Pertsinides, E. v The Australian Tanker Company P/L

[1993] FCA 1022

IN THE FEDERAL COURT OF AUSTRALIA	)
)
SOUTH AUSTRALIA DISTRICT REGISTRY	)
) No. SN 513 of 1993
GENERAL DIVISION	) )
BANKRUPTCY DISTRICT OF THE STATE	)
1
OF SOUTH AUSTRALIA	)

Re : MR E PERTSINIDES and

MRS A PERTSINIDES both trading as CAREY GULLY STORE

Judgment Debtors

Ex Parte: THE AUSTRALIAN TANKER

COMPANY PTY LTD

Judgment Creditor

AND	: SP No. 316 of 1993
Re	: MRS A PERTSINIDES

trading as CAREY GULLY

STORE

rtEDERAL COURT OF

AUSTRAUA Debtor

Ex Parte: THE AUSTRALIAN TANKER

COMPANY PTY LTD

Creditor

MINUTES OF ORDER

JUDGE MAKING ORDER	VON DOUSSA J.
WHERE MADE	ADELAIDE
DATE OF ORDER	16 DECEMBER 1993
THE COURT ORDERS THAT: In matter SN number 513 of 1993

demand that he could not have set up in the action or

1.   There be a declaration that the judgment debtor Mr E Pertsinides does not have a counter-claim, set off or cross-demand equal to or exceeding the amount of the judgment debt, being a counter-claim, set off or cross-

proceeding in which the judgment was obtained by the

judgment creditor.

2.    The judgment debtor Mr E Pertsinides pay the costs of the judgment creditor of and incidental to the reference to the Court under rule 10 of the Bankruptcy Rules.

In matter SP number 316 of 1993
THE COURT ORDERS THAT:

1.   A sequestration order be made against the estate of the debtor Mrs Angeliki Pertsinides.

2. The petitioning creditor's costs be taxed and paid in accordance with the Bankruptcy Act 1966.

Date of commission of act of bankruptcy : 5 August 1993.

Note: Settlement and entry of order is dealt with in

Bankruptcy Rule 124.

IN THE FEDERAL COURT OF AUSTRALIA )

)

SOUTH AUSTRALIA DISTRICT REGISTRY	)
) No. SN 513 of 1993
GENERAL DIVISION	) )
BANKRUPTCY DISTRICT OF THE STATE	)
OF SOUTH AUSTRALIA

Re : MR E PERTSINIDES and

MRS A PERTSINIDES both trading as CAREY GULLY STORE

Judgment Debtors

Ex Parte: THE AUSTRALIAN TANKER

COMPANY PTY LTD

Judgment Creditor

AND	: SP No. 316 of 1993
Re	: MRS A PERTSINIDES

trading as CAREY G U U Y

STORE

Debtor

EX Parte: THE AUSTRALIAN TANKER

COMPANY PTY LTD

Creditor

EX TEMPORE REASONS FOR JUDGMENT

m: von Doussa J.

DATE : 16 December 1993

There are two matters before the Court. There is a reference under rule 10 of the Bankruptcy Rules concerning a bankruptcy notice served on Mr Pertsinides by substituted service on 17 September 1993, and there is a creditor's petition issued on 13 September 1993 which was served on Mrs Pertsinides on 26 September 1993. A notice of opposition has been filed by Mrs Pertsinides to the creditor's petition. These matters are inter-related, as are the issues that have

been argued in support of the position of the respective
debtors. I propose, therefore, to deal with them together.

Each of the proceedings is based on a judgment that was entered in proceedings numbered 351 of 1991, in the Local Court of Port Adelaide. It is necessary to go through the sequence of events which occurred in the Local Court proceedings as a substantial ground raised in opposition to both the bankruptcy notice and the creditor's petition is that the debtors have substantial counter-claims against the judgment creditor.

