Pryke v Steinhoff Asia Pacific Ltd
[2009] FMCA 380
•21 April 2009
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| PRYKE v STEINHOFF ASIA PACIFIC LTD | [2009] FMCA 380 |
| BANKRUPTCY – Application to set aside bankruptcy notice – where applicant claimed he had a cross claim – whether applicant could have set up this claim in the proceedings in which judgment was obtained – where applicant alleged negligence on the part of his solicitors in the original proceedings. |
| Federal Magistrates Court (Bankruptcy) Rules 2005 Bankruptcy Act 1966 (Cth), ss.41(7), 40(1)(g), 44 and 52 Industrial Relations Act1996 (NSW), s.106 |
| Re Vitoria; Ex parte Vitoria [1894] 2 QB 387 King v Henderson [1898] AC 720 Re Hanby; Ex parte Flemington Central Spares Pty Ltd (1967) 10 FLR 378 Re Vella; Ex parte Seymour (1983) 67 FLR 287 Re Ling; Ex parte Ling v Commonwealth (1995) 58 FCR 129 Re Willats;Ex parte Nissan Finance Corp Ltd (1991) 31 FCR 206 Surfing Hardware International Holdings Pty Ltd v McCausland [2008] FCA 1522 Malcolm Colin Walton v The National Mutual Life Association of Australasia Ltd [1994] FCA 1114 |
| Applicant: | MARK PRYKE |
| Respondent: | STEINHOFF ASIA PACIFIC LTD |
| File Number: | SYG 610 of 2009 |
| Judgment of: | Raphael FM |
| Hearing date: | 21 April 2009 |
| Date of Last Submission: | 21 April 2009 |
| Delivered at: | Sydney |
| Delivered on: | 21 April 2009 |
REPRESENTATION
| Counsel for the Applicant: | Mr R Keller |
| Solicitors for the Applicant: | The People’s Solicitors |
| Counsel for the Respondent: | Ms K Welshman |
| Solicitors for the Respondent: | Hennessey & Co |
ORDERS
Application dismissed.
Applicant to pay the Respondent’s costs which shall be taxed if not agreed in accordance with the Federal Magistrates Court (Bankruptcy) Rules 2005.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 610 of 2009
| MARK PRYKE |
Applicant
And
| STEINHOFF ASIA PACIFIC LTD |
Respondent
REASONS FOR JUDGMENT
There comes before me an application filed in this court on 13 March 2009 to set aside Bankruptcy Notice NN163/09 issued by the Official Receiver on 19 January 2009 and served upon the debtor on 21 February 2009. The Bankruptcy Notice seeks payment of $865,878.33 odd based upon a judgment of the Supreme Court of New South Wales dated 19 September 2008 in the sum of $838,984.84 plus interest of $26,893.49.
It appears on the evidence in the form of affidavits from Mr Pryke, the applicant, and Mr Hennessey, the solicitor for the respondent, that the debtor was a director and guarantor of a company which had taken out a Freedom Furniture franchise. It would appear that the franchise agreement was terminated and as a result moneys became owing by a company, Markezz Pty Ltd, ACN 113 326 828, to the creditor and by Mr Pryke as the guarantor of Markezz.
The application of 13 March 2009 is an application made under section 41(7) of the Bankruptcy Act1966 (the “Act”) whereby the applicant alleged that he had a counter-claim, set-off or cross demand of the type referred in section 40(1)(g) of the Act. The effect of making such an application is that the time for compliance with the Bankruptcy Notice is automatically extended until the matter is considered by the Court.
The alleged cross claim is described by Mr Pryke in an affidavit sworn on 14 April 2009. What he says is that he believes that the franchise arrangements with Freedom Furniture were arguably unfair and unconscionable within the meaning of section 106 of the Industrial Relations Act1996 (NSW) and were liable to be set aside or adjusted under that Act by the Industrial Relations Court. He says that he was not advised of this fact at the time the original proceedings were brought. He accepts that it is arguable that in any event the right to bring such proceedings has been lost because there is a time limit of one year from the cause of action and the agreement was terminated on 1 August 2007 so that any right to bring a claim in the IRC would have expired on 31 July 2008. The affidavit also notes that the Supreme Court proceedings were the subject of what is described as a consent judgment. Mr Pryke has two complaints about this. The first is that he considers that he was pressured into having to withdraw his defence to the proceedings because his solicitors asked for a significant amount of money up front which he was unable to provide. The second complaint he has is that he says he did not agree to the orders being made and so instructed is solicitors but nonetheless they were made and were considered to have been made by consent. He has annexed to his affidavit a letter from a barrister, Mr David Roberts, dated 22 September 2008. The letter relevantly states:
“Mr Loughlin handed me a copy of short minutes of order providing:
1. Defence and Cross Claim struck out.
2. Judgment for the Plaintiff in terms of paragraphs (a), (b) and (d) of the relief claimed in the Statement of Claim.
3. Defendants to pay the Plaintiff’s costs as agreed or assessed.
On my appearance before the Registrar I informed the Court that I appeared for the First and Second Defendants and that neither had instructed me to consent or oppose to the orders (sic). The registrar then made orders in terms of paragraphs 1, 2 and 3 above.”
