Pearse v Wiseguy Pty Ltd
[2004] FMCA 983
•16 December 2004
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| PEARSE v WISEGUY PTY LTD | [2004] FMCA 983 |
| BANKRUPTCY – Debtor claims creditor owes him substantially more than the debt – counter-claim, set-off or cross demand – application for summary dismissal – whether any reasonable cause of action is disclosed. Bankruptcy Act 1966 (Cth), ss.40, 41 Dey v Victorian Railways Commissioner (1949) 78 CLR 62 |
| Applicant: | WARREN VICTOR PEARSE |
| Respondent: | WISEGUY PTY.LTD. |
| File No: | ADG195 of 2004 |
| Delivered on: | 16 December 2004 |
| Delivered at: | Hobart |
| Hearing date: | 3 November 2004 |
| Judgment of: | Roberts FM |
REPRESENTATION
| The Applicant appeared in person |
| Counsel for the Respondent: | Mr. G. Dart |
| Solicitors for the Respondent: | Donaldson Walsh |
ORDERS
That the Application filed by WARREN VICTOR PEARSE on
23rd September 2004 is dismissed
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT ADELAIDE |
ADG195 of 2004
| WARREN VICTOR PEARSE |
Applicant
And
| WISEGUY PTY LTD |
Respondent
REASONS FOR JUDGMENT
Background
On 27th August 2004 a Bankruptcy Notice was issued by the Official Receiver to Warren Pearse (“the debtor”) at the request of Wiseguy Pty. Ltd. (“the creditor”). That document states that Judgment in the sum of $6,609.30 had been obtained by the creditor against the debtor and that the debtor was required to pay the amount within twenty one days or make arrangements to the creditor’s satisfaction for the settlement of the debt.
On 23rd September 2004 the debtor filed an Application in this Court at Adelaide seeking the following:
“That the Bankruptcy Notice be set aside, and or
That further consideration of the Bankruptcy Notice be adjourned pending the outcome of the said District Court proceedings, and or the extension of time for compliance with the Bankruptcy Notice until the outcome of the said District Court proceedings, and or
To grant a stay, injunction and or prohibition to any order of bankruptcy or any presumption of bankruptcy that may or could be made against me arising out of the above-mentioned Bankruptcy Notice.
Such other order that will not permit the making of any order pertaining to my insolvency until the outcome of the said District Court proceedings
To allow the Applicant to pursue the said District Court proceedings against the creditor.”
The debtor also filed an affidavit with his Application in which he acknowledged that he was the debtor named in the Bankruptcy Notice and that the amount of $6,609.30 was due and payable by him to the creditor. However, his affidavit went on to say that the creditor owes him money substantially greater than the debt of $6,609.30. In support of that he said that on 27th August 2004 he issued legal proceedings in the District Court of South Australia claiming the sum of $299,450.00 from the creditor and he attached a copy of the Summons.
The debtor stated in his affidavit that the Plaintiff in those District Court proceedings is the FM Media Trust. He said that that Trust is a unit trust, the trustee of which is a company, Oakstaff Pty. Ltd. (“the trustee company”).
The debtor went on to state that there is only one unit holder and that sole unit holder is himself. He then said: “Thus I am the sole beneficiary of the said District Court legal proceedings”.
The debtor stated in his affidavit that the “sum that I am claiming in the said District Court proceedings ($299,450.00) is substantially greater than the Debt ($6,609.30) being claimed by the creditor in the Bankruptcy proceedings”.
The debtor’s Application was first mentioned before Federal Magistrate Mead on 12th October 2004. At that time, counsel for the creditor sought to have the Application summarily dismissed. Federal Magistrate Mead ordered that the matter be set down on 29th October 2004 for argument and that each party provide the Court and to the other party a Summary of Argument by 27th October 2004.
For administrative reasons the matter was not heard on 29th October 2004 but it came on before me on 3rd November 2004.