The Local Court proceedings were served non personally on 27 February 1991. There is an abundance of evidence about the course of the proceedings thereafter on these two files and in another matter between the same parties, wherein a bankruptcy notice numbered 567 of 1993 was issued. Those proceedings have been separately dealt with, but the issues in all three matters to some extent overlap and cross-reference has been

made to affidavit material in that earlier set of proceedings.	The affidavits in the three flles show that in about February
1991, Mr Pertsinides was disabled by a heart condition which led to open heart surgery, and that he had complications that required him to be hospitalised in the few months that followed.
Judgment by default was entered in the Local Court proceedings on 10 May 1991. Solicltors acting for the debtors

filed a notice in those proceedings that they were acting for the debtors on 18 July 1991, but no further action followed in the succeeding months on either side of the proceedings. On

25 February 1992, an interlocutory summons was taken out on

the debtors' behalf, and affidavits were filed by both Mr and
Mrs Pertsinides.

The interlocutory summons was to set aside the default judgment and for leave to flle a defence and counter-claim. The affidavits of Mr and Mrs Pertsinides at that stage raised the issue of their entitlement to rebates on the cost of petrol which had been supplied to them by a company, The Australian Tanker Company Pty Ltd. I interpose some further information about the proceedings in the Local Court; they were incorrectly issued initially in the name of Star Petroleum Pty Limited. It is now common ground that Star Petroleum Pty Limited is a company incorporated in New South Wales. It has no connection whatsoever with any of the parties involved in the proceedings. The proceedings should

have been issued in the name of Star Petroleum, a firm name,

and at the time when the cause of action asserted by the

plaintiff in the Local Court proceedings arose, the proprietor of Star Petroleum was The Australian Tanker Company Pty Ltd. The party named as plaintiff in the proceedings at 25 February 1992, was therefore wrong, but that fact was not appreciated at the time by any of the parties involved. The affidavits of Mr and Mrs Pertsinides at that time asserted rebates due to them by the plaintiff and, significantly, acknowledged a

supply of petrol to them at their places of business by the
plaintiff.

On 28 February 1992, judgment was set aside. On 9 March 1992, a defence and counter-clam was filed by the debtors jointly, inter alia asserting that there was an entitlement to rebates against the cost of petrol which was the subject of the claim. The matter was initially set for trlal on 12 August 1992, but on that day the trial was adjourned because the defendant was ill. Application was made, however, to cure the incorrect name of the plaintiff, and leave was then glven to amend the name of the pla~ntiff in the summons to The Australian Tanker Company Pty Ltd. The name was so amended and the proceedings thereafter have continued in the Local Court in that name.

On 15 October 1992, the plaintiff pursuant to leave that had been obtained, filed amended particulars of claim. The

amended particulars of claim pleaded that petrol had been

supplied to the debtors at their business address between 1

February 1989, and 3 January 1990. The amount claimed was	-
$7,426.46, being the balance of moneys due for the supply of
petrol. Other information on the file makes it quite clear that there was a running account and the pleadings should be understood against that background, namely, that what was being sued for was the balance of the account.

In addition, there was a claim for $742.65 for debt

collection costs and expenses incurred by the plaintiff. The pleadings allege that it was an implied term of the contract, if not an express term, that such recovery expenses would be made good by the defendants. In the alternative, the amended pleadings claim $6,251.50, being the amount said to have been admitted by the defendants by proffering a cheque for that amount to the plaintiff, which cheque had been dishonoured on presentation.

On 21 January 1993, an appllcation was made on the debtors' behalf by their son in the Local Court proceedings to dismrss the claim. That appllcation was refused.

The matter was listed for trial on 8 February 1993. The trial did not proceed that day, but a series of directions were given. Those directions envisaged that the debtors would be instructing a particular legal practitioner (who as named) to appear for them at the trial; that various steps would be taken to complete the discovery of documents; and that the

defendants pursuant to leave then granted would file an	amended defence and counter-claim. The matter was re-listed
for trial on 2 March 1993.
The matter came on for hearing on 2 March 1993. Both sides were represented by legal practitioners. The nominated legal practitioner who was to be instructed, had been instructed and appeared for the debtors. The official record of the Local Court shows that before the trial commenced, an

application was made to amend the defence. That application was refused. Then an application was made by the plaintiff to strike out the defence on the grounds of non-compliance with orders made on 8 February 1993. That application was granted. The defence was struck out and judgment was entered for The Australian Tanker Company Pty Ltd against the debtors for $8,169.11 plus costs. Various orders were made in relation to witness fees. The counter-claim was also struck out for the same reason that the defence was struck out, and further orders for costs were made.

