Nomchong v The Owners - Strata Plan No.6766
[2018] FCCA 3385
•23 November 2018
FEDERAL CIRCUIT COURT OF AUSTRALIA
| NOMCHONG v THE OWNERS - STRATA PLAN NO.6766 | [2018] FCCA 3385 |
| Catchwords: BANKRUPTCY – Application for review of Registrar’s decision dismissing application to set aside bankruptcy notice – whether there are substantial reasons for questioning whether judgment on the basis of which bankruptcy notice has been issued in truth represents a debt – whether applicant has counter-claim, set-off or cross demand against creditor equal to or exceeding the amount of the judgment debt on the basis of which the bankruptcy notice has been issued – application for review dismissed. |
| Legislation: Bankruptcy Act 1966 (Cth), ss.30, 40, 41(6A) |
| Cases cited: Conlan v Mladenis [2007] FCA 1129 |
| Applicant: | GREGORY NOMCHONG |
| Respondent: | THE OWNERS - STRATA PLAN NO. 6766 |
| File Number: | SYG 1547 of 2018 |
| Judgment of: | Judge Manousaridis |
| Hearing date: | 5 September 2018 |
| Date of Last Submission: | 19 November 2018 |
| Delivered at: | Sydney |
| Delivered on: | 23 November 2018 |
REPRESENTATION
| Applicant, in person |
| Counsel for the Respondent: | Mr M Rose |
| Solicitors for the Respondent: | Bannermans Lawyers |
ORDERS
The application filed by the applicant on 13 August 2018 for review of the orders made by a Registrar on 24 July 2018 dismissing an application to set aside Bankruptcy Notice No. BN222218 issued on 6 March 2018 and ordering the applicant to pay the respondent’s costs is dismissed.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 1547 of 2018
| GREGORY NOMCHONG |
Applicant
And
| THE OWNERS STRATA PLAN NO. 6766- |
Respondent
REASONS FOR JUDGMENT
Introduction
The applicant, Mr Nomchong, applies for review of a decision made by a Registrar of this Court on 24 July 2018 dismissing an application Mr Nomchong filed to set aside a bankruptcy notice that was issued at the request of the respondent, The Owners - Strata Plan No.6766 (SP6766). The bankruptcy notice was issued on 6 March 2018 and served on Mr Nomchong on 15 May 2018.
The bankruptcy notice demands payment of $28,082.38. That amount is the sum of the following amounts:
a)The first is $20,978.69, being the amount of a judgment that was entered by the Local Court of New South Wales on 2 March 2018 in favour of SP6766 against Mr Nomchong. That amount, in turn, is the sum of two costs determinations made under the Legal Profession Uniform Law Application Act 2014 (NSW) (LP Act); one for $20,096.40 made under s.70 and s.78 of the LP Act, and one for $882.29 made under s.71 of the LP Act. These costs determinations were made pursuant to an order for costs made by the New South Wales Civil and Administrative Tribunal (NCAT) in a proceeding SP6766 brought against Mr Nomchong.
b)The second amount which forms part of the sum of $28,082.38 is $6,853.47 which represents a judgment entered in favour of SP6766 against Mr Nomchong by the Local Court of New South Wales on 16 January 2018.
c)The third amount is $250.22 which represents interest on the two judgments.
These reasons are arranged as follows. First, I consider the nature of the jurisdiction this Court exercises on an application for review of a decision made by a Registrar of this Court. Second, I briefly consider the source of the Court’s power to set aside a bankruptcy notice. Third, I describe the course of the proceeding before me, and identify the evidence relevant to my determining Mr Nomchong’s application. Fourth, I will identify the grounds on which Mr Nomchong relies for seeking to set aside the bankruptcy notice. Fifth, I will identify the legal principles that are relevant to my considering the grounds on which Mr Nomchong relies. Finally, I consider the grounds on which Mr Nomchong relies.
