Maxwell v Moorabool Developments Pty Ltd

[2004] FMCA 92

FEDERAL MAGISTRATES COURT OF AUSTRALIA

MAXWELL v MOORABOOL DEVELOPMENTS PTY LTD [2004] FMCA 92

BANKRUPTCY – Bankruptcy notice – sections 40(1)(g), 41(7) – application dismissed.

Bankruptcy Act 1966 (Cth)
Supreme Court (General Civil Procedure) Rules 1996 (Vic)
Transfer of Land Act 1958 (Vic)

Stec v Orfanos [1999] FCA 457
McLean v ANZ Banking Group Ltd (1993) 42 FCR 300
Re Camilleri; Ex parte Maguire unreported, 08/05/1996 FedCt(Vic) 0238/96
Re Brown (1923) 40 WN (NSW) 73
ReWedd; Ex parte Parker [1962] WAR 42
ReLing; Ex parte Ling v Commonwealth (1995) 58 FCR 129

Applicant: TIMOTHY KEITH MAXWELL

Respondent: MOORABOOL DEVELOPMENTS PTY LTD (ACN 005 906 507)

File No: MZ10 of 2004

Delivered on: 1 March 2004

Delivered at: Melbourne

Hearing date: 16 February 2004

Judgment of: Hartnett FM

REPRESENTATION

Counsel for the Applicant: Mr Nunns

Solicitors for the Applicant: Maddens Lawyers

Counsel for the Respondent: Mr Maiden

Solicitors for the Respondent: Harwood Andrews

ORDER

1. The application filed 9 January 2004 is dismissed.

2. Time for compliance with the requirements of the bankruptcy notice shall end at midnight this day.

3. The applicant to pay the respondent's costs including reserve costs as agreed or failing agreement, as taxed pursuant to Order 62 of the Federal Court Rules.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
MELBOURNE

MZ10 of 2004

TIMOTHY KEITH MAXWELL

Applicant

And

MOORABOOL DEVELOPMENTS PTY LTD

Respondent

REASONS FOR JUDGMENT

1. The applicant, a real estate developer, made application to this Court on 9 January 2004 for the following:

   1)An order extending the time for compliance with the respondent's bankruptcy notice number VN/959/03 dated 18 September 2003; and

   2)An order to set aside the respondent's bankruptcy notice number VN/959/03 dated 18 September 2003.

2. In support of that application was filed contemporaneously an affidavit of Jerome Collopy, the solicitor having the conduct of the proceedings on behalf of the applicant.

3. Subsequently affidavits were filed on behalf of the applicant and relied upon, being an affidavit of Brendan Pendergast filed 11 February 2004 together with exhibits and an affidavit by the applicant sworn

   
   

   11 February 2004. The respondent in reply relied upon an affidavit of Peter Gibbons filed 12 February 2004 together with exhibits. Each of the applicant and respondent provided written submissions in support of their respective applications, the respondent seeking that the application be dismissed.

History

1. The proceeding which formed the basis of the respondent's bankruptcy notice was proceedings numbered 6299 of 2003 between Moorabool Developments Pty Ltd as plaintiff and Timothy Keith Maxwell and the Registrar of Titles as defendants. Those proceedings commenced by an originating motion between the parties and a summons on that originating motion, both of which were filed on 17 June 2003. In those proceedings the plaintiff Moorabool Developments Pty Ltd, sought orders for removal of a caveat which Mr Maxwell had lodged against the land which later became the subject of pending Supreme Court proceeding number 2037 of 2003 F5562. Those later proceedings were before Habersberger J between 27 October and 19 November 2003 and His Honour is yet to deliver reasons. The parties to those proceedings are Mr Maxwell and Medley Close Pty Ltd as plaintiffs and Moorabool Developments Pty Ltd and David John Scott as defendants.

2. The earlier caveat proceeding was supported by affidavit material including an affidavit of David John Scott sworn 17 June 2003. The caveat lodged by Mr Maxwell being caveat number AB966846V shows that the interest which Mr Maxwell sought to protect was:

   An equitable interest as chargee .. pursuant to terms and conditions of a joint venture agreement dated 23 March 2002 ..

