Re Andrews, Bevan Lloyd Ex Parte National Australia Bank Ltd

[1996] FCA 249

IN THE FEDERAL COURT OF AUSTRALIA     )
GENERAL DIVISION  )
   No. QN 1316 of 1995
BANKRUPTCY DISTRICT OF THE           )
STATE OF QUEENSLAND                  )

RE:Bevan Lloyd ANDREWS

Judgment Debtor
  (Applicant)  

EX PARTE:NATIONAL AUSTRALIA BANK LIMITED and Trevor John SCHMIERER

Judgment Creditors  

MINUTES OF ORDER

JUDGE MAKING ORDER:     Spender J

DATE OF ORDER:         18 March 1996

WHERE MADE:            Brisbane

THE COURT DECLARES THAT the judgment debtor has a counter-claim, set-off or cross demand such as is referred to in s40(1)(g) of the Bankruptcy Act 1966 and the bankruptcy notice of 27 October 1995 is spent.

THE COURT ORDERS THAT the costs of the judgment debtor of the hearing on 18 March 1996 be paid by the judgment creditors, to be taxed if not agreed.

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

IN THE FEDERAL COURT OF AUSTRALIA     )
GENERAL DIVISION  )
   No. QN 1316 of 1995
BANKRUPTCY DISTRICT OF THE           )
STATE OF QUEENSLAND                  )

RE:Bevan Lloyd ANDREWS

Judgment Debtor
  (Applicant)

EX PARTE:NATIONAL AUSTRALIA BANK LIMITED and Trevor John SCHMIERER

Judgment Creditors

CORAM:    Spender J
DATE:     18 March 1996
PLACE:    Brisbane

REASONS FOR JUDGMENT

This is an application by Bevan Lloyd Andrews in respect of a bankruptcy notice No 1316 of 1995, which issued on 18 October 1995.  The bankruptcy notice was a 28 day notice and is for the payment of a sum of $17,650.45, which was the taxed costs of an unsuccessful application by, amongst others, Mr Andrews, to prevent the National Australia Bank Limited and Trevor John Schmierer, the judgment creditors, from enforcing securities held by the bank over property with which Mr Andrews was associated. 

The application by Mr Andrews is a claim by him that the Court should be satisfied that the debtor has a counter-claim, set-off, or cross demand such as is referred to in s40(1)(g) of the Bankruptcy Act 1996 ('the Act'), with the effect that if the Court is so satisfied by s 41(7), the bankruptcy notice is spent.  Mr Andrews filed an affidavit on 23 November 1995 within the 28 day period referred to in the bankruptcy notice, that notice have been served on him on 27 October 1995. 

In his affidavit of 23 November, Mr Andrews claims that he has a cross demand set-off or cross demand which could not have been set up in the proceedings for interlocutory relief in respect of which the costs order on which the bankruptcy notice is founded was made.  He says that he is the second plaintiff in the principal proceedings in the Supreme Court at Rockhampton, which were commenced by Writ Number 56 of 1994.

The nature of that claim includes claims for damages for breaches of the Trade Practices Act 1974, breach of duty and conversion, and against the second defendant for breach of duty, trespass and conversion. There is, it seems, a claim amongst others, that the property the subject of securities held by the bank was sold at an undervalue. It appears the property was sold for $730,000 and it is claimed that they were valued at not less than $1,080,000. The claims in the statement of claim being for final relief, in my opinion, could not have been made at the time when the application for the interlocutory relief was heard, and the claims as far as quantum is concerned considerably exceed the amount on which the bankruptcy notice is founded.

The primary question, and it seems the central one, is whether in fact the court is satisfied that this is a genuine claim. It is asserted by Mr O'Conner for the judgment creditors that in fact the claim in the Supreme Court is a sham, and that the court as a consequence would not be satisfied that Mr Andrews has a cross claim of the kind referred to in s40(1)(g).