Nature of review
Mr Nomchong’s application is brought pursuant to s.104(2) of the Federal Circuit Court of Australia Act 1999 (Cth) (FCC Act) which provides as follows:
A party to proceedings in which a Registrar has exercised any of the powers of the Federal Circuit Court of Australia under subsection 102(2) or under a delegation under subsection 103(1) may:
(a) within the time prescribed by the Rules of Court; or
(b)within any further time allowed in accordance with the Rules of Court;
apply to the Federal Circuit Court of Australia for review of that exercise of power.
A review under s.104(2) of the FCC Act is a “hearing de novo”. That means that an: [1]
applicant for review under s.104(2) is under no obligation to demonstrate error on the part of the Registrar, and does not need to establish that the Registrar’s exercise of discretion miscarried in the sense described in House v The King [1936] HCA 40; (1936) 55 CLR 499 at 505; Pattison v Hadjimouratis [2006] FCAFC 153 at [153]- [154].
[1] Conlan v Mladenis [2007] FCA 1129 at [4] (Sundberg J)
The question before me, therefore, is whether the bankruptcy notice should be set aside.
Jurisdiction to set aside bankruptcy notices
Although the Act does not confer an express power on the Court to set aside a bankruptcy notice, the Court has power to do so. The principal source of power is s.30(1)(b) of the Bankruptcy Act 1966 (Cth) (Act) which provides that the Court may make “such orders (including declaratory orders and orders granting injunctions or other equitable remedies) as the Court considers necessary for the purposes of carrying out or giving effect to this Act in any such case or matter”.[2]
[2] Oliveri v Stafford (1989) 24 FCR 413 at page 430 (Gummow J)
Another source of power is s.41(6A) of the Act. That subsection empowers the Court to extend the time for compliance with the requirements of a bankruptcy notice if, before the time for complying with those requirements, the debtor has, among other things, applied to set aside the bankruptcy notice. It has been said that the power of the court to extend the time for compliance with the requirements of a bankruptcy notice carries with it the power to set aside the notice itself.[3]
[3] Re Sterling; Ex parte Esanda Ltd (1980) 44 FLR 125 at page 130 (Lockhart J)
Course of proceedings and evidence
Mr Nomchong applied to set aside the bankruptcy notice by an application filed on 1 June 2018. Under the heading “Details of claim”, the following is stated:
Application to set aside the notice as the matter has arisen from a NCAT decision that is a malicious complaint and I was unable to attend the hearing and I am in the process of a cross litigation against SP6766
With the application to set aside the bankruptcy notice Mr Nomchong filed an affidavit which annexed the bankruptcy notice. In his affidavit, Mr Nomchong states:
I make application to set aside the notice as I am in the process of a cross claim for malicious vexious [sic] litigation against SP6766
The matter first came before me on 5 September 2018. On that day Mr Nomchong, who is not legally represented, proceeded to inform me of a claim he said he brought against SP6766 in NCAT. I had difficulty following what he said because Mr Nomchong had not tendered documents that disclosed the nature of the proceeding before NCAT. Mr Nomchong also requested an adjournment. I ordered that the matter be adjourned to 28 September 2018, and also directed that Mr Nomchong file and serve all affidavits on which he intended to rely. Mr Nomchong filed an affidavit on 19 September 2018.
When the matter came before me on 28 September 2018 I was informed by the solicitor for SP6766 that a creditor’s petition had been filed, and it was returnable before a Registrar at 2 pm on 11 October 2018. I formed the view that the issues raised in Mr Nomchong’s application for review of the Registrar’s decision not to set aside the bankruptcy notice were relevant to the creditor’s petition filed by SP6766. Accordingly, in the creditor’s petition proceeding I ordered that the creditor’s petition that was listed before the Registrar be moved into my docket, that the hearing of the creditor’s petition on 11 October 2018 be vacated, the creditor’s petition be set down for hearing before me on 30 October 2018, and that Mr Nomchong file notice of grounds of opposition and the evidence on which he intended to rely by 19 September 2018. In the proceeding with which these reasons are concerned, I ordered that the hearing of the application to set aside the bankruptcy notice be adjourned to be heard together with the creditor’s petition on 30 October 2018.[4]
[4] The order I made i strictly incorrect. What is before me is in form an application for review of a Registrar’s decision, not an application to set aside a bankruptcy notice. Given, as I have already noted, that I must hear de novo Mr Nomchong’s application to set aside the bankruptcy notice, the order correctly identifies the substance of what was to be heard with the creditor’s petition.