No appeal was filed from any of those orders. A bankruptcy notice was issued based upon that judgment and further orders for taxed costs, which took the total amount due in the Local Court proceedings to $14,047.71. That bankruptcy notice was issued against each of Mr and Mrs Pertsinides, on 6 July 1993.

The notice was served on Mrs Pertsinides on 22 July 1993.

She sought to file an affidavit of the kind envisaged by

counter-claim set off or cross-demand equal to or exceeding	s40(l)(g) of the Bankruptcy Act 1966, asserting that she had a
the amount of the judgment debt which could not have been set up in the proceedings in the Local Court. However, her affidavit was not filed within the time prescribed for compliance with the bankruptcy notice, and accordingly it was rejected by the Registry. That led then to the issue of the creditor's petition which is now before the Court and is belng

opposed.

The judgment creditor was unable to serve the bankruptcy notice on Mr Pertsinides, hence, the application for substituted service. An order was made requiring service by post and the order deemed service to occur on 17 September 1993. Within 14 days of that date, being the time limited for compliance with the notice, an affidavit was filed by Mr Pertsinides, asserting that he had a counter-claim, set off or cross-demand of the kind envisaged by s40(l)(g). His affidavit asserted two grounds for the counter-claim.

One ground was that rebates were owing to each of the judgment debtors by The Australian Tanker Company Pty Ltd, which significantly exceeded the amount of the judgment debt. The other ground was that he and his wife had a claim against The Australian Tanker Company Pty Ltd for negligent maintenance of a petrol pump at their place of business which had caused them loss estimated at $250,000. It has been

creditor that the bass of the claim is that in 1989 a

asserted from the bar table without dispute by the judgment

mechanic sent at the request of the judgment creditor, who was not an employee of the judgment creditor, inserted a bolt, or some similar item, into a petrol pump which caused the petrol pump thereafter to malfunction by under-estimating the amount of petrol that was delivered through it. It is said that the alleged defect was not discovered until 6 February 1991. Once it was discovered, on the information put from the bar table,

the fact that the pump had been wrongly recording petrol was immediately apparent and the extent to which it was under- recording was immediately apparent. In short, it was recording only one half of the quantity of petrol delivered. It remained for the judgment debtors to quantify their dollar loss by reference to invoices and the like, and I accept in their favour that it may have been necessary to make some further inquiries to ascertain when the defective workmanship was carried out on the pump so that precise calculations could be made.

I deal with the bankruptcy notice against Mr Pertsinides first. In addltion to the counter-claims asserted, it has been argued that the bankruptcy notice is invalid in any event by reason of irregularity.

It is necessary to refer to the precise terms of
s40(l)(g). To prevent there being an act of bankruptcy upon

the expiration of the time limited for compliance after

service it is necessary for the debtor served to:

"...satisfy the court that he 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-clalm, set off or cross-demand that he could not have set up in the action or proceeding in which the judgment or order was obtained."

It is quite clear on the facts of this case that each of
the counter-claims, set offs or cross-demands upon which

reliance is now sought to be placed could have been set up in the proceedings in the Local Court. It may be (and it is not necessary to form any final view about this for present purposes) that there was a level of incapacity suffered by Mr pertsinides at and about the time that the summons was first served which rendered him incapable of taking any appropriate action in respect of the proceedings prior to the date on which judgment by default was first signed on 10 May 1991. One difficulty that would arise if it were necessary to decide that precise issue would be the fact that the debt alleged was jointly owed by Mr Pertsinides and his wife and there is no suggestion that his wife was in any sense under a legal disability. She asserts in affidavits that she had little or no understanding of the business, although other affidavits in the file shows that she regularly served customers in the business. It may be that as a matter of law the legal capacity of Mrs Pertsinides to take appropriate steps to defend the proceedings and file a counter-claim would mean that Mr Pertsinides was not unable to set up the counter-claim

within the meaning of s40(l)(g) at any stage.