It is true that there has been some tardiness about the litigation in the Supreme Court.  The Writ of Summons was issued on 20 July 1994.  There were the unsuccessful interlocutory applications in July 1994, followed by taxation of the costs awarded in that interlocutory application on 16 February 1995.  There were orders by consent that some relief claimed by the plaintiff by summons be dismissed without any order as to costs.

The application for a bankruptcy notice was filed on 5 September 1995, and the notice issued on 18 October 1995. On 23 October 1995, however, before service of the bankruptcy notice on 27 October 1995, Mr Andrews issued a notice of intention to proceed and the statement of claim dated 20 October 1995 was delivered to the solicitors for the judgment debtors. On 23 November 1995, Mr Andrews filed his affidavit claiming that he has a cross claim, set-off or cross demand of the kind referred to in s40(1)(g).

Having had regard to the correspondence between the solicitors concerning the litigation in the Supreme Court, it cannot be said, in my view, that the proceedings are a sham or that the delay in prosecuting those proceedings is evidence which would satisfy me that the claims are not advanced bona fide.  In particular, in a letter of 7 November 1995, which referred to the receipt of the notice of intention to proceed and the statement of claim, the solicitors for the judgment debtors said, inter alia:

"We calculate delivery of our client's defence is due on or before 29 January 1996.  Please advise if you do not agree with this calculation. "

On 29 January 1996, which is after the receipt of Mr Andrews' affidavit alleging a cross claim in response to the Bankruptcy Notice which had been served on him, the solicitors for the judgment debtors said:

"We also confirm our request that our clients be granted an extension of time for filing and service of their defence and counter claim in this matter.  We request 14 days extension of time from today. "

And later:

"Given the delay of approximately 15 months by your client in progressing this matter we fail to see how they could possibly be prejudiced by an extension of 14 days for filing and service of the defence and counter claim.

Please advise us by return if the request is granted.  Given the nature of your client's claim and the circumstances of the recent vacation period we consider this request to be reasonable. "

On the 30 January 1996, by facsimile, the solicitors for Mr Andrews indicated they had no objection to the request for an extension of time.  On 19 February, the solicitors for
the judgment creditors wrote, which letter amongst other things, said:

"We also confirm that Mr Hancock [the solicitor for Mr Andrews] informed Neil O'Connor [the solicitor for the judgment debtors] that your clients [which included Mr Andrews] were proposing to amend their statement of claim and that you expected that this would be available for filing service in the near future.  We confirm that on the basis of the proposed amendments to the statement of claim it was agreed that no defence (and counter-claim) is required to be filed and served until following receipt of the amended statement of claim. " 

In the light of that correspondence, it is odd that the claim is advanced today on behalf of the judgment creditors that the proceedings in the Supreme Court are a sham.  While there has been some leisurely conduct of the litigation, nothing in the material seems to suggest that the claims of the applicants are put up for an ulterior purpose. 

If the judgment creditors wished to advance the litigation in the Supreme Court there are avenues open to them to pursue that course.  Similarly, the correspondence suggests that a warrant of execution may have been returned unsatisfied and that as a consequence, other bases or bankruptcy proceedings might be available to the judgment creditors; that, however, is of no relevance to the present application. 
       On the whole of the material, I am satisfied that Mr Andrews has a counter-claim, set-off or cross demand such as
is referred to in s40(1)(g). The consequence will be that the Bankruptcy Notice which issued on 27 October 1995 is spent.

As to costs, it seems to me that the judgment creditors should pay the costs of the applicant of today.  Given the history of the application in the Federal Court, I do not think that that order for costs should extend to any reserved costs. 

I have noted my findings in respect of the affidavit.  As to costs, the order is that the judgment creditors pay the costs of the judgment debtor of today to be taxed, if not agreed.

I certify that this and the  preceding five (5) pages are a true copy of the reasons for judgment herein of the Honourable Justice Spender.

Associate

Date: 18 March 1996

Counsel for the applicant    :        Mr A M Musgrave
instructed by               :        Mackenzie Forbes

Solicitors for the judgment

creditors:        Mr N M O'Connor of Mallesons Stephen Jaques

Date of Hearing             :        18 March 1996