Moran v Lydiard Financial Services Pty Ltd
[2005] FMCA 1821
•31 October 2005
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| MORAN v LYDIARD FINANCIAL SERVICES PTY LTD | [2005] FMCA 1821 |
| BANKRUPTCY – Bankruptcy notice – application to set aside – whether promissory note is payment of debt – whether debtor has set off or cross-claim – whether bankruptcy notice abuse of process when three previous notices were invalid. |
| Bankruptcy Act1966 (Cth) |
| Bhagat v Global Custodians Ltd (2002) FCA 223 Ebert v Union Trustee Co of Australia Ltd (1960) 104 CLR 346 at 350 |
| Applicant: | JOHN GERARD MORAN |
| Respondent: | LYDIARD FINANCIAL SERVICES PTY LTD |
| File Number: | MLG 1291 of 2005 |
| Judgment of: | Phipps FM |
| Hearing date: | 31 October 2005 |
| Date of Last Submission: | N/A |
| Delivered at: | Melbourne |
| Delivered on: | 31 October 2005 |
REPRESENTATION
| The Applicant in person |
| Counsel for the Respondent: | Mr Peter Fary |
| Solicitors for the Respondent: | Wisewoulds |
ORDERS
That the application filed by the application debtor on 17 October 2005 is dismissed.
That the applicant debtor pay the respondent creditor's costs to be taxed in accordance with the procedures contained in O.62 of the Federal Court Rules using the scale contained in schedule 1 of the Federal Magistrates’ Court Rules 2001.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MLG 1291 of 2005
| JOHN GERARD MORAN |
Applicant
And
| LYDIARD FINANCIAL SERVICES PTY LTD |
Respondent
REASONS FOR JUDGMENT
The respondent to this application, Lydiard Financial Services Pty Ltd, has obtained a bankruptcy notice against the applicant, John Gerard Moran. The bankruptcy notice was issued on 23 September 2005. It is based on an order of the Court of Appeal of the Supreme Court of Victoria where on 28 February 2003, the Court dismissed an application and ordered that John Gerard Moran pay on an indemnity basis the costs of Lydiard Financial Services Pty Ltd, formerly called Cuthberts Nominees Pty Ltd, and then on an order of the taxing master of the Supreme Court, Master Bruce, on 30 June 2003, where the master ordered that those costs be taxed and allowed in the sum of $11,310.40.
The bankruptcy notice was served on 29 September 2005. Mr Moran now applies to set it aside. He puts forward three bases for his application to set aside. First, that the costs have been paid. He says that they were part of a payment of $82,521.27 paid to the creditor's solicitors in January 2005. Next he claims that he has a cross-claim in an amount which exceeds by many multiples the costs which are claimed in this bankruptcy notice, and finally, the third claim he alleges that the issuing of this bankruptcy notice, being the fourth that the creditor has obtained against him, is an abuse of process of the Court.
I deal first with the claim that payment was made. The order for costs in the Court of Appeal on 28 February 2003 is not the only order for costs which has been made against Mr Moran, thus the explanation for the figure of $82,521.27. On 31 January 2005, Mr Moran sent to Messrs Wisewoulds, who are the solicitors for the creditor, a letter enclosing a promissory note. The promissory note was for the amount of $82,521.27. The letter from Mr Moran reads:
Please find enclosed payment for $82,521.27 to be placed into your trust account for the payment of court costs to Lydiard Financial Services Pty Ltd, previously Cuthberts Nominees Pty Ltd. I would like a receipt for the attached payment, please.
The promissory note which was included is dated 31 January 2005 and is headed “Promissory Note”. It says:
20 years fixed after date, I promise to pay Paul Marsh of Wisewoulds Lawyers the sum of $82,521.27 payable at 205 Melbourne Road, Ballarat, at 4 pm on 31 January 2025. Value received -
And then signed by John G. Moran.
A promissory note does not constitute a payment for costs. It was returned by the solicitors by return mail in which they said it did not constitute legal tender. A promissory note cannot constitute payment in the absence of acceptance of the promissory note or agreement that payment is to be made by promissory note. Neither of those two things exist here. In addition, there is no evidence of an ability to satisfy the promissory note. Finally, it needs to be said, the order for costs made by the Court of Appeal contained no stay, nor did the master's order fixing the amount of the costs. The promissory note, on its face, is payable at 4 pm on 31 January 2025. The first ground therefore fails.