Pursuant to the orders I made on 28 September 2018 in the creditor’s petition proceeding, Mr Nomchong filed two affidavits made on 19 October 2018. Both affidavits contain evidence relevant to the grounds on which Mr Nomchong relies to set aside the bankruptcy notice. The longer of the two affidavits, however, contains matters on which Mr Nomchong relies in support of his contention that he is solvent. I will not consider that aspect of his affidavit in these reasons for judgment, because they are not relevant to the grounds on which Mr Nomchong intends to rely to set aside the bankruptcy notice.
Finally, I should mention that at the hearing before me on 30 October 2018 I admitted into evidence two documents. One is titled “Notice of Order” dated 10 July 2018.[5] That document records orders made by NCAT in response to an application Mr Nomchong made to set aside orders made by NCAT in November 2016 in the absence of Mr Nomchong (Dismissal Determination). I have relied on this document to identify the proceedings pursuant to which NCAT made the orders for costs on the basis of which the bankruptcy notice has been issued. The second document is titled “Strata application”, which Mr Nomchong filed with NCAT on 24 July 2018.[6]
[5] The document was marked as exhibit “B”
[6] This document was marked exhibit “C”
Facts
Mr Nomchong is the owner of one of the lots of a strata scheme of which SP6766 is the owners’ corporation (Strata Scheme).
For some years commencing in around 2008 Mr Nomchong and SP6766 have been in dispute about the parking of vehicles on the common property of the Strata Scheme. The nature and extent of that dispute is set out in the affidavit Mr Nomchong made on 19 September 2018.
On 3 September 2014 NCAT made a penalty order against Mr Nomchong for breaches of a notice to comply with bylaw 2 of the Strata Scheme. I infer the order was made pursuant to s.203 of the Strata Schemes Management Act 1996 (NSW) (SSM Act).[7]
[7] Dismissal Determination, [9]. The 1996 SSM Act was replaced by Strata Schemes Management Act 2015 (NSW) which, with the exception of certain provisions of Part 11, came into effect on 5 November 2015.
On 8 July 2015 an adjudicator made orders that Mr Nomchong immediately comply with bylaw 2 of the Strata Scheme and remove any vehicle or vehicles parked or standing on the common property, and to cease to cause or permit any motor vehicle or motor cycle or motor tricycle or other vehicle described to be parked or stand on the common property, and to cease to cause or permit obstruction of the common property.[8] I infer that order was made under s.138 of the SSM Act.
[8] Dismissal Determination, [9]
On 23 March 2016 SP6766 lodged an application for breach of the adjudicator’s orders. I infer that this application was made under s.77 of the Civil and Administrative Tribunal Act 2013 (NSW).[9] On 23 May 2016 NCAT made an order that Mr Nomchong pay $2,750 to SP6766, and an order that Mr Nomchong pay SP6766’s costs on an indemnity basis.[10]
[9] Section 77 provides for proceedings for penalties for breaches of civil remedy provisions.
