Neale v Mahony (No.2) - [2019] FCCA 3250

FEDERAL CIRCUIT COURT OF AUSTRALIA

NEALE v MAHONY (No.2)

[2019] FCCA 3250

Catchwords:
BANKRUPTCY – PRACTICE AND PROCEDURE – Application for an adjournment of hearing of application to set aside bankruptcy notice – whether there would be any utility in granting an adjournment – adjournment refused.

BANKRUPTCY – APPLICATION TO SET ASIDE BANRUPTCY NOTICE – Whether debtor has cross-claim, set-off, or cross demand against creditor – whether there are substantial reasons for questioning whether behind the judgment on the basis of which the bankruptcy notice has been issued there exists a true debt – whether creditor’s reliance on bankruptcy notice is an abuse of process – application to set aside bankruptcy notice dismissed.

Legislation:

Bankruptcy Act 1966 (Cth), s.40(1)(g)

Federal Circuit Court Rules 2001 (Cth), rr.12.02, 12.03

Cases cited:

Cheung v Burness (Trustee) [2016] FCA 1381
Glew v Harrowell [2003] FCA 373
James Woodward Neale v Bank of Western Australia Ltd; Bank of Western Australia Ltd v James Woodward Neale [2014] NSWSC 315
Neale v Commonwealth Bank of Australia Ltd trading as Bank of Western Australia [2015] NSWCA 272
Neale v Mahony [2018] FCCA 363
Neale v Mahony [2018] NSWSC 1046
Neale v Mahony(No.2) [2018] NSWSC 1253
Olivieri v Stafford (1989) 91 ALR 91
Re Riviere; Ex parte Original Mont de Piete Ltd (1919) 20 SR (NSW) 77
Re Vernon Arnfield (1925) 25 SR (NSW) 517
Wilkinson v Osborne & Anor (1915) 21 CLR 89
Wren v Mahony [1972] HCA 5; (1972) 126 CLR 212

Applicant:

JAMES WOODWARD NEALE

Respondent:

JOHN FRANCIS MAHONY

File Number:

SYG 927 of 2019

Judgment of:

Judge Manousaridis

Hearing date:

25 October 2019

Date of Last Submission:

31 October 2019

Delivered at:

Sydney

Delivered on:

13 November 2019

REPRESENTATION

Applicant in person

Counsel for the Respondent:

Mr A Maroya

Solicitors for the Respondent:

Mahony Law

ORDERS

The application for an adjournment made by the applicant at the hearing on 25 October 2019 is dismissed.
The application is dismissed.
Subject to order 4, the applicant pay the respondent’s costs.
The parties have liberty to apply by 27 November 2019 for an order discharging or varying order 3.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT SYDNEY

SYG 927 of 2019

JAMES WOODWARD NEALE

Applicant

And

JOHN FRANCIS MAHONY

Respondent

REASONS FOR JUDGMENT

Introduction

The applicant, Mr Neale, applies for an order that a bankruptcy notice issued against him on the application of the respondent, Mr Mahony, be set aside.
The bankruptcy notice demands payment of $36,096.34, which is the sum of a judgment of $29,693.46 (Judgment) that was entered in the Local Court in favour of Mr Mahony on 15 June 2016, and interest on the Judgment. The Judgment represents the assessed costs of legal services Mr Mahony provided to Mr Neale in proceedings Secured Global Opportunity Ltd, as assignee of Bank of Western Australia (Bankwest), brought against Mr Neale and his company, JW Neale Pty Ltd, in the Supreme Court of New South Wales (Bankwest proceedings).[1]
[1] James Woodward…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Neale v Mahony (No.2)

Details

AGLC: Neale v Mahony (No.2) [2019] FCCA 3250
Case: [2019] FCCA 3250
Decision Date: 13 November 2019

CaseChat Overview and Summary

In *Neale v Mahony (No.2)*, heard in the Supreme Court of New South Wales, the applicant, Mr Neale, sought to set aside a bankruptcy notice issued by the respondent, Mr Mahony. The bankruptcy notice was based on a judgment of $36,096.34, representing costs awarded to Mr Mahony for legal services rendered to Mr Neale in prior Supreme Court proceedings. Mr Neale advanced five grounds for setting aside the notice, including the existence of a cross-claim or cross-demand against Mr Mahony, an intention to appeal or set aside the underlying judgment, an assertion that the bankruptcy notice was an abuse of process intended to exert pressure, an alleged agreement regarding liability for costs, and a request for a stay to pursue a claim identified in separate proceedings. Mr Mahony opposed the application, arguing that Mr Neale was estopped from raising these grounds due to a prior unsuccessful attempt to set aside a previous bankruptcy notice based on the same judgment, and that the current application should be dismissed for the same reasons as the previous one.