Mr Pryke says that because the orders were labelled Consent Orders it became impossible for him to raise a counter claim in the proceedings notwithstanding that he believes that he has a counter claim which outweighs the amount the respondent obtained by way of judgment. A copy of a summons issued out of the Supreme Court of New South Wales on 13 April 2009 seeking leave to file a Statement of Claim in the form of the document annexed to the summons is annexed to his affidavit. The relief claimed in that Draft Statement of Claim is for damages under the Trade Practices Act 1974, damages for breach of contract, a declaration that clause 12.7(3) of the Franchise Agreement is void for public policy, a declaration that in the circumstances the defendant was estopped from terminating the franchise agreement and a declaration that the defendant’s purported notice of termination dated 1 August 2007 was of no cause and effect. The applicant says that he needs this latter order so that he can then go to the Industrial Relations Commission seeking the relief under section 106 because if the Notice of Termination was invalidly given then the time will not have expired. The one thing the summons does not appear to seek is the setting aside of the judgment.
Mr Keller who appears on behalf of the applicant told me that he believed that it was inappropriate for the Bankruptcy Notice to stand where the applicant had filed a cross claim and reminded me that the applicant had said that the advice that he had received at the time did not indicate that he had any right to make the claim which he now makes. Mr Keller believes that the Bankruptcy Notice should be set aside but if that does not occur he asks me to extend time for compliance until the issues in the Supreme Court and presumably the Industrial Relations Commission of New South Wales, if the matter can go that far, are concluded.
The law relating to matters arising under section 40(1)(g) is extensive. The starting point would be that a judgment remains enforceable and valid until such time as it is set aside; Re Vitoria; Ex parte Vitoria [1894] 2 QB 387; King v Henderson [1898] AC 720. It is also clear that once an act of bankruptcy has been committed by non-compliance with a Bankruptcy Notice, the act of bankruptcy is available to found a creditor’s petition issued by any creditor who can establish a debt complying with ss.44 and 52, notwithstanding that the judgment may subsequently be set aside: Re Hanby; Ex parte Flemington Central Spares Pty Ltd (1967) 10 FLR 378; Re Vella; Ex parte Seymour (1983) 67 FLR 287 and the other cases referred to in the practice at 1‑2634 to 1- 2635. Although I note that in this case there was an automatic extension of the time for compliance by virtue of s.41(7). This is of small utility if there is no attempt being made to set aside the original judgment.
It is also clear law that “the question whether or not the cross demand could have been set up in the proceedings in which the judgment was obtained for purpose of section 40(1)(g) of the Act is a question to be answered by reference to legal considerations and not practicalities”; Re Ling; Ex parte Ling v Commonwealth (1995) 58 FCR 129. The text is replete with examples of cases where it has been alleged that the cross claim could not have been set up but where it has been considered that one could have been notwithstanding the requirement to go through some quite convoluted legal processes. See for example Re Willats;Ex parte Nissan Finance Corp Ltd (1991) 31 FCR 206 and Re Ling supra.
Although I have not been addressed in any substantive way about how the claim under s.106 might have been brought in the original proceedings, I note that in Surfing Hardware International Holdings Pty Ltd v McCausland [2008] FCA 1522, Foster J acknowledged at [12]:
“[t]he power to declare a void or vary unfair contracts and related arrangements pursuant to the provisions of section 105 and 106 of the Industrial Relations Act 1996 is the exclusive province of the IRC. Absent of removal of such proceedings into the Supreme Court of New South Wales pursuant to the provisions of section 8(1) of the Jurisdiction of Courts (Cross Vesting) Act 1987 (NSW), the Supreme Court has not jurisdiction in respect to such matters”.
It would appear from this that his Honour accepts that there is a procedure whereby a s.106 cross claim can be heard in the Supreme Court. The above being the case, the cross claim could have been set up in the proceedings in which the judgment was obtained and the only ground that seems to be left to the applicant is his claim that his solicitors were negligent in not telling him about the availability of a s.106 cross claim. Regrettably that will not avail him. In Malcolm Colin Walton v The National Mutual Life Association of Australasia Ltd [1994] FCA 1114, the Full Bench of the Court, Jenkinson, Burchett and Whitlam JJ, said at [6]:
“At the hearing of the appeal it was also suggested that the appellant may have been able to set up a cross demand because of his solicitor’s negligence. No authority was cited to support the proposition that such a case can be maintained and it is sufficient for us to say that the negligent failure of a solicitor in fact to set up a cross demand would not make the cross demand one which a debtor “could not have set up” within the meaning of section 40(1)(g).”
I am quite satisfied that in the circumstances of this case as deposed to by Mr Pryke in his affidavit there are no grounds to set aside the Bankruptcy Notice and the only question is whether I should extend time for compliance whilst the claims that are now being made are agitated. I’m not prepared to do so. The judgment that was obtained against Mr Pryke was obtained on 19 September 2008. To the extent that Mr Pryke complains that it was a wrongly entered consent judgment he could have easily brought some proceedings in the Supreme Court to correct that misdescription and if he really had a cross claim of the type alleged in the summons that I have referred to previously he could have brought that. He most certainly could have brought all of it in those proceedings but for his problems with finance, which are not relevant, and the alleged negligence of his solicitors. Not only did he do nothing then, he has done very little since and to keep the creditor out of his remedy whilst some tortuous proceedings move through two other courts would to my mind be an imposition that should not be placed upon a creditor, especially as I have been given almost nothing in the way of evidence to support the suggestion that the claims that Mr Pryke now makes have any real prospects of success.
I dismiss the application and I order that the applicant pay the respondent’s costs which shall be taxed if not agreed in accordance with the Federal Magistrates Court (Bankruptcy) Rules 2005.
I certify that the preceding eleven (11) paragraphs are a true copy of the reasons for judgment of Raphael FM
Associate:
Date: 29 April 2009
5
3