3. The joint venture agreement referred to in that caveat notice is one of the bases upon which Mr Maxwell has sought to attach liability to Moorabool Developments Pty Ltd and Mr David Scott in the pending Supreme Court proceedings.

4. On 5 May 2003 Moorabool Developments Pty Ltd entered into an agreement with Mr Maxwell, David Scott, and Medley Close Pty Ltd wherein clause 1.2 of that agreement provided:

   Maxwell agrees to immediately, upon the execution hereof, arrange for the withdrawal of the caveat lodged over the Allenby Road property.

   Mr Maxwell did not immediately remove the caveat the subject of that agreement and despite repeated requests refused to do so for some time.

5. Accordingly, caveat proceedings were commenced by Moorabool Developments Pty Ltd which were successful and on 23 June 2003 Redlich J ordered by consent that Mr Maxwell withdraw his caveat. Consequent upon that order His Honour ordered that Mr Maxwell pay the costs of Moorabool Developments Pty Ltd on an indemnity basis up to and including 18 June 2003 and, by consent, on a party/party basis thereafter.

6. The Supreme Court proceedings which are pending before Habersberger J commenced by writ filed 14 July 2003.

7. Following the orders made by Redlich J on 23 June 2003 in the caveat proceedings, a summons for taxation and bill of costs in taxable form was filed on 14 July 2003. The matter was fixed for taxation by Master Bruce on 11 December 2003 and his order was authenticated on

   
   

   15 December 2003. On 17 December 2003 Harwood Andrews, solicitors acting on behalf of Moorabool Developments Pty Ltd, sent a facsimile to Maddens Lawyers advising that their client required immediate payment of the taxed costs.  That sum was $22,343.80.

8. Mr David Scott is a director of Moorabool Developments Pty Ltd (“Moorabool”) whom informed Peter Gibbons, lawyer acting on behalf of the respondent in the proceedings before me, that the company Moorabool Developments Pty Ltd has paid its former solicitors Clayton Utz all of the costs the subject of the order of Redlich J in the caveat proceedings and remains out of pocket for those costs unless and until Mr Maxwell pays the costs as taxed by Master Bruce.

9. Moorabool’s principal business activity is property development. The proceedings currently in the Supreme Court and the caveat proceedings concerned the subdivision and sale of 80 lots of land situated at Allenby Road, Hillside. Moorabool was the registered proprietor of the land.

Consideration

1. Section 40(1)(g) of the Bankruptcy Act 1966 (Cth) (“the Act”) provides as follows:

   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 or, by leave of the Court, elsewhere, a bankruptcy notice under this Act and the debtor does not;

   i)where the notice was served in Australia - within the time specified in the notice; or

   ii)where the notice was severed elsewhere - within the time fixed for the purpose by the order giving leave to effect the service;

   comply with the requirements of the notice or satisfy the Court that he or she 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 or she could not have set up in the action or proceeding in which the judgment or order was obtained;

   then a debtor [pursuant to section 40(1)] commits an act of bankruptcy.

2. Section 41(7) of the Act implies that a debtor may apply to the Court for an order setting aside a bankruptcy notice on the basis that the debtor has a counter-claim set-off or cross demand referred to in s.40(1)(g). Pursuant to that section time for compliance with the bankruptcy notice is deemed to have been extended, immediately before its expiration, until and including the day on which the Court determines whether it is so satisfied. Section 41(6A)(b) of the Act provides that the Court may, subject to subsection (6C) extend the time for compliance with a bankruptcy notice where an application has been made to the Court to set aside a bankruptcy notice. There is no inherent power of the Court. I note that the power to extend time is only a grant in aid of the application to set aside the bankruptcy notice. The existence of an application to have the bankruptcy notice set aside is a condition precedent to the exercise of power contained in s.41(6A)(b).

3. The applicant must show a prima facie case of the existence of a counter-claim, set-off or cross demand of the kind referred to in the relevant provision.  I am satisfied that in the Supreme Court proceedings before Habersberger J the applicant’s claim is one which is bona fide and has been prosecuted diligently.  His claim against the respondent to these proceedings and Mr David Scott is for a considerable sum which far exceeds that claimed in the bankruptcy notice.  On the material before the Court Mr Maxwell does have a genuine expectation that some funds from an identified source will in due course be available to him.  This is not to determine the validity of any set-off or counter-claim but merely a decision going to the bona fide nature of the claim.

