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 short, the current dispute between Mr Neale and Mr Mahony arises from a grievance Mr Neale had, and continues to have, against the Commonwealth Bank of Australia (“CBA”) concerning a loan from its subsidiary, Bank of Western Australia (“Bankwest”), to Mr Neale.
Mr Neale, and others said to be in a similar position, complained because they said that the securities held against the loan(s) were “undervalued”.
Mr Neale had engaged Mr Mahony as his solicitor and claims he gave instructions to commence proceedings against Bankwest in the Supreme Court of New South Wales regarding this “undervaluing”, by way of filing a “representative action”, also involving others claiming to have been affected by Bankwest’s “undervaluing” of the securities.
In Neale v Mahony (FCCA) the Court said (at [21] – [25]):
[21] It would appear that the assertion is that Mr Neale commenced the proceedings in the New South Wales Supreme Court on the basis that Mr Mahony would then represent him, and join his proceedings with others, by filing a “representative action” against Bankwest on behalf of Mr Neale and other Bankwest customers. The amounts paid by Mr Neale to Mr Mahony, and the scope of Mr Mahony’s engagement is also in dispute.
[22] On 11 September 2012, Mr Mahony’s estate was placed into bankruptcy.
[23] Mr Neale was self-represented at the hearing of the New South Wales Supreme Court proceedings. Those proceedings were determined on 24 March 2014 (see James Woodward Neale v Bank of Western Australia Ltd; Bank of Western Australia Ltd v James Woodward Neale [2014] NSWSC 315 (“James Woodward Neale (2014)”).
[24] On 12 September 2015 Mr Mahony’s estate was released from Bankruptcy.
[25] Mr Mahony then commenced proceedings in the New South Wales Local Court against Mr Neale in respect of a claim for unpaid legal fees. Judgment was given in favour of Mr Mahony on 14 June 2016 in the amount of $29,963.46, plus costs on an ordinary basis, and costs on an indemnity basis from 11 February 2015 (see proceedings no. 2015/00164387).
Prior to the hearing of the substantive application in this Court, Mr Neale filed written submissions on 21 May 2018 and 13 June 2018. Mr Neale is not a solicitor. He represented himself in these proceedings from November 2017, although it appears he has had some legal advice during the course of his long dispute with Bankwest, and now CBA.
His pre-hearing written submissions contain a large number of assertions which do not necessarily relate to any evidence put before the Court, or importantly, to a fact in issue.
For example, he makes allegations against another solicitor (Mr S Levitt), a journalist with the Australian Financial Review, and against a solicitor employed by Mr Mahony whom Mr Neale claims was married to a partner of another law firm who were “acting against” him, presumably and at best, in another matter.
At the hearing, Mr Neale continued to represent himself. Mr Neale cross-examined Mr Mahony. It is again, fair to say, that in much of his questioning in cross examination, Mr Neale was largely unable to focus on the issues he was required to prove so as to successfully prosecute the application before this Court.
To succeed in the current application Mr Neale is required, amongst other matters, pursuant to s.40(1)(g) of the Bankruptcy Act 1966 (Cth) (“the Act”) to establish the following. One, that he has a “counterclaim or cross-claim” of such substance that the claim should be permitted to be heard, and determined, in the usual way (Glew v Harrowell, in the matter of Glew [2003] FCA 373; (2003) 198 ALR 331 at [12]).
Two, that the counter-claim, set-off or cross demand is equal to, or exceeding, the amount of the judgment debt, or what is payable under the relevant final order.
Three, that the counter-claim, set-off or cross demand could not have been raised in the Local Court proceedings which made the order which founded the Bankruptcy Notice.
I note what was relevantly said in Neale v Mahony (FCCA) about what s.40(1)(g) of the Act required (see [67] – [68], [77] – [78]

and [82] – [87]).
The state of the evidence before the Court at the conclusion of the final hearing was that it could not be said that Mr Neale had made out the matters set out at [16] – [18] above.
Mr Neale’s post hearing written submissions (made on 7 August 2018), again, are a detailed account of his grievance against Bankwest (CBA) and other parties. It is clear that Mr Neale’s approach to these proceedings was to further expose his grievance with Bankwest.
At best, I understood this to be an attempt to argue in support of his assertion that his proceedings in the Supreme Court of New South Wales involving what he described as a “cross-claim” had such “substance” and/or the amount claimed exceeded the judgment debt, such that the Bankruptcy Notice should be set aside.
Since the hearing of this matter in this Court, Mr Neale’s application before the Supreme Court of New South Wales was the subject of two hearings.
On 9 March 2018, Mr Mahony had filed a Notice of Motion in the Supreme Court of New South Wales seeking dismissal, or the striking out, of the Mr Neale’s Statement of Claim (“SOC”) pursuant to certain rules of the Uniform Civil Procedure Rules 2005 (NSW).
After the “first” hearing, on 30 July 2018, the Supreme Court of New South Wales struck out the whole of Mr Neale’s pleading as contained in the SOC, except for one particular paragraph in the SOC. Mr Neale was granted leave to re-plead the claim in that paragraph (see Neale v Mahony [2018] NSWSC 1046).
It appears that Mr Neale served an amended SOC in compliance with the Supreme Court of New South Wales’s orders. The remainder of Mr Mahony’s Notice of Motion was then heard, and on 10 August 2018, the Supreme Court of New South Wales made orders refusing leave to Mr Neale to file the amended SOC, and dismissing the SOC in which Mr Neale had originally pleaded his case (including what is now described as the “cross-claim” for current purposes) (see Neale v Mahony(No.2) [2018] NSWSC 1253).
I agree with Mr Mahony that the effect of the orders made by the Supreme Court of New South Wales is that Mr Neale’s assertion that the existence of a “cross claim” that exceeds the “judgment amount”, as asserted by Mr Neale, in the context of s.40(1)(g) of the Act, is no longer available to him. In these circumstances, and in the absence of anything to the contrary on the evidence before the Court, Mr Neale is unable to satisfy the requirements of s.40(1)(g) of the Act such that he can be said to have a counter-claim, set-off or cross demand equal to, or exceeding, the judgment debt.

Conclusion

On this basis, it is appropriate to dismiss the application made to this Court on 22 March 2017. I will make the order sought by Mr Mahony. I will hear the parties on costs.

I certify that the preceding twenty-eight (28) paragraphs are a true copy of the reasons for judgment of Judge Nicholls

Associate:

Date: 12 November 2018