The next is an allegation of a cross-claim. Mr Moran has filed two affidavits. He has exhibited a copy of a writ and statement of claim. The writ was filed in the Supreme Court of Victoria, number 12 of 2005, at Ballarat. It was filed with the deputy prothonotary at Ballarat. He has in his affidavits given some explanation of what lies behind that writ and he has exhibited various documents which include an affidavit by Robert Michael McGirr of the firm of Wisewoulds filed in the Court of Appeal of the Supreme Court of Victoria. It is an affidavit in support of an application for security for costs in an appeal that Mr Moran has brought in the proceeding I have just referred to.
The proceeding filed with the deputy prothonotary at Ballarat was the subject matter of a summons issued by the respondent seeking to have the proceeding struck out. On 21 July 2005, Master Evans dismissed the application contained within the writ and ordered that Mr Moran pay costs on an indemnity basis. Mr Moran appealed from that decision of the master. The appeal was heard by Mandie J on 10 August 2005. He dismissed the appeal with costs. The order that Master Evans made on 21 July 2005 was that the proceeding is dismissed and the plaintiff pay the defendant's costs of the proceeding on an indemnity basis.
The events which give rise to the various proceedings between the parties commenced with Mr Moran's mother mortgaging a farm she owned at Clarkes Hill to the creditor, then named Cuthberts Nominees Pty Ltd. It secured a loan of $135,000. The loan was in 1982. It was to be repaid by December 1985. There were variations which extended the date for payment until December 1988. Mr Moran's mother, who has since died, gave a second mortgage over the property to three members of the family, not including Mr John Moran in August 1988.
The first mortgage was not repaid in December 1988 and extended again in January 1992. The creditor commenced proceeding in the Supreme Court of Victoria seeking possession. Proceedings were commenced in the County Court for $165,000 and $135,000 in interest. The house at the property was destroyed by fire in June 1993. There was then a dispute as to the entitlements of the proceeds of the insurance policy, a dispute between the creditor as first mortgagee and the late Mrs Moran.
The creditor commenced another proceeding, a third proceeding. They were all eventually consolidated and then compromised on 1 March 1995. They were settled on the basis that the principal amount of the mortgage was increased from $135,000 to $145,000. Repayment was extended until November 1996. It was not repaid and the creditor then obtained an order for possession. There were various proceedings and eventually the property was sold.
The basis for the cross-claim is that the terms of settlement required a variation to the first mortgage, which was done. The consent of the second mortgagees, who are all members of the Moran family, was not obtained. The argument which Mr John Moran has been putting forward is that the variation without consent of the second mortgagees brought about a change in the order of priorities of the mortgage. He argues the first mortgage, which was to Lydiard Financial Services Pty Ltd, disappeared and was replaced by a new mortgage, the varied mortgage, and since the consent of the second mortgagees was not obtained, there was a new instrument which was second in time and so priority after the second mortgage. Therefore, Mr Moran argues, the sale by the first mortgagee was unlawful and that, according to Mr Moran, entitles him to a claim for damages.
In Mr McGirr's affidavit in the Court of Appeal of the Supreme Court, he says that in oral reasons Master Evans indicated the following of the claim which Mr Moran is now relying on as the cross-claim. It was patently obvious that the proceedings had no merit, that Mr Moran had no standing to bring the proceedings. Only his late mother did. The only other persons who might have standing were the subsequent mortgagees, who do not include Mr John Moran. The only avenue open to Mr John Moran was as a lessee, but that would only be if his lease was granted with the approval of the first mortgagee, which it was not.
Mr John Moran refers to a lease. The Master concluded that it was another vexatious collateral attack on the order for possession which had been granted by Master Patkin in December 1996, the subject of an appeal to Beach J in the Supreme Court in January 1997 and further subject to an attempt to appeal out of time to the Court of Appeal in December 2002 and a subsequent unsuccessful application for special leave to appeal to the High Court of Australia.
Mr McGirr then refers to the observations Mandie J made, that the proceeding bore all the hallmarks of a vexatious claim. According to Mr McGirr, Mandie J said that while Mr John Moran had made it clear to the Court that he sought to challenge the validity of the variation of mortgage, he had failed to show that he was entitled to do so and as a consequence, the appeal was dismissed.
