Malseed, R.B. v Montro Holdings Pty Ltd
[1990] FCA 601
•30 OCTOBER 1990
Re: ROBERT BARRY MALSEED
Ex parte: MONTRO HOLDINGS PTY. LTD.
No. P610 of 1989
FED No. 601
COURT
IN THE FEDERAL COURT OF AUSTRALIA
BANKRUPTCY DISTRICT OF THE STATE OF VICTORIA
GENERAL DIVISION
Jenkinson J.(1)
HEARING
MELBOURNE
#DATE 30:10:1990
Counsel and Solicitors for Mr. P.V. McInnes instructed
the Petitioning Creditor: by S.V. Winter and Co.
Counsel and Solicitors for Miss D. Wiener instructed by
the Debtor: Mark Gray and Associates
JUDGE1
Hearing of a bankruptcy petition.
The act of bankruptcy alleged was failure to comply with a bankruptcy notice issued 16 March 1989 and founded on a judgment of the County Court of Victoria entered against the debtor ("Mr. Malseed") on 10 April 1987 pursuant to a consent order of his Honour the Chief Judge of that Court made on 29 October 1986. The proceeding in the County Court was commenced by a summons upon which were endorsed particulars of the petitioning creditor's claim against three defendants for $11,373.93. On 13 September 1985 his Honour Judge Fagan ordered, on a summons for leave to enter final judgment, that the petitioning creditor have leave to enter judgment against the three defendants for $11,208.26 and $222.38 for interest and for costs to be taxed. Judgment was entered accordingly on 4 October 1985. Unlike the particulars of the claim endorsed on the summons, the affidavit of Richard John Dixon ("Mr. Dixon") upon which Judge Fagan made his order stated several sums which were stated in the affidavit to aggregate $11,208.26. (In fact the sums stated aggregated $11,208.19, but nothing turns on this error.) On about 12 November 1986 the second-named defendant, Per Ejner Carlsen, satisfied the judgment by payment. But that judgment was not the judgment entered against the debtor on 10 April 1987. By a summons dated 21 November 1985 the first and third-named defendants, the latter being the debtor, sought an order that the judgment entered on 4 October 1985 be set aside. Having been in December 1985 adjourned sine die, the summons was brought on for hearing in October 1986. After several adjournments in that month, the summons came before Chief Judge Waldron on 29 October 1986. By consent of counsel the following orders were made:
"1. That Judgment entered on the 12th December, 1985 against the First and Thirdnamed Defendant be set aside.
2. That the First and Thirdnamed Defendants pay the Plaintiff's costs thrown away by reason of this Order.
3. That Judgment be entered for the Plaintiff for:
(a) $3,000.00 against the First and Thirdnamed Defendants plus interest of $527.17.
(b) Additional interest of $324.06 against the Firstnamed Defendant.
4. The First and Thirdnamed Defendants to pay the Plaintiff's costs of this Application fixed at $189.00."
(The date in paragraph 1 of the order is incorrect : the date of judgment was 4 October 1985). On the hearing of the petition the question in issue between the petitioning creditor and the debtor was whether the orders in paragraph 3 of the Chief Judge's order provided for judgment upon the causes of action alleged in the originating County Court summons, as Miss Wiener of counsel for the debtor submitted, or for judgment upon certain other causes of action adumbrated in an affidavit sworn by Richard John Dixon on 26 September 1986 and filed in opposition to the summons for an order that the judgment entered on 4 October be set aside, as Mr. McInnes of counsel for the petitioning creditor submitted.
The originating summons alleged a lease dated 20 September 1982 of commercial premises by the petitioning creditor to the first-named defendant, Integrated Networking Pty. Ltd., and "an Indemnity and Guarantee" of the same date by the other two defendants, Per Ejner Carlsen and the debtor. The three defendants are therein alleged to be "jointly and severally liable to the Plaintiff for payment of" $11,373.93, the sum claimed. There is reference to "default in rental payments" by Integrated Networking Pty. Ltd. ("Integrated"), and to failure by the other two defendants to pay what is alleged to be owing by Integrated "pursuant to the Indemnity and Guarantee". That is really all that can be gleaned from the originating summons. Exhibited to the affidavit of Richard John Dixon sworn 6 September 1985 in support of the final judgment summons were what were sworn to be true copies of the lease and the "Indemnity and Guarantee". The affidavit verified execution of those two documents and deposed to Integrated's indebtedness as follows:
rent: $10,144.00 land tax: $ 75.72 "Body Corporate fees": $ 881.27 legal costs of
preparation of
the lease: $ 107,20 $11,208.19
The indebtedness of Integrated was sworn to derive from the provisions of the lease, and the joint and several indebtedness of the other two defendants in a like amount was sworn to derive from the document they had executed. No reconciliation or explanation of the difference between the sum claimed and the sum sworn to be owing was offered in the affidavit, which contains no reference to the originating summons.
