Re Camilleri, Colin Michael James Ex Parte Maguire, Michael
[1996] FCA 328
•8 May 1996
IN THE FEDERAL COURT OF AUSTRALIA
GENERAL DIVISION
BANKRUPTCY DISTRICT OF VICTORIA No VN 238 of 1996
Re: COLIN MICHAEL JAMES CAMILLERI
Judgment Debtor
Ex Parte: MICHAEL MAGUIRE
Judgment Creditor
Coram: Olney J
Place: Melbourne
Date: 8 May 1996
MINUTE OF ORDERS
The Court is not satisfied that the judgment debtor has such a set-off, counter-claim or cross demand as is referred to in s 40(1)(g) of the Bankruptcy Act 1966 and orders that:
The judgment debtor pay the judgment creditor's costs of this proceeding.
In the event that a sequestration order is made against the estate of the judgment debtor based on an act of bankruptcy committed by him as a result of his failure to comply with the demand contained in the bankruptcy notice herein, the costs referred to in paragraph 1 of this order be deemed to be costs in the administration of the bankruptcy.
NOTE: Settlement and entry of orders is dealt with in rule 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
GENERAL DIVISION
BANKRUPTCY DISTRICT OF VICTORIA No VN 238 of 1996
Re: COLIN MICHAEL JAMES CAMILLERI
Judgment Debtor
Ex Parte: MICHAEL MAGUIRE
Judgment Creditor
Coram: Olney J
Place: Melbourne
Date: 8 May 1996
REASONS FOR JUDGMENT
THE PROCEEDING
On 22 November 1991 the judgment debtor and another issued proceedings in the Magistrates' Court at Melbourne in which they claimed damages against 5 defendants including the judgment creditor. On 21 December 1992, after a 2 day hearing, the Magistrate upheld a submission made on behalf of the judgment creditor that there was no case for him to answer and dismissed the claim against him. At the same time the judgment debtor was ordered to pay the judgment creditor $2,306 for costs.
On 12 February 1996 the judgment creditor caused to be issued a bankruptcy notice which required the judgment debtor within 14 days of service to make one of the responses required pursuant to the prescribed form of notice. The demand in the bankruptcy notice relates to the order for costs made on 21 December 1992. The notice was served on 25 February 1996. On 12 March 1996 the judgment debtor filed an affidavit pursuant to s 41 (7) of the Bankruptcy Act in which he asserted that he had a set-off against the judgment creditor in the sum of $200,000 which he could not set up in the proceeding in which the judgment debt was obtained. (By reason of the intervention of a weekend followed by a public holiday the affidavit was filed within the period required by s 41(7)).
Although the judgment debtor has specifically referred to a set-off in his affidavit, I understand his claim to be a reference to a "set-off, counter-claim or cross demand" as those terms are used in s 40(1)(g) and s 41(7) of the Bankruptcy Act. The term "set-off" in its conventional meaning is obviously inappropriate in the present context.
The question of whether the Court is satisfied that the judgment debtor has such a set-off, counter-claim or cross demand as is referred to in s 40(1)(g) of the Bankruptcy Act came before the Court for determination on 17 April 1996 when judgment was reserved.
THE JUDGMENT DEBTOR'S CLAIM
The judgment debtor and his wife are plaintiffs in a proceeding in the County Court of Victoria in which they claim $200,000 for damages against three defendants including the judgment creditor. The writ was issued on 11 September 1991. The matter has now been set down for trial on 21 May 1996 although it is not certain that the case will be reached on that day.
In his affidavit of 12 March 1996 the judgment debtor has deposed to the nature of the cause of action in the County Court proceeding. He says that the essence of the claim against the judgment creditor is that while he (the judgment creditor) was company secretary and general manager of Informed Sources Ltd (a defendant in the proceeding) he conducted negotiations with the judgment debtor towards concluding a share purchase agreement. It is said that during those negotiations the judgment creditor made certain misrepresentations which are set out in the amended statement of claim (a copy of which is exhibited to the affidavit). One such misrepresentation was that Informed Sources Ltd was at the time solvent. The judgment debtor has exhibited to the affidavit minutes of meetings of directors of Informed Sources Ltd held on 29 September 1989, 15 December 1989 and 26 January 1990 which are said to establish that the company was technically insolvent and unable to pay its debts as and when they fell due at the time of the judgment debtor's discussions with the judgment creditor.