The debtor faxed a handwritten summary of his argument on 27th October 2004 and followed that with a typewritten fax of those arguments on 27th October 2004.
The creditor’s legal representatives provided their summary of argument on the same day.
The Law
Section 40 of the Bankruptcy Act 1966 (“the Act”) sets out a number of ways in which a debtor may commit an act of bankruptcy. Paragraph (g) of subsection (1) provides that a debtor commits an act of bankruptcy:
“if a creditor who has obtained against the debtor a final judgment or final order, being a judgment or order the execution of which has not been stayed, has served on the debtor in Australia or, by leave of the Court, elsewhere, a bankruptcy notice under this Act and the debtor does not:
(i) where the notice was served in Australia—within the time specified in the notice; or
(ii) where the notice was served elsewhere—within the time fixed for the purpose by the order giving leave to effect the service;
comply with the requirements of the notice or satisfy the Court that he or she has 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, as the case may be, 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”
Subsection (7) of Section 41provides:
“Where, before the expiration of the time fixed for compliance with the requirements of a bankruptcy notice, the debtor has applied to the Court for an order setting aside the bankruptcy notice on the ground that the debtor has such a counter-claim, set-off or cross demand as is referred to in paragraph 40(1)(g), and the Court has not, before the expiration of that time, determined whether it is satisfied that the debtor has such a counter-claim, set-off or cross demand, that time shall be deemed to have been extended, immediately before its expiration, until and including the day on which the Court determines whether it is so satisfied.”
In this matter the creditor seeks an order that the application be summarily dismissed. Rule 13.10 of the Federal Magistrates Court Rules 2001 provides as follows in relation to the summary disposal of matters:
13.10 The Court may order that a proceeding be stayed, or dismissed generally or in relation to any claim for relief in the proceeding, if it appears to the Court that:
(a) no reasonable cause of action is disclosed in relation to the proceeding or claim for relief; or
(b) the proceeding or claim for relief is frivolous or vexatious; or
(c) the proceeding or claim for relief is an abuse of the process of the Court.
It is clear that a summary order which prevents a party from pursuing a claim should only be made in a very clear case: Dey v Victorian Railways Commissioner (1949) 78 CLR 62 at 91; General Steel Industries Ltd v Commissioner for Railways (1964) 112 CLR 125; Salemi v Minister for Immigration and Ethnic Affairs (1976) 137 CLR 388
In Dey v Victorian Railways Commissioner, Dixon J (as he then was) said:
“A case must be very clear indeed to justify the summary intervention of the court to prevent a plaintiff submitting his case for determination in the appointed manner by the court…”
In Burton v Shire of Bairnsdale (1908) 7 CLR 76 at 92, O'Connor J said:
“Prima facie every litigant has a right to have matters of law as well as of fact decided according to the ordinary rules of procedure, which give him full time and opportunity for the presentation of his case to the ordinary tribunals and the inherent jurisdiction of the court to protect its process from abuse by depriving a litigant of these rights and summarily disposing of an action as frivolous and vexatious will never be exercised unless the plaintiff's claim is so obviously untenable that it cannot possibly succeed.”
Discussion
The debtors submissions that he faxed on 27th October 2004 were, in part, an attempt to give evidence other than by affidavit. I set out his “submissions” in full below:
·I entered into the contract with Wiseguy Pty. Ltd. as myself and or nominee
·The contract was nominated to Oakstaff Pty Ltd AFT fm Media Trust
·I am the sole director of the fm media trust
·Oakstaff Pty. Ltd. is the trustee of fm media trust
·I am the appointor of the fm media trust
·I am the sole beneficiary of the fm media trust
·This debt arose from legal action/costs I incurred whilst seeking a refund of deposit paid, after Wiseguy Pty. Ltd. breeched (sic) our agreement, on behalf Oakstaff and myself
·A fiduciary relationship exists between Oakstaff – fm media trust and myself
·Promissory estoppel exists in the relationship between Oakstaff – fm media trust and myself
·The trustee (Oakstaff) of fm media trust is prepared and willing to assign it’s “Chose in action” against Wiseguy Pty. Ltd. to the beneficiary (Pearse) to the extent of this action.
