return of the application.
The debtor now seeks to have that order set aside and to pursue his initial application for determination on its merits.
Background
The creditors obtained a judgment against the debtor in the sum of $2,000 on 28 July 2005 following a decision in Maher v Commonwealth Bank of Australia [2005] FMCA 1097 (Maher v CBA [2005]). In that application the debtor had applied to set aside a bankruptcy notice. The Bankruptcy Notice was premised upon earlier orders made. At the hearing before His Honour McInnis FM the parties consented to the orders sought in the application. However His Honour awarded the creditors costs fixed in the sum of $2,000 because of the debtor’s conduct. A bankruptcy notice issued on 26 November 2007 in reliance upon that judgment. The Bankruptcy Notice was served upon the debtor on 19 December 2007. None of these facts are in issue.
The debtor claims however he has a counterclaim set off or cross demand equal to or exceeding the amount of the judgment debt and that it is one which he could not have set up in the action or proceeding in which the judgment was obtained; a section 40(1)(g) Bankruptcy Act claim.
He filed an application to set aside the Bankruptcy Notice on 9 January 2008. It was commenced before the expiration of the time fixed for compliance with the requirements of the Bankruptcy Notice which would have been 10 January 2008.
The debtor filed his application in the Federal Court of Australia
at Melbourne. It came before Sundberg J on 25 February 2008.
His Honour ordered that the application be transferred to this Court.
The matter came on before this Court before Burchardt FM on 15 April 2008. On that occasion there was an appearance for the creditors but no appearance for the debtor. In those circumstances it was ordered that the debtor’s application be dismissed. It should be noted that there are, and have been, many other actions on foot between these parties. Where relevant they have been referred to. It is that order the debtor seeks to have set aside to enable him to contest the application on its merits.
Issues
The following issues arose in the application:
a)Whether or not the debtor had notice of the hearing of 15 April 2008;
b)Irrespective of the debtor’s reason for non appearance whether there was any merit in the debtor’s application warranting a setting aside of the orders of 15 April 2008. That requires a determination of whether the debtor has a counterclaim set off or cross demand equal to or exceeding the amount of the judgment debt that could not have been set up in the action or proceeding in which the judgment was obtained.
Notice of the Hearing
At the hearing listed for 15 April 2008 the creditors appeared but the debtor did not. A copy of the Notice of Listing addressed to the solicitors for the creditors was put to the debtor in cross examination.
It was put to him that a like notice would have been directed to him by the Court.
The debtor was cross examined in the proceeding before me. In his evidence under cross examination the debtor denied that he had ever received a similar notice of listing informing him of the listing before Burchardt FM at 9.30am on 15 April 2008. He did not impress me as a reliable witness. He seemed incapable of providing a direct answer to a direct question; he sought to use every question as an opportunity to provide an answer which more frequently than not was more in the nature of submission than fact. Indeed at times he was simply argumentative and at one point had to be threatened to answer a plainly relevant question. His objection was founded in the nature of its inquiry and the answers he was directed to provide.
I formed the view he only related matters in a context that he wished them to be viewed rather than by simply reciting facts as he recalled them. See for instance those passages of evidence by the debtor under cross examination about his failure to comply with the order of Marshall J and his dealings with Moorehouse-Perks, Solicitors concerning the allegation contained at paragraph 6(4) of the affidavits of Mr Dewar filed 7 May 2008. I do not accept the debtor as a truthful witness.
However notwithstanding my rejection of his reliability as a witness that of itself does not constitute evidence of an admission by him that he received such a notice. No evidence was called by the creditor to prove such notice was ever sent enlivening the prospect of an inference that such a notice ought to have been received. Accordingly the resolution of this matter does not enable me to determine this application by reference to the most elementary of considerations, namely whether or not a Notice of Listing was forwarded by the Court to the debtor.
On balance I cannot be satisfied a notice of listing was sent to the debtor. He is entitled to the benefit of my doubt that he did not have notice of the application proceeding on 15 April 2008.
Merits
Counterclaim Set Off or Cross Demand
The judgment upon which the Bankruptcy Notice in this application was based was one for the sum of $2,000 ordered by McInnis FM on 25 July 2005. That order was for the payment of $2,000 by way of costs. From the judgment in the application (Maher v CBA) [2005] it can be seen that the costs order arose in the context of an application by the debtor to set aside a bankruptcy notice.