The same deponent, who was at material times a director of the petitioning creditor, swore on 26 September 1986 an affidavit in opposition to the summons for an order that the judgment be set aside. The first six paragraphs deal with matters relevant to that summons. The final two paragraphs read:
"7. Following the judgment being obtained in this action, the Plaintiff company has received further accounts for rates and other charges outstanding in respect of the property of Suite 18, Albert Square. These amounts are as follows:- Body Corporate Fees _ $1,231.47 Municipal Rates - $ 285.68 Water Rates - $ 391.97 State Land Tax - $ 151.77 Storage Fees re:
Firstnamed Defendants
equipment - $ 502.63 Registration Fee - $ 100.00 Transportation of
Office Furniture - $ 440.00 $3,103.52 These amounts are properly payable by the Defendants pursuant to the terms of the Lease Agreement of the 20th September, 1982.
8. I request the leave of this Honourable Court to enter judgment against the First, Second and Thirdnamed Defendants for the additional sum of $2,663.52 (sic) and I respectfully request that this Court deny the orders as thought (sic) by the First and Thirdnamed Defendants."
On 13 October 1986 Mr. Watts of counsel for Integrated and the debtor and Mr. Colbran of counsel for the petitioning creditor appeared before a Master of the County Court on the summons to set aside the judgment. Mr. Colbran gave evidence, which I accept, that he had no recollection of what occurred on that occasion. Mr. Watts had the benefit of a memorandum, which he had sent to his instructing solicitor on or immediately after 13 October 1986, about what occurred. He recorded the orders made by the Master adjourning the summons until 29 October 1986 and ordering that his clients pay the petitioning creditor's costs. The memorandum then continues:
"The view taken by Michael Colbran, after discussions with me, was that there is probably 3 months rental owing in respect of which there is no Defence, but that the balance of the amount claimed is subject to an agreeable (sic) Defence. For the reasons set aside
(sic) in the enclosed instructions from Brooking and Chernov, I take the view that it is unlikely that the Defendants would be successful in defending the claim for the first three months rental. After further discussions with Michael Colbran, it was agreed that if the Defendants paid 3 months rental in the Court prior to the next hearing date, that the Plaintiff would consent to the following orders:
1. That the judgment entered on 3rd September, 1985 be set aside.
2. That judgment be entered in the sum of (3 months rental) and that the Defendants be given leave to defend as to the balance. Accordingly, for the above reasons I would strongly recommend to my instructing solicitors that the Defendants take up the Plaintiff's offer, and agree to pay 3 months rental."
There was evidence that some part of the claim for rent might have been impugned on the grounds that the petitioning creditor had resumed occupation of the premises before the expiration of the period in respect of which the rent was claimed and that the petitioning creditor had failed to act reasonably in mitigation of damage flowing from the breach of the lease, in that it had sought another tenant on terms which were commercially unrealistic.
Mr. Watts' evidence was that, although he could remember that matters other than those he recorded in his memorandum were discussed with Mr. Colbran, he did not remember discussion of paragraphs 7 and 8 of the affidavit sworn 25 September 1986. I accept his evidence.
I accept the evidence of Dr. Hardingham of counsel for the petitioning creditor before Chief Judge Waldron on 29 October 1986 that he has no recollection of what occurred on that day in relation to the proceeding. Mr. Watts' recollection was that, his clients having failed to make any payment into Court, he negotiated for the orders which were in the event made by the Chief Judge and an order giving his clients leave to defend the balance of the claim. He could not explain the omission from the Chief Judge's order of reference to leave to defend. He had no recollection of any mention of leave to amend the originating summons by including claims of the kind to which paragraphs 7 and 8 of the affidavit refer. Mr. Watts had deposed in an affidavit sworn 16 May 1990:
"At no stage was it intended or discussed that the $3000 would represent a payment or a judgment for any amount that was not claimed in the summons."
The context shows that reference to "the $3000" in that sentence was a reference to the sum for which it was agreed by counsel there should be judgment. Asked by me whether he could say positively that the claims in paragraphs 7 and 8 of the affidavit were not discussed by Dr. Hardingham and himself, he replied "no". Then followed this question and answer:
"You are not able to say that, or you are?---My recollection is that all of the claims and so on were discussed in a general sense, and to the best of my recollection, I believe that they were in a general sense discussed."