The debtor’s affidavit does not state that he is the appointor of the Trust and the copy of the Unit Trust Deed annexed to his affidavit is clearly deficient in that it does not exhibit any of the necessary schedules.
However, the decision of Re Brink; ex-parte Commercial Banking Co of Sydney Ltd 30 ALR 433 appears to me to be authority for the proposition that the Court has the power to permit the debtor to supplement his case by additional evidence if it considers it appropriate to do so.
The creditor’s submissions are essentially that the debtor’s affidavit alleges that a third party (not the debtor) has a claim against the creditor and that the debtor alleges further if the claim succeeds, the debtor will be the beneficiary. It is the creditor’s argument that the claim of that third party cannot be a “set off, counter claim or cross demand” of the debtor for the purposes of Section 40(1)(g) of the Act.
Discussion
If the Court was to permit the debtor to file further affidavit material to establish those matters that are set out in his faxed summary of argument, the Court would still be left in the position of having to assess whether or not the debtor has “a counter-claim, set-off or cross demand” within the meaning of Sections 40 and 41 of the Act.
In James v Abrahams 34 ALR 657, the Full Court of the Federal Court of Australia were of the view that a counter claim, set off or cross demand for the purposes of Section 40(1)(g) must be a claim, set off or demand which, if ultimately established will result in an order for the payment of a sum of money by the judgment creditor to the judgment debtor.
In this particular case, even if the debtor was able to establish all that he claims, and the action in the District Court of South Australia was to be successful, the result would still not be an order for the payment of a sum of money by the creditor to the debtor. This is because there is a trustee and a trust between himself and the creditor in relation to that court action.
In Re Brink (supra) it was also held that to satisfy the Court that the debtor has the requisite counter-claim, set off or cross demand, the debtor must satisfy the Court that he has a prima facie case which has a fair chance of success.
In my view, it is perfectly clear that a claim by or on behalf of a trustee of a unit trust is not the same as a claim by or on behalf of a unit holder. In this case the debtor may have a claim against the trustee of the unit trust but, on the face of the documents filed by him, he has no direct claim in relation to the proceedings instituted by the trustee company in the District Court of South Australia.
The debtor claims in his summary of argument that the trustee company is prepared and willing to assign its “chose in action” to the debtor. However, it was clear that that had not happened on the date that the debtor issued these proceedings, nor had it happened by the time that the matter was argued before me.
The nature of the debtor’s relationship to the trustee company is perhaps best illustrated by considering a situation that is effectively the reverse of what the debtor is claiming. For example, if the Australian Taxation Office had a claim against the trustee company for an unpaid tax debt, would the debtor be content if the ATO took court action against him personally to recover that debt? Obviously he would not, and he would rely upon the fact that he did not personally owe the debt as a shield against any such action.
In my view, it is not possible for the debtor to turn that shield into a sword in an attempt to establish that he has a personal counter claim, set off or cross demand against the creditor.
Conclusions
It is clear that Oakstaff Pty. Ltd. is not the same legal personality as the debtor. Consequently, any debt owed by the creditor to Oakstaff Pty. Ltd. cannot possibly be said to be a counter claim, set off or cross demand of the debtor.
I am therefore drawn inevitably to the conclusion that in the material filed by the debtor “no reasonable cause of action is disclosed in relation to the proceeding or claim for relief”. Consequently, the Application must be dismissed.
Procedure
This matter was heard in Adelaide and I will be handing down my decision in Hobart with telephone links to the debtor and the legal representatives for the creditor. I will arrange for my Associate to fax copies of these Reasons for Judgment to them.
I certify that the preceding thirty-one (31) paragraphs are a true copy of the reasons for judgment of Roberts FM
Associate:
Date:
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