The primary legal issues before the court were whether Mr Neale had established a valid cross-claim, set-off, or cross-demand sufficient to warrant setting aside the bankruptcy notice, whether there were substantial reasons to question the existence of a true debt behind the judgment, and whether Mr Mahony's reliance on the bankruptcy notice constituted an abuse of process. Additionally, the court considered Mr Neale's application for an adjournment to obtain legal representation and whether such an adjournment would serve any utility.

Judge Manousaridis reasoned that Mr Neale's asserted cross-claim, based on an alleged failure to amend a cross-claim in the prior proceedings, was not sufficiently particularised or substantiated to meet the threshold required by section 40(1)(g) of the *Bankruptcy Act 1966* (Cth). The court found that the grounds relied upon by Mr Neale were substantially the same as those previously considered and rejected by Judge Nicholls in relation to an earlier bankruptcy notice. Consequently, the court concluded that there were no substantial reasons to question the validity of the debt or that the reliance on the bankruptcy notice was an abuse of process. The application for an adjournment was refused as the court determined it would not serve any utility, given the lack of substantive grounds to set aside the bankruptcy notice.

The application to set aside the bankruptcy notice was dismissed.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

The bankruptcy notice demands payment of $36,096.34, which is the sum of a judgment of $29,693.46 (Judgment) that was entered in the Local Court in favour of Mr Mahony on 15 June 2016, and interest on the Judgment. The Judgment represents the assessed costs of legal services Mr Mahony provided to Mr Neale in proceedings Secured Global Opportunity Ltd, as assignee of Bank of Western Australia (Bankwest), brought against Mr Neale and his company, JW Neale Pty Ltd, in the Supreme Court of New South Wales (Bankwest proceedings).[1][1] James Woodward Neale v Bank of Western Australia Ltd; Bank of Western Australia Ltd v James Woodward Neale [2014] NSWSC 315 In his application Mr Neale relies on five grounds for setting aside the bankruptcy notice. First, Mr Neale claims he has a cross-claim, set-off, or cross demand against Mr Mahony “pursuant to” s.40(1)(g) of the Bankruptcy Act 1966 (Cth) (Act). That asserted claim is based on an alleged failure by Mr Mahony to apply to amend a cross-claim Mr Neale filed in the Bankwest proceedings alleging the sale of a particular property at an undervalue. Second, Mr Neale proposes to apply to set aside or appeal the Judgment. Third, Mr Mahony applied for and served on Mr Neale the bankruptcy notice for the purpose of pressuring Mr Neale to pay to Mr Mahony what is only a small fraction of the amount Mr Neale has been adjudged to owe the Commonwealth Bank of Australia (CBA) “and the parties to whom the CBA sold my loan” and, for that reason, Mr Mahony’s relying on the bankruptcy notice is an abuse of process. Fourth, Mr Mahony agreed Mr Neale would only be liable to pay his costs out of a $250,000 loan Mr Neale anticipated he would obtain, but which he did not obtain. Fifth, all proceedings on the bankruptcy notice should be stayed to enable Mr Neale to pursue a claim identified by Davies J in Neale v Mahony.[2][2] [2018] NSWSC 1046 Mr Mahony opposes the application on two broad grounds. First, he submits Mr Neale is estopped from seeking to set aside the bankruptcy notice on the grounds on which he relies because Mr Neale has already unsuccessfully attempted in a previous proceeding before this Court (First BN proceeding) to set aside a previous bankruptcy notice (First BN) that had been issued in relation to the Judgment.[3] Second, given the grounds on which Mr Neale relies to set aside the bankruptcy notice are the same as the grounds on which he relied to set aside the First BN, the application to set aside the bankruptcy notice should be dismissed for the same reasons Judge Nicholls dismissed Mr Neale’s application to set aside the First BN.[3] Neale v Mahony [2018] FCCA 363 At the hearing before me Mr Neale, who is not legally represented, applied for an adjournment to obtain legal assistance. He told me he had recent communications with lawyers seeking legal assistance, but he did not have with him a copy of those communications with him. I indicated to Mr Neale and to Mr Maroya, who appeared for Mr Mahony, that I proposed to hear Mr Neale’s application for an adjournment, reserve my judgment on the application for an adjournment, and hear the substantive application to set aside the bankruptcy notice on the assumption that I would not grant the adjournment. I also indicated to Mr Neale and Mr Maroya that, at the conclusion of the hearing, I would make an order permitting Mr Neale to file correspondence with any lawyers in relation to his seeking legal assistance in this matter.

Ratio Decidendi

Legal Principle Established

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