The Bankruptcy Notice the subject of these proceedings had been served upon Mr Maher following a judgment entered against him following McInnis FM’s order. The debtor applied to set that bankruptcy notice aside. In his affidavit filed in support of the application the debtor purported to set up a cross demand or set off in respect of proceedings commenced in the County Court of Victoria for a sum in excess of the judgment sum. This matter was not particularised in the debtor’s affidavit and is the subject of further discussion below. However in cross examination the debtor informed the Court that his claim was one for damages against the creditor on the basis of misleading conduct resulting in the generation of a $77,000 costs order; damages for causing his emotional state (which I assume to mean distress); and damages pursuant to the Trade Practices Act 1974 (TPA) (which I took to mean for some contravention). He now relies upon these claims to found a s.40(1)(g) answer to the Bankruptcy Notice.
Two issues arise:
a)What significance has the failure by the debtor to comply with the Court’s rules concerning s40(1)(g) claims; and
b)Is the s40(1)(g) claim a claim that could have been set up in the proceeding in which the judgment was obtained.
The Compliance Issue
Rule 3.02 of the Federal Magistrates Court (FMC) (Bankruptcy) Rules 2006 (2) relevantly provides:
“(2) If the application is based on the ground that the debtor has a counterclaim, 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 counterclaim, set off or cross demand; and
(b) the amount of the counterclaim, set off or cross demand and the amount by which it exceeds the amount claimed in the bankruptcy notice;
(c) why the counterclaim, set off or cross demand was not raised in the proceeding resulting in the judgment or order in relation to which the bankruptcy notice was issued.”
In this proceeding the Applicant debtor has failed to comply with the requirements of FMC (Bankruptcy) Rule 3.02(2). Despite that omission he gave oral evidence concerning those matters. Whilst it is appropriate for the Court to adopt a benevolent view[1] of any failure to comply with the strict terms of the Court’s rules, it is still necessary for a debtor seeking to rely upon a Section 40(1)(g) answer to do more than assert the existence of a counterclaim set off or cross demand. It is necessary for there to be evidence containing sufficient details to demonstrate the debtor is bona fide in his contention that the counter claim, set off or cross demand existed; see generally Crimmins v Glenview Home Units (1999) FCA 515 per Branston J.
[1] Eastick v Australia and New Zealand Banking Group Ltd (1981) 53 FLR 91
Her Honour’s observations have been echoed in later decisions.
In Bhagat v Global Custodians Limited [2002] FCAC 51 the Full Federal Court noted at [53]:
“Counsel for Global submitted, quite correctly, that the mere production of a statement of claim in an action that pleads facts which, if proved, would support a claim, has long been held to be insufficient: "[a] statement of claim is no evidence of anything": In re Foster, Ex parte Basan (1885) 2 Morr 29 at 33 per Brett MR: see also Re Cox (supra) at 101 and Re Verma; Ex parte Deputy Commissioner of Taxation (1985) 4 FCR 181 at 187. It is not even sufficient for a debtor to file an affidavit which merely propounds a claim and states how the debtor proposes to establish it: Ebert v The Union Trustee Co of Australia Ltd [1960] HCA 50; (1960) 104 CLR 346 at 350. There is an obligation on the debtor to adduce evidence that provides reasonable grounds for the institution of proceedings Vogwell v Vogwell (supra) at 85 per Lathan CJ. The task that Mr Bhagat faced was an onerous task. He has raised serious allegations but has not placed before the Court the material (if indeed such material exists) that would justify a Bankruptcy Court from interfering with the judgment that founded the Bankruptcy Notice.”