However, it is not necessary to resolve that question as the history that I have given shows that the judgment by default entered on 10 May 1991 was set aside, and there was then a period from that date until the day of judgment on 2 March 1993 when counter-claims could have been filed in respect of any claims arising between the same parties to the proceedings in the Local Court. Not only did Mr Pertsinides

have the legal capacity to do so during that period, a defence and counter-claim in respect of the rebates was in fact filed, on 9 March 1992, and then, it seems, steps were taken to file another counter-claim in 1993.

The counter-claim filed raised the very question of rebates which it is now sought to assert. There is no legal reason why the claim in respect of the alleged negligence of the judgment creditor in the maintenance of the petrol pump could not have been set up by way of counter-claim. The fact of the alleged negligence came to light on 6 February 1991. Ultimately proceedings were commenced in respect of that claim on 30 October 1992 but no steps were taken to set up the claim by way of counter-claim, set off or cross-demand in the Local Court proceedings nor lndeed were attempts taken at or about that stage, or at any stage before the bankruptcy notices were issued, to serve the proceedings.

It is sufficient for the purposes of dismissing the rule reason in law why the alleged counter-claims, set offs or	10 reference to find, and I do so find, that there was no
cross-demands now asserted could not have been raised in the proceedings in the Local Court wherein the judgment was entered.
Insofar as it has been argued by counsel for M r Pertsinides this morning that the judgment debtors were unable to set up by way of counter-claim the negligence claim because

they were still requiring information to prove the case, there

are two answers to that.

The first answer is a matter of law to be found in the decision of Re ~ i n c i n i ; Ex parte E.A. Sealey & Co. (1982) 64

FLR 323, in particular at pp325-326. In that case the debtor asserted that the alleged counter-clam could not have been pursued in the Local Court proceedings in respect of which the judgment had there been entered because he did not have available witnesses and evidence to support his claim. That contention was rejected and Fisher J gave reasons by reference to authority for that decision. He held that an inability to find witnesses or evidence to support a claim was no reason in law why the counter-claim could not have been set up in the Local Court proceedings. That judgment deals with the very circumstances asserted here.

The second answer is that which I have already adverted

to, namely that proceedings were issued in another court in

respect of that very claim before judgment was entered in the

Port Adelaide Local Court proceedings but steps had not been

taken to effect service.

It is submitted that the bankruptcy notice is irregular, and therefore invalid because it does not strictly comply with the requirements of the Act, and has the tendency to be misleading. I reject that submission in all its formulations.

It was said that the bankruptcy notice leaves the identity of the judgment creditor uncertain. It is argued that an Australian Securities Commission search shows that The Australian Tanker Company Pty Ltd was the registered proprietor of the business name, Star Petroleum, only from 1 July 1989 to 3 March 1990 whereas the amended particulars of claim, which are the relevant ones to be looked at, assert a supply of petrol for a date earlier than 1 July 1989.

As a matter of fact, if it is necessary to go to the facts, the information on the file shows that payments were being made periodically by the judgment debtors to the judgment creditor on the running account for petrol, and the inference from those facts is that the debt that was outstanding in January 1990, when the supply of petrol stopped, would have been in respect of recent supplies. So as a matter of fact, it is a weak argument in the extreme that there could be any uncertainty about who was the appropriate supplier of the petrol.

However, the argument misses the point. The cases referred to by counsel which deal with the potential of a bankruptcy notice to be misleading because the judgment creditor is not accurately described are not concerned with whether there might be reason to argue whether the proper party recovered the judgment in the first place, or whether some other party should have recovered the judgment. The bankruptcy notice was regular here because it precisely named

the judgment creditor, gave the judgment creditor's address, and correctly stated the amount of the judgment, including the costs, as finally recorded by the Local Court. Insofar as it is alleged that there was irregularity in the bankruptcy

notice because of uncertainty as to the identity of the
judgment creditor, I reject the submission.

Then it is argued both in respect to the bankruptcy notice and in opposition to the creditor's petition, that the Court has a discretion to go behind the judgment. There is no doubt that on the consideration of a creditor's petition that the Court does have the power to go behind a judgment: C o r n e y

v B r i e n ( 1 9 5 1 ) 84 CLR 343. The purpose of going behind a

judgment, where the circumstances warrant doing so, is to

inquire whether the judgment is founded on a real debt.

