Neale v Mahony (No.2) - [2018] FCCA 3221

FEDERAL CIRCUIT COURT OF AUSTRALIA

NEALE v MAHONY (No.2)

[2018] FCCA 3221

Catchwords:
BANKRUPTCY – Application to set aside a bankruptcy notice – whether there is a counter-claim, set-off or cross demand – application dismissed.

Legislation:

Bankruptcy Act 1966 (Cth), s.40

Uniform Civil Procedure Rules 2005 (NSW)

Cases cited:

Neale v Mahony [2018] FCCA 363

Glew v Harrowell, in the matter of Glew [2003] FCA 373; (2003) 198 ALR 331

Neale v Mahony [2018] NSWSC 1046

Neale v Mahony(No.2) [2018] NSWSC 1253

Applicant:

JAMES WOODWARD NEALE

Respondent:

JOHN FRANCIS MAHONY

File Number:

SYG 847 of 2017

Judgment of:

Judge Nicholls

Hearing date:

14 June 2018

Date of Last Submission:

30 August 2018

Delivered at:

Sydney

Delivered on:

12 November 2018

REPRESENTATION

Applicant:

In person

Counsel for the Respondent:

Mr A Maroya

Solicitors for the Respondent:

Mahony Law

ORDERS

The application made on 22 March 2017 is dismissed.
The applicant pay the respondent’s costs as agreed or assessed.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT SYDNEY

SYG 847 of 2017

JAMES WOODWARD NEALE

Applicant

And

JOHN FRANCIS MAHONY

Respondent

REASONS FOR JUDGMENT

On 22 March 2017 Mr Neale made an application in this Court to, in effect, set aside a Bankruptcy Notice BN 211442 issued by Mr Mahony on 15 February 2017 and served on Mr Neale on 1 March 2017.
The basis for the application was that Mr Neale claimed to have a “cross-claim”, because of proceedings he instituted in the Supreme Court of New South Wales on 22 March 2017 which he said exceeded the “judgment amount”.
Mr Neale’s evidence before the Court is as follows:
a)The affidavit of James Woodward Neale, Retired, made on 4 May 2018, including exhibit “JWN-1”.
b)The affidavit of James Woodward Neale, Retired Property Developer, made on 9 June 2017.
c)The affidavit of Yves El Khoury, [no occupation stated], made on 7 June 2017 (excluding the references to the exhibits).
d)The affidavit of Marcel Dagher, Director, made on 12 June 2017.
e)The affidavit of Andrea Lee, Solicitor, made on 14 June 2017.
Mr Mahony’s evidence before the Court is as follows:
a)The affidavit of John Francis Mahony, Solicitor, made on 7 April 2017.
b)The affidavit of John Francis Mahony, Solicitor, made on 31 July 2017.
c)The affidavit of John Francis Mahony, Solicitor, made on 4 August 2017.
The following documents were handed up by Mr Neale:
a)A redacted copy of written submissions by Mr Mahony to the Legal Services Commissioner of New South Wales (marked as “AE1”).
b)An email dated 28 August 2017 from W G Muddle SC (marked for identification).
Mr Mahony gave oral evidence and was cross examined by Mr Neale.
The background to this case is set out in Neale v Mahony [2018] FCCA 363 (“Neale v Mahony (FCCA)”). Mr Neale made an Application in a Case for leave to amend the substantive application and to file a Statement of Claim. Leave was refused (see in particular

[7] – [25] of Neale v Mahony (FCCA) for background).
In…

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.

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Details

Case: [2018] FCCA 3221
Decision Date: 12 November 2018

CaseChat Overview and Summary

Neale (the debtor) applied to set aside a bankruptcy notice issued by Mahony (the creditor) on the basis that there was a counter-claim, set-off or cross demand exceeding the amount of the judgment debt. The application was heard by Judge Nicholls in the Federal Court of Australia.

The primary legal issue before the court was whether the debtor had established a sufficient counter-claim, set-off, or cross demand that would justify setting aside the bankruptcy notice. This required the court to consider the nature and substance of the alleged counter-claim and whether it was genuinely arguable and likely to succeed to an extent that would extinguish or reduce the judgment debt.

Judge Nicholls dismissed the application, finding that the debtor had failed to demonstrate the existence of a counter-claim, set-off, or cross demand that met the threshold required to set aside a bankruptcy notice. The court applied the principles that such claims must be more than a mere assertion and must have a real prospect of success, and that the debtor bears the onus of proving their existence. The alleged counter-claim was found to be unsubstantiated and lacking in sufficient evidence to warrant setting aside the notice.

Orders