[10] Dismissal Determination, [9]
In late 2016 SP6766 commenced proceedings to enforce the costs orders against Mr Nomchong. On 8 March 2017 Mr Nomchong was served with the costs assessment application. Mr Nomchong provided no response and an order was made against him.[11]
[11] Dismissal Determination, [9]
On 1 June 2018 – after SP6766 served the bankruptcy notice on him – Mr Nomchong applied to NCAT for an order to set aside the orders made on 23 May 2016.[12] In support of his application to set aside those orders Mr Nomchong claimed he had no knowledge of the decision or hearing “until two weeks ago”. Mr Nomchong also claimed the orders made on 23 May 2016 were the result of a malicious complaint made by executive members of SP6766, especially by a particular member, Ms Dunn; Mr Nomchong did not own the vehicle that is the subject of a complaint, other residents, past and present, owners and renters, have parked on common property and visitor car parking without any action having been taken against them, a tradesperson working for Ms Dunn in the past blocked Mr Nomchong’s driveway; and the bylaw requiring the consent of the SP6766 to park a vehicle on common property is unfair, and was created to target Mr Nomchong.
[12] Dismissal Determination, [10]
NCAT dismissed the application for the following reasons:
a)It found there was a significant delay in Mr Nomchong’s application to set aside the orders.[13]
b)It did not accept Mr Nomchong had not received numerous correspondence from SP6766 and NCAT throughout 2014, 2015, and 2016, and instead found that all correspondence and orders had been served on Mr Nomchong by post to his address.[14]
c)Apart from asserting he did not own the vehicle that was the subject of the complaint, Mr Nomchong did not deny that he had breached the notice to comply issued to him by SP6766, and he did not provide any evidence that he did not breach the notice. NCAT noted Mr Nomchong’s submissions appeared to have concentrated on the reasonableness of the bylaw and alleged breaches by other persons of the bylaw. For those reasons NCAT was not satisfied that if the order were to be set aside Mr Nomchong would have good prospects of resisting the application for a penalty.[15]
d)NCAT was not satisfied that Mr Nomchong’s absence from the hearing that led to the orders of 23 May 2016 being made resulted in his case not being adequately put to NCAT.[16]
[13] Dismissal Determination, [12]
[14] Dismissal Determination, [14]-[17]
[15] Dismissal Determination, [24]
[16] Dismissal Determination, [29]
Grounds on which Mr Nomchong relies
As I have already noted, the ground on which Mr Nomchong seeks to set aside the bankruptcy notice is that the debt on the basis of which the bankruptcy notice was issued “has arisen from a NCAT decision that is a malicious complaint and I was unable to attend the hearing and I am in the process of a cross litigation against SP6766”. Mr Nomchong does not claim the bankruptcy notice is not in a form prescribed by the regulations. Nor does he claim that the amounts represented in the bankruptcy notice do not represent a final judgment or order the execution of which has not been stayed. Mr Nomchong claims he has (to use the words contained in s.40(1)(g) of the Act) 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 . . . 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”. I will also take Mr Nomchong to claim that the judgment debt on the basis of which the bankruptcy notice has been issued does not in truth represent a debt.
In support of his contentions Mr Nomchong relies on his having applied to NCAT for relief. The best evidence of the nature of the application Mr Nomchong has made to NCAT is the “Strata application” to which I have already referred.[17] In that document Mr Nomchong complains that:
a)The previous secretary of SP6766 discriminated against Mr Nomchong, made vexatious complaints against him, and has used the executive and funds of SP6766 to “maliciously create prosecution against” Mr Nomchong.
b)The members of the SP6766 executive have been biased in their duty of service in relation to alleged illegal parking on common property, unfairly targeting Mr Nomchong of parking vehicles on common property while allowing other residents, including the former secretary of SP6766, to park vehicles on common property.
c)The current secretary of SP6766 has discriminated against Mr Nomchong and displayed a biased attitude towards him, stating at the annual general meeting of 3 July 2018 “we are not parking police”.
d)The SP6766 executive failed to carry out their duty by ignoring instances of illegal parking on common property over many years, and by discriminating against Mr Nomchong.
e)The SP6766 executive failed to properly create “a fair unbias [sic] workable procedure of managing the visitor parking of SP6766”.