I am persuaded that no agreement was made that the claims specified in paragraphs 7 and 8 of the affidavit should be, or should be included in, the claims in settlement of which the debtor's consent to the orders made by Chief Judge Waldron was given. It is, as I think, probable that if the unusual course had been taken of comprehending, within a compromise to which effect was to be given by final orders, claims arising after the commencement of the proceeding in which the orders were to be made, counsel for the parties who negotiated the compromise would have remembered that circumstance. Even if they had neglected to make appropriate provision for such a case, either by drafting and signing terms of settlement or by obtaining a consent order for amendment of the originating summons, I think it unlikely that they would both have forgotten that unusual circumstance.
I have described the claims specified in paragraphs 7 and 8 of the affidavit as claims arising after the commencement of the County Court proceeding because the wording of the first sentence of paragraph 7 suggests, if it does not clearly indicate, as much. But what I have written in the preceding paragraph may, as I think, be written without legally significant qualification of claims not known to have arisen after the commencement of the proceeding, but first brought to the notice of the defendants long after judgment and very shortly before the compromise was made. (An attempt to show by evidence before me when those claims arose could not be described as wholly successful. Some of the claims seem to have arisen before, and others after, the commencement of the County Court proceeding.)
In response to the defendant Carlsen's payment of $11,947.99 in satisfaction of the judgment entered against the three defendants on 4 October 1985 the petitioning creditors' solicitors sent to Mr. Carlsen's solicitors a letter dated 14 November 1986 in these terms:
"We acknowledge receipt of your letter of the 12th November, 1986 and confirm our advice of that date to your Mr. Frost that our client does not accept the sum of $11,947.99 as full and final settlement of its claim. We intend to hold the cheque forwarded in our trust account as part settlement of our client's claim. We advise that our client seeks payment of the following costs:-
1. Interest upon the judgment amount in the sum of $11,947.99 at the rate of 13.5% from the date of judgement being 4th October, 1985 - $1,813.61.
2. Legal costs of preparation of Bankruptcy Notice and the Bankruptcy Petition - $750.00. Disbursements: Stamp Duty and Bankruptcy Fees - $257,00. Company and Title Searches $15.00, Process Servers Fee and Miscellaneous Fee - $113.45. In addition, our client has been advised of additional fees which are owing in respect of the lease of the premises of Albert Square, these are as follows:- Inscor Body Corporate Rate - $1,714.11 Municipal Rates - $ 285.68 Water Rates - $ 391.97 State Land Tax - $ 151.77 Arrears South Melbourne - $ 502.63 Registration - $ 100.00 Transport and Storage of
Equipment - $ 521.70 $3,667.86 We advise that we have not yet received a date for the Bankruptcy Petition, although we understand that it may either be in the middle of December or alternatively in February.
Our client has indicated to us that if these additional matters can be resolved in the future, we can then make representations to the Registrar of the Bankruptcy Court to attempt to withdraw the Petition. Should we not be able to advise this, we will then merely appear on the return date and advise that the debt and the costs have been met by your client. We look forward to your reply concerning these matters at the earliest opportunity."
By a summons issued 9 February 1988 the petitioning creditor instituted in the Magistrates' Court at Melbourne a proceeding against the three persons who had been the defendants in the County Court proceeding. The particulars of demand disclosed a claim for an indebtedness, in the sum of $4,106.86, of Integrated under the lease and of the other two defendants under the other document dated 25 September 1982. It was, however, agreed by the parties before me that the claim prosecuted in the Magistrates' Court was for $3,706.86 and that the particulars of that claim were those disclosed in the letter dated 14 November 1986 together with one additional item : $39 paid to a locksmith to effect re-entry by the petitioning creditor on to the demised premises.
The proceeding in the Magistrates' Court was in 1989 brought to an end by the petitioning creditor. Before me it was said on behalf of the petitioning creditor that the proceeding was mistakenly brought, and the mistake was said to have occurred in consequence of a change of solicitors. I have not drawn any inference adverse to the petitioning creditor's case from the institution of the proceeding.
In the course of the Magistrates' Court proceeding documents were filed on behalf of the debtor, and submissions were made by counsel on his behalf, which might be understood to involve an assertion that the claims asserted in paragraphs 7 and 8 of the affidavit of Richard John Dixon sworn 26 September 1986 had been claims in settlement of which it had been agreed that the debtor's consent to the orders made on 29 October 1985 would be given. But I am persuaded that no such an assertion was made. The documents and submissions went no further than to attribute legal consequences to events and circumstances which I have found to have occurred and which I have held consistent with the conclusion I have reached.
No agreement having been made concerning the claims specified in paragraphs 7 and 8 of the affidavit, nor any amendment of the originating County Court summons having been made to comprehend those claims, the conclusion in my opinion follows that in consequence of the payment made by Mr. Carlsen in November 1986 nothing was owing by the debtor under the judgment entered on 10 April 1987 at any time on or after that latter date. It follows that the act of bankruptcy alleged was not committed. The petition will be dismissed with costs.
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