Mr Moran is seeking to satisfy the Court that he has a counter-claim, set-off or cross-demand as those terms are used in s.40(1)(g) and of the Bankruptcy Act1966 (Cth) It is not sufficient for a debtor to assert that he has a claim and then set out the basis for the claim. He must satisfy the Court that he has a genuine demand. The Court must be satisfied it has a reasonable prospect of success. I refer to Bhagat v Global Custodians Ltd (2002) FCA 223 at 52 as one of the authorities for that proposition. The debtor must show that he has a prima facie case even if he does not adduce the admissible evidence which would make out a prima facie case (Ebert v Union Trustee Co of Australia Ltd (1960) 104 CLR 346 at 350).
The applicant debtor in this case does not show that he has a claim to pursue. He has attempted to establish a claim in the Supreme Court of Victoria and the proceeding has been dismissed. He has lodged an appeal against the decision of Mandie J, but that does not establish that his claim has any merit or any prospects of success, whether he has a prima facie case or a reasonable prospect of success.
Mr Moran has said to me that he is the executor of his late mother's estate and has pointed out that the order of the Court of Appeal in February of this year describes the applicants in this way: “Isabella Bridget Moran and John Gerard Moran as executor of the estate of Isabella Bridget Moran.” There is no doubt though that the order there was against John Gerard Moran personally and it was not an order against the estate of his late mother.
Any claim which now exists in relation to the sale of the Clarkes Hill property by Lydiard Financial Services would have to lie with either the registered owner of the property at the time, which was the estate of Mr Moran's late mother, or the mortgagees of the second mortgage. Mr John Moran is not one of those mortgagees. He does not show any other basis for his making a damages claim in relation to the sale of the property. In any event, the sale was conducted pursuant to a County Court order. There was an appeal heard by Beach J, an appeal to the Court of Appeal of the Supreme Court of Victoria and an application to the High Court for special leave to appeal, all of which were unsuccessful.
Any claim which could have been raised should have been raised in those proceedings. Any claim which Mr Moran puts forward under s.40(1)(g) fails because it must be something which could not have been raised in the previous proceedings. The order which was made against him by the Court of Appeal was in proceedings between his late mother, or his late mother's estate, and him and the creditor here. They appeared to be injunction proceedings of some sort, but the underlying basis for them was the dispute which arose out of the mortgage. No explanation is offered for the claim which was commenced in the Supreme Court of Victoria this year not being brought in that claim. For a number of reasons, the claim that there is a set-off or cross-claim does not succeed.
The third argument is abuse of process. The bankruptcy notice the subject matter of these proceedings, is the fourth bankruptcy notice obtained or issued by the creditor against Mr Moran. The first was on 22 December 2004 claiming $82,521.27. That bankruptcy notice, it was subsequently realised, was defective because the two orders of the Supreme Court had spelt Lydiard Financial Services wrongly. They were spelt L‑i‑d‑i‑a‑r‑d instead of L‑y‑d‑i‑a‑r‑d. That bankruptcy notice was set aside on 17 February 2005. That was a typographical error, it would seem, somewhere within the Supreme Court of Victoria. It was rectified under the slip rule of that Court so that the errors did not appear on the orders which are attached to the bankruptcy notice I am dealing with.
The second bankruptcy notice was issued on 17 February 2005. There was an application to set it aside and on 12 April 2005, Registrar Bardsley dismissed that application. That went on review to Gray J in the Federal Court and he allowed the application to set aside the bankruptcy notice because it had attached to it the taxing master's order for costs and not in addition the Court of Appeal order.
On 5 July 2005 a third bankruptcy notice was issued claiming $89,501.28. It referred to six orders, each being orders for costs and then the taxing master's order fixing those costs. That was set aside by consent eventually, the perceived defect being that the bankruptcy notice included other creditors apart from Lydiard Financial Services. That led to the fourth bankruptcy notice with which I am dealing. No errors in the bankruptcy notice are asserted and none are apparent.
In in circumstances, where one of the bankruptcy notices could not be proceeded with because there was a typing error on the Supreme Court orders, the second because the Court of Appeal order was not attached, and the third because potentially there are other creditors involved, there is not an abuse of process. The fourth bankruptcy notice is a valid notice. There is no reason why it should be set aside.
The application filed on 17 February 2005 by the debtor is dismissed.
I certify that the preceding Twenty-four (24) paragraphs are a true copy of the reasons for judgment of Phipps FM
Associate: Sherryn Kwong
Date: 8 December 2005
5
2
1