The cause of action in the County Court proceeding is based upon the allegation that Informed Sources Ltd engaged in conduct in contravention of s 11(1) of the Fair Trading Act 1985 (Vic) whereby the plaintiffs have suffered or are likely to suffer loss or damage and that the other defendants (including the judgment creditor) were directly or indirectly knowingly concerned in or parties to that contravention. In the alternative it is said that the judgment creditor is liable to the plaintiffs for breaches of warranty and breach of a duty of care. The specific relief sought against the judgment creditor is a declaration that he was a person involved in the contravention of s 11(1) of the Act by Informed Sources Ltd. The prayer for relief seeks several declarations and claims damages (without specifying any particular defendant who it is sought to make liable) under s 37(1) of the Fair Trading Act, for breach of agreement and for misrepresentation.
The material adduced by the judgment debtor is sufficient to establish that the plaintiffs in the County Court proceeding have prima facie a substantial and bona fide claim against the defendants in that proceeding. The nature of the proceeding in the County Court is however a claim by the judgment debtor and his wife jointly against the three defendants jointly.
COULD THE CROSS-CLAIM BE SET UP IN THE PROCEEDING IN WHICH THE JUDGMENT WAS OBTAINED?
In my opinion the cross demand relied upon could not have been set up in the proceeding in which the judgment debt was obtained and this for the reason that the judgment creditor made no claim in that proceeding against which the judgment debtor could set up the cross demand. The judgment debt only arose at the conclusion of the Magistrates' Court proceeding when the judgment debtor was ordered to pay the judgment creditor's costs. The relevant "proceeding" for the purposes of s 40(1)(g) was the judgment creditor's application for a costs order against the judgment debtor following the dismissal of the claim. (Chesson v Smith 35 FCR 594 and cases referred to therein).
A JOINT CLAIM
There can be no question that whatever claim the judgment debtor may have, it is not a claim against the judgment creditor separately but against him and others jointly. There is nothing in the pleadings in the County Court proceeding which suggests otherwise.
The question whether it is a sufficient answer to a bankruptcy notice for a debtor to set up a cross demand against a judgment creditor jointly with someone else was addressed in re Brown (1923) 40 WN (NSW) 73 and in re Wedd; Ex parte Parker (1962) WAR 42. In each case the answer was in the negative. In re Brown, Street CJ in Equity said (at p 74):
I do not think it was ever contemplated by the legislature that a judgment creditor should be compelled to hold his hand while his debtor prosecutes a claim which he has against him and some other person.
In re Wedd, Virtue J expressly adopted and followed this dictum.
The decision in re Brown has been consistently adopted and followed in this Court and in my opinion represents the
current view of the proper construction of s 40(1)(g) of the Bankruptcy Act.
In this particular case there is another factor which militates against the judgment debtor's case namely that his alleged cross demand is not a personal claim by himself but a claim made jointly with his wife. The joint plaintiffs in the County Court proceeding seek a judgment against 3 defendants jointly. One may ask rhetorically whether it would be a partial answer to the plaintiffs' claim for the judgment creditor to plead in the County Court action that he has a judgment against one of the plaintiffs and attempt to set that debt off against any liability that may be found against him. The answer must be in the negative. It could not be that the interest of one joint plaintiff (the judgment debtor's wife) could be affected by a debt owed by the other joint plaintiff to one of the joint defendants. Be that as it may, it is not necessary to pursue this particular line further as I am of the opinion that the principle adopted in re Brown applies and is fatal to the judgment debtor's case.
CONCLUSION
I am not satisfied that the judgment debtor has a set-off, counter-claim or cross demand of the nature referred to in s 40(1)(g) of the Bankruptcy Act.
I certify that this and the preceding 6 pages are a true copy of the Reasons for Judgment of the Honourable Justice Olney
Associate:
Dated:
Heard: 17 April 1996
Place: Melbourne
Judgment: 8 May 1996
Appearances:
Mr J. Nolan (instructed by Lewis Hutchinson) appeared for the judgment debtor.
Mr S. Glacken (instructed by Coltmans Price Brent) appeared for the judgment creditor.
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