In light of the history of the Local Court proceedings
which I have outlined, this would not be an appropriate case,

in my view, to go behind the judgment. But assuming one were

put before the Court clearly indicates that the bankruptcy

to embark upon the exercise, the information which has been

proceedings would not be set aside on the ground that there was in substance no real debt. The pleadings in the Local Court proceedings do not raise a dispute about the supply of petrol and the basic indebtedness that arose by reason of that supply. Moreover, the facts show that a cheque of over $6,000 was presented by the judgment debtors to the judgment creditor in respect of the supply of petrol, part of the subject matter

of the Local Court proceedings. So there is no reason on the facts to dispute the existence of that debt. What is now sought to be raised, is another clam by way of counter-claim, set off or cross-demand. That is quite a different issue. If there is some cross-claim which could have been ralsed, but has not been raised, that will be a matter, in the event of bankruptcy, for the Official Trustee of the bankrupt estates to pursue.

The Court was referred to the decision of Beaumont J in an unreported case of Browbank and Miller Ex parte Loniplus Pty Limited, decided in Sydney on 29 October 1985. On the basis of that decision, it has been argued that where a stay of execution could be ordered, even though it has not been ordered, that is a sufficient circumstance to deprlve the judgment creditor of an entitlement to issue a bankruptcy notice. The facts in Browbank and Miller were quite different from the present case. In that case, the judgment creditor's solicitors had written saying that they would not enforce the

judgment had been entered was investigated. His Honour held	judgment until an alleged irregularity in the way in which the
that given those circumstances, it was a case where until the undertaking not to enforce was withdrawn, the judgment creditor was not in a position to issue execution, which is the requirement of the Act. In the present case, there was no legal obstacle to the issue of execution. Having obtained the judgment, there being no appeal in the Local Court
proceedings, the judgment creditor was fully entitled to

execute. The bankruptcy notice is therefore not invalid on
that ground.

It was asserted, in further support of the argument just referred to, that because there were claims outstanding for rebates and for negligent maintenance of the petrol pump, that execution on the judgment in the Local Court, would have been stayed, had an application for a stay been made. With that proposition, I disagree. When regard is had to the dilatory conduct of the debtors over a long period of time in the proceedings, the objective picture is one of debtors unable to meet their debts taking steps, whenever necessary, to defer and delay their creditors, but notably, taking no steps to pursue their alleged rights at other times. In those circumstances, I do not think any court would grant a stay upon the judgment that was entered in the Local Court on 2 March 1993.

In my opinion, the appropriate order that must be made on the bankruptcy notice against M r Pertsinides, in file SN 513

of 1993, is that the Court declare that the judgment debtor does not have a counter-claim, set off or cross-demand of the kind referred to in s40(l)(g) of the Bankruptcy Act.

I turn now to the creditor's petition against .Us Pertsinides. The first submission advanced in opposition to the sequestration order, is that the amount stated in the Local Court judgment was wrong. It is said that the judgment

should not have included the sum of $742.65 for debt collection costs and other expenses. That in effect, is an argument that the Court should go behind the judgment and look at the merits. Even if the Court were to do so and to find that the sum of $742.65 should not have been included, that would make only a minor difference overall, bearing in mind that the judgment and costs exceeds $14,000. The wrongful inclusion of debt collection costs in the judgment would provide no ground for rejecting the creditor's petition.

When the particulars of claim in the Local Court are considered, it is apparent that a cause of action in contract is pleaded to justify the claim for the debt collection costs. Judgment was ultimately entered in default. No steps have been taken to dispute the judgment on the merits by way of appeal, nor has any attempt been made to raise the issue until today.

In my view, the inclusion of the debt collection costs in the judgment provides no ground for asserting irregularities	in the bankruptcy notice served on Mrs Pertsinides, or for
challenging the making of the sequestration order.
I add that the same argument extends to the bankruptcy notice served on Mr Pertsinides and suffers the same fate.
It is also contended that the judgment was irregular, and hence the bankruptcy notice served on Mrs Pertsinides was

invalid, because alternative claims were pleaded for different amounts, namely, one claim for $8,169.11, and an alternative claim based on the admission and cheque for $6,271.50. In my opinion, there is no inconsistency in those two pleadings and there is no reason to think that there is doubt about the amount of the claim. In any event, any such doubt, if it existed, would go to whether or not the judgment was correctly entered. It is not a matter that is material in determining whether there was anything misleading about the bankruptcy notice. As I have already said, the bankruptcy notice was issued for the precise amount of the judgment of the Court.

