Re Guss, Joseph Ex Parte Guss, Joseph - [1996] FCA 457

IN THE FEDERAL COURT
OF AUSTRALIA

EXERCISING FEDERAL VN 525 of 1996

JURISDICTION IN BANKRUPTCY

BANKRUPTCY DISTRICT OF THE STATE OF VICTORIA

RE: JOSEPH GUSS Judgment Debtor

EX PARTE:  JOSEPH GUSS  Applicant
  and
  RAYMOND MARSHALL JOHNSTONE              Respondent

COURT: NORTHROP J
DATE: 29 MAY 1996
PLACE: MELBOURNE

REASONS FOR JUDGMENT

In this matter the judgment creditor caused a bankruptcy notice to be served on the judgment debtor on 12 April 1996 requiring the debtor to pay the sum of $4,434.90, being a judgment debt obtained against the debtor pursuant to an order for taxation made on 23 May 1995 and authenticated on 6 June 1995, whereby the Taxing Master ordered that the costs of the creditor be taxed and allowed in the sum of $4,434.90. The bankruptcy notice was dated 14 March 1996 and was served on 12 April 1996. It was a 14 day notice and it is agreed by the parties that normally an act of bankruptcy for non compliance with the notice would have occurred on Monday 29 April, the 14 day period
ending on 27 April, which was a Saturday. On 26 April 1996 an affidavit was filed by Denise Leanne Page purporting to be in conformity with subsection 41(7) of the Bankruptcy Act 1966 which provides:-
"(7) Where, before the expiration of the time fixed for compliance with the requirements of a bankruptcy notice, the debtor has filed with the Registrar an affidavit to the effect that he has such a counter-claim, set-off or cross demand as is referred to in paragraph 40(1)(g), and the Court has not, before the expiration of that time, determined whether it is satisfied that the debtor has such a counter-claim, set-off or cross demand, that time shall be deemed to have been extended, immediately before its expiration, until and including the day on which the Court determines whether it is so satisfied."

The relevant parts of paragraph 40(1)(g) of the Bankruptcy Act provide that a debtor commits an act of bankruptcy if the debtor does not comply with the requirements of a bankruptcy notice or does not, within the period of notice,

"..... 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-claim, 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."

The affidavit filed in this case has a number of deficiencies in it, but before turning to those reference should be made to the law to be applied in cases of this kind. The principles were discussed by me in the judgment of Re Doherty in matter No. VN1166 of 1993, unreported, judgment in which was given on 8 October 1993. At page 13 of the reasons for judgment, a summary was given of what must be satisfied in order to show compliance…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [1996] FCA 457
Decision Date: 29 May 1996

CaseChat Overview and Summary

In the Federal Court of Australia, the case of Re Guss, Joseph Ex Parte Guss, Joseph was heard and decided by Northrop J on 29 May 1996. The matter involved a bankruptcy notice served on Joseph Guss, the judgment debtor, by Raymond Marshall Johnstone, the judgment creditor. The dispute centred on the validity of an affidavit filed by Denise Leanne Page on behalf of the debtor, which aimed to assert the existence of a counterclaim, set-off, or cross-demand under subsection 41(7) of the Bankruptcy Act 1966. This subsection provides that if a debtor files an affidavit before the expiration of the time specified in a bankruptcy notice, claiming such a counterclaim, set-off, or cross-demand, and the court has not determined the validity of the claim before the notice period expires, the time for compliance is extended until the court makes its determination.

The primary legal issue before the court was whether the affidavit filed by Ms Page complied with the requirements of subsection 41(7) of the Bankruptcy Act. The court had to determine if the affidavit demonstrated the existence of a prima facie case, thereby showing that the debtor had a fair chance of success, and whether the cross-claim, set-off, or cross-demand could not have been brought in the original proceedings. The court examined the affidavit's content, noting that it merely asserted the existence of such a claim without providing any detailed evidence or substantiation. The court also considered the practical and legal ability of the debtor to raise the claim in the original proceedings.

Northrop J held that the affidavit did not meet the statutory requirements, as it contained no evidence establishing an effective cross-claim, set-off, or cross-demand. The court found that the affidavit was deficient and consisted only of assertions without any supporting details. Additionally, the court ruled that even if the debtor's claim could not have been raised in the original proceedings due to practical reasons, it did not entitle the debtor to avoid the bankruptcy notice under the current legal interpretation. Consequently, the court concluded that the affidavit did not satisfy the provisions of subsection 41(7) of the Bankruptcy Act. The court ordered and declared that the affidavit was insufficient, and as a result, the act of bankruptcy was deemed to have occurred when it would otherwise have arisen at the expiration of the bankruptcy notice.

Orders