[17] Exhibit “C”
These grounds are supported by a narrative of some events, and by a letter from another lot owner in the Strata Scheme. Before me Mr Nomchong relied particularly on his affidavit of 18 September 2019 which similarly describes the disputes he had with SP6766 in relation to parking over common property, and attaches a schedule listing what Mr Nomchong claims are individual instances of unlawful parking on common areas by other lot occupants. That schedule is said to be supported by photographs.
Also relevant are two other documents. One is a letter dated 4 October 2018 from the Registrar of NCAT to Mr Nomchong stating that Mr Nomchong’s application has been returned to him “as there is no documentary evidence of mediation provided with your application”.[18] The second document is a letter addressed to the Anti-Discrimination Board which appeared to have been received on 17 October 2018. Only the first page of the letter has been annexed to Mr Nomchong’s longer affidavit of 19 October 2018. It is apparent from that page, and from what Mr Nomchong has stated in his longer affidavit of 19 October 2018, that the letter repeats the substance of the complaint contained in the “Strata application” to which I have referred.
[18] Affidavit of G J Nomchong 19.10.2018 (longer); annexure “B”
In his longer affidavit of 19 October 2018 Mr Nomchong says he considers he has “a strong case against the committee members, Robin Dunn and Pam King, for discrimination and instigating a campaign of complaint and prosecution against me” and that he “would include the other 2 committee members in any case, as I consider that they have neglected their Duty of Service by allowing Robin Dunn and Pam King to control and spend the funds and of the two women’s management of SP6766”.[19] Mr Nomchong also says he “will commence proceedings in the Supreme Court for discrimination for damages etc against Robin Dunn and Pam King”, and that the damages he expects he will recover “would be far in excess of the alleged debt claimed by SP6766”.[20]
[19] Affidavit of G J Nomchong 19.10.2018 (longer), [14]
[20] Affidavit of G J Nomchong 19.10.2018 (longer), [15]
Should the bankruptcy notice be set aside?
As I have already noted, Mr Nomchong seeks to set aside the bankruptcy on the ground that he has “counter-claim, set-off or cross demand equal to or exceeding the amount of the judgment debt or sum payable under the final order . . . being a counter-claim, set-off or cross demand equal that he or she could not have set up in the action or proceeding in which the judgment or order was obtained”; and I have taken Mr Nomchong to claim the judgment on the basis of which the bankruptcy notice has been issued does not represent a true debt.
Principles
A bankruptcy court has jurisdiction to go behind a judgment to determine whether the judgment in reality represents a debt. Although that jurisdiction is usually exercised on the hearing of a creditor’s petition, the jurisdiction is available in an application to set aside a bankruptcy notice.[21] The jurisdiction to go behind a judgment arises “where substantial reasons are given for questioning whether behind that judgment there was in truth and reality a debt due” to the person claiming to be a creditor.[22]
[21] Olivieri v Stafford (1989) 91 ALR 91, at pages 107-109 (Gummow J).
[22] Wren v Mahony [1972] HCA 5; (1972) 126 CLR 212, at page 225 (Barwick CJ). See also Ramsay Health Care Australia Pty Ltd v Compton [2017] HCA 28
The matters of which a Court must be satisfied before it can find a debtor has a counter-claim, set-off or cross demand against the creditor have been stated in different ways, and in ways that sometimes overlap. The various statements were summarised by Lindgren J in Glew v Harrowell, in the matter of Glew.[23] In broad terms, a debtor must satisfy the Court that the counter-claim, set-off or cross demand is made in good faith, and that there is sufficient substance to the counter-claim, set-off or cross demand asserted to make it one which the debtor should, in justice, be permitted to have heard and determined in the usual way, rather than be forced to comply with the bankruptcy notice by payment or to commit an act of bankruptcy.
