Re Adami, P.J. & Anor Ex parte Adami, P.J. & Anor v Queensland Country Credit Union Ltd

[1995] FCA 369

CATCHWORDS

BANKRUPTCY - Application to set aside bankruptcy notice - whether debtor had a counter-claim or cross demand within the meaning of section 40(1)(g)

Bankruptcy Act 1966 ss 40(1)(g), 41(7), 44(1)(c), 52(2)(b)

Re Brink;  Ex parte:  The Commercial Banking Company of Sydney Ltd (1979-80) 44 FLR 135 Refd

Re Willats;  Ex parte:  Nissan Finance Corporation Ltd (1991) 104 ALR 361 Refd

Re James and Anor;  Ex parte:  Carter Holt Harvey Roofing (Australia) Pty Ltd (1994) 123 ALR 342 Refd

Re Peter James Adami and Rose Adami;  Ex parte: The Abovenamed v  Queensland Country Credit Union Limited

No QP115 of 1995

Kiefel J Brisbane 6 June 1995

IN THE FEDERAL COURT OF AUSTRALIA

GENERAL DIVISION

BANKRUPTCY DISTRICT

OF THE STATE OF QUEENSLAND   No. QP115 of 1995

RE:PETER JAMES ADAMI and ROSE ADAMI

EX PARTE:THE ABOVENAMED

Applicants

AND:QUEENSLAND COUNTRY CREDIT UNION LIMITED

Respondent

JUDGE MAKING ORDER:          Kiefel J.

DATE OF ORDER:   6 June 1995

WHERE MADE:   Brisbane

MINUTES OF ORDERS

THE COURT ORDERS THAT:

1.                The applications of the debtors filed on 15 February 1995 and 1 March 1995 be dismissed.

NOTE:        Settlement and entry of orders is dealt with in Rule 124 of the Bankruptcy Rules.

IN THE FEDERAL COURT OF AUSTRALIA

GENERAL DIVISION

BANKRUPTCY DISTRICT

OF THE STATE OF QUEENSLAND   No. QP 115 of 1995

RE:PETER JAMES ADAMI AND ROSE ADAMI

EX PARTE:THE ABOVENAMED

Applicants

AND:QUEENSLAND COUNTRY CREDIT UNION LIMITED

Respondent

CORAM:   Kiefel J.

DATE:   6 June 1995

PLACE:   Brisbane

REASONS FOR JUDGMENT

Bankruptcy notices were served on Mr Adami on 19 January 1995 and on Mrs Adami on 20 January 1995. They contend however that they have a counter-claim or cross demand within the meaning of s.40(1)(g) Bankruptcy Act 1966.  Were that established the bankruptcy notices would be spent. The notices were founded upon a judgment obtained against them in the District Court of Queensland on 29 November 1994 for the sum of $84,334.77.  In those proceedings the debtors had filed defences to the creditor's claim for the balance of loan monies due and a counter-claim by which they alleged that the creditor had sold two properties at a gross undervalue.  This was the argument pursued by Mr Adami when he appeared before me in person for himself and Mrs Adami who has also sworn affidavits referring to the same contentions.  The counter-claim or cross demand for damages for breach of duty and for a sum in excess of that
found due to the creditor, was not however pursued in the District Court action.  On 18 October 1994 it appears that the solicitors for Mr and Mrs Adami advised the creditor's solicitors that they would be seeking leave to withdraw from the action and at a chambers hearing on 21 October, Mr Adami appeared himself and sought an adjournment to obtain further legal advice and this was granted.  On the adjourned date, 29 November 1994, Mr and Mrs Adami did not appear and judgment was entered by default.  Mr and Mrs Adami say that they had not been told of the correct date for the hearing and when Mr Adami did appear on 30 November, he was told that the matter had been determined.  Mr Adami was however present when the adjournment was granted.  No application to set aside the default judgment has been made.

Section 40(1)(g) requires that the counter-claim set-off or cross demand be one which the debtor "could not have set up in the action or proceeding in which the judgment or order was obtained".  The inability to raise the claim has however been held to be in the nature of a legal obstacle and not one arising from practical difficulties:  Re Brink;  Ex parte:  The Commercial Banking Company of Sydney Ltd (1979-80) 44 FLR 135; Re Willats;  Ex parte:  Nissan Finance Corporation Ltd (1991) 104 ALR 361; Re James and Anor;  Ex parte:  Carter Holt Harvey Roofing (Australia) Pty Ltd (1994) 123 ALR 342, 348. The claim here was, as a matter of law, able to be raised and indeed it was, although it was not pursued to final hearing because of an alleged administrative error. If that be the case an application to set it aside may be a proper course. For present purposes however the claims do not satisfy the requirements of s.40(1)(g). The debtors' applications filed on 15 February will be dismissed.

Mrs Adami filed a further application on 1 March following a notification from the Registry that the notice filed on 15 February did not refer to Mrs Adami's proceedings by number.  In it she raised an additional issue, namely that she had not ever guaranteed repayment of monies advanced by the creditor with respect to the property at Bakers Creek, Mackay.  That application was not however filed in time.  The matter raised was pleaded by way of defence to the creditor's claim in the District Court but is not in the nature of a claim or demand sounding in money.  The allegation might however be considered in determining whether sequestration ought be ordered on the creditor's petition if there were evidence put forward to give some substance to the allegation, such that "other sufficient cause", within the meaning of s.52(2)(b), is shown. Only the bare allegation is made however. For reasons which follow however I do not consider the creditor is presently able to proceed with its petition.

Each of the applications by the debtors and accompanying affidavits, filed on 15 February were filed within the time limited by the notice for compliance, that is to say twenty eight days from the date of service. Whilst the application contained only a reference to Mr Adami's proceedings, by number, it clearly identified both Mr and Mrs Adami as applicants and the affidavit in support is referrable to both of them. Application was then made by both Mr and Mrs Adami. By s.41(7) the time for compliance with the notices would then be automatically extended until my determination. An act of bankruptcy would only be committed were the notice not complied with by the end of this day. A petition has however already issued, it would seem on the basis of the creditor's erroneous allegation that the notice had required compliance within twenty one days from

service. It seems to me that, in view of the requirement of s.44(1)(c), the petition ought not have been presented.

I will hear counsel for the creditor as to why the petition ought not be dismissed and as to the question of costs.  The applications of the debtors, filed on 15 February and 1 March, will be dismissed.

I certify that this and the preceding three pages are a true copy of the reasons for judgment herein of the Honourable Justice Kiefel.

Associate

Date:          6 June 1995

Applicants:   Mr Adami in person and as agent for Mrs Adami

Counsel for the respondent:   Mr S Eleftheriou

Solicitors for the respondent:   Roberts Leu & North

Date of Hearing:   9 March 1995

Place of Hearing:   Brisbane

Date of Judgment:   6 June 1995