4. I am of the view however that the applicant’s claim in the Supreme Court for one half of the gross profits of what is described as the joint venture, being an agreement partly oral, partly in writing and partly to be implied between the applicant and respondent and Mr David Scott, together with the applicant’s quantified claim for sales commission, could not have been set up in the proceeding in which the order upon which the bankruptcy notice was based was obtained. Thus it cannot be a counter-claim, set-off or cross demand of the kind referred to in s.40(1)(g).

5. The counterclaim, set-off or cross-claim must be mutual and due in the same right (Stec v Orfanos [1999] FCA 457 at 24). There is here no mutuality in relation to the two claims. The bankruptcy notice is in respect of a judgment debt owed to a sole judgment creditor. The cross demand is against the judgment creditor and Mr David Scott. The debtor’s claim in the Supreme Court commenced by writ is against both the judgment creditor (Moorabool) and Mr David Scott. In his amended statement of claim the debtor alleges a joint venture agreement between each of the debtor, the judgment creditor and Mr David Scott. It is his (the debtor’s) claims with which this court is concerned. There is no distinguishing in the statement of claim between the creditor Moorabool or Mr David Scott. The affidavit material in support in these proceedings make clear that the debtor’s claim is against both Moorabool and David Scott – and not against the judgment creditor separately. Nothing in the debtor’s pleadings suggest otherwise. The current view of the proper construction of s.40(1)(g) of the Act is as set out in the decisions of Re Brown (1923) 40 WN (NSW) 73 and in ReWedd; Ex parte Parker [1962] WAR 42. The question whether it is a sufficient answer to a bankruptcy notice for a debtor to set up a cross demand against a judgment creditor jointly with someone else was answered in the negative (Re Camilleri; Ex parte Maguire unreported, 08/05/1996 FedCt(Vic) 0238/96, Olney J).  The application must fail for the want of mutuality in the debtor’s claims as against the judgment creditor and David Scott.

6. Even if the above were not the case Order 10 of the Supreme Court (General Civil Procedure) Rules 1996 (the Rules) provides that a counter-claim can only be made in a proceeding commenced by writ or a proceeding in respect of which an order has been made under Rule 4.07(1).  A defendant may counter-claim against a plaintiff and any other person whether a party or not who could properly be joined with the plaintiff as a party under Rule 9.02.

7. Pursuant to Rule 4.05 of the Rules and section 90(3) of the Transfer of Land Act 1958 the original caveat proceeding had to be commenced by originating motion and not writ.  This Rule was complied with.  However Rule 4.07 provides that where a proceeding is commenced by originating motion and in the opinion of the Court it might more conveniently continue as if commenced by writ then the Court may order the proceeding to continue as if it had been commenced by writ.  The applicant in these proceedings made no application to the Court for an order under Rule 4.07.  Clearly, it was open to him and he was required to pursue that course before claiming that he could not have set up the counter-claim or cross-demand.  There existed a discretion in the Supreme Court which could have been exercised for or against the applicant.  The onus clearly lies upon the debtor and it is not one that he has satisfied.  He failed to seek the exercise of the discretion (ReLing; Ex parte Ling v Commonwealth (1995) 58 FCR 129) in proceedings which were interconnected – whilst there being no necessity for a counterclaim to be connected with a plaintiff’s claim.

8. Section 41(7) provides that the time to comply with the bankruptcy notice is extended until such time as this Court has disposed of the application to set aside the notice. I conclude that there is no general power to further extend the time for compliance. The application to set aside the notice will be dismissed and will thus cease to be an extant application. The Court does not have power to extend time for compliance where the application has been dealt with (McLean v ANZ Banking Group Ltd (1993) 42 FCR 300 at 302).

9. I dismiss the application of the applicant and declare that the applicant will commit an act of bankruptcy if he does not pay the amount claimed in the bankruptcy notice by midnight this day. I propose to order that the applicant pay the respondent's costs of the application.

I certify that the preceding twenty-one (21) paragraphs are a true copy of the reasons for judgment of Hartnett FM

Associate:  T. Jones

Date:  1 March 2004