[23] [2003] FCA 373 at [9], at [72]
That the judgment debtor may have a “counter-claim, set-off or cross demand equal to or exceeding the amount of the judgment debt” is relevant to whether a bankruptcy notice can be set aside only if the counter-claim, set-off or cross demand “could not have been set up” by the judgment debtor in the proceeding in which the judgment was obtained. The expression “could not have been set up” has been construed narrowly:[24]
The words “that he could not have set up in the action or proceeding in which the judgment or order was obtained” mean “which he could not by law set up in the action.”: see Re Jocumsen (1929) 1 A.B.C., at p. 85; Re A Debtor (1914) 3 K.B. 726 per Avory J. at p. 730 and Re Stockvis (1934) 7 A.B.C. 53 especially per Lukin J. at p. 57 where his Honour said: “I take a counter claim, set off, or cross demand which could not be set up as one which, from the point of time, or from its nature, or from absence of empowering provisions, or from positive inhibition so to do, could not be set up in the particular case in which judgment was obtained . . . Mere failure to take advantage of the opportunity can hardly be said to be inability.”
[24] Re Brink; Ex parte The Commercial Banking Company of Sydney Ltd [1980] FCA 78; (1980) 44 FLR 135 at page 139 (Lockhart J)
Substantial reasons for questioning judgment represents true debt?
There is nothing in the material that suggests there are substantial reasons for questioning the amounts for which judgment has been entered and on the basis of which the bankruptcy notice was issued represents a true debt; and there is nothing in the material that suggests there are any substantial reasons for questioning that any of the orders NCAT made that led to the costs determinations and the registration of those costs determinations are not valid. In particular, there is nothing to suggest there are substantial reasons for questioning the orders NCAT made on 10 July 2018 or the orders NCAT made on 20 May 2016; and there is nothing to suggest Mr Nomchong intends to appeal against, or take any proceeding in the nature of judicial review in relation to, those orders.
Counter claim?
As for the claim Mr Nomchong has lodged with the Anti-Discrimination Board, and the claim he proposes to file in the Supreme Court, there is nothing before me to suggest that, even if the assertions of fact on which they are based are assumed to be true, Mr Nomchong has any “counter-claim, set-off or cross demand” against SP6766 “equal to or exceeding the amount of the judgment debt”. First, Mr Nomchong’s intended claim is directed to the members of the executive, not SP6766 itself. Thus, even if Mr Nomchong were to succeed in his claims and recover an amount greater than the debt demanded in the bankruptcy notice, it would not be available to reduce the debt claimed by SP6766. Second, assuming the conduct Mr Nomchong alleges against the executive can be attributed to SP6766, and Mr Nomchong is correct in characterising that conduct as discriminatory, it is not apparent how such discrimination gives rise to a reasonable cause of action. Third, there is nothing to suggest that SP6766 took the proceedings that led to the costs orders for a purpose that was foreign to the objects of the provisions on the basis of which SP took such proceedings. Thus there is nothing to suggest SP committed a civil wrong analogous to the tort of abuse of process.[25] Fourth, even if Mr Nomchong does have a reasonable cause of action against SP6766 based on discrimination and on SP6766 taking action against him as a result of malice, there is nothing in the material before me that could reasonably suggest Mr Nomchong would recover any damages or compensation from SP6766, or any damages or compensation that would exceed the amount of the debt demanded in the bankruptcy notice.
[25] As to which see, for example, Williams v Spautz (1992) 174 CLR 509
Conclusion and disposition
Mr Nomchong has failed on the grounds on which he relies for setting aside the bankruptcy notice; and I am satisfied there are no other grounds for setting aside the bankruptcy notice. I propose, therefore, to order that the application for review of the orders made by the Registrar on 24 July 2018 be dismissed. I will deal with the question of costs when I pronounce my order.
I certify that the preceding thirty-four (34) paragraphs are a true copy of the reasons for judgment of Judge Manousaridis
Date: 23 November 2018
10
6