Further in James v Hill [2005] FCA 981 at [7] Branson J said:
“The appellant did not comply with the requirements of Rule 30.02 or seek an order from the learned Federal Magistrate waiving the requirement for compliance with the rule. It may well be that in these circumstances the deemed extension of time for compliance with the bankruptcy notice for which subs 41(7) of the Act provides did not come into effect. As I discussed in Crimmins v Glenview Home Units [1999] FCA 515, where a rule of court governs the procedure to be followed when making a particular application, a litigant is obliged to follow that procedure or alternatively, obtain an order excusing him or her from doing so. However, neither before the Federal Magistrates Court nor on this appeal has the respondent placed reliance on the appellant’s failure to comply with Rule 30.02. An order was made in the Federal Magistrates Court extending the time within which the appellant was required to comply with the bankruptcy notice until judgment or further order. Although it is not clear what was the source of power in the Federal Magistrates Court thereby invoked, no application has at any time been made to have the order set aside. For this reason it has never been necessary for the appellant to place reliance on the deemed extension of time for which subs 41(7) of the Act provides.”
Despite adopting what could only be described as a most benevolent view I do not consider that any of the matters raised by the debtor in his evidence are sufficiently particularised to identify the full details of any purported counterclaim set off or cross demand and the amount by which those claims would exceed the amount claimed in the Bankruptcy Notice. Dealing with each:
a)The first matter raised by the debtor appears to be a matter for the District Court. From the debtor’s evidence I understand the underlying allegation is one that the creditor engaged in a fraud in the conduct of the proceedings. These allegations are serious and in the absence of adequate particularisation should be rejected.
b)The second complaint appears to constitute an action for distress occasioned by the debtor’s involvement in the litigation. No particulars were provided.
c)Finally the third head claims for damages pursuant to the TPA. Again no particulars were provided and I assume the basis of that claim relates to some contravention of Part V of the TPA although the basis for any such claim is not apparent.
There is certainly no prospect of the creditor being able to respond to the debtor’s claims in any meaningful way. That circumstance prevails notwithstanding the application of section 306 of the Act which is directed to resolving formal defects or irregularities.
In this case the debtor’s evidence amounted to no more than evidence which merely propounded a claim. The debtor makes serious allegations. He had an obligation to place before the Court material that would justify a Bankruptcy Court from interfering with a judgment that founded the bankruptcy notice. He failed to do so.
Nor has he sought to be excused from compliance.
Neither matter had been addressed in material filed before the hearing of the application before Burchardt FM or me. This was despite a number of adjournments in each instance presenting sufficient time to do so. Additionally this is despite express orders by me requiring the filing of material.
It is no answer to those omissions for the debtor to now seek directions to file material to remedy them, as I anticipate the debtor sought to do at the conclusion of the hearing.
At the conclusion of the application Counsel for the debtor sought a further adjournment. That application for an adjournment was refused. Given the paucity of the debtor’s complaints forming the basis for the alleged cross claim, I am content that my order refusing the application for the adjournment was appropriate. The debtor had already been afforded one further opportunity in this proceeding to place further material before the Court. For reasons unknown he chose not to do so. I suspect that was largely because his purported cross claims could not be better particularised than it was in the witness box. Adopting even the most permissive approach to the debtor’s evidence I am not satisfied the debtor has a section 40(1)(g) answer to the final judgment.
The debtor’s failure to address in material the requirements of FMC (Bankruptcy) Rule 3.02 was fatal to the application. In my view it would have been dismissed before His Honour Burchardt FM on 15 April on that basis alone had the debtor appeared.
In considering whether His Honour’s order ought be set aside I must have regard to the merits of the original application: Evans v Bartlam [1937] AC 473; Maher v Commonwealth Bank of Australia [2004] FCA 248.
On the present state of material the claim sought to be prosecuted by the debtor is hopeless. Although I cannot be satisfied the debtor came to be bound by the orders of 15 April by any act on his own part I do not think that matter impacts on or defaults from the hopelessness of the underlying application and detracts from it.
The prospects are poor. In my view the application should fail on this basis alone.
Was the claim one which could not have been set up in the earlier action?
Even if I am wrong in my view that the debtor does not have a section 40(1)(g) answer to the judgment debt the matter arises as to whether the counterclaim set off or cross demand could not have been set up in the proceeding in which the judgment for costs was obtained.
As I have earlier noted the reasons of McInnis FM indicate that the order before him was in the context of an application to set aside a bankruptcy notice. It has not been suggested in this application that the bankruptcy notice in that proceeding was consensually ordered to be set aside because of the existence of a counterclaim set off or cross demand of the kind now advanced or at all. Such a matter would have been critical in the context of the application and I infer from that matter that the orders were reached for other reasons. So much was confirmed by legal representation when I recalled the matter and requested they make express enquiries.