Next, it is submitted that the bankruptcy notice upon which the creditor's petition is present was irregular because the bankruptcy notice served upon Mrs Pertsinides was not in the form of the bankruptcy notice which now appears in the Court file. The bankruptcy notice on the Court file, in the demand section, now reads:

THEREFORE TAKE NOTICE that within 14 days after 17

September 1993, excluding that day, you are required to

pay . . .

The notice served upon Mrs Pertsinides read:

THEREFORE TAKE NOTICE that within 14 days after service of this notice on you, excluding the day on which this notice is served on you, you are required to pay ...

It is argued that the notice that was served was not in terms of the notice on the Court f~le; and that was a fundamental irregularity which renders proceedings based on that notice invalid.

The explanation is very simple. The bankruptcy notlce served upon Mrs Pertsinides was that which was issued on 6 July 1993 and was in the terms of the notice duly sealed by the Court. It was entirely valid and she committed an act of bankruptcy by not complying with it. What then happened was that when the order for substituted service was made by the Court, an officer of the Registry amended the bankruptcy notice that was then to be served upon M r Pertsinides by striking out the words "service of this notice on you, excluding the day on which this notice is served on you", and substituting the words "the 17th day of September 1993, excluding that day". Then the notice as amended was served on Mr Pertsinides . There is no substance whatsoever ~n that point.

The argument that there existed confusion about the identity of the judgment creditor raised in respect of the bankruptcy notice was raised also in respect of the description of the petitioning creditor named in the

creditor's petition. In my oplnion, for reasons earlier	given, there is no confusion whatsoever as to the identity of
the judgment creditor and there is no substance in that point.
It is contended that a genuine dispute exists as to the liability for the debt, and in its discretion, the Court should not make a sequestration order. I make two comments about that contention. First, for reasons I have already given, there does not appear to be any real dispute about the

debt. What there is a dispute about is whether there is some independent claim or claims which equal or exceed the amount of the debt which ought to be set off. Secondly, even if that be the case, there is no defence to the creditor's petition which is based on the underlying judgment debt. As I have already commented, if there is a valid counter-claim, set off or cross-demand, that is a matter which can be attended to by the Official Trustee.

Finally, I was referred to the decision of Streimer v

Tamas (1981) 37 ALR 211 and in particular at 215 where Deane

and Ellicott JJ endorsed the power of the Court to extend time for compliance with a bankruptcy notice. In my opinion no occasion arises for the exercise of such a power in this case. The act of bankruptcy occurred with the effluxion of the 14 day period after service of the bankruptcy notice. No steps were made at or about that time to extend time. It would be quite inappropriate to exercise that power upon the hearing of a creditor's petition some months after the act of bankruptcy

has occurred.

I am satisfied that the debt on which the petitioning creditor relies is still owing. I am satisfied that the petition has been served upon the judgment debtor, Mrs Pertsinides. I am satisfied of the matters stated in the petition and in particular the happening of the act of bankruptcy. In my opin~on this is a case where a sequestration order should be made. The petitioning creditor

has proved the requirements for an order under s52 and I see no reason on the information that has been put before the Court why the discretion not to make an order should be exercised. There will, therefore, be a sequestration order against the estate of Mrs Pertsinides in proceedings numbered SP 316 of 1993, and an order that the petitioning creditor's costs be taxed and paid in accordance with the Bankruptcy Act. The commission of the act of bankruptcy occurred on 5 August 1993.

I certify that this and the \q preceding pages are a

true copy of the Reasons for Judment of Mr Justice - von Doussa

Associate :

Dated:  16

Counsel for the judgment debtors	: Ms H Pertsinides
Solicitor for the judgment debtors : MS H Pertsinides

Counsel for the judgment creditor : Mr G D Edmonds-Wilson
Solicitor for the judgment creditor: Wakefields