The debtor and creditor have been engaged in longstanding and bitterly contested proceedings. The history has been related by Finkelstein J in Maher v Commonwealth Bank [2004] FCA 248 at [20] to [24]. At [3] His Honour summarised the claim by the debtor against the creditor as claims for wrongful interferences with possession of the property and his personal chattels located at the property. He had sued in trespass and included a claim under the TPA.
Although His Honour had considered the claims “hopeless”: [20], he acknowledged the Full Court thought otherwise.[2]
[2] see Maher v Commonwealth Bank of Australia [2002] FCAFC 104 at [12] – [16] and [22] to [27].
Some proceedings were clearly on foot although their status is unknown.
The nature of the debtor’s counterclaim set off or cross demand is one that could have been commenced in the Federal Court in its original and accrued jurisdiction. Orders for consolidating the proceedings could have been joined with the application to set aside the bankruptcy notice.
Earlier I addressed the other matters sought to be raised in this application. Despite my own view as to their prospects they too were matters capable of being commenced in the Federal Court in its original and accrued jurisdiction.
Additionally the claims all appear to arise from a common factual substratum. There appears to be no reason why the debtor’s claims could not have been prosecuted in the earlier proceedings.
In that context it appears that the prospect of an Anshun estoppel may now arise; Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 (Anshun). The consequences arising from a failure to traverse issues in a claim by a defendant later seeking to claim a cross demand or set off were expressly considered by the High Court in Anshun.
The matter was examined by the majority at 602 with them concluding at 602:
“In this situation we would prefer to say that there will be no estoppel unless it appears that the matter relied upon as a defence in the second action was so relevant to the subject matter of the first action that it would have been unreasonable not to rely on it. Generally speaking, it would be unreasonable not to plead a defence if, having regard to the nature of the plaintiff's claim, and its subject matter it would be expected that the defendant would raise the defence and thereby enable the relevant issues to be determined in the one proceeding. In this respect, we need to recall that there are a variety of circumstances, some referred to in the earlier cases, why a party may justifiably refrain from litigating an issue in one proceeding yet wish to litigate the issue in other proceedings eg expense, importance of the particular issue, motives extraneous to the actual litigation, to mention but a few.”
At page 603 their Honours continued:
“The likelihood that the omission to plead a defence will contribute to the existence of conflicting judgments is obviously an important factor to be taken into account in deciding whether the omission to plead can found an estoppel against the assertion of the same matter as a foundation for a cause of action in a second proceeding. By "conflicting" judgments we include judgments which are contradictory, though they may not be pronounced on the same cause of action. It is enough that they appear to declare rights which are inconsistent in respect of the same transaction.”
In my view the matters alleged by the debtor could have been and ought have been set up in the action or proceeding in which the judgment or order was obtained. They were not. They do not satisfy s.40(1)(g).
It follows that even if I were wrong in determining that the debtor should be relieved of the consequences of his non compliance with the Court’s orders, the claim sought to be set up was one which could have been set up in the proceeding in which the judgment was obtained.
Summary
The debtor made application to set aside an order made in default of his appearance dismissing this application to set aside a bankruptcy notice.
The basis for his failure to appear was he not receiving a notice of the hearing. The creditor failed to prove the debtor had notice of the hearing.
However on the hearing of the application it was apparent that there was no purpose in setting aside the orders of the Court made 15 April 2008 because:
a)there had been a failure to comply with the requirements of FMC (Bankruptcy) Rule 3.02(2).
b)There was in any event no cross claim, set off or cross claim available to the claim that he could not have set up in the action or proceeding in which the judgment was obtained.
The application should be dismissed.
Orders
That the application be dismissed.
In default of any application for costing orders within seven (7) days of today, I order that the Applicant pay the Respondent’s costs of and incidental to the application including reserved costs to be assessed on the standard basis.
I certify that the preceding forty-nine (49) paragraphs are a true copy of the reasons for judgment of Burnett FM
Associate: Beverley Schmidt
Date: 28 July 2008
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